Trailblazer Podcast – Chris Farmand

I had the chance to interview Trailblazer Chris Farmand about his experience in moving to be a Firm of the Future. Enjoy!

Announcing The VeraSage List

We are thrilled to announce The VeraSage List.

This is a list of professional firms across multiple sectors who have affirmed that they adhere to the three pillars of VeraSage. These firms:

  1. Never bill by the hour
  2. Never use timesheets
  3. Offer a 100 percent money-back guarantee

If you know of any firm that needs to be added, please send an email to Ed Kless.

Trailblazer: Brooks Bell

Congratulations to Brooks Bell for converting to Value Pricing. Founder Brooks Bell shares the following inspiring story.

Pricing has been an interesting journey for us.  We are a professional services firm in the digital analytics and testing space. Our clients are Fortune 500 consumer brands with complex needs and wildly different expectations. Every client needs a custom solution, but we often have to name a price without complete information about the scope. With this challenge in mind, it’s been tempting to adopt an hourly price––partially because it will keep our risks to a minimum, and also because it’s what their procurement groups are accustomed to.

However, hourly pricing has been something I’ve tried to avoid since I started this firm ten years ago. The four reasons it doesn’t make sense:

1)   It doesn’t reward us for working fast, beating deadlines or improving efficiency

2)   Hourly rates make our employees feel like they’re in a factory, and keeps compensation top of mind rather than problem-solving. Everyone hates it.

3)   Some of the best work we do might be done in an hour, and sometimes we’ll analyze data for 8 hours and glean no actionable insights.

4)   It discourages communication. Adding an extra person to a meeting might be helpful for a project, but it adds considerable cost in an hourly contract.

With this in mind, we struggled with finding the right balance for pricing. How do we capture the value we create, manage our risk and our clients’ risks for scope mismatch, and offer a solution that fits with their budget needs and their procurement approach?

18 months ago, we put in place a new pricing approach that was a little different from all of our previous attempts.

We developed a fixed fee model that offers clients three pricing packages to choose from. The key innovation for us is that the main differentiators between the packages are the number of variations—or subcomponents of a test—that can be run per month during the contract.

A secondary variable is a bucket of hours for supplemental development, which is more essential for some clients than others. These hours expire each month if they aren’t used which helps keep the additional development requests focused on constantly progressive test variations.  It adds flexibility into the contract and anticipates unexpected development issues like debugging, QA or building an extra-complex test. It also helps manage our risk while helping us be able to say ‘yes’ to unexpected requests each month.

All of our price plans include unlimited creative design support throughout the entire duration of the contract. This is highly unusual but serves several key functions. It gives us control over the testing process—from strategy to design to development to analysis. It increases the speed at which variations can be developed and deployed. It improves brainstorming and strategy iteration because all members of the multidisciplinary team work together in-house. It also ensures that clients hire us for our testing and analytics expertise—not simply because they appreciate our design aesthetic.

By using a fixed fee, we are able to pursue the best ideas—not just the ideas that fit into or fill the remaining billable hours. This is really important when it comes to testing because sometimes, getting results takes time. It’s an iterative process and sometimes more learning happens when tests fail than when they succeed. A fixed fee-pricing model allows us the freedom to indulge in this process and ultimately it’s the client that benefits.

This last point is something we really believe as a company—and we now back it up by including an unlimited service guarantee in every contract. It’s a powerful reassurance to our clients and also a representation of our confidence in the work we do.

This fixed-fee pricing model has been a huge success for us and for our clients over the last 18 months. The model enables our team to do the best work they can, it allows us to tailor packages to meet the specific needs of each client, and it helps clients focus on the testing—and more importantly, what they are learning from each test—rather than lists of deliverables and a diminishing count of hours.

 

 

 

How would Charles Darwin see you?

DodoIt isn’t about survival of the fittest. Darwin actually held that the most adaptable were the survivors. So, are you and your business adapting or are you heading down the path of the Dodo?

The current environment is one where there are so many changes taking place that the firm of 20 years ago will find it hard to compete. I know looking at my business and the work we do that to produce our current output, 20 years ago we would have required a heap more people and resources. Thankfully, technology has developed and enables us to create the results etc that our customers want and need.

But, there are two other components that are vital – your people and your customers. Unfortunately, a lot of firms “out there” have taken on (some very grudgingly) the technological change, but they have made few, if any steps, toward adapting their approach to their people or their customers.

Most of my thinking here comes from the “Growth Curve” approach which looks at “Three Gates” – people, process and profit. The technology has helped us deal with and adapt to the process gate, but I am seeing very little in the way of adaptation to the profit or people gates.

The profit gate needs to be adapted to by looking at the way that you engage with your customers, the service you offer them and the methods by which you price and they value what they get from you. The arcane approach that is the timesheet is becoming less and less popular (as can be evidenced by a brief review of other posts on this site) and customers are demanding more certainty, clarity and comfort that they are not signing on to an annuity stream for the advisor whereby they are being charged and billed for the advisor’s inefficiency or learning. In effect, given the timesheet places the customer and the advisor in directly opposed positions, the customer is now waking up to the fact that they want to know in advance what the price for the work will be. Those firms that do not adapt to this emerging reality will find it very difficult to retain or attract customers where other firms out there offer this as an alternative.

The people gate is the other area where firms are finding it difficult or are not wanting to adapt. The blunt object that is the timehseet that is used for performance management in many firms is rapidly becoming redundant. As an example, we recently advertised for an accountant and one of the headlines in the ad was “no timesheets”. We have had some sensational applicants for the role who are currently working in accounting firms in town where they are managed and measured by the timesheet. I don’t know about you, but if my performance is being measured in 6 minute increments, it is going to be fairly meaningless to me. I want to be judged on results and outcomes. Inputs are irrelevant. Hence – particularly with our Gen Y guys – our people want to be and remain relevant and highly valued based on what they have added to the business, not how much time they have spent doing it.

Many of the firms with which I speak are afraid of moving from the timehseet and adapting their business model to what the world is slowly going to demand of them. These poor bastards are going to be wondering what hit them in about 5 years’ time when it will be all to late.

They will have few staff and fewer customers but they will be able to account for every single minute of their day.

They will be preceisely irrelevant.

And a future Charles Darwin will wonder why they chose not to adapt.

Are You a Diamond Cutter?

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Do you cut diamonds in your role? No, I recognise that we’re not really jewellers – we’re dealing with far more valuable and precious things than they ever do.

When someone comes into your business, they can be seen as either an uncut diamond or an unset gem. How you manage their induction and culturisation within your business will determine the sparkle and presentation that they eventually offer to you and the customers they deal with.

Many firms have the archaic concept that they can just give someone a computer and a phone and “let them at it”. With respect, they will then wonder why they have staff turnover issues and the morale and culture in the firm is not great or even toxic.

Selecting the uncut diamonds to bring into your firm is both an art and a science. It requires a deep knowledge and understanding of not only where you are but also where you want to be – as a firm and as the whole team within the firm.

Recruiting someone merely because they have a pulse and a degree/experience ain’t a guarantee of success. Getting to know what motivates them, what matters to them and letting them see the same about you (both at firm level and as individuals who make up the firm) is going to enable a far more successful/less stressful introduction.

I know in my firm, we take at least 3 meetings with other team members before I even get a look at the candidate! If anyone has reservations, they are tabled and addressed. We need to remember that everyone needs to work together and the new hires will either add to or detract from the culture that you have worked hard to establish (or are working hard to improve!) – getting it wrong can be a disaster.

The process of taking an uncut diamond (or even a rough diamond) to a sparkling gem as per Wikipedia – take the following and apply it to how you deal with your people – from initial assessment through the process of refining and cutting to produce a valuable gem that people want:

Mined rough diamonds are converted into gems through a multi-step process called “cutting”. Diamonds are extremely hard, but also brittle and can be split up by a single blow. Therefore, diamond cutting is traditionally considered as a delicate procedure requiring skills, scientific knowledge, tools and experience. Its final goal is to produce a faceted jewel where the specific angles between the facets would optimize the diamond luster, that is dispersion of white light, whereas the number and area of facets would determine the weight of the final product. The weight reduction upon cutting is significant and can be of the order of 50%. Several possible shapes are considered, but the final decision is often determined not only by scientific, but also practical considerations. For example the diamond might be intended for display or for wear, in a ring or a necklace, singled or surrounded by other gems of certain color and shape.

The most time-consuming part of the cutting is the preliminary analysis of the rough stone. It needs to address a large number of issues, bears much responsibility, and therefore can last years in case of unique diamonds. The following issues are considered:

The hardness of diamond and its ability to cleave strongly depend on the crystal orientation. Therefore, the crystallographic structure of the diamond to be cut is analyzed using X-ray diffraction to choose the optimal cutting directions.
Most diamonds contain visible non-diamond inclusions and crystal flaws. The cutter has to decide which flaws are to be removed by the cutting and which could be kept.
The diamond can be split by a single, well calculated blow of a hammer to a pointed tool, which is quick, but risky. Alternatively, it can be cut with a diamond saw, which is a more reliable but tedious procedure.

After initial cutting, the diamond is shaped in numerous stages of polishing. Unlike cutting, which is a responsible but quick operation, polishing removes material by gradual erosion and is extremely time consuming. The associated technique is well developed; it is considered as a routine and can be performed by technicians. After polishing, the diamond is reexamined for possible flaws, either remaining or induced by the process. Those flaws are concealed through various diamond enhancement techniques, such as repolishing, crack filling, or clever arrangement of the stone in the jewelry.

When having a read through the process outlined above, it occurred to me that the way we treat our uncut diamonds is vitally important to the outcome of the final gem. We also need to recognise that the setting into which the gem is going to be placed needs to be carefully considered – this has a big bearing on the design of the cutting process.

But, do we really adopt this process in the firms we run? Do we really value our people as potential gems worthy of admiration and even as objects of (for us vainglorious types), envy?

Or do we treat them as rocks – a commodity which is generally processed roughly (if at all) and not valued?

I know how I view this process. The jewellery bench is a wonderfully creative and deeply satisfying place to work. Far better than a quarry.

Why Accountants and Lawyers Suck at Learning

I have just put up a post on my site relating to the behaviours that we professionals can adopt in our businesses that can seriously impede us from learning (and contributing).

It should make you think.

It can be found here.

HSD from an attorney

Yesterday was a huge HSD. I received the following email from a sole proprietor attorney who specializes in elder care and estate law:

Dear Ron,

I tweeted a few weeks ago that I was reading your book, Implementing Value Pricing. Let me tell you a bit about how this began.

I am a Certified Elder Law Attorney (CELA) and today limit my practice to elder law and estate planning, with the exception of Residential Real Estate Settlements, something that the previous attorney that practiced here did and I continued doing it.

At all times I had my eye on limiting my practice since taking over this firm in 1995. I have stopped doing divorces, civil litigation, landlord-tenant, all the types of “threshold” law that I inherited.

This year I am moving the real estate practice into a stand-alone settlement company with another attorney that he will manage, leaving me to fulfill my goal of simply being an elder law/estate attorney!

As part of this, I have been reviewing all my firm practices. That led me to Atticus and Atticus led me to you and VeraSage! I had been using fixed fees for a while because I have always hated keeping a timesheet.

When I was a 2nd year law student clerking at a litigation firm, I was taught how to do a timesheet before anything else! Further, I wasn’t very good at it. I would find myself trying to go back and recreate timesheets for the client or the Court. Yet, it was not until reading your book and listening to the audio recordings that I knew that fixed fees were not enough. It’s all about VALUE and I was leaving money on the table!

A few weeks ago my secretary placed a stack of old files in my office for review. One was from January. I had met with a gentleman about asset protection planning, specifically sheltering assets from the cost of long term care costs in the future. I had quoted the fixed fee range and he had “sticker shock.” The next day he called back to say he did not wish to go forward. When I saw his file two weeks ago, I figured I would put value pricing to the test.

I wrote the gentleman the attached letter [see below]. Within two days he had made an appointment and yesterday, he wrote the check for $11,250! This is trust planning that I had been charging a fixed fee of between $2000-$2500.

I can’t thank you enough for your books, speeches and blog posts! I will continue to let you know how the implementation of value pricing progresses in my solo practice.

Here is the letter he sent to the customer. It’s an excellent example of communicating value and handling sticker shock:

July 5, 2012
Mr. XXXXXXXX

Re: Asset Protection Planning

Dear Mr. X:

Upon reviewing files, I came across yours. I realize you had previously decided not to move forward, I just wanted to touch base one last time to complete my due diligence.

If I recall, you were concerned about the price of my services. I realize some clients have “sticker shock” when such a price is quoted, but if one balances that with the value the client receives, all previous clients have moved forward.

The one certainty is this: if you require long term care, recent surveys by Met Life reveal that in our area, the average cost of a semi-private room is $198.00 a day and a private room is $225.00 a day; that translates to $72,088.00 and $82,125.00 annually for long term services. Knowing these costs, it then simply becomes a matter of how long you live in need of assisted living/nursing home care. You can see, at approximately $6,000.00 or $6,800.00 a month, my fee is less than two months of care.

For example: three years in assisted living would cost approximately $125,325.00. Three years in the nursing home would be about $234,000.00. Thus, if you saved a mere two months from needing private pay, it would more then pay for the value you receive.

Think of it this way, if you knew an investment of $11,250.00 would yield an return of almost a quarter of a million dollars you would certainly make the investment!

Of course, the choice is up to you. If we do not hear from you in 30 days, we will close your file and wish you the best!

Very truly yours,

This is what amazes me about attorneys, and consultants, who continue to denominate everything into hours. How could he have received a price nearly $9,000 over average hourly rates by focusing on realization rates and not value?

Will this job be profitable? Does he need timesheets to know this with certainty? Give me a break. As we’ve said a million times, focus on value and time becomes superfluous.

Congratulations to this attorney for being willing to try something new, and thank you for letting me share the story with the VeraSage community.

David Vilensky on The Benefits of Fixed Pricing

David Vilensky, managing director, Bowen Buchbinder Vilensky, in Perth, Australia, is one our Trailblazer law firms.

David recently wrote this article
for the February 2012 edition of the Law Society of Western Australia’s publication, Brief.

It’s fantastic because David articulates how work changes once a firm is no longer obsessed with tracking time.

The benefits of this are very difficult for firms to grasp who continue to track time, and they are very difficult for those who teach this to describe—you simply have to experience it first hand.

Yet these benefits are enormous, probably outweighing the gain in profitability firms will achieve with pricing for value rather than time.

The late Paul O’Byrne used to say that when his firm got rid of timesheets they became obsessed with customer value, leading to more knowledge sharing and collaboration among the team, and a less stressful quality of work life.

David’s article is further evidence of these effects.

Congratulations to David and the entire team at BBV.

New Firm of the Future Trailblazer: Carol-Ann Brouwer of Simply Made Simple

Today’s HSD (high satisfaction day) comes from this interview I did with Sage Simply Accounting partner Carol-Ann Brouwer of Simply Made Simple.

Carol-Ann attended a workshop on Firm of the Future in October 2010 and in one year has completely transformed into a Firm of the Future. In this year alone she doubled her income. Yes, I said doubled!

Get this, one of the first things she did was trash the timesheet!

I have posted both an excerpt (runs just over four minutes) and the full interview (runs 16 minutes.) Enjoy!

ET HORA LIBELLUM DELENDA EST

New Firm of the Future Trailblazer: Carol-Ann Brouwer of Simply Made Simple

Today’s HSD (high satisfaction day) comes from this interview I did with Sage Simply Accounting partner Carol-Ann Brouwer of Simply Made Simple.

Carol-Ann attended a workshop on Firm of the Future in October 2010 and in one year has completely transformed into a Firm of the Future. In this year alone she doubled her income. Yes, I said doubled!

Get this, one of the first things she did was trash the timesheet!

I have posted both an excerpt (runs just over four minutes) and the full interview (runs 16 minutes.) Enjoy!

ET HORA LIBELLUM DELENDA EST