How Accountants Can Profit From The Subscription Economy

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Ron Baker: [00:00:00] And the big thing about strategy is it's about what you don't do. A firm, a CPA firm is defined by the customers it doesn't have and the services it doesn't provide. And too many firms try and be all things to all people. They want to be Morton's. They want to be McDonald's. Oh, and by the way, we have a vegan menu as well. And, you know, if you try and be all things to all people, you're nothing to nobody.

Blake Oliver: [00:00:25] If you'd like to earn CPE credit for listening to this episode, visit earmark Cpcomm. Download the app, take a short quiz and get your CPE certificate. Continuing education has never been so easy. And now on to the episode. Hello and welcome to the Earmark podcast. I'm your host, Blake Oliver, joined today by Ron Baker.

Ron Baker: [00:00:51] Hi, Ron. Hey, Blake. How's it going?

Blake Oliver: [00:00:54] Great to see you. Great to talk to you. You too. I have been enjoying your book, Time's Up, The subscription business Model for professional Firms. And that's what we're here to talk about today, is the subscription business model and specifically how accounting and bookkeeping firms can benefit from this. I was an early adopter of the subscription model. I had fixed fees on a monthly recurring basis in my firm and it really changed my life, enabled me to build a firm very quickly and sell it. So I've experienced it. I didn't really though, have like a theory, a grand unified theory of what I was doing when I did it. I just sort of did it. But reading your book has like added a lot that I was missing, and I actually wish I could go back and and do it again now with this knowledge. So honestly, by the way, and we should say that, you know, you're not just a thinker and a writer, you are a CPA or you were and you started at KPMG and you had a firm and you had a long career serving clients. And so you've got this rich experience and background in developing all of this theory. So I guess that's a long winded way of saying, Welcome to the show, and I'm eager to talk to you about the subscription economy. So thrilled to be back. Let's let's start with like defining it. So when you say subscription economy, what does that mean?

Ron Baker: [00:02:23] Subscription economy was coined by teen Zo, the founder and CEO of Zuora, the software company that runs a platform for subscription based businesses. And it's projected to be $1.5 trillion by 2025. The subscription economy in in aggregate and that's from the USB bank, I think, or USBC bank projections. And if you look at most of the unicorns out there, they're all subscription based and we're just seeing a tsunami out there of subscription based businesses. Teen says in five years you won't own anything. You'll subscribe to everything. Now I don't believe that. I think in five years time you will have the option to subscribe to everything and whether or not your firm does anything with this model, it's going to be confronted with it because your competitors are going to be offering it.

Blake Oliver: [00:03:15] So when I think subscription economy, I think, you know, Netflix, I think Amazon Prime, I think actually of all the streaming services that I am required to be subscribed to as the parent of a kid who, you know, consumes a lot of media, Disney+ is one of them. Which Disney, Hey, that's a great service. They've got all the Star Wars stuff on there now. So it's really for the adults, too, I think ESPN you can subscribe to. So what does subscription look like in an accounting firm? Let's say I've got a traditional firm where I'm billing by the hour. I'm billing after the fact. How is that different from what you're talking about?

Ron Baker: [00:03:54] Right. If you kind of look at the evolution of our business model in the profession is, you know, hourly billing is pricing based on inputs, right? We're charging for the inputs. How much effort did it take, how many hours, what kind of activity? When I entered the profession, we were kind of in this hybrid mode where we would give a fixed price, at least for the audit work, sometimes even the tax work, if it was bundled, and that was charging not for inputs but for outputs. Here's a defined scope of work. Here's what we're going to do for the price that we're charging you. If something comes up that's outside of that defined scope, of course we're going to have to go to the Department of Paperwork and get a change order and have it approved by six different levels and all of that. And then value pricing came along and we taught that, you know, you don't price the output, you price the customer because value is subjective. Every customer is different. They have their own value drivers values, contextual. So depending on what the customer is trying to do, so you price the customer subscriptions different because you're pricing the portfolio and you're pricing the relationship, not the customer.

Ron Baker: [00:05:01] And people say, Well, that's semantics. Ron, what's the difference between pricing the customer and pricing the relationship? Actually, it's a huge difference. If you look at the way even value pricing has been implemented by firms, we're still pricing the outputs. Blake And it's frustrating because that was never the intent. The intent was to price the customer and the transformation, but people didn't go. That far with it. So when you look at three options that firms give, it's all based on scope of work, right? I think subscription can blow that up. And it's not based on the scope of work because the services are just a means to an end. That's not where our value lies. Cpas We are so much more than the scope and some of our services and we don't provide more value by adding services, piling them on brick by brick, by brick by brick. Our real value comes from transformations, and that's what the subscription economy forces you and insists that you look at and design. What kind of transformations can you provide to your customer?

Blake Oliver: [00:06:06] Okay, so let's dig into that because that seems kind of vague. And when I think of pricing based on services, I'm thinking, okay, you know, in my accounting services firm, my bookkeeping firm, we say, okay, we're going to do your bookkeeping right up on a monthly basis, and that's this price fixed fee. Okay. We're going to do your bill pay and your payroll and your bookkeeping. And that's all packaged into this price here. And maybe we add a tax return, maybe we add a little bit of advisory work. That's what you're talking about when you say we're pricing the the scope of the services. Right. Okay. So how do we change that? Like, what would I be doing differently if I were pricing the relationship?

Ron Baker: [00:06:46] Well, this is something each firm is going to have to design on their own because this is this is where strategy and positioning comes in. So and that's not something that you plan. That's, you know, strategy is designed. So it depends on what your goal is for your firm. You want a lifestyle firm, you want to scale it, all those different considerations. You can still have pricing tiers. But what I'm saying and my North Star for our profession, because I think there's so many parallels between the medical profession and what we do are the direct primary care physicians and the concierge doctors. By the way, I don't want to leave them out because they're the ones that charge the real premium prices. They're the Disney's of the medical profession, the concierge doctors. And what they do is they say, you subscribe to our practice and you're covered for anything that you need that we can do. There's your constraint that we can do. You're not going to go to a TPC and get oncology treatment for your cancer. You're not going to get cardiac surgery. You're not going to do all the things that they would refer you to a specialist to do. You're only going to get something that a GP can do now. So the goal is if you say to the customer, Hey, whatever you need that we're capable of doing and that we do, that's in our wheelhouse, that's in our core competency, you're covered, you're covered, they get audited, you're covered, they get a notice from different states, they're covered. Whatever it is. Now, I guess you could tear it and you could say for like a smaller firm that say, did Cass? And let's say they do tax and some advisory. Okay, you could say in the first tier you're in the cast tier, but that means we'll do anything that you need that's included in our cast scope of work, you know, in our in our scope of.

Blake Oliver: [00:08:37] Competencies, you're basically eliminating a lot of the scoping that had to happen previously completely.

Ron Baker: [00:08:44] It blows up scope.

Blake Oliver: [00:08:46] And I love that because if you don't have scope, you can't have scope creep. Exactly. And it.

Ron Baker: [00:08:51] Doesn't matter. Yeah. We get all caught up in, oh, did we spend ten hours on that or six hours and Oh that means we, we lost money. That's suck. We both know that's BS. It doesn't change the cash flow by one penny. Whether or not an accountant spends ten hours on something or five hours, that's not even the right way to look at it. The right way to look at it is take care of the customer, make it convenient, surface simplicity, give them peace of mind and give them absolute convenience. Because I promise you, they're comparing you to Amazon Prime and Disney+ and Hulu and Netflix, and they're having their expectations raised because of that. And I think our customer experience has really suffered. I mean, you look at the average score in the accounting profession, it's 23. Apple's is like, I don't know, 80 something BMW Porsches in the 80s. We're at 23. Blake Yeah, What does that tell you? So when I say my North Stars, the DPC, the direct primary care, I just want to emphasize that Amazon is making a major move in this space. They just bought one medical for $3.9 billion. I don't think it's gone through yet. I think it has to be approved, but they're going to pay around three something billion for it. This is the largest DPC practice in the United States and they just bought it and I just saw they have a website you can sign up for one year if you're a prime member for $144.

Blake Oliver: [00:10:19] $144. Yep.

Ron Baker: [00:10:21] It's a special price for a special time period.

Blake Oliver: [00:10:24] Well, I might need to sign up for this because it's. It's getting kind of challenging to book an appointment with my primary care physician. You know.

Ron Baker: [00:10:32] Give you an example. In October last year, I tried to get an eye appointment with my doctor, appointment with my eye surgeon because I needed a new pair of glasses and my subscription or prescription had expired. And this is October 1st. He couldn't see me until January 29th. And I pitched, you know, I complained. And she said, Well, I can get you in December 29th. I said, Great, I'll take it. I had to go to another doctor, get, you know, blah, blah, blah. I saw my doctor, who I love, by the way, and I said, Doc tried to get in here five months. So you got too many patients. I said, Either you give me a subscription plan or I can cut to the front of the line or You've become expendable in my life. You're either indispensable to your customers or you're expendable. And he's become expendable. I love him. But if I can't get to him when I need him, what's the point?

Blake Oliver: [00:11:27] Yeah, that's the problem with fee for service. We see it in medical, which is the only way to make more money is to do more services. And so in the medical profession, you see doctors rushing you in and out of the office so that they can get you done. And they're not developing a relationship with you. They're not spending time with you. And we really see that in accounting, too. Firms that are doing a lot of volume doing, say, tax returns, it's impossible to have a relationship when you've got thousands of returns you're doing or hundreds, whatever it is. You know, the principle is the same, right? You're just trying to get them done so you can bill for them. But in a subscription business, you can spend more time with each of your customers because you've priced in the the capacity. And and that's why I think one of the big objections to subscriptions is, well, you know, how do I if I'm not billing hourly, how do I make sure that my team doesn't get completely overwhelmed? How do I deal with the capacity problem? Because I might sign somebody up and then they're going to ask me for the world and I didn't price it in there and I didn't, you know, like, how do I protect my team?

Ron Baker: [00:12:35] They can't ask you for the world because they can only ask you for things that you're competent to do. And if you're focused on transformations, you can only usually guide maybe 1 or 2 transformations in a year anyway. I mean, because otherwise you'd overwhelm the customer. They don't have the bandwidth for that either. I'm just not worried about that. I worry more about the customer needing things and going somewhere else than I do about them overloading the team. You know what if they go to some other consulting firm? I mean, how many times do we see consulting expense on the income statement? You know, and it's usually alphabetical, right? So you see accounting and you go, okay, that comes to us. And then you see this consulting expense. That's five times what they pay you. And you say, What's this? Oh, well, we hired so-and-so to do such and such, and we sit there and say, Oh, well, we do that. Oh, you guys do that? Well, whose fault is that? So I think it's backwards to worry about the capacity constraint. Plus, the other thing is you're limiting the number of customers that you intake. For example, the average primary or the average primary care physician in the United States has a panel of patients of 2400. And that's why you get to spend five minutes with them because they've got to see 50 or 60 patients a day that that because they're in that fee for service treadmill.

Ron Baker: [00:13:51] And I would argue and I'll die on this hill, we are on the same fee for service treadmill. I don't care if you're hourly billing, I don't care if you're value pricing, you are on a fee for service treadmill. We get paid for what we do to the customer rather than what we do for them because it's all based on services. Do your tax return. Oh, you added ten employees. Well then the scope changes and we have to go to the Department of Paperwork. I mean, we've just we've created a bureaucracy to some extent with value pricing. That subscription just overcomes because it just says, look, if you need it and we can do it, you're covered, we're going to get it done. And if we can't do it, we've got specialists in our social capital network that will get you to and we'll quarterback the relationship. But it's all about the relationship. So the average patient or the average doc in the United States has 2400 patients. The average physician has 600. Just just to compare that, the average concierge doctor has between 50 and 100 patients now. So concierge doctors would charge you about 30 grand a year, right?

Blake Oliver: [00:14:58] Yeah. My parents just signed up for a concierge doctor for one of these practices you describe. And they love it because they can get an appointment within days instead of weeks or months. And the office will not only take care of everything they need when they're there, but will book follow up appointments. We'll make referrals to experts. We'll follow up on that. Do all of the kind of administrative stuff that has been pushed on to patients, which I is a much better experience, right? So totally.

Ron Baker: [00:15:29] It's going to change the way we we have health care delivered in this country. But how do we Amazon moving into it.

Blake Oliver: [00:15:35] But how do we reconcile that with the shortage of doctors and the shortage of accountants? Because what you're saying is to deliver this type of subscription, we've got to have a ratio that is four times smaller than it is now in terms of patients to doctors or accountants to or clients to accountants, you know, how does that work? Not there just aren't enough of us to go around.

Ron Baker: [00:15:59] And why is that, Blake?

Blake Oliver: [00:16:01] Why aren't there enough accountants? Yeah. Well, we could talk about that all day long. We can.

Ron Baker: [00:16:08] But it's because we bill by the hour, and we're in a fee for service treadmill, and we're burning out people. We're eating our young. You talk about this every week on cloud accounting. We are eating our young because we put them in a fee for service model. Gpus are in short supply, too. They are. But I think the VPC and concierge models are what's going to bring more people into that practice. It would be the same for our profession if I came out of college with a degree and I was offered to go into a big eight where I'm going to have to track every six minutes of my day like a prisoner. Or I can go to a even a small firm like a six person, nine person, ten person firm. And I can do transformations. I can actually have client contact and not have and not be overwhelmed, do one job after the other, after the other after the other, and focus on efficiency and utilization and all that BS. What's going to be more attractive for our future? This is not just about a business model at the micro level. This is about at the macro level too. I think it's the only thing that's going to be able to attract talent into our profession.

Blake Oliver: [00:17:13] Yeah, that's true. We like to rag on the 150 hour rule on The Cloud Accounting Podcast and.

Ron Baker: [00:17:18] I agree with you that needs to go. I don't know why we still have that, but that doesn't solve the problem. Once you get once you get the CPA, you go into the and this is the big four firms, you know, that's the grist mill. That's where we're all taught for not everybody, and certainly more in my day than in yours. Okay. And I'll admit that, I mean, my goal was to get in a big eight, that's all. I didn't want to go to a regional. I wouldn't even have considered it. But. You go into those firms and you realize this business model sucks and it's the same today than when I joined the profession in 84.

Blake Oliver: [00:17:54] That was my least favorite thing about joining a big firm. I went in as a manager after I sold my practice and I had to account for. Fortunately, it was just 0.25 hours at a time, not 0.6. So that was an improvement. Yes, But it was it was still a challenge. And the the hardest thing for me was just not having enough time in the day to actually make a meaningful difference for the clients. That really needed my help because I had to be so miserly with my time, especially on the smaller ones. And the startups were the ones who needed me the most, the.

Ron Baker: [00:18:29] Most.

Blake Oliver: [00:18:30] Right. And I and I got to spend the least amount of time with them.

Ron Baker: [00:18:34] So here's the thing. If you ask anybody, why did you become a CPA, why did you become a doctor lawyer? Ask any professional architect, actuary, you name it. Two thirds of the time or more they'll say to help people. That's it. To help people. Well, you can't help people if you have 1000 customers. You just can't. You're kidding. We're all kidding ourselves. Relationships don't scale. There's a Dunbar number there that you can only handle. About 75 people. Really? And we shouldn't put any more burden on that on any one knowledge worker, especially if we want to move to guiding transformations, which is the highest point in the value curve. There's nothing higher than changing the customer because when you take a customer from where they are to where they want to be, the customer is the product. The services are a means to an end. It's not about the services. It's not about the paperwork and the the financial statements and the bookkeeping. And how many transactions did you have? None of that matters. What matters is you're taking them from where they are to where they want to be some desired future. And we can do it over and over and over, and we can do it from womb to tomb. We can do it from the moment they're born for college planning to estate planning when they're gone. That's powerful. Not many other businesses can do that. Accountants can do it.

Blake Oliver: [00:19:54] And that's something that I think is not spoken of enough. When we talk about subscription and moving to this type of model, it's not just good for the firm owners and the partners. It's really good for the staff and. And ultimately, yes, I think I agree with you, Ron, that the problem we have in the accounting profession is the business model. The business model is fee for service hourly. And it's not fun. It's not exciting. As a young accountant to be stuck in that business model, just making widgets, making hours, right? It's we want to be part of something bigger. I mean, that's what everyone talks about with the younger generations, right? They all want to make a difference in the world. I don't know if that's true or if that's just, you know, the BS that we spread about younger generations, right? Like, but I feel that way. I want to make a difference. I think everybody wants to make a difference. I did.

Ron Baker: [00:20:47] Too. I mean, I wanted to know what was beyond the audit, you know? And it never got that far. It was always just know, just move on to the next job, you know, don't have any impact with the client, don't have any conversations with them about what we can do beyond the audit or the tax return. It was just move on to the next job, move on to the next job. We're jumping from one job to another. The thing is, if you look at doctors, they have a burnout rate at 51%. And this was pre-COVID, and you ask yourself, why would doctors burn out at 51? 51% is a lot. That's a big number. Now, I don't know what it is in the accounting profession, but I know it's up there. And like if you took light bulbs and screwed them into your house and half of them burnt out blew out. Would you blame the light bulb or would you blame the electrical system.

Blake Oliver: [00:21:39] And blame the grid? Yeah, the.

Ron Baker: [00:21:41] Electrical system is the business model. And we're putting these young, really smart kids through this who went through, you know, practically a master's degree to become a CPA. And it's just it's not what they entered this profession to do. So finally now we have a business model that aligns, ah, rhetoric. All we care about the customer, the relationships, everything. We want to be your trusted advisor, but we monetize every transaction. So there's this disconnect in the business model between what we say and what we monetize. Subscription cleans that up and aligns it, and now these really smart people can do what they entered the profession to do, which is to help people. We just need to help people. Yeah. I mean, you know, we call it transformation or whatever, but it's just really helping people achieve their dreams to help them search for potential. I get so tired of hearing about how we solve problems. Yes, we're great problem solvers. We're going to continue to do that. I have no problem with it. That's fantastic. But if all we're doing for our customers is solving their problems, we're just reverting them back to the status quo. We're not advancing them and we can advance them and we can do it over and over and over. And until we do that and message it that way and communicate it that way, I don't think we're living up to our full potential.

Blake Oliver: [00:23:02] Yeah. So going back to the firm that wants to change to this model, let's make it let's try make it a little more real again. One of the objections commonly is, well, if I don't have the hourly, if I don't have the fee for service model, then how do I how do I do this? And you talk in your book about creating portfolios of customers, segmenting them into different portfolios. I think that's the term and then pricing by type of customer. And that seems like something that would be actually fairly easy to do with the data that most firms have because. You know, let's say you're doing a bunch of cast work or accounting bookkeeping work, or you're doing a bunch of tax work. You can probably bucket your customers into a few different tiers or, you know, easy, medium difficult or give them scores or something like that. There's a lot of different ways to do that, and your team probably knows how to do that. And then it's a matter of. Assigning them a price and kind of aligning that with the revenue you're bringing in today. Right. Look at what you did last year in terms of revenue that you did on a fee for service basis and figure out how to create a subscription that roughly approximates that.

Ron Baker: [00:24:16] Yeah. I mean, I want to propose this model because I think it's a model that gives us more pricing power. I mean, if we go to the market with a common offering and let's face it, most CPA firms offerings are common. Oh, we do cars, we do some advisory, we do tax. It's a common offering. You're going to command a common price. If we go to the market with an uncommon offering, what Walt Disney would call a plus offering and we continue to plus it, by the way, like the concierge docs and the docs do, then we can command uncommon pricing. So I don't think it's unrealistic to take your prices and double them or triple them or quadruple them with a plus offering because you're giving peace of mind, you're giving convenience, you're giving that just like your parents have with their doctor. You're saying most doctors I've read about do same day appointments. I mean, they always have capacity for their for their customers because they don't have as many customers. But I think what really, once you get beyond once you figure out what your purpose is, you know, and I'll just take that as a given, then you start to move into strategy and positioning. And the big thing about strategy is it's about what you don't do. A firm, a CPA firm is defined by the customers it doesn't have and the services it doesn't provide. And too many firms try and be all things to all people. They want to be Morton's. They want to be McDonald's. Oh, and by the way, we have a vegan menu as well. And, you know, if you try and be all things to all people, you're nothing to nobody. So the more you're niched then all of a sudden if your niche really narrowly like I have a buddy who does nothing but dentists and only a particular type of dentist and only of a certain size. Charges them all the same. Yeah, because everything's on the rails.

Blake Oliver: [00:25:59] And that's where. The the falling of geographical barriers really has made a difference. And I feel like a lot of firms still haven't made that transition. It seems natural to those of us who have grown up in our careers in a world where we can serve clients all over the country, all over the world. But there's a lot of firms that are still just regional and they're only sourcing clients locally. And to me, it makes sense that you would need to do everything for everyone because you've got a limited client base and so you don't get the choice of, I'm only going to work with dentists necessarily. If you're in a small town, you've got to serve all the business owners. And now, though, I can be in Youngstown, Ohio, and I can serve clients in all 50 states, assuming that I can get around all the regulatory hurdles of being a CPA firm. And maybe I won't be one. Right. But I can do that. It's it's all doable. You can do it. You can serve them.

Ron Baker: [00:26:52] Blake By the way, it was doable before the Internet. My buddy who built his dental practice did it. He founded it long before the Internet came along. And to this day, he barely has a website and he doesn't use referral based media at all. It's all referral based because he goes and talks to dental schools. He writes in the things that they read. He goes to the conferences that they go to and speaks, and everybody knows this guy from the from the people who sell equipment to the dental practices, to the insurance people. And everybody knows him. So he's very, very picky about who he brings on. And he's a slow trot, by the way.

Blake Oliver: [00:27:28] The large firms, it's not like they don't do that or the regional ones because they have their experts. They'll have a partner who who just does this thing. You know, maybe they only do business valuations and that partner is, you know, the person in the firm who does that. And then they'll basically get somebody who does everything right. That's the goal of the firm, is you eventually acquire all the expertise so you can do everything that any client could possibly need. But what is not working there is that you never really know as a client what you're going to pay for anything until you have the service done right. So right. It's sort of like the other.

Ron Baker: [00:28:04] Thing that doesn't work. There is the false belief in economies of scale. The bigger we are, the cheaper the cost that we can do things. And there is no economies of scale in this business. It's a human capital business, for crying out loud. Yeah. So and also the lack of collaboration, because those big firms are nothing really but silos.

Blake Oliver: [00:28:26] Yeah, well, it's just a bunch of it's a bunch of small firms that all use the same logo.

Ron Baker: [00:28:31] Exactly. You know, and, and there's no collaboration. So the subscription blows up the silo because now the customer is at the center of the business. And if a big firm did do subscription and I don't think we might never see it, by the way, but if they did, then whatever that customer needed, the the firm would just, you know, circle, circle the firm or circle the customer and do whatever they needed from whatever area of expertise they needed it from.

Blake Oliver: [00:29:00] Well, here's a crazy idea. This comes from Hector Garcia. I was doing a stream with him for a series we're doing called Build a Focus Firm, and he told me something I'd never heard before. He calculated that if you if you take the gross domestic product of the United States and then you divide it by the number of accountants in the country, you get something like $19 million in revenue per accountant in this country. That's how much revenue there is for each one accountant on average. So the idea is also that you can then calculate a percentage of all the accounting fees as a percentage of gross domestic product. And if you do that, it comes out to about half a percent. So our country on average, right, we pay about half a percent to get all the accounting done. That's that's the. Like the credit card fee. Right. We all pay 2 to 3% as businesses for the privilege of collecting credit cards. Well, effectively, businesses in the US from small to large, on average, pay about half a percent. And I was thinking, you know, if you're a large firm, you could do a subscription model where you just charge a percentage of revenue. Like the investment advisors do this. Right. They don't they don't charge for every service that they provide. They price you based on how many assets you have that they manage. It's not how much time they put in. And they do great. They're the ones who are really enjoying life. Like, why don't why doesn't anyone do that for accounting?

Ron Baker: [00:30:38] Well, at the big firm level, there's two problems problem with that. And the problem even with subscription, is it would impair independence. And if you offer a test work that would impair your independence. So you can't do that if you.

Blake Oliver: [00:30:53] Charged a percentage of revenue and that included the audit, correct.

Ron Baker: [00:30:58] You couldn't do it now, so you'd have to do it. Amber Eisner did spin out the the test function and just do that under a separate cover and then maybe do everything else based on these different models.

Blake Oliver: [00:31:11] Yeah, but you could do the tax work. You could do the accounting services work, the bookkeeping work, the advisory work. You could do it all for just a percentage of revenue. You could say, you know, up to this revenue threshold, it's 2% of your revenue, right? For the smaller firms, you got to charge for the smaller companies with less revenue, you'll charge a little more, right? And then as they get bigger, you give them more of a discount or whatever it is, Right? Right. I mean, the reason I'm bringing this up is because this is actually how I used to gut check my own pricing. I did. I wasn't forced, you know, I wasn't advanced enough to do this when I had my firm. I would I would still price things out based on the services we were doing. But in the end, when I looked at the final number, I would take the annual fee. I was going to charge my client. I divide it by their revenue to figure out what my fee was going to be as a percentage of their revenue, because I knew that's what they were looking at. That's how they were thinking about it.

Ron Baker: [00:32:06] Absolutely right. Yeah. Yeah, I did it too. I mean, I had this. It's a heuristic, right? What's what percent of revenue and all of that is a gut check. Absolutely. It's not the it's not the driving factor of the pricing, but it's a gut check.

Blake Oliver: [00:32:19] Yeah, Well, what I like about it is that it grows with the business and it can be automated so you don't have to deal with the emotions of pricing customers and the complexity of it. It's very simple and right, and that is something that I think it's a barrier most of the time. So if, you know, maybe, maybe that's a way to do it. If you're listening and you're trying to think, how do I do? All you can eat bookkeeping services. Maybe you just charge between half a percent and 2% of revenue on every client.

Ron Baker: [00:32:53] Well, with the caveat that a lot of bookkeepers deal with start ups and that don't have any revenue and you're still adding, in fact, sometimes you're adding even more value to to those entities.

Blake Oliver: [00:33:06] You could have a floor on that, right? All all firms and ceiling prices.

Ron Baker: [00:33:10] All firms should have minimum prices. But the objection I get to the and people say all you can eat and it's it's not an all you can eat business model. People equate it to Netflix and it's all you can eat of the type of food that you serve. You know, if you're Morton's, you're not going to give somebody a McDonald's or a vegan plate, right? They came into Morton's can only stand for one thing. So it's the strategy and the positioning is critical. But if you're really focused down, then this becomes much easier to give everybody even the same price.

Blake Oliver: [00:33:44] Another way to deal with capacity. I don't know if I told you this example, Ron. There's a company called Design Pickle that's based here in Scottsdale, I believe, where I live. And they offer unlimited graphic design services for a fixed monthly fee to small businesses. And you wonder how can they do that? And it starts low. I mean, when I used them, it was like starting at $500 a month, unlimited design services. But here's how they deal with capacity. The scope is unlimited, but you can only submit one work order at a time time. So sure, the designer and there's always designers available. They have a pool of designers. Now you're assigned one. If they're not available, it'll go to somebody else. But you get your designer. So you put in your work order in this online system and you say what you want and you add any assets and then they work on it overnight in the Philippines because that's where they're based and they come back to you. And so they naturally can plan capacity because they know if I've got X customers, there's only so many work orders that can come in every day. And I just need to have enough people on the staff to make progress on those every day. Yeah. And I just thought that's such a brilliant way of managing capacity and expectations. And if you wanted somebody who's going to respond in real time to you, there's another package for that. And that's way more expensive, right? Because they've got to have capacity to have people who can chat with you at any time. It's a lower client to designer ratio.

Ron Baker: [00:35:18] Right, Right. Yeah. You know, I think there's different ways to modify and design this model. I mean, I'm not claiming to have all the answers. I just want to ask the right questions and try and point out where our rhetoric doesn't match with our business model. For example, how long have we been talking about I've heard Joe Woodard talk about this and maybe you've talked about it. I've talked about it. This idea of, well, what if we gave away the bookkeeping and the tax work to get the advisory? Everybody wants to move to advisory. Well, I just read this fascinating book, Blake, called The Crux How Leaders Become Strategists. And this guy, Richard Rumelt, wrote it and he's written Good strategy, bad strategy. So he's a strategy consultant. And I really liked this, but his definition of a business model blew my mind. He said, In essence, a business model explains where revenue will be earned when services are provided free of charge.

Blake Oliver: [00:36:18] A business model explains where revenue will be earned when.

Ron Baker: [00:36:21] Services when services are provided free of charge.

Blake Oliver: [00:36:26] Okay. You're going to have to walk me through this.

Ron Baker: [00:36:28] That's mind bending. If you didn't charge for services in a CPA firm, nothing you didn't charge for advisory, you didn't charge for cash, you didn't charge for tax, you didn't charge for anything. Yeah. What would you want to charge for? What would be the revenue model? This is the revenue model question. What do we want our customers to pay us for? Right now, we're some firms are answering hourly. Some firms are answering for a defined scope of work, plus change orders, you know, from the Department of paperwork. If we go outside of that scope, transformations are the answer. I think for a subscription firm, I would charge for the transformation.

Blake Oliver: [00:37:05] Well, I'll push back a little bit on that because I feel like that's transformation. Like feels like so overwhelming if you're a firm owner has been just doing services. Like what You know, how am I going to go from like doing one off tax returns, you know, to changing somebody's life? Like that's that sounds a little much for me, right?

Ron Baker: [00:37:23] We do it every day. We do it every day. We help our customers businesses grow. We help our customers. Businesses become more valuable. We help our customers get their kids into college. We help their customers, help our customers buy vacation homes and other things that they want to help our customers grow. We help our customers plan their legacy for when they die. If you do a state that none of these things are about the services, they're about transforming the customer. We do it every day. We're just like fish in water. Why? Because we don't think of it that way. Because we're inhibited by our we're limited by our language. We don't even have the proper language to use to describe subscription. It's one of the things I struggled with in the book trying trying to explain these concepts with my old accounting mindset. Even my old GAAP mindset got in the way. You know, we always want to allocate revenue to certain things, right? Well, in subscription, what the hell do you allocate revenue to? What does Netflix allocate revenue to do? They get a list of everything you watched and split it up. No, it just goes into revenue because they're in subscription. You're creating lifetime annuities that are more valuable than the cost to acquire them. So everything's about customer lifetime value, so you don't have to worry about the math of the moment. You know, we bang Wall Street all the time for being too short term, too quarterly driven, earnings per share per quarter, blah, blah, blah. They're too short term. They don't make long term investments. Cpa firms are not only short term, they're our termed. They're trying to do this by every hour. It's crazy when you think about it.

Blake Oliver: [00:39:00] So yeah, the allocating of the costs down to every single down to every hour.

Ron Baker: [00:39:05] So so when you say and look, this is a great push back. It's a great question. I got it. I've gotten it multiple times. Is it possible for a landscaper? To provide a transformation.

Blake Oliver: [00:39:19] I wish mine would. Because all he does is come and blow leaves around. You know, cut a few branches. But it's funny. We had some plants die in the yard and they just stay there dead. Yeah. And I'm going to have to go ask. Actually, we did ask. We asked, Hey, can you, like, do something about this? And the answer is no. Like, they don't do it.

Ron Baker: [00:39:43] Which is amazing because that's their profession.

Blake Oliver: [00:39:46] I would happily pay whatever it costs. Like, charge me for the plant, mark it up, you know, charge me an installation fee. Just keep my plants alive and then replace them if they die. Because it's Arizona and half the plants you plant die. It's just natural selection here, you know? But yeah, most most of the landscapers here don't do that. It's kind of amazing.

Ron Baker: [00:40:07] So let's imagine a landscaping business. Yeah, that I think works at a far lower potential than a CPA firm in terms of impacting people's life. I mean, because if you look at people, they want they want to be healthier, wealthier and wiser. Now we can keep them, you know, wealthier. And I think we can impact their wiser, too, and probably impact their health even by keeping them, you know, financially healthy. Um, but a landscaper, what if a landscaper came out to you and said, I'll give you a basic maintenance? We'll just we'll do basic maintenance, keep the yard up, blah, blah, blah, or I'll bring you up to neighborhood standards if your house maybe is a little bit older or not as well maintained or whatever, or I'll give you the best curbside appeal in the neighborhood. And we'll slowly transform your yard over time because maybe you plan to sell in a couple of years.

Blake Oliver: [00:41:04] I would pay twice as much for that. That's a transformation.

Ron Baker: [00:41:07] That's a that's what I mean by getting pricing power. See, that's not a common landscaper. None of them do that. By the way, If I found one, I would hire him in a minute because I hate my landscapers. But because you're right, I have to go out and point stuff out to them. Yeah. Holy crap. This is their job.

Blake Oliver: [00:41:23] And this is. This is the solution. Then, like, bring this back to the firms, right? If you're a firm doing a bunch of tax returns, you can instead of just doing the return for the client. Right. Get into everyone's moving into this tax planning stuff, right? Actually, like say I'm going to have fewer clients, I'm going to spend more time with them and we're going to talk in advance. We're going to talk at the beginning of the year about what they can do that year to reduce their tax liability. Right.

Ron Baker: [00:41:46] And I know there's there is a big movement to that tax planning or whatever you want to call it scenario.

Blake Oliver: [00:41:53] And if you did it as a subscription, it seems like a no brainer to me. And it's a it's a smooth transition. It's a way to take a traditional firm, cut the number of clients, increase the fees, do more for the clients, right, with something you're already doing.

Ron Baker: [00:42:06] But see, I've got this built in DNA that says when everybody's zigging, I'm going to zag. I don't want to copy everybody else. I want to go to the market with what like Disney did with Disneyland and all the experts that ran all the other parks in the country told them it will never work. It'll never work for these millions of reasons.

Blake Oliver: [00:42:25] I love that story. Yeah, do.

Ron Baker: [00:42:27] Too. And he ends up not listening to them and hiring two of them as a consultant for Disneyland.

Blake Oliver: [00:42:33] My favorite story about that is, you know, Disney wanted to have just one parking lot at the south side of the park and one entrance. And he brought in all the theme park experts at the time. And most theme parks were more like glorified carnivals. Yep. And they said, Oh, no, no, you got to have parking all around. You got to have gates on all sides so that people can get easy access, which of course would be a horrible experience because everybody's entering from a different point and you don't have this consistent experience of going down Main Street. It's like it's impossible. Yeah. And he ignored them.

Ron Baker: [00:43:05] So I have a colleague, Paul Kennedy, in London and he has he does business advisory. He says, I like to start where other firms leave off. So if you don't want him to do your tax work and your bookkeeping, fine. He's willing just to work with you on on an advisory level. But the only way he'll work with you is if you do advisory. So the only way to get him to do the tax and compliance work is to be an advisory client. Yeah. One of the first things he tells new customers, Blake, is this If you work with me, you are going to pay more taxes. Because if you if you work with us, you are going to pay more taxes. We will do everything in our power to minimize your tax. But in the long run, my goal is to increase your wealth and your income. Would you rather have to pay more tax? Would you rather have an accountant that was focused on maximizing your wealth and income or an accountant that was focused on minimizing your taxes? I will take the former any day of the week.

Blake Oliver: [00:44:09] Oh yeah. The marketer in me is is jumping at the bit to play with that instead of just, you know, tax planning.

Ron Baker: [00:44:16] Everybody zigging.

Blake Oliver: [00:44:17] Yeah, well, this is where the wealth managers are really beating us. Because they'd focus on that. They'd talk about that. They may not all do it. A lot of it may be a scam in many cases, right? We see that with investment advisors and all that stuff. But. Right. They talk it. And so actually, it's a huge opportunity for accountants to get into that side of helping clients grow their wealth.

Ron Baker: [00:44:45] Yep, I agree. I think it's what we need to focus on. Just, you know, Paul done quotes a great line in the book that nature doesn't look for problems. It looks for potential. And I think we've become too focused on solving problems rather than seeking opportunity and pursuing opportunity. And so I guess I would ask if you want to pivot to subscription and I think you can do it whether you're hourly billing or value pricing, I think you can if your hourly billing, you can jump right over value pricing and go right to subscription. You're still going to have to learn some tenets of value pricing because some still apply. But I see no need to move to value pricing and then subscription. I think you can leapfrog right over.

Blake Oliver: [00:45:27] Well, it's really to me and correct me if I'm wrong, subscription pricing is value pricing, but a portfolio of clients, it's.

Ron Baker: [00:45:37] It's looking at the whole it's a systems thinking. It looks at everything, it looks at the portfolio just like your investment portfolio. You know, you've got some very safe investments, some mid risk investments, some high risk investments. But as long as the portfolio overall is functioning, it's the same. And what I mean by that is, you know, we know some customers are going to get audited. We know some customers are going to get more IRS or state notices than others. We'll just deal with them because yeah, that's not that's not how it's got a different profit formula. We're not analyzing the profit of every transaction of every hour. We're analyzing here's the price where you're covered. And because we're covering you for no matter what, whatever it is you need, that's a form of insurance. And that also commands a premium price. So all of that's built into the plus offering, and I think that commands us a premium price. And I'm talking 2 or 3 times more than your nearest competitor.

Blake Oliver: [00:46:34] Yeah. And it's important, it's very important to emphasize that you're not going to get. You're not going to get screwed over on doing these audit defenses or doing these services because you know how many clients you have, you know how much revenue they generate on a recurring basis. And so you know how many staff you can afford. And all you got to do is make sure that you've got enough staff roughly to handle all that inbound IRS correspondence or audits. And if you know that it doesn't matter if one client is quote unquote profitable on a cost allocation basis or not, because those are all imaginary allocations of fixed costs.

Ron Baker: [00:47:17] When you think about it, customers and services don't have costs. Firms have costs. Yeah. So why are we sitting here trying to allocate the rent and the toilet paper and the ink to every single customer based on some arbitrary hourly rate? It's crazy. Yeah, that's what I mean by the portfolio. You just got to look at the portfolio and the cash flow.

Blake Oliver: [00:47:40] Yeah, well, that's the great evil of cost accounting. It's applying and this goes to the experience in firms is if you run your firm under the same cost theory that industrial factories used in the 1800s and you're going to create a factory type of firm and who wants to be a factory worker these days? Not not those masters of accounting grads.

Ron Baker: [00:48:07] It's the whole economies of scale. That's what the big firms believe, right? They're no different than Henry Ford. Well, the more cars we produce, the cheaper per unit. Right. Well, think about that for a minute. You mean to tell me if you buy a million, if you produce a million cars, as opposed to, say, I don't know, a half a million, that each car will be cheaper. But what happens to your cash? You're buying 500,000 times four more tires, 500,000 more engines. You there's no way. It's only because of the math of how we do margin this is why Jeff Bezos said, don't look at Gap. Gap's useless. My metric is free cash flow per share. Yeah, margin doesn't pay my light bill. It's a famous line from him from one of his Amazon letters to shareholders. Well, I'm not focused on margin. I'm focused on free cash flow.

Blake Oliver: [00:48:57] And if Jeff Bezos thought like a traditional accounting firm, he never would have done Amazon Prime two day shipping, because when you allocate the costs on shipping, most items on Amazon lose money when they are shipped two days. That's right. At least at the beginning they did because Amazon had not yet built out this network network. So they were paying UPS and FedEx $15 to deliver a 5 to $10 item. And that seemed crazy to people at the time. But what Bezos realized is that as he built out this network of his own delivery fleets, that he only had fixed costs. He didn't actually have allocated costs per item. So. They could do this two day thing and and they still lose money. Any item I think under $10 Amazon doesn't make money on when you buy it with the prime shipping. But like you said, Ron, people who subscribe to Prime spend thousands and thousands of dollars more every year. Yep. On other products on all their purchases.

Ron Baker: [00:50:05] It's about building a moat around their customers. And yeah, it was a brilliant move.

Blake Oliver: [00:50:11] And in my neighborhood, I live in a neighborhood, you know, it's like a little master planned community with about, I think, 10,000 people that live in it. We're our own little, you know, city in a way. And I just see those Amazon, they're all over cute little Amazon vans driving around the neighborhood, going back and forth from that warehouse somewhere in out in outer Phoenix all day long. They must have them coming every hour. You get same.

Ron Baker: [00:50:37] Day stuff there because you're so close to a fulfillment center.

Blake Oliver: [00:50:40] I can order same day multiple times per day. That's that's the experience of it. It's incredible. That's amazing. You know? Yeah.

Ron Baker: [00:50:50] Amazon is so focused on the customer, it's amazing just making that experience better and better and better and better. And they keep plussing it. They keep plussing it that way. When they raise their price, they don't have to blame it on inflation, rising labor costs, supply chain problems. They talk about all the value that they've added to prime in the last two years or whatever it's been, and there's always something to talk about there. And what do we have to talk about when we're going to go to our customers now and raise the price because of inflation? What have we done to plus our offering in the last two years? The other thing that needs to be said and you can talk to John Warrilow about this, the author of The Automatic Customer and the guy who wrote Built to Sell, which is a phenomenal book. You probably read that when you were practicing. I would imagine, how to position your firm to sell it. And he says, you know, normally an accounting firm sells for one times gross revenue. Now, sometimes it's 1.2, 1.1, sometimes it's 0.8, you know, blah, blah, blah. But, you know, on average one time revenue, he said with subscription because it's annual recurring revenue as opposed to annual recurring revenue. And there's a difference there because it's more predictable because you're starting on the 50 yard line every day and you're not starting in the end zone where you have to constantly fill the funnel with marketing and sales and all of that because you're a transaction based, not not relationship based, he said. We're seeing anywhere between 5 and 14 times multiples. Saas metric needs to be factored into the profit formula of your firm because when you go to exit, your firm is going to be a heck of a lot more valuable if your subscription based as opposed to value pricing. I've seen two and three multiples three times, but I've never seen 5 to 14 like he's talking about now.

Blake Oliver: [00:52:39] Well, I think in order to get that, though, you're going to have to have a cost of labor that's extremely low. And that's why technology companies with recurring revenue sell for such high multiples because you just print money. The costs are so low to to run a software company. Like if you just stop developing the product and you didn't hire any engineers and you just kept the people there. I mean, look at what Elon Musk did at Twitter, right? He came in and he let go of like 80% of the company and the service still runs and it's going to become profitable as a result. And that's why these tech companies are worth so much. Yeah, I.

Ron Baker: [00:53:19] Mean, there are definitely I mean, they're digital, so. But but take a company like Netflix. Yeah. Okay. Netflix doesn't cost any any money for them to add a new subscriber to the role. But think about what they have to invest in in terms of content. It's massive. They have to hire the most expensive people on the planet.

Blake Oliver: [00:53:38] It's true. You know what's interesting, though, is it's sort of a it's like a. They spend so much because. All they have to do is have a few hits every year and people will stay. Right. But they don't know what's going to be a hit. Well, that's a joke.

Ron Baker: [00:53:54] In the book about the, you know, the accounting firm buying the Hollywood studio after a banner year and an executive stands up and says, oh, we're going to make ten movies this year. Two of them are going to be blockbusters, five of them. We're going to lose money and the others will probably either break even or make very, very little profit. One of the accountants raises his hands because, well, why don't we just do the two blockbusters?

Blake Oliver: [00:54:18] Yeah, that's I love that. I'm glad you brought that up. That was one of my favorite parts, one of my favorite stories in the book. And that's things you don't really know.

Ron Baker: [00:54:26] Profit comes from risk. And if we're not willing to take risk, if we're not, you know, I love Blue Origin's motto, ferocious, step by step, ferociously. I mean, we're just not ferocious enough as a profession. We've got these we've got these really mediocre goals of increasing utilization by 10% or growing top line by 20% or whatever. That's not inspiring anybody. You know, give people the reason they entered the profession, Let them help people turn them loose. And I think, you know, future's bright.

Blake Oliver: [00:54:59] I wish that was the guiding principle at every firm. They talk about it. They talk about investing in their team and their people. But then when you actually look at how the business is run, you look at the business model, it doesn't do any of that.

Ron Baker: [00:55:11] And until they change the business model, it won't. This is why, you know, the big four Big Four does so many cool things. They really do because they've got a boatload of money to invest in different initiatives, but they will not question their business model. Just blows my mind.

Blake Oliver: [00:55:27] Well, the reason is that it makes a lot of money for the partners, for the.

Ron Baker: [00:55:32] Well, but I don't think it's sustainable. But we'll see.

Blake Oliver: [00:55:36] Well, that's that's where things could really change, right, Because the partners rely on new partners coming in to buy them out and and keep it going. And if the pyramid shape of the firm doesn't continue to like the the the margin on that labor can't flow upward and then the new partners will see the profits shrink. Right. And then they might say, well, what's the point of this? It's this whole this whole demographic change that we're going through as a country where we have fewer and fewer younger workers every year is a real threat to the business model of those big four firms.

Ron Baker: [00:56:15] If you're selling ours, it's terrible because an hour is not leverageable.

Blake Oliver: [00:56:19] You know, there's fewer hours to sell, right? There's fewer hours to sell every year.

Ron Baker: [00:56:24] Absolutely. And, you know, and so in some ways, the big four partners have the same problem Bernie Madoff did.

Blake Oliver: [00:56:31] Yeah. I wonder actually, the so the Korn Ferry did a study on this years ago before it was trendy and projected out the labor shortage. They call it the talent crunch. And the only large country in the world that is going to have a surplus of white collar workers is India. And so I wonder if we'll end up seeing the big four essentially become Indian companies because they're the only that's the only country with enough labor to keep the model going.

Ron Baker: [00:57:05] For now, it's really yeah, if you look at declining birth rates, we're going to start losing population and, you know, 20, 60, whatever it is. According to the UN demographers, India is going to surpass China in terms of population next year. China is going to lose 1.1% of its population per year for the next 50 years. They're going to shrink dramatically. So they've you know, they grew old before. They grew really rich. I mean, they got richer, but and they took 800 million people out of poverty. But they're going to have real issues. So it's going to be really. Yeah. If you were a betting man, you'd bet on India, India's long term future Big Four You'd bet on China's probably.

Blake Oliver: [00:57:43] Yeah. And that's that's where I'd be if I was an accounting firm that was leveraging labor in this way. Big Four I mean, they're already doing it. They've been doing it for a long time, right, with their offices there. But I feel like more and more of the work, it's not just going to be the low end processing that's happening there. They're going to actually shift most of the auditing. Most of the compliance work is going to be done in India, India for.

Ron Baker: [00:58:07] I was talking to Barry Melanson A Digital and he was talking about he's very, very. Bullish on the Middle East. And he sees a big future for the Middle East, partly because their birth rate is exceptionally high. You know, three, four births per woman, which is major compared to most other countries. I mean, Korea is like 0.8%. We're at like 1.6%. It takes 2.1% to just replace the population, right? Yeah. So he's very bullish on the Middle East, which I thought was very interesting.

Blake Oliver: [00:58:41] We have more dogs than children in the United States now.

Ron Baker: [00:58:44] Yeah, I believe it. And we probably spend more on them, too. Well, I mean, there's dog subscriptions, Barkbox. And you know.

Blake Oliver: [00:58:52] I'm fortunate to live in a place with a decent public school. I do spend more on my dog taking him to doggy daycare than I do on my son. Funny enough, guess you're going to get.

Ron Baker: [00:59:01] Backpack funding, right, with this new law. Oh, what's that? The funding for school. K-12 school? Yeah. They're backpack funding it, right. They're giving the money to the kid. Not the. Not the building, not that school. You can go and you can take your kid anywhere, right?

Blake Oliver: [00:59:18] That's a very interesting and controversial development. Yeah. It's because the question is, if this money goes with the kid and the and the kid can take it, the parents can take it. The family can take it to any school. If it goes to a religious school, is that school going to get audited by the state to make sure those funds are being used appropriately because this is taxpayer money. Right. So that's where I wonder how this is all going to shake out.

Ron Baker: [00:59:46] I'll see. You know, people can take their Social Security money and put it in the church collection plate. That's true. And not all of that is is what you earn through social. There's a huge welfare component in Social Security. So I think that's been litigated. Actually, what you just said. I think Maine had just you can do it. Had a case. Yeah, they can do it. Yeah.

Blake Oliver: [01:00:06] It's what's interesting to me is, you know, coming from California, moving to Arizona during the pandemic times is actually just how much better government services work here? Oh, no. We spend we spend less money. But the DMV is like partially privatized. And so I can make an appointment and get everything taken care of in 30 minutes. Right. I mean, same thing with just basically everything. I mean, the the trash service, the water, the gas company came and proactively dug up my gas line so I wouldn't have a leak. It was a massive project. Right. Well, they. Impressive. You know, that wouldn't happen in California. They wait until something explodes or explodes or whatever, right? Yeah. Yeah.

Ron Baker: [01:00:47] You probably drove from California to Nevada as soon as you crossed the line. The roads are, like, 100% better. It's just amazing.

Blake Oliver: [01:00:54] Well, you know what's really interesting about I mean, Phoenix, if we can overcome our water issue, really, it's going to be an economic powerhouse because all of the manufacturing well, not all of it, but a lot of manufacturing in China is moving to Mexico as a result of, you know, like you said, there's demographic changes, but also just the change in the government. And like states like Monterrey and Mexico or cities, I think Monterrey is a city are becoming these manufacturing hubs. Chinese companies are coming there and they're building a huge interstate that's going to go from Mexico up through Phoenix, up all the way to Vegas. And it's going to be a real economic potential economic powerhouse. This area, if we can if we can solve the water.

Ron Baker: [01:01:37] You got the Taiwan Taiwanese Semiconductor company building and they've got plans, by the way, to build a second one in Phenix.

Blake Oliver: [01:01:46] I drove by that factory just by accident. And it is massive, Massive spending.

Ron Baker: [01:01:52] 40 billion on it. Yeah. And they got plans to build another one that's going to do another type of chip. And their number one customer in Phoenix will be Apple.

Blake Oliver: [01:02:01] Oh.

Ron Baker: [01:02:02] I'm so excited. Apple's new chips.

Blake Oliver: [01:02:04] It's great for the economy and we're going to have some good Chinese food in Phenix finally. I miss that. You know, you'll.

Ron Baker: [01:02:09] Get some Taiwanese Taiwanese people outside of get them out of Taiwan before it's taken over. So that's a good thing.

Blake Oliver: [01:02:16] But, you know, it's I guess I just want to finish up on like, let's let's let's think positive, Ron. Let's let's, let's think about the future of accounting like. I believe and I have to keep saying this every time because I think I don't say it enough that there's incredible opportunity in accounting. And even though we've got this talent shortage, yeah, we've got this talent shortage. You know, there aren't enough CPAs and not enough young people going in. But if you want to go out and start your own firm and you want to serve clients the right way, you're not happy where you're at. I mean, it's pretty much you can do anything. It's never been easier. Well, here's here's a question. You know, like Ron, let's say, you know, you take a you find the fountain of youth and, you know, you take a swig and you're 20 again or something, right? You're just like starting your career. What would you do?

Ron Baker: [01:03:06] You know, I've been asked this before, and of course, I would never bill by the hour. I would never fill out a timesheet. I would niche. I would niche. I mean, from what I've seen in my 40 years in this profession, the most profitable firms across all professions have one thing in common. They're all niched. They're all niched. And it's I mean, my buddy who I was telling you about that does nothing but dentists. If I told you his net income and he's a sole proprietor with 12 team members, you'd be shocked. He's making more than the magic circle firms in the UK. The law firms pulled down six $7 million per partner per year.

Blake Oliver: [01:03:44] I couldn't agree more with you.

Ron Baker: [01:03:46] Not that money is everything. I'm just saying.

Blake Oliver: [01:03:48] Oh no. I mean, if.

Ron Baker: [01:03:50] You're looking at profit, you can't ignore that.

Blake Oliver: [01:03:53] You need to have fun. You need to balance your life and your work. And you know, money isn't going to make you happy, but it sure makes it a lot easier to be happy, right? Sure.

Ron Baker: [01:04:01] It gives you freedom.

Blake Oliver: [01:04:02] It gives you gives you freedom. Do what you want.

Ron Baker: [01:04:04] Yeah. So I wouldn't itch. And I. And now I would do subscription.

Blake Oliver: [01:04:09] So, listeners, if you have enjoyed this conversation with Ron Baker, be sure to pick up a copy of his book, Time's Up The Subscription Model for Professional Firms written by Ron Baker. And I should mention your coauthor, Paul Dunne. Paul Dunne.

Ron Baker: [01:04:25] Who's a who's got the greatest first seven chapters. They're just wonderful. And by the way, the foreword written by Blake Oliver.

Blake Oliver: [01:04:34] Yes, I did forget to mention that. Thank you so much, Ron.

Ron Baker: [01:04:36] You did. You did a great job on the foreword.

Blake Oliver: [01:04:39] It was an honor. Well, that's all the time we have. Thanks, everyone, for listening and hope to see you again soon on the Earmark podcast.

Ron Baker: [01:04:49] Thanks, Blake.

Blake Oliver: [01:04:52] Thanks for listening. I hope you enjoyed this episode and that you learned something new. And if you did, wouldn't it be nice to get some CPE credit for it? Well, I've got great news. My new app earmarked CPE offers free Naspa approved CPE credits for listening to podcasts, including this one. Visit earmark cpcomm To download the app, take a short quiz and get your CPE certificate. That's earmark cpcomm.

Creators and Guests

Ron Baker
Ron Baker
Quest: To bury the billable hour and timesheets. Founder of VeraSage Institute. Radio Talk-Show Host, The Soul of Enterprise, on @VoiceAmericaTRN
How Accountants Can Profit From The Subscription Economy
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