your pricing isn’t aligned with the future, and neither is your business model. plus 18 more takeaways!
this is a preview. the complete 1-hour video episode, with commentary and transcript, is first available exclusively to pro members | go pro here
subscribe to 卡塔尔世界杯常规比赛时间 podcasts anywhere: apple, google/youtube, spotify, iheart, deezer, amazon music, audible, player fm, audacy, rss.
the disruptors
with liz farr
jody padar, the radical cpa, has been pushing for big changes in accounting for years. her latest book, radical pricing, is a blueprint for firm owners who want to fully transform their businesses to serve clients better, make employees happier, and be more profitable. padar maintains that combining pricing with standardization and productization drives firm profitability.
more disruptors here | more podcasts and videos: rebecca driscoll: amplify reach by helping other firm owners | rory henry: create the return on relationships | mike maksymiw: be the leader you wish you had | terrell turner: build a solid business showing up as yourself | kelly mann: be the bull in the china shop | alicia katz pollock: create a human-centric business | nancy mcclelland: be the one your clients ask first |alan whitman: stop accepting the status quo | sean duncan: discover your own genius | ingrid edstrom: true wealth is not financial | caleb jenkins: firm growth requires owners to shift roles |
exclusively for pro members. log in here or 2022世界杯足球排名 today.
this handbook isn’t just about “putting pricing on something,” padar says. “that’s putting lipstick on a pig.” many firms that have tried value pricing say it doesn’t work, but padar says that’s because their business model isn’t aligned with their pricing. “if you leave the old school model and you just put pricing on top of it, you’re going to struggle,” she says. radical pricing walks readers through a process of standardizing and productizing services, defining the ideal customer, developing pricing, and even explaining how to bring legacy customers on board.
her process diverges a bit from ron baker’s approach to value pricing in that she sets a floor of $25,000 as the minimum engagement that will be value-priced. padar said, “it’s not worth it to me to spend all that time on the front end, getting to know the customer, really deep, diving in.” an engagement “less than $25,000 annually is more of a transaction kind of thing.”
scoping the engagement is a crucial part of switching your business model to value pricing or productized services. “once you start pricing upfront, you absolutely need to know how that work is going to come in.”
another priority for padar is improving the client experience. “all of these things that you can do structurally to your firm that basically are really customer experience kinds of things, most of them aren’t even accounting, and most of them, you don’t even need to be paying a professional to do.”
18 more takeaways
- new firms that can start with a blank slate do better with new business models and often grow faster than legacy firms.
- for pricing to transform a firm, the firm owner also needs to be willing to transform their entire business model.
- lack of talent forces us to optimize. use bots to do the work instead of managers.
- billing by the hour encourages clients to be messy.
- employees want to do good work, but they need clear direction on how to perform their jobs effectively.
- price for the outcome, not by the output.
- billing by the hour means you don’t have time for innovation or change management. you’re not keeping up with the world outside you.
- billing by the hour caps your income at your hourly rate times your work hours. value pricing could allow you to sell those hours for three times as much if not more.
- you also need to clean up your firm’s back end and standardize service offerings. if everything is still chaos behind the scenes, you’ll never reach profitability.
- consider creating personas for your ideal client types. building out granularity in those personas helps you think about how you will serve those clients.
- teach your team the industry terminology so they can have conversations with clients.
- don’t touch anything you can’t scope. you can’t price anything unless it’s scoped, and you won’t know what’s under the hood if you don’t look.
- put the right level of labor with the right level of work. consider hiring someone who’s not an accountant but who is great with people to onboard clients. automate the work that can be automated.
- clients pay for compliance because they must, but they want better business advice.
- separate tax planning from the tax return into four quarterly conversations. make this mandatory if they want to work with you. this can help you and the client prepare for big swings in income and provide a better client experience.
- create the experiences you want for your clients. don’t let clients dictate what the experience should be.
- when you price packages, include all costs so you don’t lose your shirt. include labor, technology, and overhead. also, include the costs of bots or admin to do work that doesn’t require an accountant. the total of all these costs is the floor for your pricing.
- if your clients like you, they will do what you ask as you change to a new business model. most clients are adaptable.
more about jody padar
jody padar, cpa, also known as the radical cpa, is one of the accounting profession’s foremost visionaries and pioneers. a well-known advocate for tech adoption and general forward-thinking behavior inside the profession, she has been consistently named one of the top 100 most influential to the profession by accounting today. she is the author of radical pricing which was just published in may of 2024 as well as two other books, from success to significance: the radical cpa guide; and the radical cpa: new rules for the future-ready firm. she is a regular contributor to a number of industry publications, including accounting today and 卡塔尔世界杯常规比赛时间, where she offers practical tips and advice on running a next-generation firm.
since her days as a small firm owner, she has advocated for bringing the accounting profession into the digital age and leading the next generation of accounting professionals to a better life where they can go home on time, give more to their clients and foster their passion for the industry. currently a senior tax advisor at april, jody loves the idea of using ai and automation to transform taxes, and she’s excited to help develop, evolve and share a simplified and pleasurable tax experience.
padar is married with two adult children and currently resides in door county wisconsin. she earned her bba from saint mary’s college and mst from northern illinois university. follow her on linkedin, x, instagram and facebook.
transcript
(transcripts are made available as soon as possible. they are not fully edited for grammar or spelling.)
liz farr
liz, welcome to accounting disruptor conversations. i’m your host. liz farr from 卡塔尔世界杯常规比赛时间. and my guest today is jody padar, author of the radical cpa, the radical cpa guide and radical pricing. thanks so much for joining me. how are you today? jody,
jody padar
i’m just radical. liz,
liz farr
as always, yeah, we can. we can always expect that jody is going to be radical about something. now, i absolutely loved your new book, and, man, i wish that i could have put this in the hands of all my former bosses and said, you know, here is a road map for how you can transform from a traditional firm to a future, ready firm. now, how did this book come about?
jody padar
so i think it’s years in the making, right? so if you follow my path of my first two books, i was really talking about a lot of the same things, but i was talking about them in a more objective manner, or more like just kind of looking at the market and talking about them. when i wrote radical pricing, i really stepped back, and i talked about how pricing fundamentally affected my firm at its core, and why i had this aha moment of like it was like, bingo. that’s why everybody has such a hard time changing. it’s because their pricing model is like, isn’t aligned with the business model of bill by the hour. and once you change that, all those other things that people have struggled with fall into place. and because i, you know, i owned a firm for 14 years, i iterated through a lot of the the the innovation that it took to kind of evolve my business model. i didn’t realize what it was like to be really a legacy firm and then say, okay, change it, right? because i was growing my firm as i was as i was innovating, which is different. which is why, if you actually look at the market, most of the firms that start with a blank slate do way better and grow way faster than the legacy firms who are trying to change, or try and go to go through this metamorphosis. so really, what had happened is, is when i, after i sold my firm, and i looked back and it was like, hello, like, like, why didn’t i figure this out sooner, right? and it gave me, i’ll say, the the pause to really go back and write the book, which is really about the business model innovation, and it’s called radical pricing, because pricing is really what makes everything else transform as you fix your pricing. so, yeah,
liz farr
absolutely. i mean, you know, both of us started out in firms that just started billing by the hour, which is just nonsense for me. now, how now, in your opinion, and and lots of people have heard this, how does billing by the hour limit the firm’s income, and how does it impact what you can do for your customers?
jody padar
well, i think what it does at its core is, is it limits innovation, and it limits extra time. and when i say extra time is if you’re always used to being in this production mode, where your people are your production, and we know that for a fact, because how many people get docked when they take cpe? how many people get docked when they take vacation? right? when you live in this model of of a person is good for 40 hours a week, or whatever they say those hours are, they’re not given any time to do anything else. so if you don’t have time to do anything else. that means you have no time for change management, you have no time for innovation, you have no time for anything else. and that’s what’s kept the profession stuck so long, is because they’re so focused on these hours so that they get paid, that they haven’t been able to keep up with the world around them, and the way the world works outside, right? they haven’t really changed. and then that, that’s just one piece of it. that’s the innovation prevention piece. but now, when you think about it, you only have 40 hours a week. now let’s say maybe you built 50, or whatever, you’re going to be capped at that amount of hours times rate for your profit for the week. if you have the ability to price upfront and not price based on time, price based on outcome, you could sell that same 40 hours of work for three times as much, right? and the piece that most firms totally miss completely, because they have poor data, and part of it’s their fault, part of its practice management, but and especially as we move into the future, they have managers doing work that bots could be doing, but they don’t see it as being a hamper on profitability, because they’re still getting paid $300 an hour when they bill out that manager. but what if you could, let’s just say we don’t even change to pricing, but let’s just say that same $300 an hour got billed as a bot, right? and you didn’t have to put the cost of labor on it, you’re going to be that much more profitable, right? so what’s what firms have been doing is they think they’re profitable because they have an hour attached to something. they’re being utilized, right? they’re doing utilization. but in reality, that work could have been done by a bot or could have been done by someone in the philippines or in india or whatever, at a significantly lower labor price, and they think they’re profitable and they’re not. and so when you really put pricing on top of and i would say standardization and productization, which is really what my book talks about, which is really kind of the behind the scenes, now you can actually see how an accounting firm can become profitable. and for too long, we have ron baker, and i love ron baker to death. so like, i’m not a like, but he talks at a very much a theoretical level, and i talk about it at a nuts and bolts level. and i talk about how you have to get your back end of the house, you’re you’re back end of the firm, organized or pricing will never work, because if you only price and everything’s chaos behind the scenes, you’re never going to get to profitability. and so many people have tried and they say, oh, i tried pricing and it doesn’t work. i lose my shirt. and that’s what many of the cas practices are stuck in. they’re saying, well, it’s not profitable. it’s because they’re running it like an old school firm, and that instead of really looking at cas like a productized service offering, looking at the technology, looking at the pricing, looking at how you put or assign labor to each piece of the deliverable you’re doing, and really productizing that service offering. and so really, what my book does is it kind of walks you through the how to to get there.
liz farr
i love it, and i love that emphasis on productizing and putting all the all the back office stuff together first, because i think that is a big part of what a lot of firms miss out on. you know, i was in a firm that had five tax partners, and one day we asked the tax partner, you know, at a meeting of all the tax partners, how should we do this? and we got five different answers, absolutely, so that that alone is just complete insanity. you know
jody padar
you have to, and if you’re a team member, you don’t know how to act to that partner, you don’t know who to work for, how to work firm, it’s complete chaos. so like, employees want to do their jobs well, and when they don’t have structure, they don’t know how to serve those partners. and so then, you know, it falls back on the employee, but in reality, it’s not the employee’s fault. it’s the employee hasn’t really been given clear direction on how they can perform their job the best, because they have five different bosses who want five different wanted five different ways and have five different sets of expectations. and don’t think that your employees don’t know who wants it what way, and who they like to work for who they don’t like to work for, because the five different partners have it, you know, set up that way and and i think the other piece that you know, really causes problem, or has kind of contributed to the chaos of these firms, is, again, if you build by the hour, an hour is an hour is an hour like people don’t see that the differences. so if some work comes in and it takes 10 hours and it’s very messy, and other work comes in and it’s very clean and it takes three hours, you you’re comparing those two jobs together, like, it’s the same work, like, okay, i it’s accounting services. no, that’s not the same, because one comes in with horrible pre accounting, the other one comes in with perfect pre accounting, and you’re pricing it based on the same hours and, like, it doesn’t force you to really optimize it, because the billable hour prevents it, because you’re like, oh, well, if the client is is, you know, messy and the client’s not organized, i’m just going to charge for it. well, it’s great that you’re just going to charge for it, but what happens when you have no one to do the work because you can’t find talent, or what happens when you can’t get that client to respond and nobody wants to do that work because it’s such a mess, so all of this stuff? know that are, i would say, inherently, the problems of traditional firms that we’ve all just kind of dealt with and, like, kind of accepted as well. that’s the way it is. how do i work around it? right? like, that’s the way, like, i gotta do my job, so i’m just gonna accept it. that’s the way most cpas think about it. and what this business model does is it says there’s a better way, and you can be profitable, and you can make your employees happy, and you can serve your customers better, and you can use technology, and you can do all of these things, and it’s not as hard as you think. you just have to get strategic about it and start going through the process of change.
liz farr
yeah, and i love your emphasis on using technology, because that can really be such a big lever to helping a firm make a difference. well,
jody padar
right? but now with technology and ai at first, i always used to say, in the cloud, how do you build two minutes? that was my favorite thing. well, how do you build 10 seconds when you get to ai and i heard of a client or a firm, and i was like, kind of freaking out, they’re like, oh, well, you know, we’re going to have an ai fee on it. no, you’re not going to have an ai fee on it. don’t have an ai fee on it. is not, does not make sense to have an ai fee. you’re going to price for the outcome. and if you say it’s a 5% ai fee, all you’re doing is losing money, like it’s just the race to the bottom. and why would you want to do that? and so you really have to step back and think about what it is we sell, how we’re selling it, and the value, value you provide to your clients, and put a price on that, and then figure out your costs, and then put it all together. you don’t bill ai by the hour like it is not going to work. and the sad thing is, is there are firms who are doing that today, and i would say they’re really, i don’t want to say they’re smart firms, but they’re firms that, if you saw their name on the door, you’d think they did not do that. would like you would be shocked at the at the brand name firms that are doing this, and i keep thinking, oh my gosh. like, who thought of this one and who signed off on this?
liz farr
it just, it makes absolutely no sense. it makes zero sense at all. it’s just completely insane. now, now i what i like about this book is that it offers kind of a hybrid of value pricing and fixed pricing and in so in using a $25,000 cutoff. so can you explain how that kind of works,
jody padar
yeah, so when i talk about value pricing, and this is like pure ron baker theory, right? so like, if you’ve read any of his books, you’ll know where it’s saying, you truly have to, well, first of all, in value pricing, you price your customer, not the service. so you’re really having those in depth conversations with your your potential, your prospect, customer. and my thought is, is on engagements that are not over $25,000 annually. it’s not worth it to me to spend all that time on the front end, getting to know the customer, really deep, diving in and really like kind of doing it, whereas to me, engagement, that’s less than $25,000 annually is more of a transaction kind of thing. so just say $2,000 a month, right? like they’re paying you a couple grand a month. it’s more transaction focused, more transaction based. and so to me, that’s a fixed price with a value add. so you may have a value perspective. you’re going to talk to your clients, and there’s going to be a little bit of subjective subjectivity there, but i’m not going to spend, you know, eight hours figuring out what’s involved in this engagement to price it correctly. it’s not worth my time, right? and it’s not worth my effort. so i have that. it’s basically, if the engagement is less than 25,000 it’s based on a certain number of transactions, a certain amount of risk, a certain gross, gross amount of the client. and it’s kind of standardized. and then, you know, you look at their qb file, or you look at, you know, kind of the the mess that it comes in. and you kind of put a, like, a subjectivity piece on it, right, and you just go with it, as opposed to saying, okay, i’m gonna, like, ask this question, like, 400 questions to the client, and i’m gonna, like, dig into this file, and i’m gonna ask everything there is to know about ar and ap and all of this stuff. because at the end of the day, it’s a couple $1,000 a month. it’s not worth my time. so it’s really kind of just setting your client base up. and it’s so funny because i was talking to another firm, and i said, what’s your rule? and they said, 30,000 i was like, we’re in the same ballpark. i just it was funny because it was like, completely like, they. right, like, we know each other. but it wasn’t like, he got it from my book. so i was like, he’s like, yeah, we don’t, we don’t value price anything under any, anything under 30,000 i was like, yeah, because again, on those smaller clients, doesn’t really make sense. i don’t believe so now again, if you talk to ron baker, and i’m not like, he’ll say, oh, you should price him. and he would take the smallest bookkeeping client, and he would put a value price on it, and to me, at a certain point, it’s not worth it. it’s like, either you’re going to buy it for a couple grand a month or you’re not, and if you’re not, then like, move on. like, this is not the client that’s going to fit my firm anyways,
liz farr
exactly. and that that makes it a very practical strategy for firms, much more workable and easier solution for them, you know. and i know that for somebody who just needs bookkeeping, you know, if they’ve never hired a bookkeeper, what is it going to be worth? you know, maybe 100 a month, maybe 200 a month. well, i
jody padar
think it should be worth more. but i also think that too many firms overwork files, they don’t think about what they really need from a bookkeeping solution, right? so if you think about what an in house bookkeeper does versus a bookkeeping that needs to get to a tax return, we would call that after the fact bookkeeping, right? it’s a very different it’s a very different service model. and i think too many people don’t know what they’re selling. so are you selling after the fact, bookkeeper, you’re selling true bookkeeping and and i would argue too, that there are firms that sell overkill to people who don’t really need all of it. right? it’s like, what is the business owner really need? what do they want to do with this? where are they going and really kind of having those conversations to make sure your service offering aligns with what the business owner wants and needs, versus just saying, i sell bookkeeping, and if i sell it by the hour, and let’s just say i sell it for $70 an hour, i don’t know what i sell it for, but whatever. and now it’s like, okay, i need an invoice. i need a receipt. i need to attach this here. i need to attach that there. all of the stuff for many, five for many taxpayers. it’s overkill. that’s not what they need it for, right? and so until you actually kind of ask those questions, and, and i’m talking at the lower end of the market, when you’re over a million like again, needs change, but i think too many accountants sell that. they overkill the file when they don’t have to, because they haven’t really thought about what risk is for their customer if they get audited, what they need, right? they really haven’t thought about what service level this particular customer needs versus i sell bookkeeping, and this is what i sell. and it doesn’t matter if you make ten million and you make $250,000 i’m going to sell the same complex bookkeeping process to that business owner. and guess what? that business owner at 250 doesn’t need that that level. and i and i think that’s where a lot of other firms, again, get, get confused, because they haven’t priced the service offering for they haven’t productized the service offering for their particular customer. they say, this is how we do bookkeeping, and we do it. doesn’t matter if you’re a 10 million client or a $250,000 and when i say to meaning they’re a solopreneur, right? like they’re going to do that same level of detail work on that, and then people say, well, they overcharge me, and i don’t get any value from it. well, like they didn’t need that. you just sold them something that wasn’t relevant. and so that’s where i think firms really have to step back and think about what what product or client really needs, and how to position it and sell it. and if you think about it in an app way, think about what you get from, let’s just say calendly, right? what do you get for the free version? what do you get for the $12 version, or whatever it is, what do you get for the enterprise version? it’s the same app, right? and how have you, like, kind of structured it? and i think again, when we talk about gold silver packages, people could go to that next level and say, what am i selling to a half a million dollar client versus what am i selling to a ten million client, versus what am i selling to $50 million client? and how are those services different? and again, maybe that that range is too broad for a certain firm or whatever, but i think that’s the that’s the detail that you have to think through. and this is what nobody’s talking about. everyone says, go to packages, but they don’t actually tell you the how. they don’t tell you what to include. they don’t tell you how to think about who your customer is. they don’t tell you about how to create something that’s so perfect for them that they fall in love with you. and they say, i have to use this person because they know me so well. and then they tell all their friends who are just like them that you know, go to this firm because they know me and they they sold me the right thing. yeah,
liz farr
and part of knowing the client is something that you talk about in your book, where you talk about creating personas for your ideal clients. and i love this, because this is something that i learned as a writer to do in copywriting, you know, we figure out that there is going to be joe supplement buyer, and he is mid 50s, and he’s got these problems, but by developing a persona, it’s a lot easier to be more direct and perfect for that kind
jody padar
of absolutely and you can teach your team how to have conversations with those with those particular personas, because, as i talk about in my book, or real estate guy is very different than joe small business. they have different needs. joe small business maybe is sitting at a desk. he may not be, but he might have someone with him who works for him, an admin or his wife who kind of does the bookkeeping or whatever. and the conversations you have with joe small business are very different than conversations you have with real estate guy who’s on the phone doing deals and contract and transactions and and one of my favorite thing is, is when i hear some firm owners say, well, i don’t pick up the phone. like, like, i only and again, firms can create their firms the way they want. i’m not telling them, but if you have a real estate guy as your client, you better pick up the phone when he calls, and you better pick it up when he’s calling. he’s not going to pre schedule a meeting. and like, again, you can choose to only work with people who pre schedule meetings. i’m not saying you have to run your firm to him, but you have to think about what’s important. and if that’s what’s important to someone who’s living in transactions and wants to know things and it’s very deal based, you better be available for him when he’s got a deal on the table, not when he scheduled a call three months out, or whatever, and and again, i that’s an extreme like converse or extreme example, but i think it gets to the granularity of how you have to think about who your customer is and how you’re going to serve them, and not just say, well, my firm only does you know meetings on tuesdays, wednesdays and thursday and it’s a zoom meeting, and they have to schedule, and i’m not saying that that’s wrong for firm owners who want to do that, but then you have to know who your client base is and make sure that they fit that profile. because i my gut feeling is is real estate guy is not going to come to your firm.
liz farr
no, no. and, you know. and on the other hand, you know, if you’ve got joe, the plumber, who’s always out, he might only have time to call you when he’s driving in his truck, you know, i yeah, you know, i worked with, with mr. construction contractor, who was the same way, and the only time that i could ever reach him was on his cell phone when he was driving to lunch,
jody padar
right? and the good thing is, is, i would say most people text first too. they’ll say, hey, can you talk or whatever, like, well, people don’t just call people anymore. but again, i think that’s the granularity of the way you have to think about who your perfect customer is, or your icp and like, really say, okay, this is who we’re serving, and this is how we’re going to serve them, and these are the menu items of accounting and tax services that fit this persona, and this is what they’re going to buy. and then you take that across your team, and you teach them how to have those conversations, and you teach them the language specifics. because, again, there, there’s industry verticals, and right, like, they talk about certain things that are unique to so, like, i mean, here’s an example. i used to work with a garbage person, and they are like a trash hauler, right? and they would call them the goats. well, the goats are, do you know what a goat is? a goat is actually, it’s the bin that they put the trash in that they go pick up. they go pick up the goats, right? because the goats eat the trash anyways. but there’s industry terminology that then you teach your team so they understand what they’re talking about, and they can have really good conversations with their clients based on that industry, versus, like, again, kind of having this generic we’re talking accounting and tax no like you’re talking to people who have industry verticals who want to understand the data and their terminology and in their language,
liz farr
right and and this, this also makes it really easy to figure out the services and to become an expert in that vertical, in that industry.
jody padar
so. right? you can go deep in it, and you can teach your team how to go deep. so what it also allows you to do is it allows you to get a lot of that partner only conversation to the team, as opposed to, you know, in a traditional legacy firm, the partner held the relationship. and new firms, typically, the relationship is more of a firm relationship than at the partner level,
liz farr
right, right? and so then, when everybody knows exactly the services that a small grocery store needs, or that a freelancer needs, or that a law firm needs, or a medical practice, right? then they can have those conversations, and they can also keep up with what’s going on in the in that profession, in that industry. they can say, hey, you know this, right? you know
jody padar
allows you to do deep verticalization, which, again, everyone says, pick a niche, but nobody really tells you what you’re supposed to do or how you do it. and when you start offering a productized service, offering that niche is going to build itself. because guess what? all those chiropractors talk to each other, and they’re going to say, oh, like, i use so and so, why don’t you go use them too?
liz farr
yeah, yeah. because they they told me about this technology that really saved me a lot of money. it streamlined my appointment setting, or whatever it was, so that helped me a lot. now, a big part of switching from billing by the hour to any kind of productized service or value pricing is scoping out the engagement, which is something that cpas notoriously skip. can you talk about the benefits of scoping the engagement? well,
jody padar
you don’t touch anything if you can’t scope it, i would say you don’t, you can’t price anything unless to, unless it’s scoped. and you don’t, you don’t touch an engagement unless you look at it there. it just doesn’t make sense, because there’s no way that you’ll know what’s under the hood without looking. and that’s where, again, people say, well, if i build it by the hour, and it takes me 10 hours versus three hours, it doesn’t like it doesn’t matter, because i’m billing by the hour. once you start pricing upfront, you absolutely need to know how that work is going to come in. and i’m not saying that it all has to come in in a digital format just yet, even though i would argue that’s the way i would lean towards. but there’s people who would be willing to convert to digital, but you still have to understand what you’re looking at and what you’re working with before you get started. and i would argue you separate those engagements. so one is a transitional engagement, and then one is an ongoing work engagement. but that’s why it’s so important that you look at, you know, two to three years of tax returns, plus that qbo file or the desktop, wherever their whatever their data is, even bank statements. again, if they’re old school and they’re coming in with via bank statements, quite honestly, bank statements aren’t the worst thing in the world today, because the ai can turn that stuff into data in a second, and you can move it really fast. now, it used to not be, used to be a little bit more cumbersome, but today, like you can turn a bunch of bank statements into a quick and dirty trial balance in a matter of minutes, when you used to, you know you used to be different. but again, if you don’t know how that works coming in, how can you price it? and how can you kind of get a feel for your client? and so when i talk about even value pricing that you know it has to be a $25,000 $25,000 engagement before i do a value price on it. if i do a fixed price on it, i’m still looking at all that data before i put a price on it. it’s not like i say, oh, here it is. and, you know, it’s put on the website that, if it’s like, under so many millions, you know, we’re charging, i don’t know, $1,200 a month. i don’t know what the price is, but do you know what i mean? i’m not, i’m not posting that on a website. i’m actually looking at the data, making sense of it, and because i do so much of it, because, again, this is what we’re experts at, you’ll know right away what it takes to get that work done. so this stops you from taking on all that random stuff that like you’ve never done before. because again, how do you price it if you don’t know it and and so it kind of really helps you get into this productized service offering mode, because now, again, there’s a standard for it. again. now you’re not the only sales officer. you can have your team understand, like, how to have these value conversations, whatever. like, more people can sell. you’re not limited to, you know, a partner selling your work or whatever, and and it’s really good to have your team understand what’s included and what’s not included, because now they’re not overworking a buyer file. because otherwise people say, oh, well, you know, um. um, you know, they put their time on the job, but then the partner looks at it and says, well, i can’t bill for that. or the partner looks at it and writes it up anyways, because they’re like, well, we know that this is worth more than that, so it, you know, it just goes to show you that, like, we’ve paid attention to all this data, that’s irrelevant, and we, we built our firms on it, and now we know better, so let’s just do better.
liz farr
i like that do better because, you know, i have worked at all the firms i worked at were just kind of stuck in the past. and, you know, having a scoped out engagement makes it so much easier, especially when everybody knows what’s included in what’s not,
jody padar
especially the client, right? and just start with that conversation up front to say, like, you have to have your your stuff to me by x date, and it has to come to me in this format, right? like, how about just level setting expectations with clients. from the first conversation you have is you talk about value and you talk about what you provide. most people don’t want to make your job hard, that that’s not what they like. they want to be productive, but nobody has ever told them that you need to do it this way or it’s helpful for you. and maybe, you know, not everyone is perfect with a portal. so if they have a hard time with a portal, how about having as part of your onboarding call a portal review, right? and all of these things that you can do structurally to your firm that basically are really customer experience kinds of things, most of them aren’t even accounting, and most of them, you don’t even need to be paying a professional to do. you can hire someone who’s just really a good people person, a good customer, you know, a good admin who has really good people skills, right? you can hire them to teach them how to onboard clients, how to set those expectations, how to help get your client through your firm. and then you’re not putting all this again, where, if you bill by the hour, you don’t even realize the waste now your cost per labor hour on that admin is significantly less than a cpa, and you’re already 10x more profitable because you’re just putting the right level of labor with the right level of work, which, and i’m not dissing managers, because a lot of times managers just pick up the slack because they have to. but could you imagine working in a well oiled machine that actually had the right level of work to the right person and automated the work that should be automated? and kind of how nice it would be on the back end, and how much, again, more profitable it would be, and and this stuff that i’m talking about, i was doing in my firm, and that’s how my firm got to be, the way it was. i iterated through it. it’s not like i just came up with this, right? it was like things that i did in my firm to make my firm run better. and that was, i sold my firm in 2020 and the technology is only that much better today than it was when i sold my firm. so with ai and everything coming, it’s like the sky’s the limit. i mean, you’re really going to be i always say you could do a million dollars per full time equivalent. and i think i heard of a firm owner who’s doing $6 million and he has two full time equivalents in the us. everything else is either outsourced or tech. and i’m like, that’s the that’s the firm of the future. and it’s not even in the future, it’s today. yeah,
liz farr
absolutely. you know, i can’t tell you how many time, how much time i wasted keying in trial balances when we should have been able to just scan it and then import it right away. yeah, just ridiculous. now, another big part of this book is about creating packages, you know, and that’s mainly for the one for the engagements that are 25,000 and under. so what goes into creating a package?
jody padar
well, i think you have to think about who you’re serving and what you’re selling, right? so if you’re tax only, maybe it’s going to be a piece of compliance, a piece of planning and some number of meetings if you’re doing everything, well, maybe you’re gonna have bookkeeping, maybe you’re gonna have bill pay, maybe you’re gonna have payroll, right? like, again, i think what’s interesting about my book, and what really lays it out well, is it asks you questions, so you’re not limited to saying, oh, i sell. you know, client accounting services, tax and payroll, i actually go, let you go deep. so if you’re some like specialized tax expert in something unique, you can it kind of shows you how to think through that to get to those packages. so a professional typically sell. what they’re experienced in. now, there’s some, i’ll say, generic practitioners out there who are little less specialized, but the way my book lays it out is even the most highly specialized person can answer those questions and think about what it is that they know that’s unique to them, to put that into packages, and that’s what differentiation is, and that’s what’s going to make you stand out across, you know, all the other 10,000 cpas who you’re competing against anyways, is, you know, giving you the opportunity to kind of define what makes you special and to package that up, to sell it.
liz farr
yeah, yeah. because it’s not that we are selling our time. you know, my first day in public accounting, that was what i was told. we sell our time. but the clients actually don’t really care about the time. what they care about is, you know, i give you these documents and then you give me a tax return
jody padar
or right they right. they want an outcome. they want either some sort of compliance document back, or really good clients. i want the advice that goes on top of it. they want the planning opportunities. they want the opportunities to figure out cash flow in their business. they want all the other stuff they pay for compliance because they have to, but they want better business advice.
liz farr
yeah, yeah. they want to know, you know, if i want to retire in five years or sell my business in five years, what can i start doing now, right? that will maximize my selling price? and
jody padar
so here’s the thing, too many accountants have always given that away as part of the compliance document. i’m not saying don’t do it. i’m saying you separate it out so you really put conversations and you highlight those conversations, so maybe you’re going to have four quarterly conversations with them. now, in reality, it ends up being around three, because nobody, i just say nobody wants to talk to their cpa that much. they talk to you when they need to. but the reality is, is you’re going to talk to them tax season any ways. then summer’s going to come and they’re going to like, it’s summer i just talked to you. we’ll talk end of summer. they talk end of summer, and then they want to talk for year end. so in reality, it’s usually around three. you offer four, because there’s four quarters, right? but usually they end up or one becomes an email, right? it’s just like, oh, it’s all good, whatever. but you separate those out and you have them as deliverables that they’re going to get an hour conversation, and this is when they get it, and they can’t say no, because i don’t want to sell a tax return without planning, because if i don’t do planning on that tax return, i guarantee that tax return is going to be wrong and not not wrong, but there’s going to be some sort of big swing there, and then the client’s going to be mad because they owe x amount, and i was the one who made them owe. i didn’t make you owe. it’s just you never gave me the information. so i’m going to build that into my offering, that we’re going to talk four times a year, so that i can adjust for that, so that i know that come to your end, we’re going to have that conversation or whatever, and you’re going to be prepared for that big payment. so there’s no surprises come april 15, right? like the problem with the reason they get mad at you is because they feel like they’ve been blindsided. now, i would argue that they choose to ignore it, right? but i don’t care if i’m going to work with you, we’re going to meet four times a year, or we’re not going to work together, because it makes for a better client experience. now, if i don’t know that that’s an option, that i can meet you four times a year, or that there’s an opportunity. i don’t know anything about tax, because i’m just a business owner, right? and let’s just say i don’t even need to make estimated payments per se, because i work in like, i don’t know, like i maybe i’ve had losses in the past, or it hasn’t really been material, right? and it’s always been enough, like i’ve always met the safe harbor the threshold, and so it doesn’t matter, but i don’t know to ask you for that. so guess what? i’m not going to tell you. to ask me, i’m going to put that in as part of my package offering, and that’s it. you either take it or you leave it, and it becomes part of what i sell because it makes for a better experience. you don’t allow your customer to dictate what the experience is. you create the right experience for them, and that’s where for so many years, again, if you bill by the hour like you don’t, you don’t have to think through these things. and so what happens is, is people don’t call because they don’t want to get nickeled and dime because they’re afraid to pay $300 for year end planning. and in reality, then they’re really mad at you, you know, because they owe $25,000 at the end of the year. and maybe there’s guess what, maybe the penalties on it is more than $300 because they didn’t call right? and so that’s where. we need to stop and rethink how we serve clients and make sure that we’re giving them the best thing in the package, offering, not just letting them dictate it,
liz farr
right? and so, so listening to you and thinking about this book, it’s kind of a dynamic between really serving your client well by while also at the same time, structuring your firm so that it can serve the clients well. so kind of, it’s kind of both. so, so not only is your firm running well, but your clients are being served well at the same time. it’s, it’s a
jody padar
business model change. it truly is. that’s why, like, it’s not just putting pricing on something. i say that’s putting lipstick on a pig. if you leave the old school model and you just put pricing on top of it, you’re going to struggle. you’re going to say it doesn’t work. you’re going to say, like, and again, i’m not dissing ron here, but like it doesn’t work in a practical application. you need to fix the back end first. if you fix the back end, and you can do it because of automation and the time it’s going to give you, and all these things, it’s not i think, when i was doing it in 2010 when i started iterating through this new business model, the technology and the tools weren’t completely there. i was an innovator. i suffered through a lot as an innovator, but i got to a really good spot, but that was me. but today, if you go and you approach it, the tools exist. today, other firms are doing it. we’ve proven that it works. it’s not like you’re inventing it now, right? like, so now it’s more like, okay, follow the plan, and then you’ll get there. and as you do one thing in your firm, another thing, you’ll fix itself, and another thing will fix itself, and it’ll just kind of move along. and i think the hard part is, is people don’t see that. they just say, oh, there’s so much to change, but in reality, once you start on this like path, it just it, you know, you get the momentum, and then it just it falls into place.
liz farr
yeah. now another thing that you bring up in your book is the importance of considering your underlying costs. and now you you differentiate between, you know, you know, billing by the hour is, is often thought of as sort of a cost model, but it’s just a completely erroneous cost model, you know. but what kind of cost do you have to be aware of?
jody padar
well, you do have to know your labor costs. so don’t think that you don’t know your labor costs. that would be stupid to like not think about what it costs you to do things right? so you do know your costs, right. um, but time, if you’re not going to use a product like a laurel or something else that’s actually giving you real time data, like, so laurel’s an ai product, right? you can’t say that the time sheet is a valid piece of data, because people lie on their timesheets. and so for too long, people have used timesheet data as like, the at like, it’s the bible. it’s like, perfect, right? and it’s not, it’s not, it’s not reality. so you’re billing off of something that’s not reality anyways. so you do have to know what it takes to do the work. you have to know the cost of the software that it takes. and i would argue, again, this is where i’m different, that that software that you’re utilizing in production should be a labor replacement, and that’s okay. people don’t like it when i say that, i’m not saying get rid of people. we can’t even hire enough people, so don’t worry about that. but if you’re using quickbooks online, and it costs $50 a month or $60 they just raise their price again. you build that into your service offering you don’t let your client pay that bill because, i guarantee your client will say, well, i don’t need that. i’m going to do it on whatever, in excel or whatever, right? they’re going to come up with some reason. so you sell them a packaged like, you put your technology cost, you put your labor costs, you put a burden on it again. how do people bill out construction? right? like, you know what your burden is. you have to put some sort of benefits cost, i don’t know, whatever goes in burden. you know, those kinds of things. you add that to your labor, and you put all of that together, and you put the right labor cost on it, so you don’t have cpas doing pre accounting work that can be done by admins or bots, right? you put that in, and then you can come up with truly what it costs to do the work. then you could think about pricing to get to profitability, right? so if that’s when you learn real quick that you know $200 a month for bookkeeping isn’t profitable, like it just. it. what’s happening is, is you’re doing that work, but you probably have some $5,000 tax return that would be profit by itself, but it’s eating up the 200 like, do you know it’s because you’re looking at it in total, as opposed to, like, job specific or whatever. but so i’m not saying you don’t look at your costs. all i’m saying is you don’t look at your timesheet data like it’s you know, and you’ll know what cost should be. and again, this is your floor. this is not how you price the customer. this is just making sure you don’t lose your shirt. you still want to talk to the customer. you want to see what the market’s worth. you want to see what their perspective on this is, is again. so we’re doing a fixed price with a value add, um, subjectively, do they need the do they need it today? what is like, you know, how much do they value this service? right? you’re still pricing your customer. i’m just saying, you know what your floor is, so you don’t lose your shirt. and that’s, i think, where most people have, like, kind of fallen with value pricing. and they say, you know, like, i tried it, it didn’t work. or they can’t, they can’t come to the cost piece of it,
liz farr
right, you know. and another piece of the cost is that you want the appropriate person doing the work,
jody padar
right? you don’t have a manager doing work that a bot could do right, liz farr
right? and i think that that was probably what really made one of the firms i worked for struggle so much financially, because they went through a big growth phase and then a contraction phase. and so what was left when we were contracted was, well, we’ve got all these cpas with five and six and 10 years of experience who are doing the entry level work, which it was kind of ridiculous, you know, if they looked at it from a business, right,
jody padar
right? and, and i would say too many staff accountants are doing work that bots could be doing today, that they’re not using automation to the way they should be. that’s why private equity is coming in, because they see the they see the missing piece, and they’re saying, look, these firms could be a lot more profitable if they automated some of the way they do things. yeah,
liz farr
now, as as you mentioned in your book, when you bring in a new new pricing model, new business model, it’s easier to do that with your new clients, because this is is a fresh perspective. but a lot of firms have these legacy clients. how do you bring them on to your
jody padar
first of all, your clients, if they like you, will do what you ask them to do, because they love you. so a lot of this feeling is your feeling, not what your clients feel they’re like. so i think that’s one of the first hurdles to get over, is we think, oh, because this is the way we’ve always done it. whatever they forget that most clients are adaptable. they’ll, they’ll, they’ll, they’ll get through it right then you start with bucketing your clients and starting to figure out how you’re going to productize the service offering. i guarantee you probably already have groups and pockets of things in your firm today. you just gotta get organized and start figuring out what it is you sell, how you sell it, how to package it. then you go back to three years of time sheet data, or three years of what you’ve charged them in the past, and you start putting numbers to it, and you go back, and you kind of say, okay, so we’ve charged them, i don’t know, $10,000 for the last three years. why don’t we start with $10,000 and like, let’s put that as like the floor, and say, okay, if we offer these services, we’re going to do $10,000 if we kind of reevaluate and we see what else we can do, how else we can serve them, we’re going to charge, i don’t know, 12,000 i don’t know. but like, you just start kind of putting those packages together, and you look at it like, like your consultant so come in like, don’t think you’re like, you know, come into your firm with consultant eyes on it, and start thinking about how you’re going to restructure things. and then you just start doing it. and and again, the problem is, most the time, it’s your own personal view that is preventing it. it isn’t the client’s view. and then you start with the clients who love you. you don’t like, offer up this new service to your most ornery client. i mean, that doesn’t make sense. and so then you start having good value conversations, and your clients like you, and they’re gonna like, you could charge 20% more for something you price up front, because there’s a fixed fee to it, there’s a fixed and certain price to it. so like, even think about that, right? like clients don’t want surprises, and so by giving them a fixed price, they’re going to be happy, right? and so, again, it’s really a mindset shift more so even than. the the work part of it, but i’ll say this, you have to take some non billable time, and you have to focus on changing your firm. and that’s a hard thing, because if you’re used to in this billable hour model, you’re going to have to commit to four hours a week. i don’t know of how many people to actually going through this change management process, and you know, you’ll get to the other end of it, but you you have to commit to it. it’s not going to happen by itself. no,
liz farr
and you have to look at it as an investment of time that will pay off big time in the long run. yeah, yeah, yeah. now, near the end of your book, you talk about branding and marketing, which is is kind of foreign for a lot of cpas, because we don’t really think about that. so why is this essential as a part of firm transformation. well,
jody padar
i think it has to do with lead gen. so unless you have solid lead gen, you get concerned that, oh, like, i have to take every client because i have to feed my family, or i have to, you know, i need to feed the firm whatever, right? but if you have solid marketing now, it’s not so bad, because you know that if this prospect comes in and they don’t buy your particular niche productization services, you’re like, okay, another one’s going to come tomorrow, right? like, so when you have enough leads coming in, you’re not so scared that nobody’s going to buy something from you. and so that’s why branding and marketing come in and then differentiation, right? like, how do you set yourself out from the firm down the block, the firm across the country, whatever, like, otherwise, you know, the end user really doesn’t know the difference between you and the guys. like, they don’t know so you have to kind of educate them. you have to kind of tell them why you’re the best and why they’re they should be willing to pay a premium for for you, versus, you know, paying it to the cheapest person, or, like, you know, someone who’s truly selling a commoditized service, because you don’t want to be a commodity. oh, no,
liz farr
it because commodities aren’t worth very much,
jody padar
right? it’s the fastest race to the bottom, absolutely,
liz farr
yeah. but if you can say we specialize in realtors, or we specialize in law firms, then you can really,
jody padar
yeah. so hall cpas, i think, has done a phenomenal job doing it. they do real estate people, but like, they really kind of set, i would say, set the, the the bar for how to market to a niche offering and how to do it online. really, really well, yeah,
liz farr
yeah, because their content is all about, well, what are the misconceptions about real estate and how do you make money, and how do you do this? you know he they’re brilliant over there. i agree with you. now, what else do you want listeners to know about radical pricing, besides get your hands on this book
jody padar
today. so i think my, you know, in chapter one, i really talk about the market change, and i think that’s why it’s so important for them to do it now, besides the buzz in the marketplace about pricing, we really have a lot of new entrants into the space. we have fintech. we have technology companies like intuit. we have pe coming in, we have all these new players in the space. and if we really want to be relevant in the year 2030 we have to change. and if we’re not willing to change, then i don’t know if we’ll be around. and when i say we’ll be around, i’m talking about the firm as a whole. i still don’t think the firm as a whole is going to be around, because i think the market is changing drastically enough. i think accounting professionals, there’s going to be a place for us, but i think we really have to kind of open our eyes to the broader market and say, okay, why is pe coming in? why is bc coming in? why is there really a combination of professional services intact? why? why is the market changing so drastically now versus, you know, a few years ago, and how are we going to prepare ourselves for the future? now, if you’re retiring or whatever, you’re going to have a different perspective than if you’re in your mid 30s and you’re thinking, i have to be here for the next 25 years or 30 years. but i think you need to be aware of the market changing, and figure out where do i want to sit in it long term? where, where, where do i want to be? and i think that’s really important. and i think that’s that’s why radical pricing is so important for today, and why it’s important today versus even being had i written it, you know, you know, a few years ago, it’s because the market has changed. yeah.
liz farr
yeah, absolutely, i can see that in the people that i work with. it is really, really changing the things that are in your book, that you know, that people would not have thought about doing some of those things five years ago, right? yeah, yeah. well, thank you so much, jodi, for coming on, taking time out of your busy schedule, if listeners want to connect with you, where is the best place to find you? so
jody padar
the best place to find me is on linkedin, and follow me there. i have a new substack coming out, so they can find me on substack as well, and you can get my book at cpa. trendlines.