Tag Archives: VeraSage Institute

Innovate for Growth, Price for Profit: Time with Ron Baker

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Last Thursday I was at the Ohio AAA (Association for Accounting Administration, not the automobile people) meeting with a room full of other minds eager to hear what Ron Baker had to say. As always, Ron had a lot to present—and we soaked it up like a dry sponge on a Seattle sidewalk. If you’re not familiar with Ron Baker, you should be. He runs the VeraSage Institute and is the chief voice behind the value pricing movement in the professional services world. I urge you to find out more about Ron and VeraSage by clicking here.

Why not stick with the billable hour? Says Ron, “My argument against the billable hour is that it leaves money on the table.”

Another gem that smacks the accounting profession like a hurricane: “If you’re selling something that involves risk, it’s not a commodity.”

Oh, here’s another one for good measure: “Your firm is defined by the customers that you don’t have.”

Spending the day with Ron, including my delivering him to the airport at the end of the day, was like going back to business school with a dose of Steve Martin-ish humor tossed in for good measure. When you have the opportunity to take part in one of Ron Baker’s sessions, do it, even if you’re dead-set on sticking with the billable hour system.

The Five Cs of Value
1. Comprehend value to customers
2. Create value for customers
3. Communicate the value you create
4. Convince the customers they must pay for value
5. Capture value with strategic pricing based on value, not hours

Check out one of Ron’s books here.

Ron Baker_051613

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Accountants Still Matter, Right?

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We’re all constantly learning. For example, early this morning while reading The Wall Street Journal, I was informed that the name of the Quaker Oats man is “Larry.” Who knew?

One guy we can all learn from (not “Larry”) is Ron Baker. The following Q&A from the founder of the VeraSage Institute, explains why the industry is on the verge of becoming irrelevant.

Question: What is the biggest risk to the accounting profession?
Answer: People are not going to like this, but I see the biggest risk to the accounting profession as irrelevancy. They’re high-priced bookkeepers and unless they move away from the idea that they’re historians with bad memories, who can only report on the past, who can only report on lagging indicators (they’re in trouble). You go into a lot of these firms and they’re doing very low-level work and then they sit around and complain and moan that it’s a commodity. Well, sure. It’s low-value stuff, and if that’s all you’re doing, then you’re going to be stuck with government regulation revenue, and I see that as the biggest threat to our profession. I actually question whether CPAs are a profession anymore. We don’t have self-regulation. We don’t have autonomy. We’re ruled by peek-a-boo, we’re ruled by state boards of accountancies in a lot of states that are a majority regulated by non-CPAs. That’s not the definition of a profession. A profession stands for something. I don’t know what the CPA profession stands for anymore.

Q: You’ve mentioned that another big problem is a monopoly among auditors.
A: I don’t think we should have a monopoly. I think we should open it up. I think insurance companies, banks, other people should come in and be able to do test work. If an investor wants to buy financial statement insurance, Lloyd’s of London is completely capable of doing that. And they could probably do a better job than the auditors because, let’s face it, actuaries price risk. Auditors just charge by the hour for their audit, which isn’t a test service. It’s an insurance product to some extent, and they’re not pricing it based on risk, so you get problems like Enron and Tyco, and all the others.

Q: So what do you think of auditor term limits?
A: I think term-limiting the auditors is the wrong question. We’re not dealing with the 900-pound elephant in the room. This kind of goes back to irrelevancy. How can an auditor be independent if they’re paid by the people they’re auditing? And, so, when economists look at this, they just laugh. There’s no independence there. The system, the incentive system is set up wrong. What we should do is open it up: Let the stock markets hire the auditors and pay the auditors for their listed companies, and then we’ll get some true independence. And maybe the stock exchanges would hire Lloyd’s of London or an insurance company, or somebody else, or maybe it would be the Big Four. But they would have control over it because they’re the ones who can best capitalize on the information in the audit reports.

(Q&A conducted with Chip Cutter, Content Editor at LinkedIn)

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