Today our guest is Loren Fogelman. Loren is a keynote speaker, she’s consistently been named one of the top business coaches by HubSpot, and she has a passion for helping the accounting profession and accountants reduce their hours while increasing their revenue, which is something I am very passionate about too, so I’m excited to talk to Loren today. Loren, welcome to The Unique CPA.

Randy, I am so looking forward to our conversation today.

Yeah, we had the—I had the honor of speaking with you a week or two ago on, what was it, a LinkedIn Live session we recorded? That was a lot of fun, so thank you for having me on that, I appreciate it. So let’s just jump into this because this is—the topic is near and dear to my heart. I’m not an expert. You are, and so I’m really excited to hear what you have to say on this topic because we, as a profession, just undervalue ourselves, I think, way too often. It’s something, we just don’t know how to price things correctly. We don’t know when we’re giving away services. There’s a lot of things we do. So even before we get into that, why don’t you give us some of your background and really how you got to this spot? Because I think there’s an interesting story there as well.

Mmm hmm. I’m actually a sports psychologist turned business coach. What I found is that there’s a lot of similarities between athletes who want to be at the top of their game and growth-minded firm owners that really want to be focusing on achieving results for their clients instead of just doing the compliance side of things. Some of the things I found that were actually different though, is we wear slightly different uniforms than athletes do, athletes are aiming for different numbers than business owners are, and the third one is athletes, from the very beginning, like Pee Wees, they are getting someone on the outside that is coaching them, mentoring them, training them, to be able to achieve their performance as quickly as possible, business owners, and this is true for me also, is that I love helping other people, but asking for help myself was something that was a little bit more difficult because I wanted to have that face of the business where everything looked like I got my stuff together and was all good, but sometimes in the background, I was really struggling because I was working a lot of hours.

When this all came to a head for me was when I realized, I could really work a lot of hours. You know, that part was fine. But when I saw the toll it was taking on my family, where I was missing dinners, I was missing some sports activities on the weekends, that’s when I realized that I needed to make a change. So I moved away from my previous business into this current model of business coaching. And over time, it was just finding my sweet spot. And the sweet spot is really accounting professionals. I come from a family of accountants and CPAs, and then also figuring out that the thing that I love talking with them about is the money part in their business: how to be able to price their services, as well as enroll people into higher value services, so they are in charge of their firm instead of their firm being in charge of them.

Yep. So those are some very key topics there, because often we don’t even look at our business as a business as accountants. I don’t know why, but our mindset is we’re just there to help people. A lot of the things you said, I’ve been to the same spot you were at. Family—really got me when you said that, because that’s when I knew I had to make a change. When my family was really being affected by my tax season hours, and I was one of those who was undervaluing what he was delivering. And I know that happens so much. 

So I think we got the mindset of, yes, accountants work hard. We’re fine with that. We’ve done that. We don’t have to work as hard as we think. And what it really comes down to is probably the hourly rate. Hey, we’re billing by the hour. We can only make as much as we work by a number of hours. So what’s your philosophy on pricing? How would you look at it?

Well, I think the first thing to look at is why we charge for our time. And it comes back to when most of us go into our profession, we’re paid an hourly rate. And even if you start off with a salary, it’s still somehow connected to time. And eventually you move from working for somebody else into being a business owner, and it’s a steep learning curve being a business owner for the first time. So you just do what you’ve always done to be able to make it easier and be able to reduce some of the stress, and charging for your time, because you’ve always been paid that way is something that you continue doing. And in fact, you might not even realize that there are other ways to charge for your services aside from an hourly rate. 

So I think that is something to think about, but what I realized as I was, you know, continually looking at this and having these discussions is that it creates what I call an “upper limit challenge.” So when you’re looking at charging for your time, when you max out on hours, you max out on your earning potential as well, because they’re closely related. So, that’s why I have conversations on a regular basis with firm owners that want to go from like $250,000 to $400,000, but they just can’t do it with the way that their current business model is set up, because they’ve maxed out their time, which means that, once again, what are they going to sacrifice? They’ve already probably given up their workouts at the gym, they’re no longer getting together with friends, and they’re now eating fast food instead of really good quality food. So, I think that is what comes up for me when we’re starting to look at the hourly rate and why it’s a disservice to you as well as to your clients.

Man, you get me going with this. So, one thing you just said, when I was, you know, I used to be a generalist at the firm, I was a managing partner. And every March, all my friends would go to Las Vegas for the first weekend of the NCAA Tournament and watch the first Thursday and Friday of the games. And I never was able to go because if I’m not sitting at my desk, billing those hours, I’m not making money. And so that hit a chord with me. So how do you look at that? How do we emphasize, if it’s not the hour, what do we—I’m assuming we’re going to talk about value-based billing, is that correct?

Oh, absolutely. Actually, not billing, pricing.

Okay. Pricing, good. 

There’s a difference between billing and pricing. Billing is done in arrears, so you do the work first, and then you’re sending out an invoice, which means that for the most part, you’re tracking time, you’re invoicing, you’re chasing money, because some people don’t pay in a timely manner, whereas pricing is, you get paid before you do the work. And this applies to tax firms as well as accounting and bookkeeping services. So, what I look at is when you’re making the move away from time-based fees into the value side of it, you want to understand what that is. There’s five components that I teach about. It’s called the Raise Your Rates formula, and I’m going to just real quickly go through all five of those. 

The very first one is clients, quality clients, because in the beginning, you’re accepting everybody that breathes and is willing to pay your fees. So you are ending up with a wide mix of clients. We want to understand what makes someone a quality client so that you can become more aware and not just say yes to everybody who’s willing to pay your fees any longer. That then goes into number two, which is about communicating your value. Now that we know who those quality clients are, they want certain things that are different than the lower-value clients. So, now we need to have the right words, whether it’s on your website, at a network meeting where someone’s asking you what you do—grab their attention so that they want to know more and they don’t see you just as a pencil-pusher, data entry technician, or compliance side. 

Number three is packaging and services, and this is where you start to look at the outcomes that your services achieve, rather than the work that you’re doing to achieve that result. So that’s something that you and I were talking about a little bit earlier with you and your firm is that you are all about the tax credits, and that it’s not just about knowing which tax credits are available, but it’s knowing how to apply that to a particular client so they have the best tax advantage possible. And so we want to be able to package your services so that you’re able to bundle things together for a particular outcome, like the best tax advantage possible, instead of the work that’s needing to be done. 

Value pricing, which is where you price the client—not your time—costs and maybe a little bit of profit margin, and as a result of that, you can earn two to three times more. And the last one is consultation mastery, where you’re having what I call a value conversation when you’re either having that initial consult with a new client, or you’re talking with a current client about increasing what you’re doing for them and possibly raising their fees. So those are the five steps of the Raise Your Rates formula: quality clients, communicate your value, package your services, value pricing, and consultation mastery. And the consultation mastery is great if you don’t like the sales part.

Yeah, which not a lot of accountants do, actually. So that was great because, again, accountants need that formula, I think, to understand how they’re going to do this. Before I get to the next question I have in mind, I didn’t finish that story about March Madness. This is exciting! For the first time, I just went to Vegas last week for the—and this won’t be, you know, this will be released down the road, but last week was the first round of March Madness, and I got to go, because of the way that I’ve changed how we do our business, I was able to go finally. And so I’m not missing those fun events anymore, which was a lot of fun.

And I want to say something about that, Randy. So first of all, you are doing what others just dream about. And it’s worth acknowledging. But I think the reason that you’ve been able to do it is because you have certain systems in place, and the systems give you freedom and when you have things systemized, then you can go ahead and scale your firm.

Yep. And we would do that. And for me, a lot of that was getting out of the way. I mean, and as you said at the beginning, you know, trying to do everything, be in charge of everything. And I tried to do that for a long time and then I realized, you know what, there’s things I’m good at. There’s things I’m not good at. I always thought I was good at everything—I’m wrong. There’s things I’m not good at. There’s things I’m passionate about. There’s things I’m not passionate about. I just decided to find where I’m good and where I’m passionate and stay in that lane, and then there’s so many people out there that have these skills that are so much greater than mine and enjoy that area of the business so much more than me, that once you realize that, man, that’s just a game changer.

And that’s the golden nugget because you were able to go through the transition of taking yourself out of the day-to-day operations for the most part as a technician. And it allowed you to really step up as the face of your business, being that CEO, working on the presence, the business development, and some of the high-level services. So, really, kudos to you for making that, because it’s not easy to get out of the day-to-day stuff.

It wasn’t. I fought it a little. It was not something I should have fought when I look back, because it was the right way to go with it. So, alright, let’s get back to this, and thank you for that. I appreciate it. That’s why people need to talk to you because they need to get to the spot I feel I’m at right now. 

So let’s get back to the pricing—not billing, but pricing—and getting paid ahead of time too, I think is probably part of that. But how do we, you know, communicate this relationship between the pricing and the value to our clients because they’re like, okay, what am I paying you now? Why am I paying you? How am I paying you? I mean, is this difficult? It’s probably difficult for an accountant to think, how am I going to start, you know, communicating this, but what do you see? Is there a way that you can do this easily?

I think the first thing is that you have to connect with your own value before you can expect someone else to connect with the value that you offer. And what you value is probably different than what your clients value, and I want to share about Starbucks, because before Starbucks opened up its first store in Seattle, Washington, in 1971, if you were traveling and wanted to have a client meeting with somebody, then you either had to have a meal at a restaurant, or rent some type of meeting space. And that can add up, those prices over time. So what happened is that Starbucks actually solved the meeting space problem where you can sit there all day long, they don’t bug you, they’re not on you to give up that table for the next customer, and it makes it overall very affordable to be able to have these meetings or work out of your office if you want to. But what they did is that they also charged a premium price for coffee because they realized that compared to the other options, the meeting space or the restaurants, they were a more affordable solution. And that’s why back in 1971, people were willing to pay four bucks or so for a cup of coffee, when they could have gone down the street for a buck and gotten a similar cup of coffee. 

So Starbucks recognized they happened to actually be in the meeting space business and they happened to sell coffee in order to attract people to it. And that’s true for firm owners also—it’s not about what you’re doing, it’s really the benefit or the outcome of someone engaging with your firm’s services. And that’s the value you want to connect with that will make it easier to move in this direction.

Yeah, I love that, the outcome rather than the input—let’s price on the input—let’s actually price on the delivery instead, the outcome. I love that a lot. So one of the things we do as a profession then just to keep going down this path is, you know, we should be looking at efficiencies and, you know, ways that we can be smarter while still being effective. So efficiency and effective, they’re really paired together often. So, how does this apply to the way that we can price our services?

I have a little story to share with that one. Because as you mentioned, effective and efficient usually pair together with efficient first, but I want to encourage you to flip it. The way that I got this insight of putting effective first is when I first started working with doing business coaching, I was working with a lot of different types of business owners. I was working with a painter. And we were looking at having his crew be more efficient because if they can paint five houses in a month instead of four, that would be significant towards the bottom line at the end of the year. So we were working on this—this painter was at the site at the end of the day for a particular house that he was painting, and the homeowner drives up, looks at the house, looks back at this painter with this really confused look on his face. And the painter’s like, “Don’t you like the paint job?” And the homeowner says, “I love it, but I didn’t ask to have my house painted.” That’s when the painter looked at the work order, and they were supposed to be painting the house next door. So they were efficient at doing the wrong thing. And that is what charging for your time does is, yes, it’s a quick and easy way to calculate how much to charge someone, but it’s not the best pricing model because it leaves a lot of money on the table. So that is something to think about is you want to actually do what is effective first and then the efficiency comes later.

Okay. So when we’re looking at effective, you know, what do we consider when we’re sharing our rates with our clients and their proposal, how do we communicate that effective part?

Well, what you want to realize, according to how our brains work from when I was studying neuroscience, is that whatever number you throw out first, even if it’s an irrelevant number, they’re going to compare that number to whatever price you’re giving them. So, if you tell them, even like the back of someone’s football jersey or basketball jersey, “42,” and then you’re telling them that your rates are $150 an hour, they’re going to wonder why you’re charging them so much. But if you throw out a high number first, that’s higher than what your fees are going to be, and then your fees, which are going to be lower, they’re going to think that they’re getting a great deal. So an example is that I can save you, looking at all these different tax credits, probably about $30,000 this year. But you know, our fees for doing this are going to be $13,000. Well, $13,000 compared to $30,000 sounds like it’s a great deal. What is that? Like, almost a 3 to 1 ratio? So that is something to think about. You want to be very mindful of what number you’re throwing out first, because they’re going to compare it. That’s how we make decisions. And I want to make sure that you’re throwing out a higher number first and then sharing your fees as opposed to a lower number first where they’re going to think that your fees are really expensive.

Got it. Alright, so I think that was great insights on the psychology of buying and pricing decisions and the mindset of that. I get to talk to accountants all the time, and one of the things that really gets me is when they’re complaining about tax season and all the hours they’re putting in, and they all want to make more money, but they always think it’s hours. So they really, if they want to start earning more money and have this life that is truly a life they want to live, they probably don’t know how to start this. And so, you know, what do you recommend to start separating this, you know, their time from their fees to the value pricing? How would they get going?

I look at it similar to when you first started riding a two-wheel bicycle. In the beginning, it’s a little messy, you fall over, you skin your knees, and then eventually you get more comfortable to where maybe you can take those training wheels off and ride on your own. And so what I’m going to share is what I call the “good, better, best” pricing model, which is like those first steps towards a transition of value pricing.

So what you want to look at is, clients are going to come to you, and you want to come up with what that original fixed fee proposal was that you would be sending them, and now I want to go ahead and have you give them your new good price. Your new good price would be taking that original fixed fee and multiplied by 1.5. I want you to enroll three people at your new good rate because this shows you that clients aren’t quite as price-sensitive or tied to how much time it takes as you thought it was. After you enroll three people at that new good rate, we’re going to go to tier two, which will be a new better rate. People come to you, come up with that original fixed fee you’re going to charge. And now we’re going to go ahead and multiply it by 2X. And I want you to start enrolling three people into your new better rate at two times more than what you originally would have charged. This gives you better insights as to what they see as value. So you can change how you do that initial consultation and start focusing more on the outcomes, you know, what questions might come up, so you’re not as flustered now. 

After you enroll three people at your new better rate, we’re going to go to the top tier, which is your new best rate. Once again, they’ll come to you, come up with that original fixed fee. Now we’re going to multiply it by 3X. And I want you to start enrolling people at three times more. As a result of this, what’s going to happen is you don’t need as many clients to be able to meet your revenue needs, which means you freed up some of your time, you can either focus now on advisory services, business development, or just take back some of it for your own personal time. Go with Randy to March Madness next year. 

Everybody’s invited!

Las Vegas is a big place! So that’s something to think about, is you want to start to move away from your hourly rate to the good, better, best pricing. It’s a gradual move towards value pricing and at some point after you’ve been having your best rate for a while, you might want to recalibrate. Bring that back to the bottom and go through that sequence all over again. So those are the first steps to start moving away from hourly or fixed fees.

So in the good, better, best, is there different service levels within there? Is good, this one thing, better, there’s three things, and then best, there’s five things listed?

What you’re talking about is packages, which is a little bit different. I’m just talking about what that original proposal is. A lot of times when you’re sending out a proposal, you come up with a price with the proposal. We’re going to just start marking that price up 1.5, 2x, and 3x.

So this is—sorry Loren—but this is just helping the accountant get out of their own mind. 

Yes. 

There’s nothing they need to do now. Let’s go one and a half times, go two times, sign them up, go three times. Okay.

So this is a way to start earning more without working additional hours, and also because I know that this might be a little bit complex and also packaging is definitely something I’m a fan of, I just have a free resource. It’s at businesssuccesssolution.com/package. Go ahead, grab it. It gives you these first steps to start going towards the good, better, best pricing and also packaging your services.

Alright, that’s great, and we’ll put that in the show notes as well, so thank you for offering that up for people to look at. And then, so one of your services then is also coaching, and so coaching on value price I assume, so how do you work with the potential, or clients I guess, on the pricing of their services?

Well, I went through the Raise Your Rates formula before, which is the essence of what I do, but I want to give you some things to think about as you’re moving in this direction. The first thing is you have to, as I said, connect with your value. But your value isn’t what you do from a client’s perspective, you want to think about the results and get really clear about what are the results that you’re offering clients. Because it’s not about the reports, it’s not about the fact that you’re closing them out at the end of each month or filing the taxes, it’s about the fact that you can help them with their cash flow, you can go ahead and maybe improve their profit margin, you can give them insights so they’re making better decisions moving forward. So that’s the first thing: become aware of the results that clients enjoy because they engage your services.

The next thing that I look at is what I call Surge Pricing. So it’s similar to airlines and how airlines charge for the customer, they don’t charge for the seat. They want to get the maximum price out of each person flying because they have certain fixed costs, and then beyond that, everything else could be profit margin once you take the variables out of there. So you want to look at the fact that Surge Pricing is something you can do with your clients also. Tax season, Surge Pricing is a beautiful model to apply during tax season. When people are coming to you in February and you have capacity, they get the baseline rate that you would normally charge for your taxes. In March, let’s go ahead and bump it up another 20 percent because now you’re busier, you don’t have as much capacity, time is a little bit more of a premium. Now once people come to you in April, let’s go ahead and charge a premium rate for doing taxes for clients and put everybody that comes to you on an automatic extension. So that’s a way that you can apply the same model as airlines do with Surge Pricing, is realizing that depending on when people come to you, you have more capacity than other times and also they have more urgency and they will pay for that urgency. It’s similar to people paying four times more to overnight something with FedEx than if they use the postal service and ground service.

Yeah, that’s great, ’cause I think that’s important too. That’s the other thing we do as accountants is like too often, you know, it’s March 15th and someone says, “Oh, can you do my 1040 this year?” And we say yes, and it’s just that same price or it’s a friend: “Okay. I’ll give you a discount.” We have to get rid of that mindset. 

It’s April 10th and you’re doing that.

No, you’re right. You’re right. I even, I see I’m even changing so much I’m saying March 15th’s late now. 

I was happy to hear you say that. I agree with you. Everybody after March 15th ought to be going on an automatic extension.

Yep. See, my mindset has changed. There we go. Well, okay, I appreciate this. I mean, there’s a lot of information here. Great information. I love this whole psychology and mindset of pricing and getting out of our own way, which is going to be extremely important. What would you recommend if people want to start, you know, investigating or implementing value pricing?

Well, I’m going to say first of all, anybody that’s listening to this, I hope you had some takeaways, even one action step you can immediately implement. And if you felt that you got value from this and you want to go ahead and figure out how to be able to get this implemented in your business, I would say, you know, re-listen to this episode. But if you want to personalize attention, then it can’t wait. If you want to be able to talk about what this will look like in your firm, go to businesssuccesssolution.com/letstalk and we can get that conversation started so that you can have the kind of firm of your dreams, just like Randy does.

Well, that’s great. This is, believe me, this is, I think, one of the most important topics. I think everybody knows, and you know, we talked about this, but one of the things that I talk about a lot is burnout in the profession and how unfortunately prevalent it is. And I think one of the biggest culprits is the archaic pricing model we’ve used in the past, which is of selling hours, selling our time. So I think everybody needs to look at this going forward and start really valuing themselves because I think we undervalue ourselves way too often.

Alright, two last questions before we wrap up today. I didn’t warn you of these, but you know, we know what you do, you’re a coach, you help people, you’re giving people better lives by increasing revenue and decreasing time. When you’re not helping others, what are your outside of work passions? What do you enjoy doing that is not work-related?

Oh, I travel. We travel a lot. So, we are on the road, we are traveling, and I find that having the next getaway on my calendar is what inspires me the most.

Yeah, I agree with that. I think you and I, I was on the road last time we talked, and my wife and I, we take a trip basically January through March, at least into March, where we’re working remote, and I’ve already booked all of next year’s trip, because just having that, I agree with you completely, just having that on the calendar, it’s like, wow, all right, I’m looking forward to this. Having something to look forward to, I think is so important. So I love that.

And then last question, if people, we already have the websites. We have other things. I assume there’s other places people can see you. I know you’re on LinkedIn and Facebook, I think as well. Where would you direct people besides the website, I guess?

If somebody wants to connect with me, I actually devote most of my time to LinkedIn. So I do LinkedIn Lives like we’ve done together. You can actually listen to his interview that we got to turn the tables and I got to ask Randy the questions. It’s there on my page in the events section. So LinkedIn is the place to go.

LinkedIn, nice. Alright, well Loren, thanks again. I appreciate you being here. Wonderful, great conversation. I really enjoyed it.

Thank you so much.