Value-Based Pricing and Adapting to Change with Ron Baker

This week on the Expert Voices podcast, Randy Wootton, CEO of Maxio, speaks with Ron Baker, CEO of Verasage Institute, author, and long-time influencer in the finance and accounting space. Ron and Randy discuss the concept of value-based pricing and the need for businesses to move away from the traditional hourly billing model. Ron also highlights the need for CPAs to shift from being problem solvers to strategic advisors, guiding businesses toward their desired future state. Ron and Randy discuss the value of taking risks and adapting to change to stay ahead in a disruptive market as a business. 

Quotes

• "For value pricing, it is just a different mindset. It's more of an entrepreneurial mindset than a production mindset. It's more of being a true professional, a definition of a professional, somebody who's accountable for creating a result, not performing a series of tasks. If I want a series of tasks, I'll hire a day laborer to walk my dog, mow my lawn, and clean my gutters. But if I hire a professional, I'm looking for some type of outcome. Perfect eyesight from an eye doctor, that type of thing. And the problem with the timesheet and the billable hour, the mindset that it creates is that's what we sell.” -Ron Baker [04:47]
• “The distinction between a series of tasks versus result orientation, one of the keys is vertical expertise. So, understanding the nuances, I used to talk about that with selling. You could sell into travel, but selling travel is super different when you're selling to hotels versus airplanes versus car rentals and seats versus heads and beds. The language you used, how they thought about getting people, and the acquisition costs, are all very unique to the sub-verticals. 20% of accounting firms that are doing well by being advisors is they have context, industry context, probably they know a bunch of people and they've got a bunch of. They're able to do pattern matching.” -Randy Wootton [12:49]

Expert Takeaways 

• Value-based pricing is a more effective approach than hourly billing, as it focuses on customer value rather than time spent.
• CPAs should move from being problem solvers to strategic advisors, guiding businesses toward their desired future state.
• Subscription business models offer simplicity, convenience, and peace of mind to clients while providing firms with planned capacity and the ability to offer additional services.
• Deep industry expertise and specialization are key factors in the success of advisory services.
• Businesses should be willing to take risks, as profits come from risk-taking.

Timestamps

[00:02] Introduction to Ron Baker and his work on value-based pricing 

[02:43] The need to move away from billing based on time 

[03:37] The problem with timesheets and the importance of measuring results 

[06:10] The pricing revolution in corporate America 

[08:46] Moving away from cost-plus pricing to customer-value pricing 

[12:43] Characteristics of successful accounting firms 

[16:33] Subscription business model for accounting services 

[21:37] Amazon's acquisition of One Medical and the subscription model 

[23:12] Differentiation in willingness to pay and understanding customer needs 

[31:13] Evolution of accounting and finance function to strategy and possibility 

[33:21] Profits come from risk, not just past data 

Links

MAXIO