Matthew Tol, from the Trailblazer firm of Matthew Tol + Associates in Australia, recently sent us an update on his progress since dumping timesheet on July 1, 2007.
Sixteen months after what Matthew calls this “leap of faith,” the story of this firm corroborates all the others we have heard from who have taken the initiative to transform themselves into Firms of the Future.
As I read this, I was thinking of the many consultants from Down Under who still insist you must keep a timesheet to lead a successful accounting practice—Rob Nixon, David Connell, Andrew Ged, David Smith, among others. They don’t seem to understand that not all swans are white. Some are indeed black, including ones in their own backyards.
How these so-called experts can continue to deny the existence of these Black Swans is a topic that fascinates us to no end. It is very similar to the medical profession not giving up on bloodletting even though antiseptic surgery, along with germ theory and penicilin provided more effective ways to heal patients.
It reminded me of what G.K. Chesterton wrote (paraphrased):
If it were true that the man who is trained is the man to be trusted—if the man who saw something every day saw more and more of its significance—the argument for expertise would be unanswerable. But the man who sees and studies and practices something every day does not understand more and more of its significance, but less and less.
In any event, here is Matthew’s inspiring journey to emerging, like a chrysalis, into a Firm of the Future.
I must admit, it was a leap of faith to dump timesheet from the 1st of July 2007. My staff were against it (whilst understanding the reasons for it), my clients (in the main) were a little bit sceptical and, to be honest, whilst I was confident it would all work out in the end, I wasn’t exactly sure how long that would take.
I’m now 16 months down the track and I’m pretty sure the time is up!
Taking the step from timesheet which I’d been bought up to believe were the whole raison d’être of our lives as professionals was somewhat daunting. I’d read the books, trawled the internet and spent many hours speaking with colleagues about the whole process. It was still relatively new in the accounting profession in Australia and most of the people I spoke to expounded at length on a whole heap of reasons why it would never work. All of them quantitative.
One of the first steps was to get the team’s head around it. They too had been inculcated with the belief that everything they did had to have time attached to it. They’d been trained that way, they’d been reviewed that way and they had also trained others in this system. It was, to a large extent, ingrained.
Many hours of discussion, mo of new processes by which we could run the business and the methodologies we would adopt with clients ensued. It was actually quite illuminating as it caused us to look, dispassionately, at what and why we were doing things for the people we were doing them for.
In many ways, it helped to clarify our culture and business mantra—we like dealing with people we like.
We then had to sort out our client engagement process and go through the exercise of discussing this with the clients. This served to help us to uncover and get more confident in the value we provided to them by the processes and procedures we used (our Intellectual Capital if you will). Prior to this, we had not really thought about this as it all revolved around the hour and applicable rate.
As part of the engagement process, we moved the clients on to monthly billing which was, again, a difficult process in some ways as they were used to “you work now, bill then and we pay later.” Speaking to our customers now, they are very happy with the process—they have certainty, clarity and comfort that they’re not going to get “a blister” of an account from us—everything is priced and signed off up front.
We then proceeded to get on with doing the work. If I may hark back to the timesheet model—assuming we have 10 staff and they all spend 15 minutes per day in doing timesheet—by dumping them, I freed up and additional 150 minutes per day (12.5 hours per week) which could then be spent servicing customers, training or on business development. All of this came at no additional cost. The month end process of reconciling timesheet, doing bills, reviewing write-offs and sending out the bills was all stopped. This would free up a minimum of an additional 25 hours per month. So, I’m already about 75 hours ahead per month.
Couple this with the fact that we don’t then have any debtors (all invoices are raised on the day the direct debit comes in) the additional time taken to collect the outstanding accounts has been removed. This would have totaled about 20 hours per month plus the costs of mail, phone calls, faxes etc. I’m now about 95 hours per month ahead with reduced costs.
Now, with the extra 95 hours per month I have, we are able to work more on the client and “follow the rabbit down the hole” on issues where we can add value to the customer. The admin team are working on further development of our internal systems and processes which then improves our efficiencies and traps our IC. My team are and have been encouraged to think about what they do rather than just get it out the door so we can bill it. They’re coming along really well and developing at a far more rapid pace than that which they were able to before.
One other thing we’ve done is signed up with Principa. We’ve found their products to be extremely useful in providing high value, challenging proposals to our customers which help them in attending to the raft of issues they need to grapple with as they move their businesses forward.
All sounds terrific doesn’t it?
There have been a couple of pitfalls. We didn’t get our pricing right the first time around. This is what I refer to as the “learning premium.” We have developed our skills in identifying value AS IT RELATES TO THE CUSTOMER rather than as we perceive it. This is a big issue because, as accountants, we’re trained to focus on the quantitative issues of the customer—profit, balance sheet, cash flow and tax. They’re all definable, measurable, provable and totally meaningless (in a value way) to the customer. The customer wants your help in understanding their business, working with them to build and drive their business, to think for and with them and to help them develop their own set of skills. You can’t really do that by looking at historical figures—you don’t drive your car spending all your time looking in the rear-vision mirror!
There have been a couple of customers who just “don’t get it.” Or, should I say, ex-customers. If you’re going to do this, be prepared to lose a few on the way. If I can be so blunt, they will more than likely be the customers who you didn’t really enjoy/want anyway.
There was also a bit of a short term “blip” in the cash flow. Instead of having a succession of big payments coming in, there were very regular smaller amounts coming through. Sure the debtors as at 30 June paid up (eventually—one of them just last week!) but it took quite a while. And I put up with this payment crap for years!
As part of our ongoing development of our business, we also spend a fair bit of time on the following:
- Team “love-ins” twice a year where it’s a full de-brief of what we’re doing well and not
- Up-skilling our team and up-scaling our IT hardware and software to enable us to be more efficient
- Workflow management processes (all our compliance work will be done within five months of year-end) and
- More “down time” in the office where people are encouraged to just talk
So then, how are we positioned now? Well, life has become a whole lot more enjoyable. I have employed a General Manager who now negotiates all our terms and pricing with existing and new customers. He is from a banking background and has terrific training for this type of role. The rest of the team (technical and admin) have been freed up to do what they do best—work, think and engage with each other, the customers and the rest of the people we deal with in this business (banks, lawyers, financiers etc). They don’t need to be concerned about how much time it takes—it’s all about the results. Results are what counts to our customers and that is a large part of how they assess the value of what we do.
The team is also more focused on thinking for the customer rather than worrying about the time it takes to do things. Again, a far better result is created.
In a discussion with my GM and one of my senior guys this morning we crystallized what it was all about. It’s all about qualitative assessment of what we do rather than quantitative measurement. If we concentrate on the qualitative things:
- Our internal relationships
- Our customer relationships
- Creation of value for the customers we are working with
- Open, honest and considered responses to customer queries
- Proactive, challenging proposals for the customers (as a result of our earlier thinking)
- Our relationships with other people who touch our business, and
- Fostering and refining a great environment for everyone to flourish in
then the results will look after themselves.
All sounds very “new age” doesn’t it? Maybe it is. But it works. Very well.
Now, for the quantitative types out there, here are the results:
- Growth of >30% (increasing)
- Profits up a little bit (but a lot more this year)
- Staff turnover of zero (actually negative as we’ve put more on)
- Cashflow improved out of sight
- Me working about 3.5 days per week (could do less, but I enjoy it)
- Average client fee has increased to about $18,300
- Debtors of zero
- No write-offs
- Very collegiate and supportive culture in the place, and
- Lots of customer referrals (hence the growth)
So, from a quantitative point of view, I cannot tell you what my profit on any one customer is. I don’t care. If we like dealing with them and we believe we are being fairly remunerated for the work we do, that’s fine. I’ll bet most accounting businesses out there would be able to tell me who their non-profitable customers are without looking at a time costing model—they’d just know.
From a qualitative point of view, I’m pretty sure we’ve got a fair way down the road. We’ll never reach the end of it—I don’t suffer that delusion—but the whole place is a far better place to be now than when I was keeping track of my life in six minute increments. I recommend it.
It’s worth pointing out that this isn’t merely a “pricing strategy change.” This is a business model change.
A business model is the way in which a firm monetizes the value it creates for its customers. What makes the Firm of the Future just such a change is that it is no longer selling time, but rather Intellectual Capital.
In a service industry, like an airline, if a seat goes unsold, that revenue is gone forever—it’s what economist’s call a “rival asset,” since it can be used by only one person at a time.
But a PKF that knows it sells Intellectual Capital also knows that IC is a “non-rival asset—meaning it doesn’t disappear just because it’s not being utilized. Therefore, the service analogy of “unsold seats” = “unsold time” doesn’t make sense in an IC framework. Just because my book sits unread on your shelf does not mean that someone can’t benefit from it during that time.
This is an enormous difference in how to think about what you really sell, much more liberating than thinking about the confines of time.
Matthew brings up another excellent point—his concept of a “learning premium.” We are often asked what are the risks of adopting this model, and there are no doubt some short-term costs.
But those must be compared to the mistakes you are making now, not some utopian idea where everything is 100%. You have to consider that learning premium as an investment in a better future. It is, after all, a short-term cost, not perpetual.
There are many other lessons I hope you take away from Matthew’s experience. Reading our Trailblazers is always exciting, since no two firms take the same path to becoming a Firm of the Future. They are as unique as each butterfly. Or each Black Swan.
If I could Matthew, I would hoist a glass of Black Swan wine with you, to congratulate you and your team on your tremendous progress.
I was thrilled to learn about the advertising agency Fletcher Martin in Atlanta, Georgia. They have implemented many bold—and all too rare—strategies, such as stopped doing “pitches,” offer a full money back guarantee based on results, do not get compensated by the hour, and trashed timesheets.
Andy Fletcher, President and CEO, was kind enough to write-up the following case study of his agency’s transition to what we at VeraSage call a Professional Knowledge Firm. Here is Andy in his own words:
About two years ago I began to wonder if there was any hope left for the advertising agency industry. Really. Any hope at all?
It seemed to me that our industry was in a freefall nosedive and we just weren’t strong enough to pull up and out of it. Agency/client relationships had slipped to an all time low of less than three years, major advertisers had relegated the agency selection process to search firms and our compensation was put in a queue in the purchasing department. Agencies had finally become interchangeable. Surely not a commodity, but all too close for comfort.
Obviously I had become a bit overly dramatic. Our industry is as alive and well as most any could be considering the current economic climate. More importantly, I have realized it will do me or my company very little good to try and change the entire industry.
My agency, Fletcher Martin, is located in Atlanta. We are majority owned by a holding company somehow headquartered in both Toronto and New York. Of the multiple entities that make up the MDC Partners dynasty, we are somewhere in the middle in terms of size. When it comes to fame, we pale by comparison to our wildly successful big brothers in Miami and Boulder. Crispin Porter + Bogusky casts a long and foreboding shadow throughout our corporate family and the industry at large. For this I am surprisingly grateful. The attention they garner on a regular, if not daily basis, has allowed my agency to embark on an entirely new approach to our business. Our success will provide a possible template for other MDC agencies to explore. Our failure (perish the thought) would cause no over arching financial effect.
In a nutshell, we changed everything about our business model. We weren’t stupid or even fool-hearty. For our existing clients, we continue to operate under the terms and conditions that were in place at the time they selected us as their agency. To expect them to adopt our new approach after the fact would be both unfair and ungrateful. We hope, however, that some will explore that option as our success continues to mount. For this particular discussion, I will focus solely on our new approach to compensation. It is not entirely new or totally unique, but it is nonetheless rare.
There were five critical factors that shaped our new compensation plan. First, our steadfast belief is that clients actually don’t value “free” even though they may seemingly ask for it all the time. We took a candid look at our recent (i.e. about the last ten years) recommendations to our clients. We eliminated those that our clients paid us to develop. We selected what we thought was the best strategic advice we had offered. Sadly, we determined that none of our best counsel had been implemented. Now I know you could say that that our thinking was blatantly flawed and rightfully rejected. You could also conclude that our clients showed insight and wisdom to select alternative approaches. But the fact remains, we instituted and executed the strategies that they put forth. We did so honestly and with honorable intent. After all, the execution of their existing approach was our only opportunity for compensation. To no one’s surprise, we failed, they failed and a new agency appeared on the horizon.
Second, with failure having been confirmed with a client’s current agency and failure almost assured within three years with whomever they hire, everyone is looking for a better deal. I actually used to be amazed at this one simple fact—when a marketer fires their agency, they automatically want to pay the next one less money. They actually seek success for less than they paid for failure.
Third, agencies make the same amount of money whether their work performs for the client or not. We have become somewhat like professional athletes. It doesn’t matter if we help our team win or lose, we will still get the same check. Unfortunately, it appears most all of us in our industry are willing to accept the league minimum rather than those headline generating, multi-year contracts.
Fourth is the always stated desire for a “partnership” between the client and their agency. It would seem that this little topic would be the most easily achieved. After all, clients routinely include their desire for an “agency partner” in their RFP, and agencies mention “partnership” in their capabilities about as often as they as they do “integration.” I acknowledge this as a noble goal, but it is none-the-less unachievable. In a true partnership, one partner does not pay the other. They share. In a true partnership, one partner does not fire the other. Normally one buys the other out of the partnership. You get my drift.
The fifth and final factor is the actual assignment or “scope of work.” Too often agencies are asked to provide the next executions of failing strategies. Marketers jump to the conclusion that a new agency will breathe new life into a tired brand message. They skip the often painful process of reexamining their product, service, distribution and ultimately the customer expectations that have no doubt shifted in their marketplace. This all but assures the new agency will fail. We tell our clients it just doesn’t matter how well you say the wrong thing. So, what did we do? We eliminated the assumption of failure. Shocking, I know. We only engage with a new client on the following terms.
We will only work with clients who allow us the opportunity to fundamentally affect their strategy. We will not produce any speculative recommendations or “initial thinking” until we are engaged. Subsequently the client must allow us to challenge their current strategy and provide us full access to all senior management within their firm, current customers, channel partners and market data and research. This evaluation will result in a fully executable strategy in detailed plan form. To assure success, the client must pay for this plan. The price we charge is based on complexity of the assignment and degree of difficulty. We believe that the more differentiated our client’s products or services are, the less difficult it is to develop the strategy. The reverse is obviously true if the client lacks meaning inherent differentiation. In those cases we charge more. It has been proven that our new clients are much more attentive to the planning process and place high value in the ultimate deliverable due to their financial commitment. Because the client paid for the plan, they own it. They can give it to any agency to execute. If they want us to execute it, we move to a new phase. We will risk our entire compensation going forward against success of the new strategy.
It really is simple. If our client doesn’t achieve greater success (make more money) with us than they did before us, we shouldn’t get paid any more money. None. If they make a little more, then so should we. But if they make a lot of money, then so should we. We should be paid based solely on success. Not based on how many hours we spend or on a percentage of how much our clients spend in advertising. We are still not a “partner” but we are unquestionably in the same boat.
There is real upside for the client. Failure is cheaper than ever before and success is the only result that costs them money. We love it because we can make real money for our work, but only if the client succeeds.
As you can imagine, many companies we present this to push back. Their greatest fear is that we will somehow get credit for their success that was not our doing. That’s fine. If there are so many things going right for their sales unrelated to our efforts, they probably don’t need a new strategy any way. Others have mentioned they have no way to truly measure success. For instance, what if top line growth is as important as other criteria? No problem. I have never known a CEO that didn’t know if his or her company wasn’t more successful one year to the next. However they judge it, we’ll make it work. Frankly, we’ll use their personal compensation deal. However they calculate their incentive plan is good with us.
To pull this off, we had to change a lot. We no longer participate in traditional agency reviews. They almost always require spec work. We have to say “no” and that is almost unheard of in our industry, let alone our previous culture. We hear frequently that there are “plenty of agencies out there that don’t charge for the strategy.” We eliminated timesheets to eliminate any temptation to charge hourly “just one more time.” We have to stick to our guns. Our clients pay half of the strategy cost before we even begin. That almost always generates spirited discussion.
So far we are more than pleased. We have been hired by good new clients. Our work is improving because it is based on solid strategies. Our clients really like the reality of our success being solely tied to their success.
Congratulations to Andy and his entire Team at Fletcher Martin for being another brave penguin, among the first in the profession, to leap off the iceberg!
I had a great conversation this week with Michael Stewart of Integrity Wealth Pty Ltd, outside of Brisbane, Australia.
I’ve known Michael since his days with Results Accountants’ System under Paul Dunn and Ric Payne. Then he was with Principa, and now is with Integrity as General Manager.
As of October 1, 2007, the firm eliminated timesheets. More empirical evidence that this is the wave of the future if firms are serious about operating effectively in an intellectual capital economy.
During our conversation, I asked Michael to provide me with a case study on his firm’s transition to becoming a Firm of the Future.
Here is his first installment, as he wants to add to the story in the future to inspire others:
Hello Ron.
Thank you again for speaking with me during the week. As is always the case when interacting with you, or your material, I left feeling further inspired; and also somewhat humbled—there is still much for us to learn and implement as students of pricing and value.
As agreed I’m sending this email now and if there is sufficient interest from the VeraSage community I’ll follow up with a more detailed case study. While getting rid of timesheets was just one step in an overall strategy to change our firm, it has proven to be a critical one. Not being an accountant myself I’ve never had to record my life in 6 or 10 minute units (and if I had I probably wouldn’t have lasted very long). So in some respects I don’t think I can really convey some of the differences it’s made to individuals within the firm. But I do know what it’s done for our mindset, how we promote the firm, and how both clients and team members react to a no timesheet model—and it’s all positive. Perhaps in a future email I’ll get one of the team to write their thoughts. As an example, Denise Gibbons (Partner) said to me recently “I used to make myself sick preparing bills for clients”. We don’t have to worry about that anymore, which in itself has to be a major win.
As a summary:
Practice Profile:
- 2 partners + 11.5 FTE (includes our financial planning division)
- 2006 revenue $645,000
- 2007 revenue $735,000
- 2008 revenue $1,180,000 (growth approx 50/50 acquisition/natural growth)
- Approx 400 clients in Accounting division
We are located in Clayfield, Brisbane, QLD, about 10 minutes from the heart of the city. Over the past 18 months we have been working to redesign the business on many levels in order to create a place that will attract team members. The partners, Denise & Mark, were very keen to implement many things but like most firms were struggling to balance client work with internal goals. I joined full time in October 2006 with my focus being on establishing the strategy and infrastructure that would attract team members and allow us to grow. For a firm of this size to hire someone who does little or no client work was a significant decision, both financially and in terms of mindset—the partners were agreeing to hand over the day to day running of the overall business so they could focus on client work and development of the team.
We made the decision to abolish timesheets as of 1 October 2007. We had been talking about it for at least 9 months prior to that and had committed in writing to the team we would do it. There were many discussions on whether we should keep timesheets at the same time to make sure, well, to make sure the sky didn’t fall in I guess; or whether we should still record total time on the job to identify scope creep. Finally common sense prevailed, we chose to back ourselves, we took the leap, and haven’t looked back.
How it works:
- All clients now receive an engagement letter with a fixed fee and a date for when their work will be completed. Typically the fee is based on last year + 10%. We review each job and the scope of the work before determining the price. Mark, the partner of the accounting division does the initial review. We then sit together and as Chief Value Office I challenge anything that has not seen a minimum 10% increase. (This is in addition to a 10% increase last year for most clients). Mark is right on the page with value pricing so he identifies any special work or areas in which we could add significant value. Though for most work it’s very similar year in year out.
- We must receive the signed letter back from the client before work begins. Naturally there are some long-standing clients where we respect the relationship and we haven’t bothered trying to force an agreement upon them. So long as they agree to the price we’re happy.
- We now ask for payment of invoice immediately upon completion of work, instead of 14 day payment terms. New clients often have to pay $1,000 upfront for us to review their work, then we quote on the scope and price of the work that needs to be completed. Again, the client must agree to all terms in writing before the work begins. We haven’t worried about moving to bill existing clients upfront. Instead we have focused on workflow—if we can get the job out the door quickly then we can invoice sooner. Then of course you need a system to chase debtors (receivables for our international colleagues).
- We initially set a minimum fee of $1,000 for new clients. We have since moved that to $2,000 and will soon be increasing to $3,000.
- We currently have just one KPI that has replaced timesheets—a monthly invoicing target. The entire accounting team are responsible for ensuring we make this target. I have set the budgets for the firm, Mark then looks at all upcoming work and selects the jobs to be completed each month. Then we just get on with it. If we make target, we know those jobs have been completed. Nice and simple.
- Monthly targets are based on a combination of what we have invoiced for the same period in previous years; what the firm would have achieved on a hours x rate x productivity model; plus any price increases, allowances for special work or value priced engagements etc. In a firm of our size it’s pretty obvious if people are working hard or not. If productivity or workflow is lower than we believe it should be, it’s usually more to do with planning, getting the right people doing the right work, and resourcing, than it is a lack of effort by the team. In other words we believe people come to work with the intention of working hard; we just needed to get the planning and infrastructure correct so their efforts turned into outputs.
To ensure I was happy with the monthly targets I conducted a financial analysis using Principa’s FirmPlan—I think it’s the best tool I’ve come across in relation to looking at the financial performance of a firms that record time. Within it I compared our numbers to some benchmarks, ran some what if analysis on impact of price increases etc. From there we picked an annual revenue figure, divided it by 12, made some adjustments to each month based on seasonal fluctuations, and targets were set. We have 15 years of history on what price our clients will pay for most of our work and how much work we can do in a given period—so even if that is based on a timesheet model it is a well established precedent and provides an easy starting point for getting rid of timesheets and quoting a fixed price before the work begins.
- It’s important I point out how helpful our team, in particular our admin team, have been in adopting this change. For the professionals it has made life easier. Though for Barbara (admin, reception) it has created work. Who gets engagement letters; who doesn’t; changes to the system every other week as we learn new things; extra work in preparing engagement letters; updating the workflow system etc. We continually communicate why we are doing these things and we are very grateful that all of this has been handled with a minimum of fuss and we are a better firm as a result.
Ron, there will be many other things to discuss and share: strategy, vision, client selection, pricing, marketing, recruitment, post job reviews, successes, failures, things we have no idea how to approach, examples of value pricing successes, and comments about “accounting utopia” (more on that story in another email). This email is to get the process started. On behalf of Integrity I’d like to say a massive thank you to everyone who has shared their ideas with us and myself over the years. We hope our contribution is helpful to others who are heading down this path.
Ron, please feel free to publish my contact details in case anyone would like to contact me.
Michael
Michael Stewart
General Manager
Integrity Wealth Pty Ltd
Integrity Chartered Accountants & Business Advisors
http://www.integrityaccountants.com.au
http://www.integrityfp.com.au
Tel: +61 (7) 3262-3533
Thank you, Michael, and we look forward to more details on your firm’s transition.
Congratulations to the entire team at Integrity for blazing the trail for your colleagues—and all of those reluctant consultants—to follow.
This is truly Firm of the Future 2.0.
Congratulations to our newest Trailblazer firm, Base52 Ltd in Hertfordshire, outside of London (the same city as O’Byrne & Kennedy).
Fred McBeen is the Director and Practice Manager of Base52. I was privileged to meet him at a talk I gave for CIMA last June outside of London.
Here is Fred’s email reporting on his firm’s progress since our meeting:
Dear Ron,
I hope that you are well.
You may recall we met at a UK conference a year or so ago and exchanged e-mails after this.
I was enthused by your presentation and by your book, The Firm of the Future and implemented some changes to our practice after reading this. You asked if I could send you an update after 6 months or so and let you know how things are going, so here goes:
Broadly, things have gone quite well. We are a relatively small practice having only started a few years ago. In the last financial year we grew revenues and profits by about 35% and a good proportion of this growth was due to “Value Pricing” measures we implemented.
We scrapped timesheets about 6 months ago now and I don’t think we have missed them. We set work completion targets every month and track these every week so as practice manager I have a good feel for how work is progressing. Being less hung up about hours has meant that we focus on quality even more and ensuring that we do a first rate job.
I mentioned in my previous e-mail that we had secured a contract with one customer and I had followed value pricing principles and priced this 2 or 3 times higher than if I had used my normal “hourly rate” method. I am so pleased that we did this as the work has been problematic. Nevertheless we have made a good profit on the contract and have done what we said we would do. On our old pricing methodology it would have been very hard slog for very little (if any) return which would have been demoralising for the whole team.
My conversion rate for signing up new customers has dropped from around 70% to nearer 25%. The prospective customers we have not signed up have not been prepared to pay the higher prices I have quoted. By and large I am satisfied that they would not have been the right customers for us. In a tough market, we are finding it more difficult to pick up new customers but for now I am holding my nerve and looking to compete on value and not price.
I have been a bit less tolerant with customers who do not fit our ideal profile. Again it is a tough call but I expect to give notice to a couple of customers shortly who have repeatedly ignored our advice and do not seem to appreciate the work we do for them. This will mean a short term hit on revenues but will hopefully will be for the longer term good
I have taken on board the views in your book about building capacity before taking on new business. We have invested in training, systems and a bit more space so feel ready to expand with the right customers. We are only a small team and I am hoping that I can retain my key team members for the immediate future. If I can do this, I think the prospects for growth are very good.
One of the biggest changes in my own attitude has been self belief and confidence that what we offer is good value and we don’t need to be apologetic about this.
So to summarise the progress report. It’s so far, so good. Our target is to grow profits by another 30% or so this year. I will let you know how it goes..
Thank you again for your advice and support.
Best regards,
Fred McBreen
Director
Base52 Ltd
Fred makes many excellent points here, probably the most important being that you’ll never be paid more than you think you’re worth.
Also, it’s nearly impossible to implement Value Pricing with the wrong customers. I’m a bit concerned, Fred, about your acquisition rate dropping from 70% to 25%. This may be just a temporary drop given your new pricing strategy.
If it persists, however, it may be a indicator that you are not effectively communicating value to prospective customers, since customers aren’t as price sensitive as they are value conscious. If this continues, you may want to develop a “stripped down” version of your services at a competitive price (pricers call this a “flanking product"), which will allow you to acquire some of these customers and then as time goes on they will purchase more from your firm.
But I don’t want to take away from your incredible accomplishments in the past ten months.
Congratulations again, and please keep us posted on your progress.
In August of 2004 I traveled to Lancaster, Ohio to present a Value Pricing workshop to Snyder & Company. I’ll always remember this trip for many reasons, one of which is Victor took me to the Accounting Hall of Fame, located in the business school at Ohio State University.
The partners immediately grasped the opportunity of transitioning from hourly billing to Value Pricing. We also discussed the benefits and costs of timesheets, with me arguing strenuously they trash them.
Well, they did. As of January 1, 2008, Snyder & Company is a Timeless firm, both for pricing and as a misguided means of measuring so-called “productivity.”
Here is the email I received yesterday from one of the firm’s partners, Victor Christopher:
Hi Ron,
Hope all is well. Not sure if you remember me or not, but you visited with our firm a few years ago to help us get our arms around the Value Pricing Philosophy. It’s been a long process, but we’re finally completely finished billing by the hour.
...And I am proud to say that since January 1st, I’ve had zero billable hours...since we officially did away with timesheets on January 1! Much to the surprise of others in the industry, the walls did not come crumbling down around us...work is still getting completed...staff are still getting paid (and partners too)...and our clients are happy.
We’ll have to catch up at some point later this year.
Sincerely,
Vic
To all the skeptics out there, take a good look. This is the future of the profession. Deny it all you want, but it’s happening every single day.
Your dogma of timesheets has been tossed onto the ash heap of history—and not a moment too soon.
Congratulations Snyder & Company for becoming one of our Trailblazer Firms.
