woodard: move past reports; deliver results | the disruptors - 卡塔尔世界杯常规比赛时间

dashboards and statements aren’t enough—accountants must help clients turn data into action.

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according to woodard, clients are seeking two primary outcomes: journey protection and visibility. “i find in almost every business the most sellable product is journey protection,” he explains.

journey protection encompasses everything from accurate financial information that protects relationships with banks and lenders to tax compliance that keeps clients “out of hot water with all the different sales tax and payroll tax jurisdictions, with the irs,” woodard says. it also includes the softer but equally important byproduct of peace of mind.

the second critical product is visibility. woodard compares most business owners to drivers trying to navigate “with all the windows blacked out” and using only gps-level accuracy. “they’re running into all kinds of stuff, creating otherwise preventable errors. and if somebody were to come to them and just say, ‘here, let’s clean off that windshield. let’s clean out that rear-view mirror. let’s show you what’s around you and let you see and drive that way.’ that’s invaluable.”

in woodard’s view, even providing the products clients want – journey protection and visibility – isn’t enough. accountants need to move up the value chain to provide knowledge and transformation.

according to woodard’s definition, service work involves the “exchange of body movements for money,” which includes a mechanic moving a wrench, a surgeon moving a scalpel, or a bookkeeper moving their fingers over a keyboard.

knowledge work is the next level up and is characterized by utilizing one’s knowledge to educate and empower clients, enabling them to change their circumstances. from the healthcare arena, woodard cites nutritionists and physical therapists, whose work can “take years off my life.” for accountants, knowledge work includes tax consulting and advisory work.

the key difference between service work and knowledge work is conversation and education. “you cannot do a meaningful tax analysis,” woodard explains, “unless it’s a conversation with the client. and the conversation with the client can’t happen unless you’re educating the client.”

in the transformation economy, which is the highest level of offering, “the ultimate product of the knowledge worker is the client.” this shift requires starting with the end in mind — recognizing that “your job is to manufacture the best possible product,” and that product is an improved version of the client, whether individual or business.

unfortunately, woodard observes that many accountants fall short of transformation with their clients. they may provide the knowledge that contributes to their transformation, but they’re not “seeing it all the way through to the end.”

in addition to providing the dashboards and educating clients on ratios, woodard urges accountants to take the next step. “i’m going to understand that i need to work alongside the client to turn this financial information into some positive impact upon them.” though this is a relatively short step, many accountants “just stop at delivering the information, thinking the client knows what to do with it.”

moving into transformation work requires intentional client selection. “if you start off with the wrong raw material, you can’t create a good finished product,” woodard explains. if you have “an uncoachable client, a client that won’t listen to you, that’s not a formula for transformation work.”

pricing transformation work is another challenge. woodard recommends starting with discovery engagements priced at “0.1 percent of their annual revenues.” this formula creates client buy-in by identifying wealth-generation opportunities and understanding what is most valuable to the client.

using what is learned from the discovery process, accountants can create predictive value propositions, with pricing based on a percentage of the wealth that is likely, but not guaranteed, to be generated by following the accountant’s advice. when the pricing and value proposition align, “they will keep paying you, and maybe even pay you more monthly as they begin to see results. you just have to start someplace.”

12 key takeaways

subscription pricing eliminates the perverse incentive of rewarding firms for accepting problematic clients who create more work and, consequently, generate more billable hours.
stop rewarding yourself for extra work by keeping bad clients.
the biggest obstacle to subscription pricing is the fear that clients will abuse the all-you-can-eat option, but protections can be put in place. managing your portfolio of clients will also mitigate that risk.
retention problems often stem from demanding clients who run off good team members and strain processes and technology.
you don’t need a timesheet to identify the clients to fire. simply ask the people who work directly with the clients.
peace of mind has quantifiable value in a subscription model because 100 percent of clients receive it, even if only a few require issue resolution.
clients who want peace of mind in perpetuity need accountants in their lives for the long term.
the profession rewards expertise in service work, but transformation work can have a greater impact and be more valuable, while requiring fewer formal credentials.
in the experience economy, the product is how you make clients feel. in the knowledge economy, the product is how you solve the clients’ problems.
in the transformation economy, the ultimate end is the client’s transformation. the deliverables of financial statements and tax returns are a means to that end.
if you don’t transform your business model, private equity will guarantee that your firm will be aggregated, automated, and owned by others in the future.
private equity will bifurcate the profession, with large, private-equity-owned firms run by a c-suite and board alongside small, boutique firms serving wealthier clients who want personalized service.

more about joe woodard
joe woodard is the founder and ceo of woodard®, a company that empowers cpas, enrolled agents, professional bookkeepers, and other business advisors with education, coaching, resources, networking communities, and consulting services. as a seasoned author, consultant, business coach, and national speaker, woodard has trained over 150,000 accounting and business professionals in practice development, technology trends, strategic consulting, and optimizing the use of accounting software. woodard is also the host of scaling new heights®, one of the world’s largest and most respected conferences for accountants and bookkeepers. each year, for the last 10 years, accounting today has recognized woodard as one of the top 100 most influential people in accounting. woodard is a published author with accounting today, the journal of accountancy, insightful accountant, cpa practice advisor, and mcgraw-hill. additionally, the woodard report™ reaches over 100,000 readers annually within the accounting and bookkeeping space.

transcript
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liz farr

welcome to accounting disruptor conversations. i’m your host. liz farr from 卡塔尔世界杯常规比赛时间, and today is a special treat, one of the geniuses of the accounting profession, joe woodard, who is the founder and ceo of woodard, co host with heather satterley of the woodard report podcast and host of the scaling new heights conference, which just happened last week in orlando. welcome to the show. joe,

joe woodard

great to be here. liz,

liz farr

thanks. and we have lots of questions, and i’m sure you have a lot to say, so we’ll just jump right in. now,

joe woodard

sounds great.

liz farr

now, one of the big problems that accountants and bookkeepers have is that their clients complain about the prices. but as you explained in a keynote at firm growth forum last month, this arises from a disconnect between what accountants think they are selling, which is not actually what clients want to buy. can can you talk about this a little bit?

joe woodard

yeah, and i think that there are a couple of of separation points between what the clients want to buy and what what the accountants are selling. and the biggest separator, i’m sure a lot of your guests talk about it, that’s the whole hours problem. i think you had ron baker on recently, and i’m sure he had something to say about time. so i’ll kind of echo some of that and say, this is the this is the way i would explain, maybe a little hyperbolically, but not that much if i’m going into cvs and i need tums, right? so cvs’s job is to deliver to me the tums capsules. now we can actually keep this metaphor going for later in the conversation on what am i actually buying? because i’m not buying tums. that’s still a means to an end, right? at least it’s cvs job to sell me the tums. so what if, if say it, i hung around in their store for twice as long to buy the tums as i needed to, i took a circuitous path. maybe i looked at some of the kids toys for an upcoming birthday party where they’re going to charge me twice as much for the tums, or, let’s say that their team member spent twice as long stocking the tums because there was a misunderstanding about where it was supposed to go on the shelf, and now that suddenly become the customer’s problem, because it took longer to stock the item on the shelf. as ridiculous as these things sound, that’s exactly what we’re doing to our clients. you’ve spent longer in my office by you know, for me to deliver your product, or my people spent longer in the preparation of the product. therefore, the value of the product changes based of some off, some arbitrary time metric. now, as long as that’s the case, there’s always going to be a resistance to the billing for selling the wrong product,

liz farr

exactly. and what is it that clients really want to buy? you know, it’s not, it’s not the tums. you know, we go into cvs and we’re not buying the tums just to have these kind of chalky tablets on our shelf, but we’re buying the results.

joe woodard

the absence of the heartburn, right? yes, so, so it’s the ultimate outcome that it really comes down to. so first, we’re packaging is in a way that doesn’t represent the product. the package is the tums capsule. the package is not the time it takes to stock or to buy it. so we have the wrong the wrong delivery system. but on top of that, we’re not focused on the ultimate end of what we deliver. so if we say, well, joe, i’m ahead of you here, we value price, which, by the way, a lot of people conflate with fat flat fee pricing, which is not the same thing, but they so they flat fee price, and we understand what people are really buying is the financial information. so we’re selling the right product and we’re delivering it with the right billing system or pricing system, and then they’re still getting resistance to the pricing and liz, you really hit the nail on the head. it’s because, at the end of the day, people aren’t even buying the financial information. what they ultimately want. or to put it in spice girls terms, what they want, what they really, really want, is the solution to the problem. they want to buy the outcome. and if we will just cut through all of the intermediary steps and sell them the health that they want from from the medicine, then they will pay what it’s worth to get there. and as ron baker would say, he’s fond of saying that that water is either valuable or anti value, depending on how you look at it. if i’m dying in the desert of thirst, that glass of water might be worth $100,000 to me. but if i lived in new orleans during katrina, water is anti value. so value is relative. and so if i’m suffering from extreme heartburn, if i am in some country that doesn’t have a supply chain like the united states does, and somebody were to offer me a tums, it might be worth 30 or 40 bucks a capsule to me, as opposed to the cvs around the corner. so if we also think that if we’re selling the outcome, and we also think the outcome is static, not relative, then we run into another pricing problem.

liz farr

so what is the the outcome that our clients really want from us? you know, it’s clearly not a tax return.

joe woodard

not an anti acid, right? where’s the metaphor breakdown and apply to us? what what they want? what i found that’s most sellable, because there’s a lot of answers to your questions. liz, but i find in almost every business they’re the most sellable product is journey protection. that doesn’t mean that’s the end of their journey. i’m saying journey protection is the thing. if you were a storefront, you would put in the window to draw people into your store and and it’s differentiated. h and r block is not trying to protect journeys individually or business when they do a return. they’re trying to create a transaction and and when most bookkeepers engage, they’re also creating transactions. how how many transactions am i capturing? how many reports am i outputting? tax returns? same thing, but, but if we were to focus on not those deliverables, but instead on the overall meta product of i’m protecting this client’s journey, then everything we do up underneath it, whether it’s accurate financial information, protecting their journey with banks or lenders, or even their own ability to manage their company, their tax liability and the accuracy of their returns or the compliance matters, that’s more direct journey protection. i’m going to stay out of hot water with all the different sales tax and payroll tax jurisdictions with the irs. then there’s a byproduct of journey protection, which is softer, but very important, called peace of mind. and we can sell them as a bundle deal. i’m going to protect your journey. i’m going to give you peace of mind. because a lot of journey protection is preventative and and so they don’t see that they saved money on penalties and interest, because you saved them before they incurred it, right? and so it becomes a little softer on the saving side, but if we’ll couple it with that peace of mind on the preventative side, then we get the proactive and the preventative, and people will buy that product, if we will just package it that way and frame it that way, and then if we will make everything else a means to an end, it’s the pill to get to the acid reflux, you know, health, if we will make the tax return, the 1099s, the w9s, the sales tax returns and all that other stuff they couldn’t care less about until it becomes a problem. make that the means to that end. they they can relate to that. that’s one of the two big products,

liz farr

right? and what’s, what’s you meant? you said one of the two big products.

joe woodard

i had to tease the audience a little bit, all right, yeah, so, so let’s frame the second one, and the second one is visibility. they are flying blind as business owners. there was this movie that came out on netflix a while back and had this horrible premise, even for a sci fi nerd like me, that that is called black box. and if you, if you somehow, if you saw the the creatures, then they, they did, they consumed you. it was just weird premise. but there’s this one scene i remember that’s going to be worth it to your listeners here, that they were trying to drive this car with all the windows blacked out so that they could survive. because that was the whole idea is you couldn’t see beyond. you couldn’t actually look or you were gone. and they were trying to drive the car with the windshield, the rear view mirror and the side windows blacked out. and they were driving using the gps, which is only accurate to within material discrepancies, right? and they were running into all this stuff. and if they were trying to do that in a real life environment with other people on the roads, they would be dead. and most small business owners are driving their business using the gps, broad stroke measurements, gut feelings. they’re running into all kinds of stuff, creating otherwise preventable errors. and if somebody were to come to them. and just say here, let’s clean off that windshield. let’s clean out that rear view mirror. let’s show you what’s around you and let you see and drive that way. that’s invaluable. so journey protection and visibility are the two products we should be selling, and i don’t i have to tell your listeners, both are still connected to our core products that we deliver. the financial statement is the best path, best path to visibility. and then when we couple it with fp&a, cash flow projections, operating capital management and forward looking metrics and measurements, it takes on a whole new level. but what we still the mistake we make liz is we think what the client wants is the dashboard full of data. and they couldn’t care less about the dashboard full of data. what they want is visibility, and we’ve got to sell them the end, not the means to the end,

liz farr

right? you know, other guests have said, well, they, they may, we may think they want a dashboard, but what they want, really is what the dashboard could tell them if they understood what all the dials and graphs mean and because they’re not accountants like we are they, they just kind of look out. these are some nice colors, but they have no idea what that means.

joe woodard

so i’ve got a fun story, because i fly a lot, but you know, the the cockpit doors open when they’re on the ground, right? i mean, even post 911 i got invited to sit with the when my daughter was little. i didn’t think they did that anymore, but they let my daughter sit there. they took a picture. you know, that kind of brought back old memories when i was a kid. i used to do that a lot of time, but we’ve all looked in the cockpit on the way in, and you see, you know more knobs and dials than you could possibly imagine, right? well, that’s, that’s sort of what’s, what’s in our heads that we know better than to give to the clients, because that’ll, that’ll just overwhelm them. hopefully, you know better listener, but here’s the mistake that the pilots make. they interrupt my movie or my work to tell me what the headwinds are. you know, what altitude we’re going to be flying, what the temperature is at our destination. liz, i couldn’t care less what i want from the pilot is, and i know this where the metaphor breaks down, because, yeah, the knowledge economy, i’m supposed to share some of that stuff, but at the end of the day, what i want is the pilot to tell me when i need to put my head between my legs and start praying right. otherwise, get out of the way and let me enjoy my seat right? and now that’s a strange metaphor, because we are supposed to, you know, inform our client and and expand their knowledge of us and train them and coach them. so don’t carry the metaphor too far. but i but that we do run, we do err on the side of over informing the passenger, and ultimately, the passenger just wants to know you’re with them in the boardroom and the back office, and if something really important happens, you’re going to let them know. otherwise, let them run their business, you know. and there’s value in that,

liz farr

that’s right now. you know, something else you talked about at length in your keynote at firm growth forum was the transition we’re undergoing from a service economy to the knowledge economy. so what is this?

joe woodard

yeah, so my definition, and i’m not seeing it listed this way anywhere else, it’s, it’s sort of my definition of service work is the exchange of the movements of your body for money, right? so the you saw my keynote, so you know what i use in a keynote presentation is i, i talk about the mechanic, and then i talk about the surgeon. and we don’t really think about those being both in the same economic sector, but they they are. if the mechanic doesn’t move the wrench, they don’t get paid. if the surgeon doesn’t move the scalpel, they don’t get paid. right? the only difference between the mechanic and the surgeon is the complexity of the machine that they’re repairing. otherwise, by nature, they’re exactly the same. now, what in distinction? because i know that knowledge work was a topic that you talked about with ron in the most recent episode. so the distinction between knowledge work and service work is not how much knowledge it takes for me to perform the service. it takes a lot more knowledge for the brain surgeon than it does the mechanic correct. but we can we conflate that with knowledge work? well, no, the only difference between typically, we break down the services that require more knowledge versus those that don’t. we call that professional versus labor, but it’s still service work. all right. so. knowledge work is where the nature of the work actually changes. and in my keynote, i compare the surgeon to other kinds of health professionals, health care givers, where it’s the nutritionist or the physical coach that are in the knowledge work category. ironically, again, it requires less knowledge for them to perform that service than it does the brain surgeon. they may even be compensated less for it, because in the service economy, the amount of expertise it takes to perform the service has historically been the basis of how much you get paid. but that’s what’s changing. liz in the healthcare profession will catch up with it much slower than will the business advisory category. but you can have less credentialing, less formal education, and have more of a transformative impact, which is exactly what i would say the nutritionist does. nutritionist and physical therapists for me, have been more impactful than has surgeons. now i’ve never had to have a surgeon save my life, so put that in context, but, but if i, if i go to a surgeon’s table, they’re restoring me to my to my original working condition. but if i go to a nutritionist, they could actually take years off my life and how i feel and how in my energy levels and how i’m able to engage the world. they’re transformative. whereas the surgeon is is a repairing tool, right? they’re restorative tool to my original condition. now, again, that comparison breaks down a little bit, if you want to say some surgeons actually do transformation work. but the point i’m making is, one is a knowledge style and one’s a service style,

liz farr

all right. and so how does this apply to accounting. you know, i can see that the service work is like the manual inputting of numbers into a tax return, or manipulating software to get the bank feeds and everything to bring everything into the financials. but how do we move from those kinds of tasks into the knowledge work?

joe woodard

okay, so it’s a great question, and i would say it’s not just the inputting of the tax information all the way through to review and delivery the tax return. i would still call that service work, even though you’re involving the partners in the process, even though you may have non credentialed people in the preparation side, which is increasingly happening in the profession, and it’s credentialed people, enrolled agents or cpas doing the signature part, even though the credentialing is different, i would call all that service work. but by comparison, i would say that tax analysis is transform transformation work, it would be more like the nutritionist or the physical coach. and it’s not just that the impact of it is different. it’s that there’s an inherent exchange of knowledge you cannot do a meaningful tax analysis, and i’m not talking tax planning, because that’s basically an incremental tax return, tax analysis and tax strategy that is not a meaningful engagement unless it’s a conversation with the client. and the conversation with the client can’t happen unless you’re educating the client on everything from a roth ira to the conversion of roth to roth ira, and all the downstream impacts of that to an s incorporation and a reasonable salary. it’s a conversation, and in that conversation, i’ve learned something about myself that i didn’t know before, and the nutritionist taught me things about my body. surgeons just act upon my body. it’s a completely different nature of work,

liz farr

all right? and so if you’re a knowledge worker, what is the ultimate product that you’re working on?

joe woodard

okay,

liz farr

it sounds like it’s the person,

joe woodard

yes, the client, yes, the so the ultimate product of the knowledge worker is the client, and this is where there’s a distinction between knowledge work and transformation work, because we were at a service economy. now some people would say it’s an experience or knowledge economy. those kind of get equated right now, it depends on who i am. if i’m a nutritionist, i’m in the knowledge economy. if i’m walt disney world, i’m in the experience economy. but because value is broken down between how you solve my problem and how you make me feel, all right? so if you’re, if you’re in the, if you’re in a how you make me feel, value prop, you’re in the experience economy. if you’re how you solve my problem, you’re in the knowledge. economy, if you’re in that next stage of evolution, you can solve my problem as a service worker too and be very transactional, but we’re talking the next level up, so knowledge work solve my problem, experience economy, how you make me feel right now, some get to straddle both lines, like, like, like, psychological therapists, they also trade in feelings. it may not be the feeling i want to feel, it’s the feeling i need to feel, but they still trade in feelings. but they also trade in solving problems. so those that can straddle both lines, see, they get to double dip on the value prop. and i brought that up for a reason, because accounting professionals also get to double dip on the value problem. see not so much lawyers. you typically only spend money with a lawyer to prevent a problem or solve a problem, and then you the best experience you can have with a lawyer is not to need them. i tell that to my attorney every time i’m done with an engagement. thank you rich. appreciate you. hope to never have to call you again and he laughs. he gets my joke, right? and then we’ll go have lunch or something off the clock, but i hope i never have to call him again. with with accountants. it should be the exact opposite. i hope that you’re forever in my life, right, kind of like the therapist, until the job is done. the only difference is they never work their way ultimately out of a job as a business coach. a therapist, could theoretically do that and and the reason they always want the accountant there is because they’re straddling both value props. i haven’t just solved my problem. i’ll come back when i have another problem. it’s i also need peace of mind, and i need it in perpetuity. i need to have some joy again as a business owner, and i need that in perpetuity. and and those, those services where i can offer both would be in that, that that tax analysis, business analysis, tax advisory, business advisory, coaching. now, if you’re, if you’re servicing only individual individuals in here with 1040 work, then i would say you become a certified financial planner, or some sort of equivalent service line. maybe even get into wealth management, but you can advise them on their personal wealth strategy, and you can still be treating the whole patient with that kind of work. so the way i would layer them liz is, i would say service economy is, is essential because it’s, it’s table stakes. you cannot do the knowledge work, and you cannot do the transformation work without that service work being performed by you or someone else. financials have to be compiled. taxes have to be filed. but if you stop there, it’s like an incomplete golf swing. all right, then you also need to do the work of that nutritionist. what i, which i would say, is more the tax analysis and an advisory work and the business advisory and analysis, fp&a, right? if you stop there, still an incomplete golf swing, because you have to think ultimately, not about the delivery system, but the end product. and if all of this stuff culminates in the fact that the client is the product, and your job is to manufacture the best possible product, then you’ve begun with the end in mind. everything else service and knowledge work become a means to the ultimate end that i am going to create a better version of that client, whether it’s an individual or business, and that means the client is kind of everything. if you start off with the wrong raw material, you can’t create a good finished product, an un coachable client, a client that won’t listen to you the that’s not a formula for transformation work.

liz farr

no, now we’ve tossed around the terms transformation work and experience work and knowledge work. and so what? what is the difference between transformation and the transformation economy and the knowledge economy? you know, i just had ron baker on, and we talked at length about the transformation economy. so what? what? what’s the difference between these two?

joe woodard

well, the the big difference is that ultimate product i’m selling, and if i’m focused on the transformation of the individual, or the client, right? so if the client becomes my product, i’m a transformation. i’m in the transformation economy. if i stop short of that, i i might contribute to their transformation, but i’m not seeing it all the way through to the end, which means i’ve reduced value now with the knowledge work economy or the knowledge economy, it’s obvious to see the connection. all i have to do is say i’m not going to stop at providing the dashboard. i’m not going to stop at educating the client on ratios, or whatever i’m doing, i’m going to understand that i need to work alongside the client in order to turn this financial information into some positive impact upon them. that’s a that’s a relatively short step, but a lot of accountants don’t take that final step, and that’s why it’s so tragic, because they’re so close, right? they just stop at delivering the information, thinking the client needs, knows what to do with it. kind of that whole thing we talked about for with the pilot metaphor. in the experience economy, it’s a much bigger leap, and very few people get there. but if anybody is like me, i’m a science fiction nerd and i’m also a disney-phile. i’m both of those things. so if you want to kind of make the connection on the experience economy side, most of your listeners are not in the experience economy, but it’s just good to kind of make the intellectual leap. i’ll give you an example from the pete’s dragon movie, okay? and i’m about to get emotional, which means i can’t even talk about disney’s product without creating emotion, because their product was transformative. it wasn’t just experiential. so i went into this pete’s dragon movie. it wasn’t the one we grew up with liz, you know, with the cartoon dragon, it’s the newer one, right? so we went to the movie theater and it was the cg dragon much more realistic. my daughter was about eight or nine that that age when everything’s magical, and we’re sitting there, she’s between me and my wife, and we’re watching pete’s dragon, and she’s completely wrapped up into this dragon, and she wants this dragon to be okay. so you know how kids do. and the dragon was in jeopardy. they somebody was trying to kill the dragon. and i remember, see, comes the emotion. so it’s just a movie, but it’s not just a movie, because it’s ultimately about my daughter, right? and this is the impact we can have, right? so she, i remember, she tucked into my side, and then she ducked up underneath my elbow. and i can remember it like it was yesterday. she still wanted to watch the movie. so she, if you were watching the youtube on this, or whatever the video, she poked my elbow up at a right angle so she could look out underneath my elbow, but still be protected by, you know, she was under dad’s wing, literally. and then, of course, the dragon was okay, spoiler alert. and then she was fine. she went back to her popcorn. but, but what disney did at that moment was transformative to me. it’s, it’s a memory that i will carry for the rest of my life, and it will always make me emotional to remember they, they finished the extra mile and got to transformation. and so the way you would value that’s really hard, because, yeah, i paid about that was a matinee movie 10 years ago. so i paid whatever. i paid eight bucks for it. how do you value that kind of a memory? well, disney can’t really do that. well, they can only do it in scaled economics and hope that they get through repeat business right by creating disney loyalist multi generationally. i’m sure they have some metric for measuring that with customer loyalty, but it was worth so much more than the $8. so the question i would ask of your listeners, and i’ll kind of present to you to bounce off of you is how much would say that did that somebody had the power to extract that memory out of my brain? what would i pay to keep the memory in my brain? more than $8 more than $800 right? probably. and that’s the ultimate valuation of the transformation economy. the problem is i didn’t even know what the memory was worth until after i had the memory. and that’s the biggest objection i hear from people is joe, all of this sounds great, but it’s theoretical, because i don’t know the value of my transformative impact until after i’ve had the transformative impact, how can you possibly price that? on the front side, i’ll take a sip of water and see what you have to say. yeah.

liz farr

well, i think the pricing might depend on what kind of transformation it could be. you know, some transformations are amenable to pricing. you know, say you are helping somebody sell their business. you could say, i my price for that will be 1% or 5% or some percentage of the final price.

joe woodard

correct

liz farr

the selling price, you could do that.

joe woodard

so back end economic, you can, you can create a front end formula for a back end economic. that’s one way for sure,

liz farr

right? and others are really hard to price. and i think that then you really have to just guess, what might this be

joe woodard

better had the client guess, right? so what you do is you create a formula that’s predictive in nature, you would do a discovery. and this is where the whole metaphor with pete’s dragon breaks down, because it’s much higher impact than this, right? so if i’m going to into a client relationship, i start with a discovery engagement. the discovery engagement is priced at .1% of their annual revenues. that one is arbitrary, and now that’s my way of doing it, but it works really well. million dollar a year revenue, run rate, $1,000 discovery, $10 million run rate, $10,000 discovery. so i’ve never had a client push back on that .1% of their annual revenues to do discovery. sometimes i call it an assessment, because it sounds a little heavier. it’s all the same process, same same delivery. but in the discovery process, liz, i could create some predictions of future wealth. it could be through reduction in general and administrative expenses, which i’ve assessed, it could be that their labor to revenue ratio is off as compared to benchmark for the industry, which we of course know those things as coaches of accounting firms. and we could say, look, we can do some corrective motions here. and they could be under deploying technology. there are so many things we can see, and then we can create, through either savings on the cost or expense side, maybe we even see some lost revenue opportunities on the top line, we can, we can create a formula, a predictive formula, and then based on that formula, we can say, you know, then our price ends up only being a percentage under the wealth that we all agree here, we’re likely, not guaranteed, likely to drive now, what’s fun about that formula liz, is the percentage can change based off what the client says, but the dollar amount my walk away price doesn’t. so let’s say that my walk away price is $5,000 a month. i’m not going to go below that, right? and we just had a conversation with my consulting team. our walk away price was 25,000 on the initial discovery. it’s a, it’s a big firm. we’re not even going to touch it for less than 25 and then we will, we will, we’ll walk away. but let’s say that i’m doing like a it’s it’s more of a monthly thing. i’ve already done the discovery, and now it’s like, okay, our walk away price is 5000 a month with a one year contract, hypothetically. so i’m not going to give that price to the client. i’m going to ask them to walk through this formula of wealth generation with me. then whatever the client comes up with, let’s say that we can find $300,000 worth of wealth. then i would say, well, you know, then all i want is 20% of the wealth that i’m going to generate 5000 times 12 is 60,000 that’s 20% of 300,000 now. i’m not going to do that like i just did with you. i’m just going to say, you know, then, and i might not even say 20% i might just say, well, easy. then it looks like we’re going to make about 300,000 together with these, with my with my engagement, and i’m asking you to pay about 60 over the next year. all right now, if they had found $200,000 then i would have said, great, it looks like you’re gonna make about $200,000 and i’m only asking you to pay me 60, so i’m going to generate more than three times what you’re paying me. you know, in it, you know, not promises again, projections, not promises, projections. notice that my 5000 didn’t change. the only thing that changed was the multiple of the projected wealth that i’m going to generate. now if at some point they get down below 120,000 if they keep challenging my formulas and go, no, no, no, we can’t do that. no, no, we can’t do that. no, we can’t do that. and they get down to 100,000 of projected wealth generation, we’re probably not going to be in the same universe of price, they’re not going to pay me 60 to make a 40 return, net return, right? so that that’s when i start knowing this, the walk away. but what i really want your listeners to get on this is discovery comes before you create a predictive value proposition. and second, only the client, only the client can ultimately tell you what’s in their head. but if the client challenges the variables in the formula, but they accept the formula, you’ve almost always won already out of the gate, because it just comes down to the multiples. and then you’re not going to start with the 5000 you’re gonna ask them. so whenever i was doing consulting in a different arena, and i had it was just me by myself. i’ll give a really fun story. i sat down at breakfast with a client, and i knew my walk away number was three, but i wasn’t telling them that. i had already met with them. i had already done discovery, met with their leadership team. now, this case, it was a software company, and they had a certain idea in my head of what they believe, of their head, and what they believed that a relationship with me would would be worth on the upside. and they walked into the breakfast with that number. i walked into breakfast without what i thought my number was, and their number was higher. so whenever i said, you know, whenever i said, all right, then what are we looking at here? i wouldn’t give them a price. i told them i knew my walk away was three. almost apologetically, they said, joe, i’m i think they even said the words, i’m sorry, joe, i’m sorry, but we just can’t do anything less than 5000 a month. oh, so i put on my poker face, and i went, well, then we can make $5,000 a month work. but if i had opened my mouth first, i would have given my walk away number. i would have left $2,000 a month on the table. now here’s the happy end of the story. not only did they pay me $5,000 in year one, they paid me $5,000 a month in year two and year three, for three straight years, $180,000 contract, and they did not have one ounce of buyer’s remorse. i probably made them. we never calculated it, but probably the relationship generated over a million for them. so they will keep paying you. probably ron baker would tell me, i should have adjusted my monthly price at some point in there, right? and i probably should have, but they will keep paying you, and maybe even pay you more month over month as they begin to see results. you just have to start someplace

liz farr

exactly, yeah, and that and your experience is a bit reminiscent of what ron baker calls the tip clause, where you leave it up to the client to determine what the price for that service should be, correct.

joe woodard

but, but the read the where the tip metaphor breaks down is they’re paying you on the front. yes, yeah, because you’re paying on the back. is really hard. ron also picks on doctors for having the for having to deal with all those medical codes. and i use this example when i’m on soul of enterprise a little bit. you know, i have chronic migraines. well, i guess technically, i still have them, but they’re under treatment, so i don’t experience them. but until and they, when i mean chronic, i mean daily, right? it had gone from twice a year to once a month to once a week to daily. i would be completely bedridden, writhing in pain constantly, if not for my neurologist and so i’ve seen my neurologist 10 times, 30 minutes a pop, you know, five hours over the last two or three years, and they and she has found just the right cocktail of preventative and breakthrough medicines and some injection treatments and other things that that she’s done, and she’s navigated me through, because everybody’s, you know, system responds differently to these medications, and i still have migraines, but i experienced no pain, and only about once a month am i actually knocked down on my back, on my heels, and with them, she’s she’s given me my life, right? and she’s put that through one of the 10,000 billing codes. how on earth is that a value price? so i even told her once, i said, i know that you’re compensated the way you’re compensated, but the that you know, if i were to, if i were to tell you what it’s worth to me, you know, my business, my life, my relationship with my wife and my daughter, you’ve saved all of those things. and i said, i can’t, i feel like the only thing i can give you is a hug, because the billing codes stand between me and the value, right? and she, she jokingly, you know, i wasn’t going to hug my doctor, but she jokingly said, well, i take hugs, you know, because that was her way of saying, you know, i get it. there’s a discrepancy between value and compensation here, right? and it’s not just her who’s losing. it’s everybody in that whole supply chain that’s losing, ultimately, except maybe the pharmaceutical companies. that’s conversation for another day. but the point i’m trying to make is, if we set our billing codes between us and the value we can control that they can’t control that. so why are we sticking our billing codes between us and the client’s value when we don’t have to? and the answer to it is a subscription economic. ron talked about this in his keynote at scaling new heights. there are some doctors now, boutique doctors that are actually using subscription economics. they won’t take more than 30 or 40 clients at a time. you pay them some 1000s of dollars a month, and they just treat you as the whole patient, as long as they. have as long as they’re not practicing outside their area of expertise. they don’t write down how long you spend with them. you don’t have intermediaries, you don’t have billing codes. you know they’ll even come to your house if you’re bedridden, but you know they’re not going to put a billing code between you and the transformation.

liz farr

that’s right, yeah. and speaking of subscription pricing, we both know several people who were successfully doing this, as accountants. now, dawn brolin is an example. jody grunden has been doing this for decades. hector garcia is doing this also. so there are lots of examples out there for people who want to do this,

joe woodard

and that’s, that’s what i would say, is the vehicle, if you want to get all the other stuff out of the way. remember, i was 5000 a month with that prospect, and it was arguable that couldn’t have been jumped up to 6, 7, 8,000 a month. should have done it. don’t regret it. it was still a good relationship, right? but it was because it was on a subscription level with with an all you can eat that anytime they want to call me into a board meeting, anytime they wanted to pick my brain, anytime they might have needed to help with a little bit of an introduction here or there, i was at their disposal. i was on team, fill in the blank for clients name, and they knew that. but there’s the there’s the rub liz. that’s the reason more accountants don’t do it, because they’re thinking, as soon as somebody pays me x amount of dollars and they have carte blanche access to me, then there’s going to be abuse. well, there are protections you can put into place. like i said, you can pull me into as many virtual meetings as you want, but if at any point it goes over certain number of hours in any given week or month, and you and i, we need to have a conversation, right? and if the conversation isn’t about more money, it’s pressure testing, can these two meetings be combined together? do am i really needed in this meeting over here? is this where i can provide the most value? not? i’m going to charge you more money, and then, if it’s consistently, you know, more intensive, well, then they’ve changed the nature of the engagement altogether. let’s come back to the table. let’s talk about a different compensation model. you can have those conversations in the middle of a subscription. subscription price isn’t fixed price. subscription prices change all the time, not because you just go up on the price. but because people buy a different tier of product, right? a different nature of product, i should say they jump nature as you jump price. there are protective measures to put in there. but i also will tell you liz, what i would tell anybody who’s looking at the subscription pricing, that there’s safety in numbers. the more clients you have on a subscription, the better your margins, and the more you’re protected. if i’m an insurance company and i insure one, one person, i have extreme risk. if i’m an insurance company, i have a million people, then it’s an actuary table. so if you have a tax practice and you want to provide people with unlimited issues handling, let’s remember that you’re the tax preparer listener anyway, right? so if you did a good tax return, it’s just going to be errors on the jurisdiction’s part. but if you have unlimited issues handling, and you have 1000 tax clients, you’re going to have less risk than if you have 50 tax clients, because 950 are going to pay for the 50 that might actually have a notice, but we’re going to come full circle here. but 100% of those tax clients get peace of mind.

liz farr

yes, absolutely. and, and something that you that you kind of refer to, but didn’t really say, is that the key to having a successful business, providing transformations, providing knowledge work, is the clients, your selection of clients

joe woodard

correct. so if you’ve got, if you’ve got a client that that creates problems, creates issues to handle with jurisdictions, doesn’t get you the information on time and creates forced extensions of returns, or even returns that you have to estimate that are past due. okay, well, now you’re dealing with a situation that’s outside subscription, and that’s that’s basically a branch you have to prune off. but, but now, if we think about this. liz, where before come full circle, right? we were selling hours. then we’re actually rewarding the firm in revenues by accepting the problematic clients. because we spend more hours preparing the return, we have to prepare an estimated return and then an amended return. you know, yeah, we’re making more money to have a really bad client, but that’s also the same client that would never engage you for any kind of tax strategy or analysis in the middle of the year. they would never allow you to transform them. and if you put them on a subscription model, they would weigh your subscription model down. so once you change from hourly to subscription. it’s a lot easier to prune the bush.

liz farr

yeah, and i would say that those problematic clients are also the ones that lead to retention problems with your team

joe woodard

correct. they run off good team members, and they strain your processes, they strain your technology. and if ever you did want to sell your practice one day, they’re the very clients that any buyer is going to shave off anyway. they’re not going to be part of your valuation, right, right? if you don’t think they’re going to shave them off on the front, they will shave they’re they’re going to have a client retention problem. they’ll shave them off in the first year, which means they’re still not part of your, your your economic, because client retention is is key to valuation and payout. so those clients are just dead weight. but until you go from hourly billing into subscription model, you won’t feel the full pain of their how problematic they are, because you’re being rewarded for the for the extra work. so stop rewarding yourself the extra work, and then all of a sudden you’ll feel the pain. you’ll feel the pain. it’s gonna be a lot easier to identify the clients who just go and you don’t have to have a timesheet to do it, in that case, because you, because your measurement is, is based off of the drag they’re causing on a on a portfolio, portfolio, not on the capacity measurements of a timesheet. i’m gonna quote ron again. people ask ron all the time, how do i know which clients to fire if i don’t have a time sheet? and he said, it’s easy. ask the people who service those clients exactly, and they’ll tell you exactly who they want to fire

liz farr

exactly. you know, i remember when i was practicing as a cpa, there were lots of clients that i wish the firm would have fired, yes, and ultimately, some of those clients ended up firing us, maybe not for the reasons that we would have fired them, but nonetheless, we were relieved to have them gone and out of our hair,

joe woodard

yes, but as long as they stuck around, they were drag they were drag on the practice and even a drag on the brand, because those same clients that are pain in the neck to you are out there talking about how you’re not an effective practice to work with. so they’re they’re wrecking your reputation all the same time. so yeah, we could have a whole episode on ideal client profiles, but subscription will help to weed those people out for sure.

liz farr

yeah, yeah. now, to close out our time, i’m going to ask you a question that i asked just about everybody. i’ve been asking lots of people this question for a while, and that is, where do you see the accounting profession in 10 years.

joe woodard

okay, radically transformed. if you use on that t word again, your question is, there’s debate as to whether it’s going to be good or bad transformation. but there’s, there are over $3 trillion of private equity. they’re being infused into the profession, past, present and future over this 10 year horizon that started about two or three years ago, trillion i’m not misspeaking here, and i had that straight from multiple pe firms, who know exactly how they’re following all this. so that kind of aggregation that’s going to come from the mergers and acquisitions being funded by this capital is going to change the landscape of the profession, plus the the business owner, the average age of a business owner of a cpa firm, tax practice or bookkeeping practice, it’s really high. so this is, this is coming at a there’s a convergence of trillions of dollars of equity being poured into market aggregation at a time when a with over 50% of firm ownership is going to be seeking retirement. it’s perfect, perfect convergence, and what’s driving it is not the retirement age. a lot of company a lot of industries have a retire off. private equity just watches from the sidelines, and couldn’t care less, what’s driving private equity’s interest in this is artificial intelligence. they know that they can invest in firms at cost model a today and get cost model b in the imminent future, and they’re able to to see the full or at least they’re projecting the full impact of this artificial intelligence on the workforce. so if i’m if i’m a private equity company, i’m looking at a perfect situation. i’ve got a high, sellable market that wants the money. and then i’m looking at portfolios, where i can create significant increases in gross profit margin over a very short run. aggregate all of that underneath the largest firms in the world, and even take over ownership of those and start flipping them from pe company, pe company, which we’ve already seen with citrin cooperman, they were the first to take pe dollars. they were the first to flip owners. and everything at citrin cooperman is running great, right? so it’s not just what you see on the outside. i have some inside tracks at citrin, and it’s all looking good in there. so pe will own the industry. i think cpa firms will be larger and aggregated. i think the workforce will be largely automated, which is going to help us with our staffing crisis. i don’t think we’re gonna have to fire anybody. i just think we’re gonna solve our staffing crisis. i think offshore work resources are going to get consolidated back into onshoring as more and more of those, those low cost workers, by comparison to the american economy are displaced with bots, and i believe that the model of running these firms is going to change from partner and executive committee to a c suite with a board. and i think that my opinion is all of those disruptions are going to be net positive, because we don’t have a strong enough workforce to sustain the growth of the industry without ai. and even though there are some partner led firms, liz that are very well run, we can all probably name a bunch, we know that overall, the politics of that model is inherent with problems and the c suite model of leadership with a board’s oversight is proven, and i think it’s going to create a better direction for the industry.

liz farr

that’s an interesting viewpoint, and i you know, i’ve heard people say that they think it’ll be more smaller firms, but here you’re saying it’s going to be more bigger firms.

joe woodard

it’s going to be both, but, but the majority of the industry will be serviced by the larger so i’m glad you mentioned that, because it gave me the opportunity to say, in in that equation, we will still have boutique firms. so if you look at what happened to the travel industry. the travel industry was automated through the website revolution and the information age, right? so you don’t see travel agents on strip malls in every every corner shop, right? like there used to be, right? that market’s been aggregated, that market’s been automated, and it’s owned largely by by private equity or publicly traded companies shareholders. but what still remains are the boutique travel agencies. they’re very small, they’re very specialized, and they tend to engage a wealthier clientele who want a more personalized service. i think that part of the market will endure.

liz farr

i think you could be right there. and my hope with all of this is that the clients ultimately get much better service than they have been, that they are able to access not just the services, not just the transactional work, but more of the knowledge work and more of the transformational work,

joe woodard

agreed. and if you look at the way we engage in travel, we, you know, a lot a lot of us, depending on how much you travel, we travel quite a little bit, so with business and personal. so we’re a good example, a good type case of both knowledge worker and sort of scaled service worker. and this may be how people engage accountancy. i go to delta.com or marriott.com and i never engage a human for the majority of my travel. and that’s better for me. it’s convenient for me as the consumer of that product. i want it to be that way. but every once in a while, we’ll we’ll do a different kind of vacation. we’ll go outside the us, maybe once every three or four years, like we went to italy this past spring, i was not going to go to marriott.com and delta.com and see okay, my italy vacation is planned. i know nothing about italy. don’t know the best places to go, the best places to stay. so we engaged one of those boutique travel agents who had been to italy was a specialist on italy. there’s another one in our neighborhood that’s a specialist on all things antarctica. we skipped that trip when our friends were going. i just didn’t appeal to me. but antarctica, you have to have a specialist. well, they knew every single place to stay, every city that we needed to prioritize for the number of days that we were there, all the different train routes to take when you needed a certain kind of speed train and when you didn’t. i mean, they had it all done, mapped, and of course, we spent the money on that to create a better experience. and i think that’s where accounting is going to fall out. i think a lot of with a lot of people. they’re going to go to the xeros and the qbos and maybe the emerging digits and puzzles of this world. that’s going to be their website experience. and then they’re going to bring all of that ai generated financial intelligence to somebody who’s a specialist when they want to launch a business, when they want to get funding, when they want to open up a new warehouse, when they have that italy trip that they need, they’re going to go to somebody who’s a specialist on italy by metaphorically, and they’ll engage.

liz farr

that’s probably correct.

joe woodard

scary to some, though, because they make their living on bookkeeping and tax. and if you’re listening and you make your, you know, living on bookkeeping and tax, you you we are disruptable. okay, go ahead, right,

liz farr

right. well, you know, i think that’s a scary but realistic note to end our conversation on. i want to thank you so much, joe for sharing your intellectual capital and all your wisdom with listeners here. it’s been just a joy having you here. now, if listeners want to connect with you, where is the best place to find you?

joe woodard

yeah, so you can just go to my last name. but my last name is woodard, not woodward. i got called woodward just today again. i answered to these days. but if you go to woodward.com i don’t know where it’ll go, but if you go to wood woodard.com with 1w it’ll get you to everything we do. and liz, i think after the way i frame the next 10 years, it should you should note that the theme of our next year’s conference, coming up in june 2026 is called strange new world, and with an emphasis on the new right. so if you do feel like you’re in a strange new world, accountants, tax preparers, bookkeepers, that’s we’ll be talking about, all of that that are and you can find that at woodard.com

liz farr

and fantastic. now i want to thank you so much. joe and i look forward to seeing you again at some conference in the future.

joe woodard

i’m sure we’ll run into each other. it’s great being with you. liz, thank you.

woodard: move past reports; deliver results | the disruptors

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this is a preview. the complete 1-hour video episode, with commentary and transcript, is first available exclusively to pro members | go pro here

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related posts

private equity update: over 90 deals, $200 billion in value

paul dunn: from standard, to stand out, to stand for | the disruptors

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