Impact Pricing #CLASSIC Trash the Timesheet: Exploring Opportunities in Subscription Businesses with Ronald J. Baker
Ronald J. Baker is the founder of VeraSage Institute, a reformed CPA and cost accountant who has changed his mind on the value of timesheets and cost accounting. His quest is to bury the billable hour and timesheets.
He is also a radio talk-show Host, The Soul of Enterprise: Business in the Knowledge Economy heard on www.voiceamerica.com.
In this episode, Ron let us know why he changed his mind when it comes to the use of timesheets when setting up pricing. Hear his reasoning about why you should also get rid of timesheets. He offers profound insights, as well as examples and explanations, into how certain pricing value and cost models are appropriate for particular industries.
Why you have to check out today's podcast:
- Learn why many companies in accounting and the automobile industry are switching to subscription pricing
- Discover how timesheets cause leaders to focus on the wrong metrics, especially in pricing and value setting
- No timesheets? Is it possible?
"Even if you're a solo entrepreneur, have somebody else help you with pricing because it will put a spine in you and you won't give yourself away."
– Ronald J. Baker
Topics Covered:
02:44 – Talking about four defenses for timesheets in relation to Pricing
04:41 – Taking into consideration the Cost of Goods Sold in setting the price
07:22 – Difference between a metric and measurement type of cost allocations
09:09 – Opportunity Cost and Sunk Cost
10:39 – Is time really considered in setting up pricing?
14:31 – Project management as a way of making better decisions in the future
15:47 – The best advantage of niching your expertise on
18:31 – The start of subscription pricing in the accounting world
21:30 – Insurance classified as subscription pricing
24:08 – What's the best thing about hiring an accounting firm rather than accounting staff for your business
27:48 – His thoughts on cars leaning towards a subscription model
29:50 – Ron's pricing advice
Key Takeaways:
"Keep in mind that I don't need to see timesheets to know your firm's costs. I need to know, I need to see your GL, your income statement and I need to know what your labor and all of that is. I'd much rather track revenue per person or labor cost per person, profit per person in a professional firm because that's a true measurement." – Ron Baker
"Even if they're just starting out as a sole solo. Don't have any employees. I still think they can put a price on things consistent with their opportunity cost and what they want, willingness to accept and function fine, and this is an integral part of this, as long as they step back after the job is completed and do an after-action review and learn from it." – Ron Baker
"If you're niched, if you specialize, it's much easier to know what something's going to take once you build up some experience." – Ron Baker
"A subscription model is a way to lock customers in for life. So in value pricing to Oh you're pricing, not the customer. And this is the subtle difference, but bear with me, you're pricing the relationship and you're pricing the portfolio because you're looking at it as a portfolio rather than a project or just a customer. You're actually looking at the entire portfolio." – Ron Baker
"We're too busy. I think we confuse being busy with being effective and being profitable. And I'll see a correlation there." – Ron Baker
People/Resources Mentioned:
- Bain & Company: https://www.bain.com/
- McKinsey and Company: https://www.mckinsey.com/
- Porsche: https://en.wikipedia.org/wiki/Porsche
- Canvas + Fair: https://drivecanvas.com/
- Ed Kless: https://www.linkedin.com/in/edkless
- TSOE Episode #200: Interview with Reginald Lee: https://www.thesoulofenterprise.com/tsoe/lee2
- Lies, Damned Lies, and Cost Accounting: https://www.amazon.com/Lies-Damned-Cost-Accounting-Management/dp/163157065X
Connect With Ron Baker:
- VeraSage Institute: https://verasage.com/
- LinkedIn: https://www.linkedin.com/in/ronbaker1
- Twitter: https://twitter.com/RonaldBaker
- Email: ron@verasage.com
- The Soul of Enterprise: https://www.thesoulofenterprise.com/
Connect with Mark Stiving:
- Email: mark@impactpricing.com
- LinkedIn: https://www.linkedin.com/in/stiving/