Value Pricing & Offering Guarantees

Align the customer’s desired results with the firm’s interest to maximize profits.

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Thank you to our sponsor, Avalara! Avalara’s award-winning tax automation solutions help accounting practitioners of all sizes, from sole proprietors to Top 100 firms. Avalara simplifies sales tax compliance with real-time rates, automated returns filing, registrations, tax research and automated tax solutions for specialized tax areas. We live and breathe tax so you don’t have to. Learn more at Avalara.com/Accountants.

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• (00:00) - Building a Focused Firm Ep 05
• (00:35) - Welcome to Part 05: Value Pricing & Offering Guarantees
• (06:40) - Where is the value?
• (08:14) - Compliance Value
• (08:47) - Economic Value
• (11:00) - Accounting Professionals vs. Number of Potential Clients
• (15:17) - What does price and value mean to an accounting firm?
• (15:59) - The rule of 3
• (21:25) - Does any of this matter to your customers?
• (25:27) - How does Spiritual Value translate to your clients?
• (27:21) - What does this concept of spirtual value mean in context of pricing our services?
• (30:43) - Types of Value Pricing
• (34:38) - The problem with hourly rates?
• (38:13) - Answering the time/rate questions
• (51:28) - Types of Pricing Models (not based on time)
• (57:24) - Task-based and Output-based pricing
• (59:14) - Productized Service
• (01:00:52) - Access-based or Subscription Model
• (01:01:26) - Value-based Pricing
• (01:04:36) - Value Conversation Tips
• (01:07:28) - Mahan Khalsa 5 Golden Questions
• (01:10:55) - The 12 Ts for Option Building
• (01:14:18) - Service Delivery Options
• (01:16:48) - Option Building Results Options
• (01:18:14) - How to present your value options?
• (01:26:59) - Presenting your best option first
• (01:27:47) - Golden Rules for options
• (01:29:12) - Big guarantees, should set apart the top option
• (01:32:03) - Creative Guarantees

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https://go.earmarkcpe.com/the-focused-firm

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https://app.earmarkcpe.com/?course_id=11d08a91-988a-4465-8e0c-e974240b637d

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Connect with Hector Garcia, CPA:
Website: http://hectorgarcia.com
LinkedIn: https://www.linkedin.com/in/hectormgarciacpa/

Connect with Blake Oliver, CPA:
LinkedIn: https://www.linkedin.com/in/blaketoliver
Twitter: https://twitter.com/blaketoliver/

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Creators & Guests

Host

Blake Oliver

Certified Public Accountant. Co-host of @cloudacctpod. Founder of @earmarkcpe. I have approximate knowledge of many things.

Host

Hector Garcia, CPA

Quick Bookkeeping & Accounting LLC. QuickBooks® Training Services. Business Consulting. Tax Planning. My e-mail: [e-mail] / office: 954-414-1524

What is Build A Focused Firm with Hector Garcia, CPA?

If you want to build an accounting or bookkeeping firm that gives you joy, you need to stop, and focus. Learn strategies and best practices for practice management and earn FREE CPE while you're at it!

Attention: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding!

Hector Garcia: [00:00:00] There are 1.3 million accountants in the US. This is according to the Bureau of of Statistics. These are accounting professionals of all walks of life. There are 32 million businesses in the US, small businesses in the US, which is based on SBA statistics. So if we take simply 32 million divided by 1.3, you get approximately one accountant every 24 businesses. Now, by definition, a client needs an accountant 24 times more than the that the accountant needs their customer.

Blake Oliver: [00:00:36] Hello and welcome to our series Building a focused firm with Hector Garcia, CPA. I'm Blake Oliver, your moderator for today's episode. This is the fifth installment in an eight part series, all about how to build an accounting or bookkeeping firm that gives you joy by focusing on what matters. We're going to be going live for the next few Tuesdays at 11 a.m. Pacific, 2:00 pm Eastern. If you're on our email list for this series, you'll get an email with the link to each live stream. So if you aren't on that list, please go ahead and sign up. Head over to earmark CPE. Com slash Focus. Thank you to our sponsor Avalara for your financial support to make this series possible. Avalara is an award winning tax automation solutions help accounting practitioners of all sizes, from sole proprietors to top 100 firms. Avalara simplifies sales tax compliance with real time rates, automated returns, filing registrations, tax research and automated tax solutions for specialized tax areas. We live and breathe tax so you don't have to. Learn more at aba-liga.com Slash accountants. Thanks, everyone, who's joining us live today. Please chat with us. You'll need to subscribe to our YouTube channel to chat. Let us know your thoughts and opinions, ask questions. Hector will be happy to answer those. If you're looking for continuing professional education credits, you can earn that for watching today. This is a live stream, not a webinar, so it works a bit different. You're going to get an email next week with a link to the course on the earmarked CPE app, so be sure to sign up for our email list. If you have not, you'll download the app, click a link to go to the course and then you can take a quick quiz and get your CPE certificate. So with that out of the way, let's get to our topic today and our host, Hector Garcia. Hector, we're talking today about value pricing and offering guarantees. We're going to learn to align the customer's desired results with the firm's interest to maximize profits. This is one of my favorite topics so eager to learn from you today on this.

Hector Garcia: [00:02:43] Yeah. Yeah. Thank you very much, Blake and Avalara and Ian Mark for putting this series together again, pricing your services. It's probably the most important piece of building this building a firm that gives you joy while doing what you love. Theme. Because the one thing that gives me the most joy doing what I do is to watching my customers succeed. And they can succeed in multiple ways. They can succeed financially, They can succeed spiritually and personally. Their employees can succeed. So just watching them succeed is what gives me joy. Simultaneously, it should give your customers, your customers joy to watch you succeed as an individual, professional, as an accounting firm, watching your employees succeed. And the only middle ground that that attaches those two things, helping the customer succeed and helping you and your firm succeed is that transference of money in exchange for the services is the pricing of the services. Because if you under price, you could potentially continue to help your customers succeed, but then you won't succeed and then you will basically regret working with that customer and over time you will not put it's just psychological. It's just how things work. You won't put the effort that it requires to continue to help your customers succeed. So it needs to be a sustainable relationship.

Blake Oliver: [00:04:12] Also, you have to be profitable. Hector I think that's where a lot of the resentment perhaps crops up between clients and their accountant or accountants to clients. Is that mismatch in terms of the value that is perceived as being delivered and what is actually being delivered? So hopefully we can correct some of that today or help folks correct some of that.

Hector Garcia: [00:04:32] Absolutely. And only if your firm is profitable, Then you can increase the salary of your employees. So you want to keep your talent, which is which is the people that help your customers succeed. You have to pay them more. So like this entire cycle needs to be a cohesive it needs to be symbiotic and it can never be a one way street. It needs to always be a win win. So if you're going to continuously increase the prices on your customers, you have to continuously increase the value you create. That way they have no issues paying for the price that you're going to pay for anyway. So this is part five of an eight part series. This is called Value Pricing and Offering Guarantees Part five. So for this episode, we're going to break this down into three sections or three topics. Section one, Where is the value? We're going to talk about this. Most accounting professionals, accounting firms, they say. But Hector, how do I know how much the customer values our services? I'll give you a quick answer and you can skip the next 30 minutes or so. You don't. So but but what you do need to be aware of is that we can approximately kind of close to to get there by having a conversation with our customers. And this is what's called the value conversation. So we'll dig into that as well. And we turn that value conversation into value pricing. We understand how much it's worth to them and how much value we can create for them.

Hector Garcia: [00:06:00] Then we price commensurate to that value. And finally, we offer them options. We offer them three options and different different types of guarantees or non guarantees across those options. And as as there's more guarantees of results, obviously the price needs to get higher and that it gets reflected on the options. So we're going to use the guarantee, the guarantee of a result, guarantee or satisfaction, guarantee of transformation, whatever you want to call it. We're going to use that to anchor the price of the options. And then if we have any Q&A at the end or through the the the episode, we will answer those live as they come. Okay. Where's the value? Let's get started with that. So first of all, there's three types of value and this is within the context of accounting. So obviously, you know, the industries, this could be a little different. But within the context of accounting services, I believe there's three types of value. There's compliance value, there's economic value and there's spiritual value. And all three matter or three are important. But we're going to be focusing mostly on economic and spiritual value. So we quickly go through what compliance value is or compliance value is the proverbial cost of doing business. You have to pay to survive, right? So taxes, license fees, all these things. That's the compliance value. So getting this to compliance, it's typically seen as this sort of negative.

Hector Garcia: [00:07:28] I have to do it. I got to get it done. It's a cost of doing business. There's really no, no, no value added to any of these processes. The second one is economic value, which is when the financial reward supersedes the investment or cost. And the third one is a spiritual value where the investment or cost makes you feel, feel more confident, makes you sleep better, makes you have less stress, makes you have a more positive outlook about the future, right? So these are the three things or one, I must pay it. Two, if I pay it, I get something in return and three, I don't really know what it in return, but I feel like I got something in return. So we're going to talk about all the pricing and within the context of these of these three. Now, one really important thing is, is that the compliance value, which is a big chunk of our industry, is seen as a commodity. Customers always look to reduce this irrespective of how this is done. Customers hate paying for this and unfortunately, most of accounting accountants get their business based on this perceived notion of cost of doing business by their customers. And if you and if you offer for the most part compliance value, you're almost always going to be seen as a commodity. Now, what about economic value? So I think that in the accounting profession, economic value is essentially found in two main places. One is lowering the compliance cost, which is kind of interesting.

Hector Garcia: [00:08:59] This is like doing it right or doing it mistake free. So just doing it right or accurately or mistake free without penalties, etcetera, etcetera. That's what lowering compliance costs. But at the other side of this could be lowering compliance costs through you finding loopholes through the system. So some people draw value from their accountants economic value, again, economic value and not compliance value through having an accountant that knows how to work the system or knows how to. And we're not talking about doing anything illegal. We're saying within the rules and and those accountants, accounting professionals that find those loopholes or specialize in those loopholes or tax credits or whatever you want to call it, there's some there's some economic value to what could be could feel like a compliance cost. So that's a really important distinction to make that these two things are different. The second area where there's economic value is the information provided by accountants, which essentially accountants. All we are is information providers. So all we do is, is we do a bunch of work and then we tell them this is the summary insight, the valuable summarize the steel information about all these transactions. And this is supposed to have some meaning for you, for the business owner or business manager. So the information we provide to our clients help them make better decisions that actually increase their revenue or actually decrease their costs above what they pay the accountant.

Hector Garcia: [00:10:25] Right? So if they pay an accountant and they decrease their cost by half of what they pay the accountant, why they pay the accountant for. Right. So that's a really important distinction to make. You need to understand what your role is, because again, if your role is strictly to charge more than what it would cost for them to do it on their own, then it just doesn't make oh, and they could do it on their own correctly. And it doesn't take that much time and it doesn't take away from increasing revenue or decreasing costs. Et cetera. Et cetera. Then why are you there for? So you need to understand that you got to be able to provide information that helps them increase revenue or decrease costs. Now, we talked about this briefly, Blake. We answered one of the live questions on the last episode, which is kind of the numbers or the facts about our profession, about our clients. There are 1.3 million accountants in the US. This is according to the Bureau of of Statistics. These are accounting professionals of all walks of life. There are 32 million businesses in the US, small businesses in the US, which is based on SBA statistics. So if we take simply 32 million divided by 1.3, you get approximately one accountant every 24 businesses. Now, by definition, a client needs an accountant 24 times more than the that the accountant needs their customer just because there's more small businesses than accountants.

Hector Garcia: [00:11:46] And again, we're not even talking about individuals. Any personal tax returns and personal financial planning, we're only talking within the context of accountant to business ratio. Now, if you take the gross domestic product of the US, which is 25 trillion or approximately 25 trillion according to the Bureau of Statistics, and you divide that by the number, by the number of accountants, then you get about $19 million per accountant, which means that for every $19 million that the US as a whole generates across all businesses, small and large, there's one accountant managing that, accounting for that, organizing that. Now, the median salary in the US for an accountant is $78,000, which basically means that it's 0.5%. So in average, the US or US businesses spend half a percentage of their revenue in paying for accounting services to get this done. Now this is obviously this is much different in a Fortune 100 company or a Fortune 500 companies, they probably pay a lot lower percent just because the revenue is so much higher. And the little small businesses because there's higher minimums to work with an accountant, that percentage is much. So a small business, the percentage is much higher. In large companies, the percentage is much lower just because of the revenue variable. Now what does that mean? If you take a $1 Million revenue, small business, they should be paying at the very least, just just by using these numbers. They should be paying at the very least $5,000 a year in accounting services.

Hector Garcia: [00:13:22] If they're not doing that, they're severely underpaying. And honestly, in today's world, with the shortage of accountants, it'll be very difficult for less than $400, for 400 bucks a month, you know, to get really good accounting service and includes everything accounting, tax, compliance, all these sort of things. But at least what I want you to have is some notion for a floor. This is a floor, okay? This should be the floor bare minimum. No one should be ever be charging under under this. Now, the alternative to paying an outside accountant and paying a fee that's not a salary would be to actually hire an in-house accountant that somehow can do the same thing that an outsourced accountant can do that would cost $78,000, right? If you take the medium amount. But in $1 million company, that's 7.8% of the revenue. So you could probably extrapolate that that is the most someone is willing to pay, right? So now you know what a floor and a ceiling is in terms of charging for accounting services, it is somewhere between 0.5% based on the averages that we did earlier and somewhere on 7.8% based on this million dollar company example. So for this particular client, you know exactly what the range should be. Now 78,000 is 150 times more, you know, than than five the 5000. So obviously it's a huge range. It's not very easy to like frame things within that range. But you as a professional offering, the services should just keep this in mind, sort of in the back of your head.

Hector Garcia: [00:14:58] So you're charging this million dollar small business between 400 and $6500 a month. This is where having a value conversation, understanding what results the client wants, allows you to offer a service that is somewhere between this range. So that's where the economic value is, somewhere inside that range. Now what are these figures may mean or should mean to an accountant, to an accounting firm. So let's assume let's do a similar exercise, let's reset. You know, the numbers that we've talked about, I know in podcast is very hard to talk about numbers, but just reset those numbers. Let's start with new numbers. So let's say we have five employees in an accounting firm and let's say the burdened cost is 100,000. So we're above median age, medium amount. Let's say we're in a in a higher priced market and we're paying in average half $1 million of payroll for these five employees. Now, the rule of three, which is the rule that I use for almost every one of my customers, when they ask me advice on how much should they charge for services, the rule of three is that your burden payroll costs should be multiplied by three to reach a target revenue. Okay. So I strongly believe that you should be able to take an employee, especially in employee heavy type companies, not like, you know, product based but like employee not like.

Hector Garcia: [00:16:19] Knowledge. Knowledge worker type of services. Professional services. Accountants. Lawyers. You should be able to take the payroll costs, multiply it times three, and that should be your firm's revenue. Now, if you actually go out and look at all the public company accounting firm financial statements, the average is actually 2.4. So if you take the the Deloitte, PricewaterhouseCoopers, you take all the big ones that top 100 firms and you look at all these financial statements and you average out, you know, payroll divided by by revenue, you get about 2.4. Now, I'm not going to suggest that you do average. Of course, building a focused firm is being above average. So we're going to use the same rule of three and we're going to aim for three times the cost of of of your payroll. So in this example, with a 5% firm, your target revenue should be $1.5 million. Now, let's take this one step further. Let's assume that these five employees are not all client facing. Let's say only four out of five are client facing. And one of them is, you know, sales marketing admin, not an accountant. It's not in production. So we can only really, truly take the ones that are in production to figure out how many clients each of them should be taking. So taking that into consideration, you got a four person accounting firm, or at least the ones are in production, and then we take the same percentages we used earlier in terms of total number of businesses, total number of accountants where you get that 24 to 1 ratio.

Hector Garcia: [00:17:47] All of a sudden now you know that your four production accountant person firm should have approximately 96 clients on the firm. So you just take 25 times four, you got 96 clients. So now we have these two numbers. We have the $1.5 million revenue target and we have the 9696 clients. The firm should be managing target. So now we can figure out what should be our average per customer in order to reach that target revenue. So based on that, you divide the 96, you divide it by the divide, 1.5 million divided by 96, that gives you $15,000 per client, which is approximately $1,100 per client per month. Okay. So now with this information in hand, you know how much your employees cost, you know how much your target revenue is, you know how much customers more or less you want to serve. Now you know what your average per customer is, which is 1000 hundred bucks per month per client. And again, this this will vary based on the size of your firm and your target customer and all that stuff. This is just an exercise I'm making just so we can arrive to numbers that can create a baseline for you. These are not hard and fast figures, but I'm using averages to create a simple, simple baseline. You can do this exercise on your own.

Hector Garcia: [00:19:08] Now, if you backwards engineer your numbers into your firm and you arrive to whatever your number is, let's keep in that 13,000. That 13,000 should be the sorry, 1300 that should be the target that you try to get most of your customers in. Now, not all your customers are going to be at that 1300. Some are going to be higher. Some are going to be lower. Now, my suggestion is that if you're going to have a minimum price, if you set a minimum engagement price, it should be no less than 70% of that average. So if you take 1300 and you multiply it times 70%, you get about $900. And after you come up with this exercise, then you know that the minimum your your firm should price is $900, period, and that's it. And you go to market with that bare minimum and you don't make exceptions because otherwise you're not going to hit your target again. You could still survive and be profitable. But do you want to reach that target that we mentioned earlier based on the rule of three?

Hector Garcia: [00:20:10] So the only the other thing that I would just suggest is a really important piece is we're targeting this $1,100 a month customer, which is the average for a target, $1.5 million firm. And we're going to take some customers under that. And we know that we're probably going to take some customers above that. Just make sure that you have a proportional amount of customers under and over. So, for example, let's say that 60% of your clients, which is pretty it's on average 60 to 70% of your clients will be in that average, in that 1100 average that we that we calculated. So if you got 40% left, you should have about 20%, half of them, you know, with below average closer to that minimum. And the other 20% should be above average that way, again, without having to every day look at a number and every day make the math more or less. If you know the vast majority of your customers are in the middle and half of the difference is on the lower end and half is on the high end, you're going to be on target. So that's all I want to give you is this simple rule. Um, again, not hard and fast, but just to do a quick sanity check on your profitability and, and trying to hit your target revenue, I think it's a good system in place. Now, does any of this matter to your customer? The answer is no. The answer is no. I've wasted the last ten minutes talking because none of this stuff matters to your customer. None of this stuff affects the price your customers are going to pay more or less based on some mathematical spreadsheet.

Hector Garcia: [00:21:41] You told them that, Hey, this should be the minimum price that matters zero to your customers. However, however. This compliance value is something that customers are already ready to pay, right? The economic value is, for the most part, just needs to make sense within these acceptable ranges to your clients and the. And the vast majority of the value is going to sit in the spiritual value. So we know what the numbers are. We don't use them to calculate a price. And now we leverage our understanding of compliance, economical and spiritual, to set the price and arrive to this 1300 or 1500 or 1800, depending on where you want to go. So knowing your numbers in the back end, it's important to sort of build a baseline and structure. So when you go out there and offer and apply any of these techniques that we're going to talk about, you at least stay within these ranges and understand that there's there's compliance and economic from the customer's perspective and their spiritual, which is the stuff that you're going to create in order to get you closer to where you want to reach. Now, spiritual value, by definition is. Whatever you pay above compliance and economic value. So again, we're looking at it from the customer's perspective. What is spiritual value mean? It means whatever premium they pay above compliance and economic value. So think about this, Blake, and I'll see if you can you can answer this. What do a lot of people pay for that has zero compliance or economic value? What does people what do people pay for Now, a lot of people that has 000 nothing, no compliance value, no economic value.

Blake Oliver: [00:23:26] What do people pay for that has zero compliance or economic value? Bottled water?

Hector Garcia: [00:23:33] I think bottled water has a compliance value. You need it to survive, right?

Blake Oliver: [00:23:37] Well, but I could drink tap water.

Hector Garcia: [00:23:40] True. But. And that's free. Okay, you can say that. But for the most part, the urge to drink. So I'm saying 100% spiritual value, not not even like a part economic value because you still have to drink the water. Right?

Blake Oliver: [00:23:51] Right. That's true. Okay. Spiritual value only. Well. Mm. Well, I was going to say, the blue checkmark on Twitter.

Hector Garcia: [00:24:01] That could have some marketing value, Right? But now. But now, apparently.

Blake Oliver: [00:24:06] Okay. Go ahead. Tell me.

Hector Garcia: [00:24:07] Yeah, it's in the slides. So let's let's let's share the screen again. So and again, I was thinking about like, what? What how can I frame this in a way that people go, Ah, you're right. I mean, this is because most people are like, Ah, you know what? Customers will pay only what they want. Customers don't see any value in accounting services. Customers are 100% rational and 100% economical, and they only look at, you know, whether or not what they pay for is worth it to them. And they don't they don't value any of our accounting services and blah, blah, blah, blah, blah, blah. So I can tell you this is absolutely not true because did you know that the US is the highest ranked country in the world in charitable donations as a percentage of capital? As a percentage of GDP? About 1.5% of our income gets donated to charity in average. And if you look at a GDP of 25 trillion, this is a this is a lot of money. This is like, you know, half it's almost half $1 trillion, $400 billion that we give away for for for charity. So. Voluntary donations by definition have zero compliance and economic value. So if people can do this, if people actually voluntarily look to do this, that is that is 100% proof that spiritual value, it's a real thing.

Hector Garcia: [00:25:27] Now, how does this translate to clients? Spiritual value is present mostly in two stages of the buying cycle. The buying cycle is very long. We've talked about this in episode four. We talked about the sales cycle, but there's two main places where it's it's predominantly in there. One is doing the sales process where the customer feels again, they feel that they're hiring the right people to solve the right problem. They haven't bought anything yet. You haven't solved the problem yet. At that point, they can only feel it, right? So in that sales process, it's why we spoke why it's important to spend so much time with your customers in the sales process and why we spoke in episode four about filtering out the ones that are going to waste your time so you can reinvest back into the ones that are not the ones that you are going to. Work with. And the other piece where the spiritual value is the highest is doing the post service stage. When they feel the difference, they have to feel it between their current state and their previous state. This is what Ron Baker calls the transformation. This is how people feel changed and moved with your services.

Hector Garcia: [00:26:35] Now that means that you as a firm need to have a deep understanding of the underlying problem that makes the customer feel good about what they're doing. And you need to have an offering with a guaranteed transformation that makes the customer feel like there's no risk in the transaction. That is your job. Doing the pricing process. When customers feel good about their purchase and the risk is mitigated through a guarantee they will pay a premium price, they will pay this. All the spiritual value can be built in into your price. Now, before we go into the next section, we'll do a couple more slides and then we'll do a quick break to think about Lara for the, for the, for the podcast series. But let me just wrap, wrap up this section with this. What does this concept of spiritual value mean in the context of pricing services? If you recognize that only a small portion of what you do is to comply with minimum requirements of compliance and economic value. And a much larger portion should be focused on spiritual value. This is where value pricing we're using a value pricing approach helps you hone this down. So we're going to move on to value pricing. But Blake, go ahead.

Blake Oliver: [00:27:50] Well, and we had a question, so I figured I'd give you that first before we get into Avalara. So this is from Tino. Tino asked, what is your 70% of average price based on? Is it previous experience?

Hector Garcia: [00:28:05] Yeah. So I've run a firm for 15 years, so I could tell you right off the bat that every time we do cleansing of customers based on what they pay and what they're willing to pay. The ones that end up being the ones that we must get rid of are the ones that are under that 70% of our average, more or less. So it's proven, it's proven that the average of people that pay under average compared to the average people that pay over, it's about this 30% range. Because if the average people that pay over pay about 30% above the the the average price. So so that 70% is the backstop to normally is your your your percentage on the higher end as well.

Blake Oliver: [00:28:49] That makes sense to me too because what's the most you'd want to discount anything I imagine for friends and family you wouldn't ever want to go less than 30% in a focused firm. So yeah, a focused firm.

Hector Garcia: [00:29:02] Shouldn't any discount anything at all. But I'm saying we know that this is going to happen no matter what, but. Yeah, but 30% is. It's about that number that's beyond that is abuse pretty much.

Blake Oliver: [00:29:12] All right. Well, now it's time for a little break. We're going to let Hector take a drink of water and thank our sponsor, Avalara. Thank you to our sponsor, Avalara for their financial support that makes this entire series possible. Did you know that 52% of accounting practitioners from large to small still rely on spreadsheets and manual processes for sales tax compliance? It's time to stop and focus on automation. The Avalara for Accountants Suite empowers even the smallest practitioner to support clients tax compliance needs. All firms can benefit from their referral program. Simply refer clients to avalara and let them assist on your behalf for practices that offer direct compliance services. You can use Avalara for Accountants award winning tools to help you start or grow a tax compliance or CAS service expressly designed for accounting service providers with multiple clients. Solutions include real time rates, automated returns, filing registrations, tax research and automated tax solutions for specialized tax areas. Partner with avalara and grow your practice with efficient and accurate sales tax compliance while reducing risks for you and your clients. To learn more, visit avalara. To learn more, contact [e-mail] or visit them at avalara.com/accountants. All right, Hector, back to you.

Hector Garcia: [00:30:40] Okay. So can you share my screen again? Perfect. Okay, so let's move on to value pricing. So we talked about the first piece, which is getting your head wrapped around why it's important to think of value as a context of pricing. And hopefully that's a good introduction. And you're convinced that that you're not just a commodity, that you could provide a lot more. Let's see what this actually looks like in the real world. Before we do that, I want to talk about the pricing models that most firms use now, which are time based pricing models. And Blake and I and a lot of us in the profession could, could could spend hours and hours talking about what's wrong with this or we're going to quickly go through it. So one of the most common ones is a straight hourly rate, which is basically tracking your billable time and then sending an invoice to the customer saying we spent 15.3 hours on this. And that's the mathematical equation that you will do 15.3 times your rate and invoice your customer, that there's also estimating based on time with a percentage of slack before adding or adjusting more hours. So I see a lot of professionals that say, you know what, this project is going to take about 20 hours and if it's within, you know, 10% error, right? So if it's within, let's say, even, you know, 10% it so if it takes you between 18 and 22 hours, you probably won't make any adjustments.

Hector Garcia: [00:32:01] Just keep, you know, keep the invoice exactly as the estimate and then start thinking about adjusting up and down after that, that slack percentage. That's much better than straight time based because it just gives the customer a little bit more security and feeling about what they're paying for. But it still has an underlying problem, which is an hourly rate. Now Frankenstein monstrosity of people getting creative with time based models is what's called the blended rate, which is they take the combined rates of several people. And they charge a single blended rate based on the proportion of time they spend in the job. So, for example, they have a junior bookkeeping and they're billing them out at 75 and they have, let's say, a senior accountant billing them out at 150, and they have this principal owner partner or whatever, billing them out at 300, and then they figure out more or less, the junior bookkeeper will be doing 70% of the work. The senior will be maybe doing 20% of the work, and the partner will do 10% of the work. And they take this mathematical equation that takes all the rates times the percentage proportionate to what they do, and they do a blended rate. And because they have this spreadsheet and they have math, it feels accurate. So they fool themselves into thinking the hourly rate is just perfectly mathematically calculated because they added formulas and at the end they can go to the customer and go, look, you know, this is super fair.

Hector Garcia: [00:33:25] You know, we're doing this based on each level. And again, the problem with this, it's still an hourly rate. Again, it's feels slightly better, but it's not a true improvement. And then sometimes they disguise hourly rates by the day or by the week, which I think is much better than an hourly rate anyway, just because it's harder to to compare because most firms don't have a daily rate or a weekly rate, but it's still sort of an hourly rate in disguise. Now, some people will guarantee a fixed price, but they use the fixed price based internally on the number of hours that it would take times an hourly rate. I actually prefer this over anything else where the customer gets a fixed price, it's not necessarily the best approach because, you know, sometimes you go up, sometimes you go down and then you're not pricing for risk. But but in terms of a customer service experience guaranteeing a price regardless of how you how you calculate it or how you came up with the number, it's still better than an hourly rate. But don't fool yourself that guaranteeing a fixed price. But you use a spreadsheet to estimate how long it would take you. It's still an hourly rate. It's still time based billing. Okay. Now a couple of fundamental problems with hourly rates. Number one is it requires you to actually track time.

Hector Garcia: [00:34:44] This is a huge resource drain. I mean, some firms spend 15% of their time just tracking time, which sounds like an oxymoron, but they actually do that and it's crazy. Second thing is, it's really hard to separate thinking time. You know, this is the time where you're processing an issue in your head and looking for a solution to the issue versus hand keying or mouse clicking time. And in the industry, you need both. I mean, there's there's certain some parts is 100% keying things in on the computer and clicking things on the mouse. And sometimes it's just stopping to think, is there a better way to fix this? So with hourly rates or time tracking in general, how do you how do you separate these two? It's very hard because many times I'm going on a walk on a Friday night. Or a Saturday morning or whatever. And I'm thinking about a client's problem. And in that walk, I come up with an idea, something I'm going to suggest to them or something I'm going to change in how we do work for them. And that's fundamentally change the direction of that client's future. And how did how do I even track that? Right. So that's the problem is that that that hourly rates and time tracking assumes that we're all machines and we turn on and off on demand for a particular customer or project that we're not freely thinking and looking for solutions outside of hand keying and clicking on things.

Hector Garcia: [00:36:09] And I think that the introduction of artificial intelligence and all these AI based tools are going to accelerate this concept just a lot more because now a lot of your customers are going to say, Well, but you know, Chatgpt did half the work for you, you know, or whatever, right? So, you know, whatever tool, you know, QuickBooks automatically classify things for you. So like you're doing a lot less hand keying and mouse clicking and now you have to explain that you're what you're billing for is it's thinking it's just complicated, right? So just get rid of hourly rates altogether because it's just it's a it's really a race against the bottom at this point. It's really hard to defend hourly, hourly rates. Now, the other thing is that clients are always going to dispute how long things actually took or how long things should take. Great clients, horrible clients, they all do the same thing. This is when we're giving when as human beings, when we're giving a measurable number, when we're giving a point of measure, we gravitate towards measuring it or towards looking at the results for it, because an hourly rate always gets multiplied times the time. So then since the customer can't control the hourly rate, they feel they can control the time and they're always going to try to and that's going to be in the forefront of your relationship.

Hector Garcia: [00:37:30] That's horrible. And the last problem, I think, with hourly rates is clients will avoid contacting you for seemingly important things in fear of getting a dreaded six minute invoice. Right. It's just just like getting that invoice just feels like such a negative experience that they just won't call you and they'll make whatever wrong decision with without you. And no matter what, if you have multiple employees in your firm and you have multiple rates like A, even if you have lender rate, clients will always request the lowest rate employee to do the work, but expect the quality from the highest rate. It's just how it works. It's just how life works, how customers work. So how do you make that transition and answer those time rate questions? Because customers, small businesses are trained or they're educated or they're accustomed to automatically going for that that rate time. Question So one of the most common things is people ask me, how do I answer the what's your hourly rate question? So there's just one simple answer, which is. I don't have one. And that's it. And you don't have to you don't have to frame it. You don't have to reframe it. You don't have to explain yourself. You don't have to talk about philosophy. They say, what's your hourly rate? And you say, I don't have one. So you're asking me a very strange question. I don't know answers to those weird questions. I don't know what hourly rate means in the context of being a knowledge worker.

Hector Garcia: [00:39:00] So, you know, the answer is I don't have one. So they may follow up with, well, how do I know how much this is going to cost me? Like this is a typical sort of reprise from the from the from the customers. When you tell them I don't have one. So you can say I will give you a fixed price based on the results you're seeking and that's it. You don't have to explain anything else. That's the only answer to give. Okay. And I'm telling you, so many so many of my colleagues just get so wound up on these questions and they try to explain and reframe and they just trip over themselves. You don't need to go beyond this. This is the only answer you can give. Okay. So like, if you don't do taxes, like if you're not a tax preparer and people ask you, well, why don't you do taxes? All you have to say is, well, that's not my specialty. There's nothing else to explain. I mean, you. So why is this hourly rate question one that you feel that you have to explain yourself? But what if your customer comes back and goes? Results? What do you mean, results? What if you can't deliver results? Then you can say we offer guarantees to our work and that's tied to those results. And if we can't give you the results that we promise, we will refund you.

Hector Garcia: [00:40:09] That simple. And a customer may come back and ask you, well, can I use pay you after you deliver the results? Because that's actually a really slick way to to sort of backwards guarantee that the customer says, well, if you talk about results so much and you don't charge by the hour, can I just pay you when you're done? And then you can say something like, not at first because we don't have a working relationship, but we can get started with the most important and immediate needs that you have. And after we can prove to you that we can deliver results and you can prove to us that we can work together to achieve a common goal, we're open to discussing it. So I see no issues of you charging after the fact. But again, you're going to price that in into your services because you're guaranteeing that result. Right? And the biggest guarantee you can give is have people not paying you until you deliver the result. That's going to have a big premium attached to it if you're doing that. Many people just won't even do that. Then the other question that you may get, which is basically an hourly rate question in disguise, which is how long will this take? How long will it take you to do this? How long will it take you to do that? How long will it take you to do my tax return? Most people don't really care how long it takes you.

Hector Garcia: [00:41:24] They only care how much it's going to cost them. But they they think that the how long question is a backwards way to ask the hourly rate question. So how long will this take? Then you can say. I don't know. But I can guarantee you a delivery or completion time if you need it. And you follow up with a question. Do you have a hard deadline? Right. So you don't even fall into the trap of answering how long something will take. You say, I don't know, but I can guarantee. And you're not guaranteeing how long it will take. You guarantee a completion date because that's what matters for compliance purposes or whatever that matters is can you do it by April 15th or whatever it is so I can give you a delivery completion date if needed. Do you have a hard deadline and you completely flip it on them and no longer answering hourly and time questions? Now, what if they say and this is a very interesting one, it says, but I need to know how many hours specifically it will take you. I've had customers have gone down this route where, you know, they feel that I'm using all this word sorcery to get to get around their question. So they're super direct and they say, I need to know how long it would take you to do this. And you know what? Honestly, I don't see a big issue with that question.

Hector Garcia: [00:42:36] And instead of getting conflicted with the customer and trying to, like, prove to them that that's a bad question, then you can say something like, If you really need an estimate for that, I can provide how long it will take more or less a range after we do a paid diagnostic. Because not only I have to diagnose your problem, I also have to diagnose my own firm and my own firm's capabilities and pre calculate that time for you, which I normally don't do because I guarantee a result, you know, or I'll give you the money back. But if you actually need me to do both exercises first, determine if I can help you and how much it would cost you. And to give you an estimate of how long it would take, which it might take me that or it might not, I'll do it. But after we do a paid diagnostic. Also keep in mind that whatever estimate I give you, it's irrelevant to the to the fixed to the fixed price I will give you because my fixed price is based on how much I've charged customers to solve similar problems for companies that are similar like yours. Now, generally, you still want to try to avoid this question. I divert it, but I really don't have any issues with answering it. If you feel that, you have to answer it like you have a question about this.

Blake Oliver: [00:43:50] Can I just say, Hector, how much I love that strategy. I just want to repeat it so that I remember it. When a client asks or a prospect asks, How long will this take? Respond with how soon do you need it? And what I love about that is it it puts the question back to the prospect or the client, and you get a lot of information as the service provider as to their urgency, which is a big indicator of value, right? If somebody doesn't need their return done until October, they're in a totally different value discussion than somebody who needs it in a few days.

Hector Garcia: [00:44:31] Yeah. And realistically speaking, I've done I've done tax returns for a customer at 1 a.m. where I get a text message at 1230 that says, Hey, dude, you forgot, you know, my W-2 from X, y, z. I just emailed it to you. Please have to go to the bank tomorrow, 9 a.m. Can you get it done? I've done it. I don't do it for everybody. I have 500 customers. I do it for a handful. So most of the time, anything the customer asks virtually if it's legal and it's within the capacity of a human being or your entire firm of dropping everything to do that, it's possible. So like that question is so irrelevant at the end of the day, you know, how long would something take? Because then the question is, well, how many people what time is it after, you know, after work hours, during work hours? You know, you said, well, I'm concentrating, talking, talking, dealing with your account, Or is it like, you know, in the middle of me doing personal stuff at 9:00 at night? So the question is so irrelevant at the end of the day that it's diverting it to the question that you want the answer for, which is what is your deadline? That that's the only thing that matters because you can you can drop everything and have your entire firm work on a file or you can do it just with one person, or you can bring outside contractors or most of the deadlines could be met if the price is right.

Hector Garcia: [00:45:46] And sometimes there's no physical capacity, they're asking for the impossible, but it could be done. Now, another question I'd like to answer or have an answer for is Hector. This is a simple job. It should only take you a couple hours. It's a very simple one. Customers already, not only they self-diagnose the problem and they go to a professional to fix it. They also already know how simple or complex the job is and how long it should take you, which is really hysterical, honestly. But so the answer to this is that would be awesome if we can get it done that quickly. Like you want to. Basically what you want to do is instead of trying to give them the counter answer, just agree with them. So this is a simple job. It should only take a couple of hours and you answer, That would be awesome if we could get it done for you that quickly. Quick question for you. Our firm has a minimum of $1,500 a month to take on a client. Assuming that you are at this minimum, would it be worth to do such a simple job or do you have a more complex job in mind for us to do a more comprehensive type service? And then all of a sudden their question is just completely lost in your answer? And they go, Whoa, whoa, whoa, wait, wait. You say you have a minimum. And I thought I had a simple job and now you're asking me if there's more work for you to do.

Hector Garcia: [00:46:54] So all of a sudden, the customer. Wait, wait. What? And then you go, Yes, your tummy is a very simple job, but we have a minimum of $5,000 a month per client. So if you are pretty sure that this job is is very simple, is it even worth it for us to to discuss it? At that point? They can no longer talk about the simplicity of the job. Now they have to switch over to figuring out whether that minimum that you quoted is a hard minimum if because some minimums are fungible. Right. But if it's a hard minimum and then they have to reframe their needs around that minimum, and if they even want to work with you, they have to think about their job in a different context. And if they can't, in their mind, fathom working with you at a minimum, why are you guys even talking? So we go straight into an exit exit ramp and help the client go in a different direction. So that's a that's a really, really quick way to get this whole simple job. It can only take a couple hours back into a different conversation, and it's a very smooth transition into talking about minimums. Okay. The next question or kind of comment that your clients could give you or it could be we used to do this for eight hours and you you're the expert. It should take you more or less. It should take. So it's funny because it's it feels like it's a compliment, right? So it used to take me eight hours, but you're such so good that you could do it quicker.

Hector Garcia: [00:48:10] So they're basically inside the compliment. They're hiding. They're hiding, reframing how long it should take you and or how much you should charge, regardless of how long it should take you. So something like for that answer, something like it's possible, yes, we're very fast when we need to, but generally we're more focused on quality versus speed. Let me ask you a question. Would you prefer we focus on speed over accuracy? It's a redundant question because most people are going to be at that point when you ask, would you prefer we focus on speed, sorry, accuracy over speed. Then at that point, if they have a deadline, then then they're going to come up and go, Well, I do need speed because I have this deadline, this urgency, blah, blah, blah. But I do need accuracy because if it's wrong, it's useless anyway. So it's a rhetorical question to get the customer again, not talking about how long it took them or how long it should take you. It's now talking about you want us to do it right. Therefore, let's not even talk about how long it took you or how long it should take me because the focus is on doing it right and not doing it fast or not doing it comparatively faster than you. Okay. Now, some people may come back and go, you know what? Your minimum is too high.

Hector Garcia: [00:49:19] I don't need all that. I just need you to solve this one simple issue. And then after that, then we can talk about working in the monthly or minimum. So what they try to do is they try to get you out of like try to get you to accept your policy about your minimums. They just want one simple thing for you to fix. And then they and then there's a promise that, hey, after we fix this, you know, I'll think about doing something else. And this is very typical for people like me that are a QuickBooks consultant where they call in and they say, Hey, I just need you to help me reconcile my bank account really quick. Let's get that done and then we can talk about everything else. And the challenge with that is, is that many times people already maybe already have another accountant or another or another avenue to fix overarching accounting problem. And they just trying to use you and all your expertise and all your might to solve one simple thing that took you 20 years to learn, but in their mind it should be a five minute thing and you should only charge 100 bucks for it. And so you really want to get out of that trap rather quickly. So you want to avoid getting on that trap. So typically what I do, and this is why our company is both an accounting firm and a training firm is because the best way.

Hector Garcia: [00:50:30] To combat this is, hey, we don't have the capacity for clients of this nature. However, we have a training services division, okay? And we can teach you and your team on how to do these things. We believe that all these skills can be learned and we have a training department I can refer you to. Would you like to talk about training services? And you can frame it with look, education, it's a much bigger investment, but it could save you time from hiring professional accounting services in the long run, assuming that you have the time and money to invest or to invest in learning. So what you do is you shift the conversation to training and education, and if you don't do it, then that's a different story. And maybe you don't want to lose the client anyway, and you want to maybe reframe the conversation towards value and accuracy and all that stuff that we spoke about earlier. But if you do have training as an avenue or as an exit ramp, you can quickly move it in that direction. Okay. So once we get over the hourly and we we know how to talk to our clients about. We don't offer hourly, then we'll talk about. Offering services in non time based pricing models. So there's a couple of options here. We have input based, which is when you price per task or per unit of work. This is very common when a bookkeeper charges per transaction, per bank transaction, per credit card transaction.

Blake Oliver: [00:51:55] We had a question come in. Do you mind if I pause you for a sec?

Hector Garcia: [00:51:57] Sure, sure. No problem. All right.

Blake Oliver: [00:51:58] So this is from Albert. Does time tracking always make an accountant work? A cost to the client. Will value pricing eliminate this cost benefit dilemma.

Hector Garcia: [00:52:11] Do you do you want to rephrase the question the way you understand the. See if I can. Because I couldn't. I couldn't quite grasp it.

Blake Oliver: [00:52:19] Um, maybe it's work at a cost to the client. Will value pricing eliminate this cost benefit dilemma? So I guess I guess the question is when your value pricing or when you're working hourly. The clients always perceiving a cost. Right. Every hour you work is a cost to them when your value pricing. How does that change how the client perceives the cost? Okay.

Hector Garcia: [00:52:44] Yeah. Well, first of all, they agree to a price in advance. So I would say that's the single most important thing. And unless somebody is holding a gun to your head, you only buy something that you perceive to be worth more than what you're paying. Right? So so the problem with services different than going to Best Buy and buying a better headphones is that services take a long time for you to receive the gratification. The confirmation that what you paid for was worth was worth it. Right? Versus a product that you could just buy. Try. If it doesn't work, return it. So with services, the only way to to eliminate the the dilemma of cost. Right because it's all benefit is to say okay I understand what your problem is. We're going to solve this problem. Okay? And this is the guarantee we're going to solve this problem. And for that we're going to charge this much and if at the end of the period and we're going to discuss this, we're going to wrap up the session with with guarantees at the end of the period, if the guarantee gets triggered, it didn't get solved. Whether it's an objective measurement or a subjective measurement, then you're going to get your money back. So then there's no longer a cost benefit dilemma. Does that make sense?

Blake Oliver: [00:53:58] Yeah. So the difference with the hourly is when I'm when I'm pricing hourly, I'm not giving any guarantee to my client that the work's going to that their objective is going to become accomplished. I'm just saying I'm going to work and I'm going to bill you for it. But when your value pricing, there's either an explicit or an implicit guarantee that a certain thing will get done for them, and they've agreed to that in advance. So. That's how I that's how I understand it anyway.

Hector Garcia: [00:54:24] And it's also like like life insurance. You can make a good connection with it because life insurance, if you pay for life insurance, you're not guaranteed that you won't die. There's no guarantee for that. But if you do die, your family will get compensated. That's how it works. That's that's how guarantees work, right? Guarantees are triggered based on the conditions of the agreement. And it's that simple. Okay. All right. So so we talked about input based what's the non time based. We have input based which is based per task or unit of work such as per transaction. Some people, some bookkeepers charge per transaction. That's a thing. I have no big issue with that. But there are better methods and we'll talk about that in a little bit. Then we have output based where people price it per deliverable. This is very typical in high volume tax firms. What they charge $500 for the 1040 and then $25 for the schedule and then $50 for the schedule and then $100 for the schedule. See, it's just basically it's all output based and that also that can work. It's better than hourly for at least for the customer. But I think there's still no value component. Then there's this really interesting thing that a lot of accounting professionals don't talk about. And I reframed, um, a pay diagnosis around this concept of a productized service. So a productized service is when you take a service. That's what we talked about, something that you do now and get value on when it's finished and we package it as if it's a product.

Hector Garcia: [00:55:53] And a prototype service typically has scope and price fixed prior to even diagnosing the problem. So I think that the perfect product to to connect with this concept of productized service is a paid diagnosis. As a matter of fact, my firm, this is the biggest this is the most common productized service that we charge for is a paid diagnosis. Hey, I have problem X, y, z. I'm like, okay, yeah, pay for diagnosis and then we'll sit down and confirm that that is the problem, that we have the solution for it, or that the approach that you're thinking about is the correct one. So I think it's a very, very good one to to to implement. Then we have value based pricing, which is you have a comprehensive conversation with the customer, whether it's unpaid or paid, and you can evolve to paid in the future. And then there's a fixed price that's tied to a result with the guarantee. And then we have access based or the subscription model where the client subscribes to the firm said they're not even paying for a service or they're not paying for the value of the service. They're subscribing to access the firm. And then the firm could potentially do everything that they're capable of doing under the roof for that fixed monthly fee. Now I promise you that we'll talk about hourly about subscription at some point in the future.

Hector Garcia: [00:57:09] I'm not sure if that's going to be within Avalara podcast series or whatever, but subscription is an entire change and transformation of business model, and it does require a lot more than eight one hour episodes. So we're going to we're going to put the concept of subscriptions on pause. We're going to be focusing on on on value based pricing. Now, I do want to point out that task based and output based or input based and output based could potentially be an hourly rate in disguise unless you tie the price to risk. And this is what I what I what I mean by that. So, for example, I could charge a fixed a fixed fee to repair a damaged QuickBooks desktop file based on the size of the file, which feels like an input output based type of price. But if I can't fix it, if I spend ten hours on it and it can't fix it, I can't charge anything. So if I have it tied to risk and the risk is eventually not getting paid, then it's not hourly. In this case, hope that makes sense. You know, another example is, let's say auditing accounts receivable. Let's say, you know, a customer says, Hey, you have about 100 customers and my accounts receivable are all messed up, can you help me audit them? And that includes calling them and getting confirmation letters and understanding, you know, looking at invoices and all that stuff. And let's say you said, Yeah, you know what? I will charge you, let's say $1,000 per confirmed account receivable, 100 bucks, whatever it is.

Hector Garcia: [00:58:33] And there are some risk elements to it because I don't know if one customer is going to have 100 open invoices or just one, and your system could be wrong and the customer can go back and go, Yeah, no, I paid them. Here's a list of payments and you go back into the system and the payments are tied to a different customer, so there's a risk element attached to it. So that's not time in disguise, if that makes sense. Something like a higher risk tax form, like an employee retention credit form, an R&D credit form that includes representation if it gets scrutinized by the government. So you could charge higher for that, much higher because you're building in risk. Into it. So it's okay to have task based, output based as long as you have risk built into it. And as I mentioned earlier, this for this product type service, especially if you're going to charge for a paid diagnostic, I believe this is the best approach to get your customers in the door. But you have to make sure that you deliver value even with the paid diagnostic, which is very difficult. Okay, Especially if you've never done it before. Because understanding what the real problem is, what the customer's real problem is, can turn into value, for example, compliance, value determining if you're doing the things right so you can have real tangible compliance value through a diagnostic to tell the customer, Hey, yes, you've been filing the forms correctly or no, you have not been filing them correctly.

Hector Garcia: [00:59:54] You better voluntarily correct it before you get audited. And it has, you know, painful consequences. Understanding the real value through a diagnosis can also have economic value, like not wasting time and money solving the wrong problem. And this is a very common thing. People think the problem is X and they go to find a firm and the firm does a beautiful job at solving X, but then they realize that solving the X didn't get them the end result that they wanted because the firm didn't take the time to understand the underlying problem that they're trying to solve and spiritual value. Because many times the business owner has a feeling that something's wrong and then they'll pay you to confirm that feeling that it was accurate because feeling like something is wrong, but not having a third party or so confirm it. It's something that could that could take away a lot of sleep at night. So just paying again, I'm talking about people just paying for a diagnostic and doing nothing else with you. These are the things that you have to think about that you can do. So for for access based or subscription based business model, only thing I'm going to recommend is that you read Ron Baker and Paul Dunn's book called Time's Up. Time's Up subscription business model for professional Firms. Ron Baker and Paul Dunn.

Hector Garcia: [01:01:09] And is Paul Dunn's last name and Baker. Baker Baker is the last name for Ron Baker. Look him up in Amazon. That book is wonderful. It's something that you really, really will be mind blowing in terms of transforming your your firm to that. But let's let's continue with value based pricing and let's get into sort of the meat and potatoes of this. So I'll preface by saying that everything I know and understand about value pricing, I essentially learned from these three books. Ron Baker is the same person as the same sub book, his book and implementing value pricing for professional firms. Allan Weiss's book called Value Based Fees and Blair N's book called Pricing Creativity. Basically, everything I will teach you about value pricing or have taught you is an is an amalgamation of these three books plus maybe some of my own experiences. Plus I should give a lot of a lot, you know, credit to people like Ed Kless and Doug Slater and Mark Wickersham, Joe Woodard and other other leaders in our profession that have that have talked about value pricing for a very long time. I think it's worth mentioning them them as well. And Blake, you've talked about value pricing as well. So, you know, I mean, I appreciate the contributions you've made to this conversation, but let's get right to it. So there's a single framework I want you to think about. This is all the concepts into one concept number one charge for a diagnostic.

Hector Garcia: [01:02:31] I would say that's that's the simple, most important framework to have is to stop doing free consulting. So charge for diagnostic, even if it's a dollar, like get people to take out their credit card. And the first interaction with you means I paid something to be able to talk to you. Okay? Because. Because the only time that people pay attention is when they paid for something, right? They're getting a free diagnostic. They might. Their attention might be somewhere else. They might be listening to the phone. They'll give you half the documents. They pay for the consultation or they pay for the diagnostic. They're going to be much more inclined towards towards being involved. And in that diagnosis, you're going to have a value conversation. And we're going to talk about the why questions that we talked about in episode five. But you're going to include why questions in the value conversation, and you're also going to include those expectation questions that we also covered in episode four in the sales process and add what's called the economic value questions, which we'll cover briefly and always make sure that you you promise that you will credit that diagnosis to the final service, because that has to be part of the process. You pay for diagnosis. We'll give you a price. If you like the price, it gets immediately credit towards that. If you didn't like the diagnosis, we won't refund you. I mean, they got to pay for the diagnosis. And I've had I've done maybe maybe 300 paid diagnosis in my life and I've had 1 or 2 people ask for a refund because, you know, we did a horrible job at setting the expectation.

Hector Garcia: [01:03:57] And no matter how much we diagnose the problem, there was no solution to that problem. And we probably could have done a better job at at filtering them prior to booking that paid consultation. And this could happen. But for the most part, once people understand they've got to pay for it, they'll pay for it. Then the second part of the framework after we did the value conversation we charged for diagnostic is to build options. A really important piece. You have to give people options and we're going to use a 12 keys to build those options. And the third one is we offer those three options framed or anchored against the guarantees. Okay. So let's let's get to it. So we're going to talk about let's start with the economic value question. So the economic value questions is understanding if if there's any economic value from working with you. Okay. And and it's hard to tell right off the bat, like, you know, deep in your heart as an accounting professional, you know, that if they work with you, they're going to spend less money because they don't have to have a full time employee, an accountant. Right. And they're going to be more efficient because their books are in order. So you know that and you feel that in your heart, but your customers don't, at least not right off the bat.

Hector Garcia: [01:05:06] So when you're having this value conversation with your customers, you need to keep your ears open for the key economic value words. So, for example, if they say something like increase revenue, increase growth rate, increase income increase, return on investment, increase market share, increase loyalty customer loyalty, increase cash flow or improve cash flow, increase profit margins. If you hear them say any of that, you need to write down immediately in your notebook in the back of your head. There's an economic value question that could come along. If you hear them say something like reduce direct costs, reduce overhead, reduce risk, reduce turnover, reduce returns, reduce shipping delays, reduce errors, reduce tax penalties or liability. If you hear them say any of this stuff, again, write it down somewhere because it's an economic value question. If you hear them say improve efficiencies, improve product quality, improve speed of delivery, improve response time, improve communications, improve workflows, improve quality of information. Again, that is an economic value. Question So once they gave you what they're looking to improve, what they're looking to reduce what they're looking to increase, then you're going to turn around and place and peg the economic value. To do to actually helping them achieve that goal. Okay. So this we can take this information and we and we and we frame it against Mahon SaaS five Golden questions. And the five golden questions is get ready. It's five questions is what is the metric? How do I measure it? That's the first question.

Hector Garcia: [01:06:44] Second one is, what is it now? Second is where do you want it to be? Three years was the value of the difference. And five is what is the cumulative cumulative value over time. Typically three years. I would like to frame everything with three years. Let's go back for a second. So your customer says just to say reduce turnover. That's the key economic value concept that they said that was the biggest problem with turnover has been the biggest headache to them. They're they're getting too many clients or mean too many employees are coming in and coming out and not being trained correctly. They're not cultural fit, whatever happens to be. It's a big pain point for them. And you go back and go, Hey, I heard you say that this reduced turnover. It's like the main problem to to to all these issues that you're mentioning. What if I could help you fix that? And the customer goes, Yes, of course. Absolutely. I would I would love for you to fix it. Okay. Let's sit down and talk about this. What is the metric and how do you measure it? So what's the metric for turnover? How do you measure it? Well, you can look at payroll reports. You can see how many new employees are versus the ones that left and what is the metric. So let's say we're we're losing two employees per year. We're hiring two employees and we're losing two employees per year.

Hector Garcia: [01:08:01] So we know that's it. We got the measurement. It's two per year. Okay. So so now we know what the we know how to measure it. We know what the metric is. We know the current number is two per year. So where do you want it to be? So obviously they want it to be zero, but that might not be realistic. So you say, Hey, Mr. Customer, for the next three years, I could consistently reduce that from 2 to 1. You know, would that be valuable for you? And they're going to come back and go, Yeah, of course, absolutely. I mean, that's 50% of our problems being reduced by some sort of guaranteed service from from my accounting and advisor. So what's the value of the difference? So you can you can estimate how long, how much it costs you to train a new employee. You can say, look, new employees are pretty much useless for six months, so we can take six months of their salary. And pretty much that's the value of the difference. Correct. Plus the training plus, you know, compliance seminars or whatever you send them to so we can actually put a monetary value to each of the turnover. And if we reduce that for three years worth. Get multiply that number times three. That has a real numerical value attached to it. So then you come back to your client, your client and go, okay, if through my services, which is, you know, it could be traditional accounting services could be upgrading to a better ERP, right? Because you you could have found out through your diagnosis that the turnover is because the systems are complicated, difficult to use, busses micromanage through their systems, and they just have a bad accounting system.

Hector Garcia: [01:09:29] And you believe strongly believe that through an accounting system upgrade, you can you can really, really increase the happiness factor and how people feel about their job. And you can guarantee that you won't have that turnover. And now you know how to measure the number and now you actually have a number in hand. The number in hand is, let's say for whatever reason, it's $150,000. And you say, look, if I can every year reduce the turnover from 2 to 1, which is its cost, it's costing you $150,000. And I could guarantee that if I could guarantee that, would you be willing to pay, let's say? 30% of that, right. Are you willing to pay 30% of that to have that guaranteed? That's $45,000. I mean, all of a sudden, whatever you were charging before, you are potentially gaining an extra $45,000 just by placing that guarantee. And if the customer goes back and goes. Absolutely. If you can guarantee I won't lose, you know, three employees over the next three years, I'm willing to pay an extra 45,000 for the three years, 15,000 a year. Then all of a sudden you have economic value attached to your services. Okay, so any questions? Blake, Does that make sense?

Blake Oliver: [01:10:43] Yeah, it makes sense. No questions.

Hector Garcia: [01:10:45] All right, so you can do that with any point of economic measurement. Okay. And so that's one huge. A tool that you have at your disposal. The next tool is the option building tools, which is using the 12 TS. And I'll just add that I learned about Run Bake about the 70s with Ron Baker and applied them and I was missing some TS and added some more. And I made this sort of my own version of this. But I learned this from from Ron Baker originally and. To to be able to offer options like three different options and prices. You are going to need to understand the 12 T's. And there's there's there's three types of T's. Basically, there's scope option, T's, there's service delivery, T's. And we're talking about the letter T, by the way, not the drinking T, And then we have results that result T's and T's is just the word starts with T to make it easier to remember. So the scope option t's are the ones that answer the what is the work going to look like? So there's two T's, one is called transactional and the other one's called tangential. So as you scope your services, you want to understand if the customer values transactional level detail or not. So for example, you know that if you're doing bookkeeping services and you're going to include a customer job for job costing a location, a class, a tag, some sort of additional dimension to the categorization that could double or triple the amount of work that you're doing versus just adding an expense category.

Hector Garcia: [01:12:18] And that's it. So you need to understand how much a customer values transaction level details. So that's one of the T's, right? And then you can build options based on how much detail you will go in the services. So if you let's say, you're going to offer three options and they're just based on transactional, transactional level detail, you can say, look, with this option, which is whatever 700 bucks a month, I will categorize all your expenses to the right expense category. With the second option, I will categorize them to the right expense category. Plus, we're going to have a chart of accounts that's double the size and we're going to go into very, very detailed level, granular level in the chart of accounts. Plus I'll do it by location based on the source account that it was paid for. So you will know how much your sales per location or expenses per location are. So now you have that extra level of detail. And in the third level of the service, we're going to do all that plus tagging, plus job costing, plus classes plus locations. Et cetera. Et cetera. So I hope that makes sense that the transaction level detail can create variants in terms of. How you offer that service. The tangential services or services are not directly linked to the inputs of your work, but they're linked around other events that are caused by the input of your work.

Hector Garcia: [01:13:34] So let me explain what that means. So when you charge somebody to prepare a financial statement, that's all it is. I prepare the financial statement, you're using it. But they may have an investor that's looking at that financial statement and that investor may not understand it and may need an explanation. That's called a tangential services has nothing to do with what you hired me for, but it was caused by the work that you hired me for. Or they give the financial statements or the tax returns to the bank and the banker has additional questions or needs additional schedules. That's a tangential service. So you can include that conversation with the investor, with the banker, with a lawyer, with whatever in a in a maybe in a higher level service, but not in a lower level services. So these are the two T's for scope options. Now we have the 70s on what's called the service delivery options, which answer the how, when and who. So how's it work going to be done? When's it going to be done and who's going to do it? So these are the seven T's training terms, timing, tailoring, technology team and travel. Okay, so I'll explain that. So training is am I obligated to train you on your staff in addition to the services I'm providing? So if the answer is yes or no, or maybe then you use your options to offer that terms, you know, am I paying now? Am I paying later? Right.

Hector Garcia: [01:14:55] That sort of thing. Am I paying half now? Half at the end? Do I have 30 days to pay that sort of thing. Timing is am I going to do this immediately? Am I going to do it in a month? Am I going to do it two weeks after you give me all the documents? Am I going to do it by the 20th of each month? That's timing. Tailoring means how much I need to modify my processes to tailor to yours. So you want to come physically and give me paper statements because you don't want me to go into your bank and download it because you don't want to download it and put it in my portal. Right? That's called tailoring, right? So if your customer is asking you to tailor your process, you're going to charge more and you're going to put that in a higher option. Technology. If the customer refuses to use your technology because let's say you use Xero or QuickBooks or Avalara for sales tax compliance. Right? Or Augusta Paychex, whatever, for payroll. So if you use your system that you're accustomed to using, that you want to use and the customer goes, No, no, no, you have to use my tech, then you can charge more because you are using different technology, right? Team or talent. The customer might say, Hey, I need you specifically to show up to the monthly meetings and I want to talk to you, the partner.

Hector Garcia: [01:16:07] Okay. You can charge more for that option versus having maybe a junior person do it. Okay. Travel, which we call it travel. And because there's no more travel, because post-COVID, there's very little travel. So it's travel or unreimbursed business expenses. So I'm incurring expenses to be able to serve you. So am I paying for every envelope or every letter I have to send to the IRS return receipt? Am I paying for that or am I getting reimbursed? Am I paying for your QuickBooks subscription or am I getting reimbursed? So you have to figure that out. If you're going to have unreimbursed expenses that you're going to incur or travel expenses and include that only on a higher type option. And the third group of the. Is the white the one that the the one that answer. Why are we doing this in the first place? So this is t termination, transference and transformation. So we have termination, transference of risk and transformation. So termination means how easily can the customer cancel and maybe they get their money back, right? So can they cancel any time? Is there a one year contract? Is there a six month contract? Of course, you can add one year contracts on the on your lower offering because it's lower risk to your customer and lower price. But maybe on the highest option, they can cancel any time.

Hector Garcia: [01:17:24] So you can play with termination across your options, transfers or risk. How much risk are you taking and removing from your client as part of as part of this engagement? So guaranteeing that there will be no change in the tax return. For example, if it gets audited, that's a huge transfer of risk, you know, guaranteeing that if they get a worker's comp penalty, that you will pay for that. That's a huge transfer of risk, that sort of thing. And lastly, are you guaranteeing any measurable transformation? So those are the three T's for the why options. And okay, so that's the second section. So now we understand that there are ways to create variability of service with those 12 T's. We understand the value pricing process, we understand the economic value questions with the five, you know, measurable questions. Now, what does this look like when you actually go out there and offer your services? So we got maybe about ten more minutes and we'll be we'll be done. So imagine if you're listening to the podcast imagining you have a three pieces of paper in front of your client with three different service offerings. So you had the value conversation. You thought deeply about the guarantees. You thought about the you talked about the 12 T's, right? All these T's that we've talked about. You talked about them. And then based on their answers, we made modifications to the potential exact service that the customer is getting.

Hector Garcia: [01:18:52] But they're getting variations of that service and variations in guarantee based on what you're offering. Okay. And these three pieces of paper have a price and they have a name for the service. That's a really important piece. You have to give it a name. You can't call it the low option, the middle option or the high option because that's just way too good, way, way too on the nose for the customer. You have to give it an actual name. So, for example, I'm going to give the lowest one. I'm going to call it Quarterly Ready books. That's that's the title. I'm giving it quarterly ready books. Okay. And then in that offering, let's say it's 900 bucks a month because let's say that's our minimum. We're going to offer quarterly bookkeeping. We're going to send the reports via email or via a portal. We're going to do the bookkeeping offline. That means that we do it in our premise with our systems. It's going to be cash basis only, right? No quarterly adjustments. We're going to have 3 to 5 day response time by a team member is an annual contract, so they have 12 months to cancel and they have to pay three months in advance to start at the end of each quarter. So think about that. We offered a service that essentially gives them a financial statement, but with the 12 T's, with maybe, you know, two or 3 or 4 of those T's, we added some variation.

Hector Garcia: [01:20:08] So timing we did a quarterly right transaction detail. We did cash basis, no RFP timing. We responding with between 3 and 5 days terms. We we have an annual contract terms. They have to pay three, three months ahead of time every quarter. So we used some of the T's, not all 12 of them, 3 or 4 to construct that low option. Now, the middle option, imagine it's called the monthly support option. Again, we call it quarterly ready books, and then we call it monthly support. And then that one we're going to say, hey, we are going to do a monthly bookkeeping and we're going to use QuickBooks Online that we're going to pay for. So it's collaborative. That means you have real time information to the books. We're going to do cash basis only, but every month we'll do an R, an adjustment. You give us that number so that way you have some semblance of accrual based accounting. We're going to respond to your emails or questions between 1 or 2 days. There's no contract. Just give us a 90 day notice for canceling. And we're going to include a quarterly training or financial statement review, and you can pay at the end of the month. So think about the same exact service they're getting financial statements, but through the T's they're getting all this variables. Blake Which are the T's do you detect from here? Let's see if, if, if it was easy to to grasp the concept.

Blake Oliver: [01:21:29] Oh, you're asking me?

Hector Garcia: [01:21:30] Yeah.

Blake Oliver: [01:21:32] What are, what are the T's that I said? Well, give me a let's see, give me a clue at least.

Hector Garcia: [01:21:36] So we have- One is called transaction detail. Yeah. Between the middle option and the and the and the lowest option.

Blake Oliver: [01:21:43] Yeah. So the, well the at least three of the 12 t's are in effect. I mean I should have been paying better attention. I'm not ready for a pop quiz here.

Hector Garcia: [01:21:50] Yeah. So we got transaction detail, right. Yeah. So which, which of these. If you look at the quarterly service, which is cash basis. No, quarterly ARP and then we have the monthly service that's cash basis, but we make an AP an adjustment at the end of the month. Okay. So what, what, what variations do you see there?

Blake Oliver: [01:22:10] What variations see, I'm sorry. You're going to have to say this one more time for me.

Hector Garcia: [01:22:14] Yeah. So the lowest service is 900 bucks a month, right? And we do the work we do. Quarterly bookkeeping is cash basis only. No AP or are in the middle option with the monthly services. And we do we do. We still do cash basis, but we make an adjustment every month. Right. Okay. So you see, you feel the variability there. You see the difference in scope?

Blake Oliver: [01:22:37] Oh, yeah. There's a huge difference in the scope, right? I could do that, that quarterly work, you know, I can sit down and probably do it all at once. Right. And come up with a list of Uncategorized transactions. Send that to the client. I'm done for now. Correct. Right. Whereas with that monthly support, I mean, I've got accruals. I've got a lot going on there in terms of communicating with the client, figuring that out. Yeah, a lot of that.

Hector Garcia: [01:22:58] But that's still input. Blake So that's still the, that's still the what it takes us to do to the customer. How does the customer, how can the customer see that differently?

Blake Oliver: [01:23:07] Well, they're going to get monthly reporting versus quarterly reporting. Yeah.

Hector Garcia: [01:23:11] Right. Yeah. So they can make decisions quicker and faster. And we're also including QuickBooks Online so they can see the reports at any time instead of waiting for a whole quarter.

Blake Oliver: [01:23:20] And they get a balance sheet, not just a PNL.

Hector Garcia: [01:23:23] Right? They get a balance sheet with with Apnaa. And we have you see the response time. So we have a change in response time. Right? You know, Is that so? So is this a clear way to create differentiation between the two, the two options?

Blake Oliver: [01:23:35] And I think the response time is really good. I don't see that very often. A lot of times with scope, we are focused on number of transactions, number of employees, number of bills, but the response time is what creates a lot of the compression in our firms is everybody gets the same response time and which is immediate.

Hector Garcia: [01:23:53] And notice nowhere here talk about number of transactions and number of bills. I don't talk about that. That's that was already scoped out. That was already in the diagnosis. That's not going to change. So what I'm doing is I'm creating variability around how the work gets done, not necessarily what the work is, right? Because the work is the work. And now let's talk about the highest option here. Let's I want to give it a name. I'm going to call it the weekly advisory service, which is $9,000 a month. But now we do the work weekly, right? We send the reports weekly. Maybe we include a better version of QuickBooks QuickBooks Online Advanced. We do full accrual based accounting. We do 24 hour support via email or, you know, one of our senior team members will respond to that, cancel any anytime, no contract payment due at the end of the month instead of the beginning of the month satisfaction guarantee, which means we'll refund up to three months. If you're unsatisfied at any point in time, no questions asked, we will train your staff or your team monthly. We review the financial statement and explain to them how it works.

Hector Garcia: [01:24:56] We'll go over budgets, stuff like that. We'll include audit support. So if you get supported while you are in a monthly service, we will do your IRS audit support, state work, workers comp support and we'll keep seven years of document archival. And if you at any point in time terminate will immediately give you a hard drive or a USB backup and give you all your documents fairly quickly. So so look, this is the exact same thing. People are getting a PNL and a balance sheet. This is the exact same service. The difference is we're reframing on everything around that service and that's the how the 12 T's are done and your customers will possibly draw spiritual value for any of these things because knowing that you can respond within a day, knowing you can cancel any time, knowing that you can get a refund if you ask for it, knowing that you're going to support me, there's an audit. All none of these things have real economic value because the economic value was getting the books organized was the only everything here is spiritual value, making them feel right.

Blake Oliver: [01:26:00] Yeah. And that is exactly what Albert is asking about. He asks, How much fluctuation do we see in the spiritual value that clients may have over an accountant services over time? And I would say that generally as you develop a relationship with that client, you develop more of a spiritual or non-tangible intangible value from the relationship. And the way that Hector has scoped out these different services, the more expensive services have greater intangible value. There are guarantees, there is assurance, not audit type assurance, but assurance that the work will get done with these guarantees and that run.

Hector Garcia: [01:26:39] Calls that insurance. Ian I like.

Speaker4: [01:26:41] That. Yep.

Blake Oliver: [01:26:42] Insurance. And that's a spiritual type of value that is very high and people will pay 2 or 3 times as much or more just to have that confidence.

Hector Garcia: [01:26:52] Absolutely. So so to to wrap up, we talked about presenting these three options. One hot tip I'll give you is always present the highest option first. That's the one that makes people feel really, really good. Let's say they can't afford it. Fine, You got the three options available, but you want to anchor and frame around the one that has all their desires and wishes come true, the one that has the most spiritual value, and then let them determine how important response time is or how important guarantee is, or how important weekly versus monthly versus quarterly is, or how important accrual versus cash is. You know what I mean? Customers will determine with their wallets how important it is, because if you ask them, is this important? Is this important, this important, they're going to say, yes, everything is important, so you won't know how much more important things are. The other because you have to prioritize based on how much you're willing to pay when you construct these options. And even if you get this wrong, you can go back and re reconfigure it for them. A couple of golden rules about constructing options to wrap this up is I generally like generally, for the most part, I like to keep these three options within a mathematical constraint. I don't like the lowest option to be a lot less than maybe 65 or 70% of the middle option.

Hector Garcia: [01:28:06] And I don't like. The highest option to be more than double than the middle option. So if you would use these numbers, if you were your middle option was 1000 bucks, then your high your highest option would be 1900 and your lowest would be 700. That's kind of what I like. I like not getting not quite double of the highest compared to the middle one and not much lower than 60 to 70% towards the middle. Now, this this is not a rule like this is just what I like. You could do whatever you want. Um, the lowest option should probably fit what? Your firm should not be lower than the firm's minimums. And your middle option doesn't necessarily need to be on your equal to your firm's average targeted amount. But you want to do check it for sanity, right? And most importantly, there's no limit to what the highest option can be. I said within, you know, don't make a double, but that's okay if you are going to build in risk. Like risk and transformation and guarantees. That's where we go beyond this double on the middle. So, for example, let me give you an example. Let's say that you're going to guarantee you're going to increase somebody's revenue by 10% per year. Let's say that you're looking at the numbers, you're diagnosing their services and you're like, you know what? These people are losing a lot of money because they're not invoicing quickly and they're not estimating quickly or they're not pricing good enough.

Hector Garcia: [01:29:32] And I know that if I work with them, I can get them there and I can guarantee they'll increase their revenue by 10%. Let's say that and this is the guarantee means if they don't do it, I'll refund you 100%. And that's exactly what it means. So. At this point, you can just really break through this formula where maybe the first two options, the lowest in the middle, doesn't have this guarantee. So the lowest can be 700, the middle can be 1000, but then the highest, which has the guarantee, which is the big important pain point that you talked about in the value conversation. You can make that 4000 like it could just be a crazy number, comparatively speaking. And you would think, wait, how is the customer going to pay $3,000 more a month for this? Well, think about it. It's economic value, right? If they have $1 million in revenue and you help them increase 10%, that's a hundred grand in revenue. You're only charging $36,000 a year to guarantee this. That seems like a good deal for the client. Like I'm only going to charge you 36% to guarantee you will increase that.

Hector Garcia: [01:30:32] And on top of that, I'm going to get all your books ready for you. So it should be very, very easy when you have a guarantee tied to it. Or let's say, for example, you're going to have a big guarantee like offering a risk free sales tax compliance service. Say you partner with Avalara and you offer this, Hey, you're going to have an error free, risk free sales tax experience combined with your QuickBooks or whatever you have. And your customer historically has been off in sales tax that has costed them up to $50,000 in penalties in the past. You can easily charge if they paid 50 grand in the past and sales tax penalties, you can easily, easily charge a premium of two grand a month. Add it to any package just to guarantee zero risk on sales tax. They'll be done correctly and penalty free. This is essentially risk transference. We talked about this. It's one of the 12 T's. It's pure risk transference. Now, what about other guarantees? So you can have an objective guarantee, such as guaranteed that your bank accounts will be reconciled and financial reports will be ready by the 15th of the month. That's a really soft objective guarantee. I would only put this in sort of in the middle option. But if you have a subjective guarantee, like if you're not satisfied, you can cancel any time and will refund the full month.

Hector Garcia: [01:31:56] I would only reserve the subjective guarantees to the highest option because it's both that you are taking risks here at the same time. Now, there are some creative types of guarantees out there. I learned this from Ron Baker as well. There's something called I'm giving it a title. I really don't know what it's called, but I'm calling it performance feedback Adjustment guarantee, which basically means that the client can adjust down, give themselves a discount on any given invoice. If there's a performance issue in exchange for feedback. So you tell your customer, if you can give me feedback about what went wrong, you can adjust the invoice any time for whatever amount and you can make it, you know, incongruence or proportionate to the severity of the performance issue, but need detailed feedback. Trust me, you want to pay for this discount and you want to get this this feedback because your customer is actually wanting to work with you and wanting to improve your service. Most customers just drop you, right? So. So this is a great way to tell the customer, Hey, we're human, we will make a mistake when we do. Don't get so mad that you leave us. Take an adjustment and give us a feedback. And this creates such a great open communication and feedback feedback loop and it makes it obvious to the customer, to the customer that when you make a mistake, instead of them getting mad, they go, Hey, I'll get compensated for your mistake.

Hector Garcia: [01:33:17] I'll just let you know what it is. It just softens the blow so much. And we're human. We will make mistakes. The other creative guarantee here is really cool too. I learned this from Ron Baker. It's called the Tip Clause, where the client can adjust up or give you a tip. For any given period that they feel their service that was provided went above and beyond for that customer. So you can these are creative guarantees that are technically not guarantees, but they're creative guarantees you can add. And the very last one I'll add, this is kind of a bonus. One is it's the most unique of guarantees, the one that can really make your company stand out, which is have a loyalty perk that no one else can offer. So it's not really a guarantee. But think about this. If you can give your customer an item of enduring value that they cannot get anywhere else and none customers cannot get either, you can create a deeper sense of spiritual value from being a customer. Perfect example is membership into some sort of exclusive club. So, for example, my customers are members of a very exclusive club, which is the exclusive club of people that can call me to my cell phone at any time.

Hector Garcia: [01:34:27] If they have a question that's an exclusive club. If you don't frame it like that, then you don't understand the value that that actually creates. And that's only for my highest VIP type customers or another exclusive club you can have is maybe you have a monthly webinar only for your customers where you talk about, you know, how you're feeling about what you're understanding about tax changes. Maybe you talk about politics, but it's like this exclusive place that no one else can access but your customers. Think about that. Costco does this. Okay? Costco, if you if you're a Costco customer, you're a member of the exclusive club, you can only buy at Costco if you have a membership for Costco. Okay, so total wine does this. They have a special membership that has access to the to the best wines or the or the or the limited releases. And only those people have access to that. And that creates a piece of enduring value that you cannot get anywhere else. So that being said, that wraps up my value pricing and guarantee talk. Blake If there are any other questions, I'll answer them. Otherwise we can wrap things up.

Blake Oliver: [01:35:35] I think that's it for this week. Please do join us again on Tuesday. If you are watching live, you can join us again next week or even if you are watching this recording and you catch this message in time, you can join us next week. Be sure to sign up for the email list so that you get notified. Go to earmark CPE. Com slash focus. We will also email you a link to the course on the earmark CPE app. Once it is available, you can take a quick quiz and get your CPE certificate skate. Download the app at Earmark cpcomm. Thanks again to avalara for sponsoring this live stream in this series. Learn more at aba-liga.com Slash accountants. We really appreciate that. And guess that's it for this week. Thanks, Hector, and I'll see you here next one. Bye.