Providing Knowledge, Not a Service

Today, our guest is Ed Kless. Ed, well, there’s about a thousand things I could probably list that Ed does, and I will have him expand on a few of those in addition, but, where I originally knew Ed from was, he’s co-host of The Soul of Enterprise with Ron Baker, a weekly radio show, radio slash podcast. What would you call them both, Ed?

Yeah. I would say both because we are broadcast live on VoiceAmerica—not Voice of America, by the way. VoiceAmerica talk radio, so yes.

Alright. Well, I let you jump in early just because I asked you a question, but, Ed, welcome to The Unique CPA.

Thanks so much, Randy. I appreciate you having me on.

Alright! Well, this is a lot of fun. Like I said, I’ve known of you for a long time. Your name’s obviously out there in our profession. But if you could do me a favor, I gave you a little bit of an intro with, you know, Ron and Soul of Enterprise and what you’re doing there, I know if I look at LinkedIn, there’s a lot of things listed. Do you wanna give us a little more background?

So, yep, many of those things that are listed on LinkedIn are not actually anything official. They’re titles that I have made up for myself over the years. I’ve been at Sage—that’s my day job as I work for Sage, and it will be 20 years this coming July, which I’m amazed at every time  think about that, and maybe I shouldn’t shouldn’t jinx it. But yeah, so I know you have, before we started recording, you said you talked a lot of or thinking about a lot of Simon Sinek’s work.

Yep.

And so let me give you my why. Because I think that could be a good place for us to launch from. 

Yeah, for sure.

But my why is that I believe that entrepreneurs continue the work of creation. And I don’t care if you think of creation as 6 days in a garden and one day of rest, as an explosion out of nothing that’s 13.8 billion years ago. Whatever you got. Turtles all the way down. Whatever you got for your creation thing, entrepreneurs continue the work of creation. And I think it’s important for us to know that. And I put it into practice every day in three capacities.

One, I work for Sage, and I do that work. I also work with our partner organizations. And our partner organizations, I have a very broad definition of “partner.” That can be the people who, well, I guess they they used to resell our software, now they just sell it, sell through because it’s all subscription. So they sell our software. But then also our recommenders. So our Sage Intact Accounts program as well as our SAN network, Sage Accountants Network. So the folks who are just recommenders of our product. And then thirdly, and I’ve been involved in this to some degree or another, and sometimes more, sometimes less, directly with our customers, because most of our customers are entrepreneurs as well. 

So there was an episode of Cheers where Norm gets a beer tasting job. So, and it turns out terrible for him, but, for me, it’s great because I do one job and I get three times the benefit because I’m helping Sage, I’m helping our partners, and I’m helping our customers. And I just love that experience and what I’m able to do. Now my day job involves mostly working with our partner organizations on helping them make their businesses better—their business models better. Which, hence, why I call myself a meta-consultant, right? I consult to people who do consulting. So hence, the idea of Meta. Cause I consult about consulting. I consult about, like, how do you best consult?

Wow. Alright. That’s, now I’m getting, that’s way over my head. 

Yeah. So let’s say, I mean, it’s like, I just came up with that, and I put that on there. I also have, I think, “Corporate Iconoclast” on there. 

Yes.

And that is the breaker of these ideas that I think are really bad. In fact, Ron Baker and I do a presentation, and it changes over the years to what they are. But there’s the top 10 business myths, and we try to smash those myths. And one of the ones that is probably related to your audience, especially those of you who are still billing by the hour there, is that price does not come from cost. Price is not a function of cost. 

Okay. Got it. Yep. 

Price is not a function of cost. Price is a function of the value that one creates outside the organization. You can get a price or something, and then your prices justify your costs. But they don’t derive from your costs. And I think that there’s an example of breaking an icon that is stuck in people’s minds. You know, you talk to accountants, they’re all like, well, how do we how do we know that we’re gonna be profitable on this engagement, on this job with this customer? And I’m like, who cares? It’s not about being profitable on every single engagement. In fact, if you try to be profitable on every engagement, you’re gonna be less profitable overall, because it means that you’re not gonna take the right risks to be able to go into, and find customers where you’re gonna be able to have some really large profits.

Right.

Because you only wanna get a risk free return or a lower risk return on your investment. So I said a lot there. I’m sorry. I could, I probably could just talk 20 minutes and then, end of episode.

Believe me. You can talk 20 minutes. I’d be completely fine with it because, right now, I’m just, you see me leaning closer and closer to the camera. I’m just, like, intrigued with everything you’re saying here. But I do have a question. And you can keep going on this, but I do have a question based on that. So say it again, price is not—

Price does not derive from cost. It’s not a function of cost.

Okay. So now are you saying that just in professional services, or are you saying that across the board? 

Across the board.

Okay.

Absolutely across the board. Price is not derived from cost. Prices justify the expenditure of cost. Let me give you a non-accounting example. This is a fun one. So you’d mentioned my friend Ron Baker, and he’s got this, one of his favorite wines is this Far Niente, estate bottled cabernet. And if you go to visit—Far Niente, by the way, is a great marketing name because Far Niente in Italian means “do nothing,” which is just a great name for a wine, right?

I like it. Yep. 

You know, there’s marking lesson number one. Say it in a different language, and, you know, it sounds more—“Chez Louis” as opposed to Louis’s place, you know?

That’s awesome.

By the way, Häagen-Dazs means nothing. There’s no, it doesn’t mean anything in any language. 

It’s just a made up word.

It sounded like good ice cream. But, so Far Niente has this estate bottled cabernet, they’re like $350-$400 a bottle. And if you go on the tour with Ron, they take you through, and they have other vintages. They do some whites, but they’re less expensive. They’re like $60-$70 a bottle. But, I mean, it’s all high end stuff. 

But you’ll get to the point on the tour where they’ll talk about the estate bottled cabernet, and then they’ll tell you the story of why this wine is so expensive, and they’ll say, well, the reason is because the grapes for this that we use to make this wine are very delicate, and they bruise easily. So we have to handle them, you know, specially, and the harvesting takes a lot longer to do that. And when we press the grapes, which, by the way, is bruising them, right? I don’t understand. 

Well, that’s true! 

Well, and then when we bottle it, the reason why we even call it a “estate bottled” is because instead of going to the normal bottling plants that we usually send our other the wines to, this one, we have to hand bottle and we hire extra laborers to come in and hand bottle and we put a special cork in it that, you know, doesn’t shake the bottle. And when we send it out to you, we don’t send it out to you in one case of 12, we send it in two cases of six, so we put extra packaging in because it bruises easily. I’m like, liquid bruises?

So they’re going through this whole story and, like, you can see because all of this added production cost is why this wine is so expensive. You know, like, you’re looking at me, that’s bullcrap. That’s not true at all. The reason why this wine is $400 a bottle is because wine geeks like Ron Baker are willing to pay $400 a bottle for it. They value it at more than $400 a bottle.

Right.

And because they “get” that, then, they justify the costs of bringing in the added laborers. So prices justify costs they don’t derive from cost.

And that seems to tie in with what I’ve been reading with Simon Sinek too. It’s just, you know, they’ve created this brand awareness. People are flocking to it. They’re the part of a community of—I can’t say the name of the winery. Say it again, what’s the name?

Far Niente.

Far Niente, I might have said it right. We’ll see.

Justin, you can edit that, make it sound right, if I said it wrong. And so they’ve created this, you know, people are following it. It’s like, you know, they probably put their why out there, and now people are intrigued by that and following it. That’s pretty cool. Because when I was thinking that and you’re and you gave me a great example, when I was thinking that, it was like, okay. It feels like most restaurants are, you know, pricing based on, you know, 30% of cost or whatever the number is. And that can be, but if you can show that there’s some the value there, and that’s what we’re getting at, right? The value?

Yes. And this is another thing that’s important to note on this is that value to the customer—it can’t be broken into smaller parts. So you’ve talked about a restaurant. If you go out to a restaurant, and the, you know, the meal is wonderful, but in the middle of your dinner, a cockroach runs across your table. 

Mmm hmm.

You’re gonna find this place repulsive, right? And likewise, it might be the cleanest place in the world, absolutely spotless, but if the food’s terrible, it destroys the experience. So you can’t parcel down value. As a customer, we don’t parcel down value into its sub component parts at all. As a customer. We accept it as a whole. 

But yet on the other side, we think we can parse out the value and cost on our side, even though it’s completely irrelevant to the customer.

Yeah. Right.

Right? And to take it to the accounting firm level—your partner’s time isn’t worth any more than a junior’s time to the customer, if the answer’s wrong, or if you blow the advice or whatever it is, doesn’t matter. 

Yeah. 

Doesn’t matter. Whether the numbers were wrong or the partner gave the wrong advice, it’s still the same thing to the customer.

So you call this perceived value or reality of value, or is there a definition of how the customer value is?

Perception of value. And if you wanna really delve into this, it’s called the subjective theory of value. Value is subjective. Value is what the customer says it is.

Okay.

And there is no theory of value that says we can actually total it up and equate it. And look, This is an important thing for value to be subjective because if it weren’t, we wouldn’t innovate.

Right.

So value has to be subjective. This goes back to what’s called the marginalist revolution in economics in the late seventies because they, look—even Adam Smith fell victim to the labor theory of value. The labor theory of values says that the value of something is equal to the amount of labor that it takes to put the thing together. And by the way, you know who is a big proponent of this, by the way? An economist from the 1840s and 50s. So you might have heard of him—Karl Marx.

Oh, yeah. Yep. I have.

Big fan of the labor theory of value. 

Really.

Yeah. Oh, yeah. So I like to say that if you bill by the hour, you are a practicing Marxist. 

Alright! So everybody out there, remember that. It’s time to value your subscription. 

It is undeniable. It is undeniable. If you bill by the hour, you are using one of Marx’s theories, the labor theory of value. Now, here’s the crazy thing, and, Marx didn’t believe that value was evil. What did Marx believe was evil? Begin with a p. The bottom of the financial statement. Profit.

Profit! Oh!

Profit was evil.

Alright.

’Cause it was the exploitation of the worker. So think about this. You got people out there who are using a guy’s theory who thought profit was evil in their business where they’re trying to guess what? Make a profit. It’s incongruous!

Alright, now I am completely confu—no, I’m not confused. 

Well, and there should be, I think, for all of us, I mean, because when I first heard this, I was blown away by this. 

Yeah. 

So there should be some cognitive dissonance as Simon Sinek talks about, right? So there should be this wait a minute—my belief about what was, isn’t. That’s a problem.

So we need to change everything that we’re thinking because we’re billing based on something that doesn’t have any relativity to what the customer, the client is looking for.

The customer doesn’t care. And none of us—if you walk into a Starbucks, none of us care. About the cost structure of the people we buy from. None of it. You walk into a Starbucks, you don’t go, I really hope they have their cost structure figured out.

We do not, no.

What do you care about? The price. 

Right. Right. Yep.

Is the price acceptable to you? Now you can pay your $5 for your cup of coffee at Starbucks, or you could go to Dunkin’ Donuts, and for the same $5, get, you know, two donuts, an orange juice, and coffee for the same $5. So, is the price acceptable? But the real thing is, is what is your value of it? And Starbucks customers are not necessarily Dunkin’ Donuts customers, and that’s all okay. People are—we can go to McDonald’s or Ruth’s Chris. And people would be very confused if you walked into a Ruth’s Chris and were expecting McDonald’s prices.

Right. So for the Starbucks then, I perceive that value of that coffee, whether it’s better or the service is better, or the atmosphere is better, or whatever it is. 

Experience.

Experience is better, yep. That’s why I’ll pay the $5 for one coffee rather than the $5 for one coffee and 2 donuts or whatever that is.

Mmm hmm.

It’s the perceived value that I get. So there’s something that I enjoy about Starbucks up and above. The coffee can even be the same, I assume, in that case.

And you can make the coffee at home for even less than you can get it at at Dunkin’ Donuts.

Alright. So this is amazingly intriguing to me. I had mentioned to you before the show that I screwed up on the time, and I thought we had another half hour to prepare for this. So I didn’t write down a lot of notes, but, man, this is a path that is just intriguing to me. So let’s now transition from this just pricing in general and valuing and perceived value.

And then how—and you touched on it a little bit. We were getting to how this affects accounting firms, professional service accounting in general. Let’s dig deeper into that then because, you know, I’ve been in public accounting for 35 years. And from day one, it was, you know, tracking hours and billing by the hour. And I know you and Ron have been fighting against this for a long time. And so let’s kinda get into that. How do we use this new knowledge that you’re giving us to, you know, structure our pricing different or run our practices different? What would be this next step, I guess?

So you actually used the 2 keywords in your question. Mhmm. You said “professional service firm,” and then you asked me to give you “the knowledge.”

Yep.

And that’s the key is understanding that what an accounting professional provides is not primarily service, but knowledge.

Mmm hmm! Right.

And once you make the leap to understand that your customers are not buying primarily services from you, but instead knowledge, then it becomes obvious that you can’t charge for the for that by the hour. Because charging for knowledge by the hour, it’s a non sequitur. It’s insane. It’s like trying to measure the doneness of your turkey with a ruler instead of a thermometer. I mean, it makes no sense at all, because I can transfer knowledge in 5 minutes in 5 hours, I mean, it depends.

Right. Right. 

And it depends also how willing you are to accept that knowledge and to and receive that knowledge. So it’s completely non dependent on any kind of timing, at all, right? It’s more dependent on when is it done as opposed to how long did it take to be done. In other words, it’s important from a turnaround time perspective. Like, I need to have access to the knowledge that you create by the 15th of April, let’s say.

Right. Right.

So timing is important, but not the number of hours that it takes to get there. 

To get back to your question now about the transition of firms—you know, I think that so many of them are making it a transition from even billing by the hour, which is billing for inputs, to beyond even value pricing and toward this new realm called subscription pricing. In fact, Ron Baker’s new book is called Time’s Up. and it’s about moving professionals to the subscription economy. and if I could I could give a a plug for some free stuff.

Yep.

So it’s not gonna cost you anything, but he just created a website called TimesUpClub.com. You can join the club at the free forever level, and it is free forever, and one of the things that you get is audio chapter summaries. It’s not the audiobook, it’s actually Ron and I talking about each chapter.

Oh, cool.

Which is kinda fun. So if you wanna go out and visit that page, that’s great. 

But when we think about subscriptions, what we’re really selling in the subscription economy is beyond even experience like Starbucks—because after all, Starbucks is dependent on you coming to them for the coffee and even for the experience. But rather, subscription is about serial transformations. So in other words, transforming the person that you’re working with over and over and over again, repetitively—whether they’re selling their business, whether they’re starting a business, whether they’re trying to get their kids through college, whether they’re trying to advance their careers, whether they’re trying to expand their business, contract their business, level off—we’re selling actual transformations of people. And we believe, Ron and I believe, that this is best priced on a subscription basis, not even on a value price basis. What we’re looking for is to have a, you know, a periodic, repetitive, frictionless, payment for serial transformations. That’s what we’re looking to have happen. That is a change to the fundamental business model.

Right. I’m not just delivering a tax return or a financial statement. I’m helping you be successful or I’m helping you transform.

Transform.

Into whatever it is. 

Peace of mind.

Peace of mind. I can send my kids to college. I can retire someday. You’re gonna be there for me. You’re gonna—whatever it is, it’s, you know, all these different steps in my life, my career, my business, my family, my whatever, you as my subscription pricing partner are going to be there for me to do these, all these steps along the transformation of my career.

Right. So you’re effectively selling financial health. That might be one way to think about it.

Yeah. Alright. So here’s my question on subscription pricing because, obviously, this is not whatever, 90 something percent of the the accounting firms out there are not doing this, right, or do you have a percentage on how many have started?

No. And it’s very few. Some of them think they’re doing subscription, but, by the way, here’s what subscription is not: Taking your annual price and dividing it by 12.

Right. 

Not subscription.

Because, one, you’re not adding perceived value in there in that case? Is that it?

Correct. Correct. And what it is that we run and I have stolen a term from Walt Disney. We call it plussing the offer. 

Yep.

Think about it this way. What would you charge for if the services were considered free?

What would you charge for if the services…

… services were considered free?

Oh, I get it. So what’s the outcomes that you really want?

Outcomes and security. So quick example—if you’re doing taxes, a subscription model taxation would likely have the following included in it: Not only are we gonna provide your tax return, but we’re gonna give you a tax plan for the coming year as part of it. And if you’re audited, we got you covered. You’re gonna pay whatever it is—I’m just making up a number, $500 a month, $1,000 a month. And if you’re audited, we got it covered.

Yep. Yep. 

We’re not gonna charge you for the audit.

So we’ve got tax return, tax planning, audit defense, for a subscription pricing of $1000 a month in this scenario, and they’re covered. Now, so that was one of my questions then. When I’m doing subscription pricing, there’s still a, you know, a menu of services you’re gonna get for that. I assume it’s not alright, it’s $1000 a month, and now you can call me at 3 AM, and we can talk about anything.

No, no. We can talk about everything that’s covered. Let so, again, let me jump outside the accounting profession as an example. 

Sure, yep.

Because then we can reapply it afterwards. Sometimes it’s better to think abstractly and then come back. So there’s a movement right now in the medical profession called Direct Primary Care, DPC Docs. And what these folks are, is they are creating practices that are subscription based, that do not accept insurance, it’s usually a monthly payment of, you know, somewhere between $50 and a $100 a month is what most of them that I’m seeing. And what you get is everything that that physician is capable of doing in-house. You are covered for everything that they are capable of doing. 

Now not many people know this, but any any doctor, any MD, is technically allowed to perform brain surgery. Like, there’s nothing from a legal constriction to say that they can’t perform brain surgery. 

Right. 

Now, there’s not a hospital in the world that’s gonna let anyone do it in their hospital, because the hospital has protection, but Let me get back to DPC. So we have this guy, Dr. Paul, he’s been on our radio show a couple times. He’s got a practice in South Detroit. and he covers all of his patients.

Now here’s, interestingly enough, he’s got an X-ray machine, he does sutures. He’s got a pharmacy on-site. So he’s constantly adding stuff that is part of his coverage—

Plussing?!

Plussing!

Look at that. You’re teaching me!

There you go! So he’s plussing the experience. He does house calls. Oh, by the way, his office does not have a waiting room.

Okay. 

Does not have a waiting room, because you don’t have to wait to see Dr. Paul, you just come in. And now, he might have two people, three people at the same time, and they have multiple exam rooms that he’s gonna visit you in, but there’s always gonna be somebody who’s gonna be with you at any one time. Because the typical general practice doctor in the United States has a patient role of about 2,500 patients. Dr. Paul has set his maximum at 500.

I was gonna ask that. I figured it had to be, you’re serving less.

So 20%. But he talks about this. It’s amazing because he says, look, I’m making the same money as I would if I had 2,500 patients and I had to serve the system of insurance. I don’t have to deal with insurance companies. I can actually practice medicine the way I wanted to, which was actually to help people. I had a patient come into my office and wanted to talk to me and read poetry to me for a half hour. And I was like, great! 

Now you know, he’s gonna be pulled away for something else. He’s not gonna listen to the thing. But you know, he says, I’m able to to serve these people in the capacity that a doctor was supposed to serve them. 

Right.

And it wasn’t about how many more can I fit in, how many can I slam in? But, again, anything that he does, in his four walls—or outside because he does house calls—that’s covered. But if you have, if you god forbid get cancer, that’s not covered. Dr. Paul is not gonna be an oncologist, right? So I think the same thing can be true. You can have, we can have a general practice tax accountant, right? Here’s where you’re covered for anything regarding tax. Maybe it’s it’s personal tax. Once you bring corporate tax in, we’re not gonna do that. We’re not gonna do corporate taxes. We’re gonna leave that to somebody else who can have a subscription for corporate taxes. Maybe there’s a bigger mega firm that does both personal and corporate taxes. I don’t know. There’s lots of models that you can build around this. But anything that you are capable of doing, because I think one of the big things that, accountants, especially, they fall victim to, is just because an accountant is theoretically capable and is allowed to do it legally, they do it, and they do the financial equivalent of performing brain surgery on people when they shouldn’t be.

I agree with that. So I’ve talked about this before and just I’ll cut in for a second. Because before I started Tri-Merit and people have heard this, it’s a specialty tax firm. We wear a very niche, which I think is extremely important. For me at least. And I think for a lot of practitioners, I think, it’s extremely important. It oesn’t mean that I couldn’t or a general practitioner couldn’t know that there’s other services that are available but just create a relationship with somebody that I can refer someone to. So for me, when I ran my business, my firm, from—I don’t even know what year—from 1988 until 2006, we were generalists. We were probably trying, like you just said, to do brain surgery when we shouldn’t be doing brain surgery. 

It took me a long time to realize that, but when we started Tri-Merit, I just saw the difference there. It’s like, I don’t have to know everything. I can know something exists. I don’t have to be an expert at it. I know other people that can do these other things, and that’s so important. So I like that the way you find that the way you showed that, hey, you know, just because you could do brain surgery, it doesn’t mean you should do brain surgery. Same thing in accounting.

Mhmm. Yeah. And I think, sadly, many firms, especially some of the smaller ones fall victim to it, but I think it plagues even the mid size and larger firms, even some of the top 100 firms, they’re like, “Well, this is revenue. Why should we turn this away?”

Right. Because you’re not an expert. 

Mmm hmm. 

Exactly. And you’re doing a disservice to your client in this case. I mean, simple thing. Like, you know, just partnership returns. They are way more complicated than most people think, and everybody’s gonna do a partnership return. And I was just talking to somebody a week or so ago, and he said—I don’t know if he’s exaggerating. He said 99% of the partnership returns out there are wrong. And he’s probably right that the big percentage are, just because you’re a CPA, a tax preparer, an EA, doesn’t mean you’re an expert on partnership returns, because there’s a lot of complexities there. So that makes a lot of sense. 

So let’s go back then to the whole, okay, the things that I can deliver, I’m going to. And how about the things I can’t, then what do I do? Is that, am I still the go-to in this subscription model that then I’m gonna send you somewhere else?

You can do one a couple of different things. But one is that you might serve as the project manager or engagement manager who will say, I will find somebody who will handle this for you.

Right.

And then you can either contract through your organization and be a passthrough, or just say, like docs do, I’m gonna make you a recommendation for a specialist.

Yep. Okay. So you’re still gonna be that go-to. You’re still gonna be the tax preparer, you’re gonna still be, which I think we are, the most trusted advisor. They’re almost always gonna come to you first, but now they know that you’re not the expert at everything, but you’re going to have information available.

Right. But I think, and this a potential future model too. Think about this: So say Dr. Paul, and maybe this DPC movement completely takes off, and there’s, you know, a hundred or a thousand of these docs across the country. What if these DPC docs started subscribing to specialist organizations?

So in other words, they subscribe to an oncology group. They subscribe to a cardiology group. They, the doctors do, and then offer that as a plussed service back down to their customers as included in their subscription to them.

Right.

So the accountants could do the same thing. So you could have whatever specialty you are, but your firm can be subscribed to the partnership organization, or the audit group, or whatever this is, and you could either act as a passthrough or conduit for that, and then offer that as a quote, plussed offering down to your customer because you’ve got someone who will do that.

Right. So Ron’s been on the show a couple times, and—Ron Baker, I assume everybody knows who we’re talking about—but Ron and I both got to speak at an event last fall. And every time I talk to him, I hear him, I’m thinking, okay, so in our business, could we do that? You know, we’re a specialty tax provider. So in my mind, you know, our clients are not the CPA firms, not the accounting firms, our clients are their clients that they send us to, and we do work for their clients and then get them the information. But could I create a model where the tax preparer subscribes to us, and then now they just can offer these services to their clients, because they have access to us and we’re gonna do anything. 

The problem is for me, and you can, maybe this is the question—I deal with a sole proprietor. I deal with a, you know, a top 20 CPA firm. You know, the number of clients that a top 20 CPA firm can send to me is gonna be a lot more significant than the sole proprietor. Do I have to change my subscription based on who’s subscribing to me, if I were able to do this, and then equating that to the accounting firm, you know, I’m gonna have people with different levels of need.

Sure. And the answer is maybe. You’d have to play it through, because it—and this gets back to your niching idea. It’s like, you know, who is the focus? Who do you look at? I mean, Tim Williams, who’s another member of the VeraSage institute that Ron founded and I’m a fellow at, he’s a marketing guy. He says, look, you can do one of two things. You can be moderately appealing to a large group of people, or you can be intensely appealing to a small group of people. 

Okay. Alright.

Right? And that that’s the only 2 marketing strategies. That’s it. Right? Walmart and, you know, selling yellow bows, right? But it’s also, you know, Hewlett Packard and Apple, right? Apple is intensely appealing to a smaller group of people.

Yep. Oh, intensely. For sure.

We’re zealous. I got my Apple devices all over the place here. And they don’t want it. Now and and and this gets to a whole another one of the myths by the way, which is the whole market share myth. Apple has about 40% of the market share in cell phones and smartphones.

Okay. That seems significant. 

Yeah. They have 85% of the profit.

Really?

Uh-huh. 

Alright. Because they have this intense following.

And there’s only one other company that sells smartphones that even makes a profit, and that’s Samsung. All of the others, I’m talking Huawei, like, they’re subsidized by the Chinese government. They don’t make a profit. They actually lose money on their cell phones.

Really.

Because they’re also selling, wrapping the service in, which is a different model. Point being, though, like, you know, people say, “no one would pay $1,000 for a phone.” Yeah, we do it all the time. Now, and, you know, and and by the way, the last thing I use my iPhone for is a freaking phone.

I agree. Yep. That is true. It’s just a computer or whatever.

You know, it’s the thing I grab in the morning to see what the weather is. And then, you know, then I move on to my iPad and then finally my desktop. And then, you know, but I’ll even grab devices for different uses during the day. It’s weird. Like, I, you know, I only check the weather on my phone. I can check it on the iPad. I can check it on the computer. But I only do it on the phone. 

Yeah, same. I already did that this morning.

Yeah. It’s weird. Anyway, so getting back to your question about this—we have to decide where our market belongs. Where are we going after? Because I mentioned McDonald’s and Ruth’s Chris. It’s impossible to be McDonald’s and Ruth’s Chris. It’s even more impossible to be McDonald’s and Ruth Chris and the vegan restaurant. 

Right. Nope. 

Because the vegan’s not gonna be happy that you even exist with the other 2 things.

Oh, no. Yeah. For sure.

And I think that that’s what you have to look at with regard to the customers that you serve. Who are you going after from a target perspective? It’s much better to, I think, to go narrow than it is to go broad.

I see what you’re saying. I’m still confused. Because each of those each of those have clients that need our help, but the client can be the same. So that’s why ours is, in my mind, a little different. So maybe I’m confusing it with what we do because we support tax preparers, and I can have a sole proprietor that has a $100 million manufacturer that needs my help, and I can have a top 20 CPA for them as a $100,000,000 manufacturer that needs my help. And so that the end user could be the same. It’s just that middleman’s different and that’s maybe where I’m confusing it a little bit.

Well, no. But that can be, in fact, my wife works for a company that does themed events, like, you know, if you have a conference or whatever, casino night, that kind of stuff, right?

Yep. Yep.

And the guy who started this firm, his name is Gary, super guy, and I’ve known him for almost, I guess, 25 years now or so. But we had lunch, I don’t know, when he first started the business. Well, it wasn’t when he first started. It was actually, the business was about five years old. He said Ed, It took me five years to figure out who my customer was, because I thought I was selling to, like, the Sages of the world, when Sage would come into Dallas and have a conference. He said, it took me five years to figure out that there are these companies called destination managers that manage the local conference in the local area. And this is the equivalent of your large firm versus going direct to the customer type thing. 

Yep.

So What he decided was, and he literally spun off the company into two entities: one that did serve the individual, But then the other one that was actually serving the destination management people, because it’s two different audiences. It’s two different marketing strategies. That end customer is the same. It’s the event that comes to Dallas.

Right.

But the go-to market had to be different because it was a different channel. Let’s think of it that way.

That’s—I like that. Yeah. 

And it was a different marketing message too. One channel versus the other. And what he said, he didn’t wanna create confusion in the marketplace, so he separated the brands.

I like that a lot because you know, can I equate that to the… So I’ve kinda felt like we’ve done this, you know? So people have heard my story before, but the bottom line is, I don’t even know how many years ago, six years ago, I gave up the managing partner role at Tri-Merit and really started concentrating on The Unique CPA more.  Tri-Merit was a top 400 CPA firm—that was our audience. Which is still a big range. I mean, you got, but it’s bigger firms. The Unique CPA has attracted, I think, those bigger firms, but that’s also attracted a lot of smaller modern startup firms, that I think is a big part of our audience. And so it’s almost like we’re marketing two different ways. You know, Tri-Merit, I’m out speaking at big association events, and then The Unique CPA is, you know, I’m getting in front of these smaller modern firms. So I guess we’re kind of doing that. Man, you’re educating me left and right here today. So it’s kinda like we’re doing then. It’s just a matter of do we just completely separate that, which I’ve been thinking about doing anyways, and figure out the marketing plan for each separately, and run them as separate businesses.

Yeah!

Alright. Again, at the beginning before we went live, I said as long as I feel like I’m learning something, I think other people—this might just be all selfishly me today. I’m just, you are educating everybody else, but it’s like, I’m thinking directly for me. 

Randy, you should know that Ron and I had the same strategy about our radio show because it’s basically just people that Ron and Ed wanna talk to. 

Yeah. Right.

And people say, well, you are you aren’t you an accounting podcast? Oh, no. If you listen to our show and you think we’re an accounting podcast, you are sorely mistaken.

Yep. Yep. Nope. You don’t even have accounting in the name. I can’t believe people would think that. I guess it’s just based on the books and that, that come out, and you working with Sage and all of this background and, like, profession. 

Alright. So we should probably try to kinda wrap up the whole, you know, accounting and subscription pricing. We went on a lot of tangents. I guess if you were to, you know, if I give you, you know, five minutes, three minutes, whatever you need right now, tell us what do they need to do, and how should they dip their toe? I mean, do you dip your toe in, and do you go full force, or what would be the next step for someone that they want to start subscription pricing?

I think well, buy Ron’s book, or, you know, because I do think that it’s a distillation of a lot of great thinking. The other thing that you can do, even for free, not to buy Ron’s book, but I do the radio show The Soul of Enterprise with him. if you go to TheSoulOfEnterprise.com, at the top, there’s a categories tab. And if you click on categories, one of them is subscription. If you click on that, you’ll see all of the shows that Ron and I have done where we’ve interviewed, Tien Tzuo, who’s the author of the book Subscribed. Robbie Kellman Baxter, who wrote The Forever Transaction with Anne Janzer, who wrote Subscription Marketing. So there’s a lot of material that’s out there that you can listen to for free that will be able to get you up to speed on some of the stuff. 

But with regard to what they do next, it’s really, first of all, is to stop thinking of yourself as service. I said this earlier, I know, but it’s so important to make the leap between understanding that you do not sell service, you sell access to or transfer of knowledge. And you gotta get that through your head first before you can process it and do anything with it. Because if you’re stuck in the idea that we sell service, you’re gonna be forever mired in that way of thinking. So it is a completely different mindset. So that’s my words of encouragement on that is to think differently about that.

Yeah. So the next step, we have to do another show on just then coming up with the subscription pricing models, and inclusion of services and the exclusion of services and how we rate contracts and how. And I know a good friend of mine, and she was at this event Ron and I talked at last fall, Dawn Brolin, and she has been talking about the whole relationship pricing she’s doing now, which is, you know, I don’t know if she defines it any different, but it sounds very similar, and it’s based on, you know, what she’s heard you and Ron say in the past as well. But I’ve been following her progress with this and it’s really becoming a very positive for her and her clients, and we didn’t even talk about this—you mentioned it with the doctor, but he’s probably making it, and you did say this—he’s making as much now with 500 patients as he would have with 2,500 patients. I’m guessing he’s even working less with 500 patients.

Yeah. You know, sum this up: work less, make more money. I don’t see what the problem is. It’s like! But if I, let me just summarize it this way. This might be more helpful as a wrap. It is just to say that in the past, when you’re billing by the hour, you are pricing the inputs, right? You’re pricing the inputs. And with value pricing, you’re really pricing the output. 

Yep. 

But with subscription, you’re pricing the outcome.

The outcome.

Right. And I think that that’s three different ways of thinking about it. And Dawn’s right. One of the things that Ron has talked about is that In value pricing, one of our mantra’s was price the customer, not the services, right? So you’re pricing the individual customer. With subscription, you’re not pricing the individual customer most of the time. What you’re doing is you’re pricing either the relationship or another way of thinking about it is you’re pricing the portfolio. To think about it almost like a risk pool. Again, the whole tax audit, because not every one of your customers is gonna be audited every year. That’s the point. You’re selling an insurance model. So you’re spreading the risk pool across this larger swath of your customers. 

Someone came to Ron and said, well, what if 90% of my customers are audited in the same year? And Ron said, well, if you got 90% of your customers being audited in the same year, you’ve got a problem with the way you are practicing.

That is true. That is true. Alright. So this is great. Don’t tell Ron, but you were much better at explaining this to me than he was.

You know, it’s funny we work so well together. and I have been using a lot of Ron stories in this. Yeah. And sometimes it’s it’s just it’s peep different people appeal to different ways of storytelling. 

You guys have become the shared mind duo. It’s like you’re sharing each other’s stories. You have this thing.

We share a lot of stuff. We do, but, you know, and this is another great line. If you think disagreeing with Ron is tough, try agreeing with it. It’s even harder.

Alright. I’ll remember that quote. Alright. Well, we’re we’re running out of time, but we have to do this, because we do this with everybody. So let’s, I think we did a good wrap on that. There’s a lot of things we can go further. In fact, you and I maybe we’ll schedule another one of these down the road. I’d love to do it. But we’re gonna have to stop talking about subscription pricing and models and all that right now. We gotta talk about, you know, when you’re not being this meta consultant and this, iconalist, whatever. 

Iconoclast.

There you go. What are your passions outside of work? What do you do for fun? How do you stay busy when you’re not out there working?

Two ways right now, and they’re 17 and 14. And that is, my son who’s 17 is on the varsity baseball team and plays on the summer travel team.

Oh, yeah?

So I love to go watch him play. And I’m usually the scorekeeper on this thing called Gamechanger, which is a whole—

I know Gamechanger!

It is literally a game changer. It is one of the best named apps ever. But, so and then my daughter does theater. Both of these things were both my passions growing up. I actually minored in musical theater in college. 

Oh wow!

So I love watching them do their thing—it’s my biggest hobby right now.

Yeah. Well, pretty much anybody on the show that has kids that are high school or below, that’s pretty much the answer I get, which makes a lot of sense.

Which makes a lot of sense, and, you know, someday this probably will evolve into me, the, you know, going back to following baseball myself. and then also maybe, I even have done a little bit of theater the last couple of years, after setting it aside for 25 plus.

Have you really? It’s funny. Not that I never have acted, never have done anything. And I in the background, I keep thinking, you know, I would be interested in just seeing if I could do something like that. Then there’s nobody gonna take a sixty one, almost sixty one year old and throw him in some play, and I’ve never acted in my life. But who knows?

Well, take an improv class. 

Yeah. 

Go take an improv class.

You know, Kristen Rampe, I don’t know if you’re familiar with her. I know she’s done improv, and she and I have done a little bit, little teeny bit of improv back and forth because she’s trying to teach me how to, you know, this is how it works. I’m like, oh, I can do that. I mean, when it’s her and I, when there’s someone else, maybe not. But, alright.

Well, now we’re on tangents. We’re gonna wrap up. Ed, you know, this is great. If anybody wants to, you know, hear more, you gave a couple websites already, but if they wanna get ahold of you or see these websites, what’s the best place and where should they look?

Yeah. Officially, Sage is ed.kless@sage.com, but I’m the only Ed Kless in the world. My parents were really big into differentiation. So, yeah, I’m pretty easy to find.

But yes, TheSoulofEnterprise.com is the radio show. I also do the Sage Thought Leadership Podcast. And then one last plug for Ron’s Time’s Up book, because I think it’s so so important. So it’s timesupclub.com.

Perfect. And I’ve got my copy of the book. I’ll have to admit I have not read it yet, but Simon Sinek’s been taking all my time recently. So now we’re gonna go to Time’s Up. That’ll be the next one.

Fair enough.

Alright, Ed. Well, again, thanks for being here. This was awesome. We really look forward to talking again, and we didn’t even talk about this, but you and I are gonna be on a panel together. Well, it’s gonna be—by the time this runs, we will have done our panel, at the Accounting Today conference.

I’m sure we were brilliant.

We did awesome! Everybody said it.