153: Understanding Pricing and Value with Stephen King

Hi, Profit Designers! As we at Tap the Potential gear up for a number of special, upcoming projects, we’re taking this time to bring you some of our most popular episodes from the vault! We hope you enjoy it, and we’ll be back with new episodes for you very soon!  In this episode, Stephen King, president and CEO of GrowthForce, joins Dr. Sabrina and her co-host, Mike Bruno, for an illuminating conversation around pricing. Should you discount during an economic downturn? Listen in to this discussion to hear compelling reasons why you should NOT discount, and what you should be doing, instead. Top executive at a Fortune 500 company. Bootstrapped CEO. Venture-backed tech startup founder. Non-profit fundraiser. It’s safe to say Stephen King is not your traditional CPA. Stephen is president and CEO of GrowthForce, one of the nation’s largest providers of outsourced bookkeeping and controller services. Regarded as an industry thought leader by AICPA and CPA.com, his ability to visualize the future of accounting has lead GrowthForce to become one of the fastest-growing companies in America. His experience at the forefront of technology development and accounting system design spans nearly three decades. In 1995 he founded Virtual Growth, the nation’s first cloud-based accounting service, and quickly grew it into a market leader. After being acquired by Insperity, Stephen was brought on as president of Insperity’s Financial Management Services division, serving two years before leaving to build GrowthForce. He also spent seven years working at Amnesty International USA—first overseeing 300 percent growth as CFO, then raising over $20M a year as Director of Development. Stephen’s time at Amnesty reinforced his life-long commitment to giving back to the community. As a result, non-profits represent 35 percent of GrowthForce clients. Profit by Design is a Tap the Potential Production in collaboration with Small Business Consulting Group. Show Highlights: Business owners are feeling a lot of pressure in this new normal. Pricing is harder if you’re not confident of the value that you’re bringing. Stephen addresses the issues around discounting, then provides the math: If you have a 40 percent gross profit and you give a 10 percent discount, you need 33 percent more sales to generate the same bottom line. If you have a 30 percent margin, you need 50% more sales to generate the same bottom line. If you have a 40 percent gross profit and you ADD 10% to your pricing, you can sell 20 percent less and make the same money.  When Stephen let an objective person price his jobs, his fees started going up. Stephen shares some case studies and classic mistakes from clients that allow him to share their data. The accounting industry was designed for compliance. Financial accounting is designed for external users. For example, it is your CPA’s job to help you pay as little in taxes as you’re legally allowed to, to get you through an audit, and to keep the banks happy. Management accounting is about internal users and about understanding your unit economics, the profitability on each job.  Stephen explains the benefits of automated activity-based costing and cautions against time-leakage. Things to consider to gain confidence in pricing appropriately: Stephen offers accounting system suggestions to set up reports to show you your “income minus your cost of goods sold equals your gross profit”. Your gross profit percentage is the most important number of every financial statement. This will tell you if you’re pricing right. Which clients should you fire? Which clients should you re-price? How do you spend money to make money in sales and marketing? Dr. Sabrina explains the 80/20 principle: 20 percent of your clients and customers are responsible for 80 percent of your revenue. If you focus on increasing revenue from the top 20 percent by 25 percent, you’re at choice and you can get rid of 80 percent of your clients and customers. One mistake is to think that your biggest account is your best client. When you have the appropriate margin in your pricing you are able to run a much more simplified, streamlined business. Whatever you do, don’t discount your services during an economic downturn. Don’t make decisions based on fear. You need to have an attitude of gratitude. Surround yourself with people who have a positive mindset and who are looking for growth. Links and Resources: Download Your Free Workbook: How to Make Your Time Worth $10,000 an Hour Register your A-Player team members for Tap the Potential’s Leadership BootcampMentioned in this episode:Jumpstart Your Business!You’ve built a successful business—but it’s still running you. Join us to reclaim 10 hours a week and finally step into your role as the owner—register now: https://www.tapthepotential.com/jumpstart.