215 Use SCARCITY To Make Your Firm More Profitable

It's big brain time. You know those limitations your firm has around how much work you can get done and how many people you can find and all that scarcity, the limitations that we have not been able to help everyone. Let's turn all that into a competitive advantage. Let's reframe it. Reframe the messaging to. Instead of being something that like, lets people down, we leverage it properly to make sure you're the hottest ticket in town, buddy. We're talking scarcity and five examples of where you can plug it into your firm to get paid better to do the work that you are already doing. Isn't that the dream? Come on in, let's do it. So reframing this scarcity problem, because we usually think of it as a problem, it's as simple as the difference between telling a client, sorry, we're not going to get it done in time, or sorry, we can't help you, versus proactively telling them, hey, we have X slots left, or we can do this for certain number more people. And while the underlying problem is the same one legitimately commands more money and urgency from the people on the other side of the transaction. But usually we are, I don't know, apologetic. Oftentimes that's probably the most common way that comes across like, oh, yeah, no, I wish, I wish we could do everything for everybody, but we can't. And this can kind of, you know, blow up in your face. In fact, I'm a small firm guy. I'm a how can I do more with less guy. And in some ways, this actually benefits the firms that want to stay small, maybe a little more than, than the firms that want to scale. All firms need to be implementing certain aspects of this. But the analogy I've always come back to, I worked with a bunch of different partners with different approaches to doing all this stuff. And a lot of partners who would take pride in being like, I win, you know, I win every deal. And the process of winning every deal looks like, you know, learning. Learning what their previous provider was giving them and what the other options are and, and giving them a better deal than anybody else. And oftentimes that's the foundation of why they are winning every deal is we're giving more. You're giving away your cell phone number, you're coming in at a, at a lower price. You're doing more than the other people are doing. And like, when I came of age and firm running, this was framed as like winning a sale when it really is the opposite of winning. Like, you're giving all that stuff away. If you go through the checkout line at the grocery store and you've got all these different chocolate bars and in the US you've got like, you know, Hershey's is like your, your bottom tier chocolate bar, but then you got, you know, the fancier chocolates. Do I want to be the Hershey bar that's dirt cheap, or do I want to be the nicer bar just above it that's two and a half times the price, but people are still happy to pay it. That's who I want to be. I don't want to win because I'm giving it all away. We've talked about this a bit in the past around, you know, Alex Hormozy's book, $100 million offers. Not a huge Hormozi guy, but great book. There's a lot of, a lot of really helpful things to pull out of there for accounting firms, surprisingly enough. But I came back to this after reading an article about Ferrari and I think it's called Quarter. I could put a link to the article in the show notes. Ferrari basically intentionally keeps production levels below demand to enable better profit margins. So they literally build scarcity into the process. They could make more cars, but they choose not to to optimize for profit margins and that element of exclusivity. And when we think about all of the people who would happily have us do work for them, you've got this distribution of what all of these people are willing to pay from top dollar because the pains you're solving are really painful to them to, you know, next to nothing because the things you do are not that painful for them. And the interesting thing about creating scarcity is it does two things. One, it shifts everybody up that spectrum of how much they will pay you to do this work because it builds in fomo, the fear of people missing out on this thing. People are more likely to take action. There's a fear of missing something. The scarcity also has like kind of built in social proof that can see that other people are buying this and they don't want to miss the boat. So just with that change, people will pay more because the perceived value of it just went up. And this scarcity lets you cherry pick the people at the top of that distribution of what folks are willing to pay you. Now if I let everybody in, I'm taking the full distribution. The only difference is I'm letting in the people at the bottom as opposed to limiting the volume of what I do. I'm taking in the top end of the distribution. So, so two really positive things we've already done by reframing this to make yourself look scarce. We share that scarcity and we'll, we'll run through a bunch of examples of how to do that in not slimy ways. We share that and people will pay more because of it. And then we only pull out of that group of folks we can work with the folks that will pay top dollar because they really value us. In 2023, Volvo made 52 times as many cars as Ferrari. And both companies made the same amount of money. Which of those companies do you want to run? That's how I think about running accounting firms. So I don't get super excited about like mega scale stuff. Scale, you know, the right way to do scale is ultimately a product of what is your inbound. Do you have and we all have loads of leads and not all leads are the same. If you have, you know, say a bunch of stuff out there that's driving a huge volume of really high quality people to work with, then yeah, maybe you could take on a whole ton of stuff and get paid really well to do all that stuff. But my personal preference is more on constantly refining to do more with less. I want to be running the Ferrari firm, not the Volvo firm. And this is an astronomical example. 52 times as many cars and one company made the same money as the other on a much smaller scale. This is absolutely happening in accounting firms and people are totally blind to it. I talk to runners of much bigger firms, 100 plus employees that make very little money who have really been pushing growth oftentimes. And this isn't just an accounting thing, it's in every industry thing, oftentimes in pursuit of some revenue threshold that triggers this magical EBITDA multiple that nine times out of ten is imaginary. But boy is there a lot of advisors and all that telling people non you just get over this threshold and that really kicks in. I'm sure that stuff happens in limited situations, but boy can I tell you a whole lot of times where it just hasn't. And also you totally sacrifice like the journey along the way of getting there. Like I'm actually going to enjoy getting there. I digress. Big firms, super growth minded firms that make next to no money. Itty bitty firms that make stupid amounts of money. But even just within that, let's think more simply. You can have a $500,000 revenue firm and $1 million revenue firm. No, throw that up. Let's just say two $500,000 revenue firms. You can have one firm that does that with one employee, one firm that does that with five employees. And let's say the owner in each works the same amount. I want the one employee firm, right. And it doesn't mean that I couldn't keep growing, but my margins are wildly better. So in the Ferrari example, what are they doing? So they're intentionally limiting production. There's always people like foaming at the mouth to get on the list next. They are very differentiated. There's only one of them in the world. They're very unique. In the context of running accounting firms, we think about it through the lens of solving rare problems. What are the rare problems that only beekeepers have that I'm the only solution for it? It's removing substitutes. Whether you're looking at, you know, value pricing or any of these methodologies, substitutes is always a big factor. If a client can walk across the street and get the same thing, then I don't ultimately have much pricing power. So they're differentiated. And with Ferrari, there's also some kind of community aspects, like, it's a club, there's an element of belonging, and then other people want to be in that club and want to belong. And this is where the. The external representation of your brand and the mystique around the brand matters. And why, you know, podcasts, your social media being visible at industry events. Like, if you're the only exhibitor at that at bcon, then the perception is like you're. I don't know, at the very least, you're out there more than anybody else, but, like, you're a premium brand within that space. So there's a tremendous amount of value in selling out. But the way we talk about it is capacity constraints. So now let's flip that on and say, let's think about it as selling out and optimize for it. This episode is sponsored in part by tech guru Pop Quiz. Your computer just explodes right now. What do you do? A, we're going to go down to Costco and get the. Get the best deal on a new tower that I can. B, call my IT group and let them figure it out because they're the professionals. The correct answer is B, you thought there was gonna be four options. I'll be honest, when I started that, I thought there would be four options too, but I couldn't think of anymore. Gang, we talk about delegation and the stuff that you ought to be worried about and the stuff that you really need to get off your own plate. IT tech, please just stop okay, there's professionals for this sort of thing. I don't want Tina spinning up her new Etsy shop, going out and filing her own tax return. But computers? You got computers figured out, do ya? You just don't. Okay? You just don't. Tech guru. They just work with accounting firms. You know the stupid apps we have to use. They know the great apps we get to use. They know the oh the cyclical natures of our business. So they're gonna get up off your back during busy season. But yeah, no, I'm sure that you know more about how to manage it than a company that literally just has a big old team of people that just talks with accounting firms about all their tech stuff all day, all night deals with it non stop. But yeah, no, I'm sure that you know better than they do. Why am I so upset? Check out the link in the show notes to learn more. We're getting to deadline season. If you don't have a good plan for it, just book a call with them now so you got something on the calendar to force yourself to circle back to it and put together a better plan going forward. This episode is brought to you in part by Team up. Helping you recruit top Filipino accountants without any ongoing monthly fees. The difference between Team up and all the other offshoring options. So Team up helps you hire staff directly. No middleman. You work directly with your new hire in the Philippines. Hire the person, not the company. Guys, gals, gang. Here's just a few reasons to hire directly. You have access to higher level talent. Makes sense. You have complete control over team culture and training. They keep 100% of what you pay them and it's a lot more affordable for you. So you can retain your team for the long term. 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One example from my life and then we'll run through some just examples of how you word this stuff and do it in a non slimy way. I stumbled upon a clothing brand that I super liked. I'm pretty tall so I generally have to buy tall sizes which very much limits like the clothing brands. Like I generally cannot buy stuff in store anywhere. I can't buy tops in store absolutely anywhere. I have to order everything online. And there's not all that many brands that do tall sizes for men online. But I found one that I really liked. I'm like oh man, this is so great. A little bit spendy though. But they frequently do like big sales and you can opt in for them to send you text message messages whenever these sales drop. And I'm like oh, oh yeah, no I need to. I've got this stuff that I see that I really want. But I saw that they actually just did a big sale a couple of days ago. So next time they do that sale, I'm going to buy it. And the first text rolls through and I'm like okay, this is my chance. And I hop in and it's like oh, these two items are on Sal. Those aren't actually the things that I wanted. Next time sale runs through, I'm a little late getting out there and it's all sold out and I'm like ah dang. But they're doing this like three times a week and these suckers are getting me to like I don't give other humans my cell phone number but I've given this clothing company my cell phone number and I'm like going through and looking in there multiple times a week. It works. And obviously it, I mean most of the time it is manufactured. But I would say in our case with professional services firms you can do it in a totally non slimy way because the reality is there are capacity constra. We just almost treat them as our own like failings or something. When it's like no, you're going to sell out. There's only so many of these. Like you can only do so many taxes, only do so many month end closes or advising calls. And if we communicate that there is scarcity there instead of it being like oh, you can't run your firm efficient enough, you're like no, like we have 10 muffins to sell per day and I'm sorry, we just sold our 10th muffin. But here's when. When we're pulling them out of the oven tomorrow. We'd love to see you then. Okay, five practical examples of where this comes up in firm running and how we can like, word this in a way that isn't going to feel slimy. Onboarding new clients now, there are probably times of the year where you have absolutely no interest in onboarding new clients. Maybe it's the busiest time of the year for you. Unfortunately, those are oftentimes when clients go looking for a new provider is when that thing needs to be done and you're like, no, this is actually the very worst time for me to like sift through that new client stuff. I find. And there's going to be exceptions to this, but generally the people that are coming to you during their busiest season are not the planners, are not. The folks that were thinking ahead about what they're going to need may not be as good of a client in that regard, as opposed to the folks that were thinking about it ahead of time and putting together a plan. Obviously that's a generalization, but I think there's an element of that that is true. But we all have times of the year where we don't want to take on new stuff. Another thing to think about when you onboard new clients is there's certain things in the annual cycle of a firm that may be better done in batches, where you just. You like do a whole bunch of them at once for whatever reason that can be easier, can be more efficient. But I can tell you definitely on the marketing and messaging side, taking new clients in, in batches, almost in cohorts throughout the year is not only probably better for you operationally, but creates some scarcity in how you communicate it externally. So you tell them if they're interested in becoming a client and you've gone through, you know, whatever the prerequisite steps are for you to sign off, that, yeah, you actually want to do this. You tell them, hey, every quarter, you know, or this time and that time every year, we take in say 20 clients or however many it is. Tell them I can get you on the list and let you know when we start working through those. Or say we've got X slots left, do you want to commit? Like, that's the beauty of this, as you can give them a finite, like literally say we have a finite number of slots and tell them how many are open. The non slimy version of all this is the one that is real and this is real. Should you only take in a Certain number of clients or I don't know if headcount is the right yardstick there. But like, yes, there absolutely ought to be boundaries on how much stuff you should take in. Don't be afraid to share that stuff. Don't be afraid to talk about it with clients. Because that scarcity, it is real. But when we communicate, it creates this element of social proof for them to see that, yeah, a bunch of other people are doing this too. Like, we're legit, we know what we're doing. Other people are coming in if you want on board, like, get in line. But also a fear of them not getting into that next cohort. Now, most of this stuff only works with proactive communications. It can't be reactive. It can't be after the fact reactive. After the fact is telling somebody, oh, sorry, we actually can't get this done for you because we don't have enough time to do it. That just pisses people off. Right. The opposite of that is proactive comms to say, this is coming up, here's how many slots there are and here's how many remain. We need to be having these conversations before you're at capacity. Once you're past capacity, then you just ultimately let people down because they didn't know there was a capacity constraint or they didn't know that they were one of the ones on the chopping block. That may not get done. Now, this can be taken too far, definitely, if it's too frequent, if it feels too gamified, like people are going to see through that. The best way to do it is literally just build it around your actual capacity planning, frame it as selling out. And those people are going to be turning up first thing in the morning for those muffins, rather than just popping in whenever they want to and making demands. Second scenario where this can work really well if you got a bottleneck at a deadline, big one right now, obviously, for us tax pros running extension estimates. But this is the case for any bottleneck. Let's say, you know, 1099, reporting whatever annual compliance looks like for you in the way that you support your clients. If you're dealing with a future constraint or bottleneck, it's as simple as telling people, we're going to run this more people. If you want on the list, let me know. Or, you know, go through this proposal and pay the deposit, whatever that looks like behind the scenes. This is reality. You can only do so many of them. But we don't really tell people that. We kind of sit back and people Ask us to do things and we say yes until at some point we just say no. Instead, let's proactively say we're getting down to the wire. I know this is important to you that we get this done. I want to let you know we've got X number of slots left to ensure that we get you on the list. Now, this can be hard to think through when you're in the heat of things in the heat of a busy season. Generally the best practice here is going to be to have a clear communication plan before you get into busy season so that you can say, at this cutoff, we're going to send this email to folks who, you know, don't have that thing done yet. At this cutoff, we're going to send this email out and it'll say, you know, how many slots are left. The more you can build that stuff out ahead of time, the more you can just like it just happens when you get there. Rather, rather than having to stop and, and stress over this in your most busy time of the year. Example number three, when you need someone to just stop dragging their feet. Oftentimes being an accountant feels like just pestering people for documents over and over and over again. But you know, oftentimes if they wait too long, there's some sort of penalty beyond, you know, when they don't get it done within a certain timeframe. That may be an actual tax or compliance penalty. It may be the penalty that you're about to leave for two weeks and they're gonna have to wait if they don't get it to you before then. Take the time to communicate. Hey, I know that you have this need a heads up. We're taking seven more and I want to make sure that you get into the queue, but I can't do that until you get us X, Y and Z. Now, if you're part of a bigger firm, it's pretty easy to deflect this one to the team like you are. You're looking at the capacity of the team as a whole. Here is here, how many things we can actually get through the machine. People can understand that that's not unreasonable. Their business works the same way. But how do I do that? Is say you're a solo operator. How do you do that in a way that isn't going to feel slimy? Honestly, it's the same thing. It's something along the lines of, hey, planning out our, planning out my capacity for the next month and wanted to let you know we're going to be able to do this, you know, for another six people. Do you want me to get you on the list? If so, I need you to get me all of these things, and you getting me those things will reserve your spot. For some reason, a lot of us don't feel like we can do this, and I'm not sure why that is. Maybe that's it's an element of kind of being trained to be order takers or something like that. And maybe it's a little uncomfortable to take control of that and be more proactive. I know we all aspire to be proactive, but I think one of the reasons that we are not is that servant mindset, which is a great mindset. That's kind of where most of us come from and our gratitude that people will bring us that work to do. But for, for whatever reason, it can be a real challenge to kind of flip that and be more proactive about it when it's definitely in the best interest of your business to do so. But generally, it's also more helpful for your clients too, because they're not having to read between the lines. There are no question marks about where you're at on things like we talked about with status updates, you're ensuring that they don't feel forgotten and they have a better understanding of the process. This episode is sponsored in part by our friends at Accruer. If you have not heard about Accruer yet, all it does is it gives a sick, sweet new skill to your QuickBooks. All you do in a QuickBooks online description, you type for the period, start period, end period, and it posts accrual entries covering that whole date range. If this is a payroll journal entry that straddles month ends, you say the work period and it will automatically post a journal entry. If it's a sales contract, an invoice for 14 months, you know how much bloody work that is. Post every single journal entry, do the recurring thing, set up a spreadsheet to tie it out. Oh, and then it changes and you go delete all those things. Accruer one word, accruer all you do, you type in the description for the period, start date, end date. You might have to have a 2 between the start date and the end date, it posts all that stuff automatically. And if you got to go back and change it later, it'll do all that too. You change the date, it'll wipe out the old ones, update it to be correct. And then when you log into Accruer, it gives you a schedule of all of your accruals plot that maybe a a work paper file and you got an easy thing to tie out to. Simple as that gang made by a bunch of accountants because it was a thing that they needed. Hop over to their website to do a demo. Demos are just 20 minutes. Or skip the demo and sign up directly@accruer.com with code Jason Daily One to try for just a dollar this month. Oh my gosh, $1. Code Jason Daily One. Do it. I'll put the link in the show notes. Go use that promo code. What do you got to lose? This episode is sponsored in part by liveflow discussion going on online this week. Frustration with accounting ledgers and the tools not always doing what you want them to do. And so it's like why are all these like additional kind of ecosystem tools necessary just to augment the core app with the things that I want. And oftentimes the things that you want are going to be very different than what anybody else wants. And this is where LifeFlow can actually be a way to customize your QuickBooks experience because it can sync out to Google Sheets just about anything that's in QuickBooks, right reports, so ledger activity, specific account balances. You can lift all that information out, organize it however you want, but then give access to that Google Sheet to whoever needs it, like third party stakeholders, internal users, maybe even members of your team. And then because they have a consolidations product now obviously you can use that to, you know, consolidate and roll up related companies books, they can also use that for internal purposes. If I'm looking at a cross section of, you know, know 30 beekeeping clients that I have and there's specific things that we want to monitor or benchmark, we're really like augmenting the ledger experience and kind of building whatever we want in the spreadsheet. Because LifeFlow bridges all that data from QuickBooks to Google Sheets. Could do a one time sync, can do like a sync that continues like auto updating anytime the data inside of the accounting system changes. I've always been a like let me kind of build my own solution sort of guy. LifeFlow could be a good way for you to do that. Learn more about Life Flow link in the show Notes Opportunity number four for where we can plug this into our firms. When you're upgrading people to a new thing. So let's say it's renewal season and you're trying to get somebody up to the next package. Yesterday we were talking about recurring like SaaS subscription reporting and how one of the great ways you can get people up Sold to that is in renewal season. Saying like, hey, this is, this is something that you would benefit from usually saves our clients quite a bit of money. To make that even spicier, you tell them, hey, we're taking six more clients at the gold tier. I want to get you on this because I think you would really benefit. And we're leaning into the fomo. We're leaning into the social proof of the fact that other people are doing it. And I don't know, even though it can feel a little salesy or markety, like usually people will be appreciative that you're being like, yeah, no, I appreciate that you have thought about specifically my needs because this is a problem for me and for letting me know before you ran out of slots, like communicated the right way. People are going to be appreciative of this. For accounting and bookkeeping firms, the crush is everybody wanting their books right away after the close of the month. Right. The way I gated this, we had some people who would pay extra to get their stuff earlier. But obviously you can only do that for so many people. Just be transparent about that. We've got, you know, x more companies books we can get closed by the 10th of the month. Here is that upsell option and we have this many slots left. I would actually love it if proposal tools could show capacity. The people who have really innovated on this space are like the dtc, E. Com companies who are just hacking the heck out of scarcity and limited time deals and all that. It's all built into the platform. Airlines do this as well, where it's like one ticket left, but it's usually one ticket left at this price. Not like one ticket left, you know, altogether. It's just at that price. So they build that totally into the user experience to try to manufacture some urgency to get you to just commit in that moment. If my proposal tool could show like on that goal tier, three packages remaining or something like that, I would actually really like that. If it's a real number. And the last example here, it can be as simple as when you only want to do so many of a thing. Let's say you only want to do 10 advisory calls a month. Tell people that you only do 10 advisory calls a month and that there's three left. I am convinced just by doing that people will be willing to pay more and you will get more advisory calls because the people that kind of know that it's a thing but don't have a reason to commit right now. Now have A reason to commit because they don't want to miss the bus. So X number of advisory calls could be zoom meetings, phone calls, whatever it is, if you're putting some sort of limitation on it, just put it out there, tell people what the limitation is and like optimizing these little things, like, I don't want to lose perspective of the fact that these small optimizations have a really big impact on the bottom line. Like if this ultimately enables you to charge, you know, 5 or 10% more because you created that urgency around the thing and people will just decide and pay that, that's 5 or 10% going straight to the bottom line. These, these little changes that impact pricing are big opportunities because they hit the bottom line too often. I think we get sucked into operational stuff and it's not that it doesn't matter, but we get sucked into operational stuff maybe because we are kind of tinkerers. And like, I know for me, I definitely enjoy that stuff more than maybe uncomfortable client facing things or marketing. But operational stuff is abstract and when we save time for something, honestly, usually we find another way to lose that time elsewhere or we just do one more client at that same margin level as opposed to things that are impacting the top line. When you're doing the same work for somebody and you can charge more for it, that increase goes straight to the bottom line. And if we go back to that distribution of all the people who are willing to pay different things for you to get that work done for them, scarcity defines the cross section of that distribution that we're going to agree to work with with now, upstream from that, how you're attracting people into that distribution of folks, that matters a lot. But for every single firm out there, if you're more restrictive in who you're willing to work with and you're going to take less in, it means you're getting paid better to do that work. So regardless of the stage that you're at, resist the urge of, of, you know, growing at all costs. Think, am I restricting production in a way that is ensuring that we're retaining pricing power and protecting our margins. I've shared before, the most fun time I had in firm running was when I like contracted. We increased prices significantly, cut like 20, 30% of clients. I cut a few staff. Who are the staff that I was really struggling with. On the other side of that, I was working with the people that I loved both internally and on the client side. We were making the same money. I think we may have been making more money actually. Revenue Ended up being about the same because we were increasing prices, but we were making more money with a more focused team doing less. And it was in a really fast period of growth that, like, I was at my worst. I did not enjoy that we were flexing the boundaries for the type of work we were willing to take in just to grow both on the client side, also on the internal team side. We couldn't hire fast enough, so we made some compromises on hires where maybe we wouldn't normally have. And, you know, we talk a lot about that curation of the client list and how that always needs to be evolving. Scarcity really helps here. It forces people to make a decision to commit. It drives home what a value you are and how many other people want you to do this thing for them, so they should too. But if we're not proactive about putting that in front of people and sharing that, then the reactive version of it is like, yeah, no, sorry, I know I have all your stuff, but we don't have any muffins. At that point, you totally missed the opportunity for them to buy the thing that you actually want them to buy, and now they're just pissed because you couldn't get it done right. So don't be hard on yourself when it comes to capacity constraints. It's a reality of every business. If you can think of it as. As selling out and how that scarcity can make your brand feel premium, can make you be in demand, because, buddy, you are. It has never been a better time to be an accountant than it is now. Oh, my gosh, are there so many things to do. We just got to, like, protect ourselves and our businesses along the way, right? Any lessons you've learned around scarcity, feel free to share them in the comments. Maybe like before and afters, the wrong way you've done it versus a better way that you've done it. Any thoughts on batching when you take in clients too? I think that's something that we probably don't talk about enough. I'll link that Alex Hermosi book that I, that I mentioned too, in the show notes. It's a good, really quick read. There's an audiobook version of it as well. A lot of it's relevant to firm running. That's all we got today. I'll see you in the next one.