Rick Telberg, the prolific Twitter poster and editor of CPATrendlines (and frequent sparring partner with VeraSage) posted a Tweet today referencing CPA firms and their plans to “raise” their prices. Since pricing is a core competency of VeraSage Founders and Fellows, I clicked on the link and after picking myself of the floor I shook my head while muttering “they” (the established group of consultants that are killing our profession one firm at a time) still don’t get it. To be fair to Rick, he didn’t originate the survey, as he is merely only guilty of repeating it. But repeating bad works with poor conclusions is a sin of consultants and publishers.
The original survey was published apparently by IOMA and their overpriced Partner’s report. There are several fallacies that need addressing: First is the use of a “Book Rate” to gauge whether or not a firm is actually raising its prices. Ford, GM, and other dinosaurs in the car industry have raised their “book” prices for years only to provide rebates, 0% financing, and other discounts to sell at lower prices then even previous years. Even their own report (of course using statistics from another source – does IOMA actually produce any original research or are they simply one more link in a long “telephone game” chain where original research is repeated and re-crafted so frequently that people actually believe the conclusions? that anticipated changes to book rates on a year over year basis ranges from 2% for the bottom quartile to a whopping 5% for the top quartile. Hold your britches as the best is about to come.
According to the article, the editor Jess Scheer (referencing is this good news?) states “….we suggest holding off on popping the champagne just yet.” Why? you might ask. Raising our Book Rates should be a Positive Boom for our bottom line Shouldn’t it? Well, the article explains……..”Realization rates remain dismal”. That is the old Ice Pick into the brain comment and the Drano to all of this fake-a-roo party. Realization.
Book Rates are for egos. They allow people to boast and brag. High Book Rates combined with “dismal” realization rates are no better than plastic surgery to enhance a corpse. Window dressing…….but who cares? As an aside, firms that price on value, who have left the Marxist Labor Theory of Value behind frequently successfully raise their prices by not 2, 4, or 5%, they raise them by magnitudes. They successfully raise their prices (those are net prices) because skillful pricers understand that value is subjective and they also understand that pricing up front is good for the customer (and great for the firm as payments tend to be received up front too) and when risk is taken off the table, prices continue to rise and not fall. But there are plenty of examples in this Blog about the success of Value Pricing. Correction……Value Pricing the VeraSage Way – not the lazy Value Guessing way so promulgated by advisors to the IOMA style reports and so popular at “Me Tu” conventions and gatherings.
Rick’s article continues that a benefit of raising a Book Rate is use it as a “negotiating” tool. Like CPA firm customers are dummies. Start high and negotiate low. How about having a conversation about the value provided, the value received, and finding out what your customers are willing and able to pay premium prices to receive. Oh, I forgot, that doesn’t extend a Partner’s “man” or “woman” hood via the measure of having a high but never utilized billing rate.
The two biggest wasters of a firm’s capacity are; 1) Partner’s Meetings where egos talk and 2) the firm’s T&B system where the liars and whores congregate to over price before………what did they term that? Oh, apply those “dismal” realization rates. I would call them adjusting the Ego to the Market. Or, High Books fall Farther. Or My Ego is Bigger than Your Ego. I could continue, but I choose not to (you may thank me later).
Someday, maybe even Rick will get it and stop regurgitating moronic information that is toxic to our profession, our colleagues, and our customers. Someday may never come. One thing I know, VeraSage will continue to help the learned leave the imbeciles that read and follow the cancerous thoughts like Book Rates and become dinosaurs to die off and become oil to be used for something productive.
As Edward R. Murrow was fond of saying……”Good Night and Good Luck”
Daniel D. Morris,