On this episode of the Boomer Briefing Podcast, Allen Gregory, Partner, Federal Tax at TaxOps, talks about billing time versus delivering value to clients. They dive into how removing hourly rates can add value to client relationships and improve your accounting firm’s client retention. 

On this episode of the Boomer Briefing Podcast, Allen Gregory, Partner, Federal Tax at TaxOps, talks about billing time versus delivering value to clients. Allen and host Marc Staut, Shareholder and Chief Innovation and Technology Officer at Boomer Consulting, dive into how removing hourly rates can add value to client relationships and improve an accounting firm’s client retention.

Allen shares how TaxOps has used value-based pricing since its inception. This experience has taught us how fixed-fee pricing creates collaborative client relationships and a culture of trust and accountability within the firm. Two key components, clear communication and experienced staff, are also key to ditching charge hours and making fixed-fee engagements work for clients, staff and partners.

In this podcast:

  • TaxOps uses a fixed fee approach rather than tracking hours to deliver value to clients through proactive engagements and collaborative relationships.
  • Hiring experienced professionals who align with the firm’s values of trust and accountability is crucial to value-based pricing. It also provides work flexibility and a client-first culture.
  • Key challenges to implementing value-based pricing includes educating staff accustomed to traditional billing methods and effectively communicating the value-based pricing model to clients. But today is an opportune time for the industry to shift towards a more value-oriented approach.

Transcript

Marc Staut: We were talking a little bit as we were getting prepped for this podcast, and, uh, it became clear that your firm is a little bit different than a lot of other CPA firms. What are some of those differences?

Allen Gregory: Thank you, I would say very much so. So, we talk about ourselves, kind of the elevator speech is, hey, we’re a little bit of both. The best of both worlds in the sense that we have the experience and expertise of individuals with larger firms, but as a smaller firm, we have a closer feel and connection with our clients and senior people being engaged in work on a day-to-day basis.

That’s kind of the elevator speech. I think it goes a little bit deeper than that too. If you just think about our culture, obviously, we think really separates us as well. And that is not necessarily Big Four in the sense of our target is really that work life balance that’s defined differently for a lot of different people, but then also our clients.

So, we’re smaller in number – we are at 25 people – but our client base is really upper middle market, focused on that upper middle market, a lot of that comes from having worked at larger firms. So, we tend to be more of a broader spectrum of offering to those middle market clients.

As we think about our ideal client too, we talk about being really just kind of an outsourced tax department where they haven’t a financial reporting department. Maybe need a little more help in some of the direct tax work.

Marc Staut: That makes a lot of sense. I really appreciate the approach that you take to your people as well. A lot of them are already experienced. And they know exactly what they’re looking for when they join your firm, right?

Allen Gregory: We like to think so. We’re at a size where we haven’t really found the efficiency and going to direct hire out of school. We’ve tended to look at those folks that are three to five years of experience and that helps us get an understanding that they’re really committed to public accounting, certainly. Get a little training for some larger firms. But then, we’re at that point of matching up what we have as a mission statement and looking for those people that you can trust, they have some background, they are accountable, and that then, just leads to our flexibility that we have in a culture.

Marc Staut: That’s awesome. And it really sets you up for success, which is important as we get into the meat of this episode. Alan, you often speak to the focus on providing value to your clients versus time tracking. That is a huge topic these days. What does that look like in your firm?

Allen Gregory: It certainly has. And so, TaxOps since formation has really taken that approach. As you mentioned, from an employee standpoint, of course, it’s very attractive to them and has helped us from a recruiting standpoint because there is a little bit of that administrative headache thought process as a staff person, trying to record time. But yet, it really lines up with our culture and our client base from the standpoint of, we want to be they’re outsourced answer.

So, we do have just a fixed fee. We don’t track hours. On the other side, from a standpoint of, we don’t think the value should be determined by the amount of time that we have involved, right? The value is really the deliverable and the output of the product that is not just maybe a tax return but it’s also that relationship and the ability to be on a call. A lot of people talk about being proactive, but sometimes there is a hesitation in whether I going to get a on call and charge for 15 minutes. But if we don’t have that kind of hanging out there, what we find is we’re more engaged, as I mentioned, more proactive, and then, the relationship works really well.

I did mention our ideal client, and it kind of comes full circle because what we’re looking for is someone that client-wise is going to be collaborative with us. That’s one of our final criteria there for an ideal client. We can explain what, we’re delivering as far as experience, expertise, is in that fixed fee is part of everything they’re receiving. It’s worked really well for us in the space that we’re working at.

Marc Staut: That’s amazing. And I love that you focus on more than just the deliverable, right? The value that they’re getting really comes from the type of relationship that you have built. And you’ve removed the things that kind of would get in the way of that relationship.

So, by saying, hey, here’s our fixed fee, you’re able to say, let’s invest the time in, and let’s make it easy for them to call you. That builds that partnership. I think that’s really, really powerful.

Allen Gregory: Yeah, absolutely. And again, as I said, that collaborative working with our clients certainly has, created positive results on both sides, internal and external. The external client is the success that we’ve had in maintaining those clients with this collaborative relationship. Then knowing what they’re getting not only from a fee standpoint, but also from the experience with us and of course internally, then it helps because you know staff don’t have to worry about or not as a one more thing, right? So, we’re not worried about inputs. We’re worried about outputs and making sure our client is receiving that proactive approach to ultimately what the deliverable is.

Marc Staut: That’s awesome. I love that. Well, what are some of the challenges that come with your methodology?

Allen Gregory: Certainly. Well, if you just think about our industry, from years gone by, everyone’s had that. Here’s how the public accounting industry works, right? You figure out your charge hours, and everyone bills you by hour, and you get charged, and then you pick up the phone and have a call.

What challenges we have seen is just first making sure that people understand that value that we’re bringing. What we’ve seen is ultimately positive once we get past the first hurdle. Are there challenges from kind of defining the kind of specific work?

Absolutely. We want to be that outsourced resource for everyone, but obviously if it gets to a transaction plan or we’re going through an IRS examination, there’s got to be the understanding up front and communication. Okay, well, that’s something separate that we’ll have to talk about. But for everything that’s defined up front, the fixed fee approach has worked really well for us.

Marc Staut: It really comes down to pricing and scoping is one of the bigger challenges out of the gate. If you get that right, everything else seems to kind of fall into place. Is that correct?

Allen Gregory: It is. Now, I think you really hit on it Mark because, each client is different. But certainly, you can get into those situations where I thought we were all in. So, you get a call for everything and then we just need to help with this little thing and that little thing. And certainly, like I said, we want to be a resource and we want to be responsive and we’re in the client service business. Of course, we also have to be fair to ourselves and fair to our staff as well.

So, communication up front and that goes right to our engagement letter, and also just speaking to our clients. Here’s what we’re going to deliver to you. And if you get that mapped out, it’s like anything else. It seems like if you had that communication up front and understood, you can at least be able to respond to those kinds of creeping questions. But yes, it’s certainly an ongoing challenge and you have to be aware of it.

Marc Staut: Yeah, I love that. It’s like one of the biggest secrets to life, right? Upfront communication. Great. Let’s do that ahead of time and solve so many problems later on down the road if we’ve gotten that right.

So, I love that. Well, let’s shift gears just a little bit. And I’m curious because You know, your firm has been practicing for a while now. You’ve built something really cool there. But as you bring people in, even though they are experienced people, how do you really teach the importance of value and value pricing to CPAs that are traditionally focused on billing?

Allen Gregory: Yeah, that’s certainly a change and like I mentioned, with some people that are used to being looked at as to charge hours and how many you had this week and what are you going to get? It’s certainly a little bit of relief and actually from a hiring standpoint an attractive point.

But yet what we’re trying to do and what we talk to people about as they’re coming in is, we’re looking for trust and accountability. That’s part of our vision statement. What that results in is some flexibility for our people if you pull all those together.

So, it’s selling people on, here’s what we’re about, and here’s our culture. Because hand in hand with the no charge hours is, we don’t track vacation time. It’s unlimited vacation, if you will, or time off as, as we say. So, it’s again, focus on the outputs versus inputs.

And, you know, by having people and hiring people that we feel like we can trust, have accountability both ways, that flexibility just results almost in a challenge certainly to educate people about that. But I think as we are able to show them what the possibilities are, it’s quickly absorbed.

Marc Staut: Yeah. So, it sounds like it’s really key to make sure that you’re hiring the right people, not just, people who can do the work, but have the right mindset. And as you look to the succession of your firm, having those people in place and really embracing your mission and your philosophy is what makes that move forward. Is that about, right?

Allen Gregory: I think that’s well said. And, going back to it’s a little bit more of a challenge, at least with us in our size, to hire people directly out of school, and train them up. We just don’t have that process in place. That’s a plus in some sense for us because we can look to people that have spent three to five years in public accounting — that’s something they really seem committed to.

Certainly, when I started in the practice, it was at two to five years, you figure out whether you’re going to stay or move on. So, we have a little bit of that benefit in our hiring practice. And then it’s, as always, part of an interview process. But I think we can at least have a little bit more of that identity, like maturity scenario to be able to really gauge whether someone is committed and understands and appreciates what we’re trying to accomplish.

Marc Staut: So, it really works out well together. One of the challenges that I have seen firms run into when they want to move more towards value building and value pricing is really how they’re going to do metrics or measurements. How do you measure success inside your firm?

Allen Gregory: That’s a really good question. And certainly, we look at a lot of those key performance index to try to make sure that we’re in line with other firms. We have some intangibles, of course, that we look at, and we’ve been fortunate and recognized by Accounting Today as among some of the top firms in the smaller firm category.

We also think that that intangible of clients staying as well as people staying is really good for us. But the really key index as we look at a tangible number is revenue per person, revenue per professional staff and, revenue across the board.

We’ve actually seen more recently, and we participated in a Rosenberg survey, Mark, that I know you’re familiar with. There are some 300 firms that participate there, and we followed that for the last five plus years. And you can at least have some feedback in alignment to, hey, where are we as we look at even some of the profitable firms. We’re trying to make sure that we’re not in the lower area as well. But it gives us at least some feedback to share internally, as well as it gives us some goals to kind of target. So that’s what we found is best currently.

Marc Staut: Awesome. It sounds like there’s a lot of opportunities there that you are using both a combination of both internal and external metrics to really gauge where you’re at. And I completely agree with you on revenue per FTE. We actually do some metrics at Boomer as well. And that’s one of our best indicators for how a firm is really performing. So, looking at how you’re comparing there is absolutely a key area. Well, as we wind this up, Allen, I think this has been a really good conversation. I think you’ve probably intrigued a lot of people as they start to think about maybe how this could apply inside their own firm. What are some next steps that you would recommend to our listeners that they would be able to apply these ideas?

Allen Gregory: Yeah, so maybe just shifting from a kind of a brief per hour kind of process. Certainly, I think one of the things that we’ve talked about that as I would share with other firms currently is where we are in an industry currently. There seems to be a lot of opportunity, and there’s always discussion about what’s the right client, and make sure you have the right client, in the mix.

And that’s very important for us. As I mentioned previously, one of those things we look at is whether they’re kind of collaborative in the end. So, in my mind, this is the time and the opportunity to do it. You know, again, we’re fortunate where we are in an industry. We have to be super-efficient. The number of resources is condensed; we have to use technology efficiently. And if you think about it, if there’s one less thing we have to worry about, at least from tracking charge hours, then man, this seems like the right time to really potentially do a little bit of a shift.

I think that it’s really not that challenging when you sit down and have that conversation up front with clients. It’s just been received really well for us. I think the challenge is trying to break that barrier of what people are used to internally, historically, but right now, it just seems like, boy, there’s a time knowing what’s going on in our industry to kind of rethink this and really think about value versus what your inputs are. There’s a lot of firms out there that can provide a lot of value, no doubt given that there’s limited resources. So, that’s what I would talk to folks about.

Marc Staut: Awesome. And when it comes down to it, just do it. Just get in that first step. The next step is the most important one that you can take.

Take that very first step. Thank you so much for your time today, Allen. It was great to hear your insights and for our listeners, if you enjoyed this conversation, we release new episodes every Tuesday morning.

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