Build Capacity by Improving Your Pricing with Tom Wheelwright

Hey.

Hey, it's Jody Paid our. Here the radical cpa. And welcome to Radical Ideas, where we dive deep into a topic that will help you better manage and grow your firm. And in this season of radical Ideas, we're rethinking tax advisory. Yesterday we talked about what it takes to actually build a tax advisory practice.

And.

And since that likely you're wondering how you could possibly find time to build a practice area, well, we're actually going to explore today how you can build capacity by just by improving your pricing. Once again, today I'm talking with my friend Tom Wheelwright, the founder of Wealthability Network and a serial entrepreneur who has developed a process for doubling profits without actually adding any new clients. So I'm really excited to talk to Tom today. So, Tom, can you just say hello and give everyone a brief introduction of yourself for those who haven't tuned in yet.

Thanks, Jodi. Great to be with you. So I'm been in the practice for 40 years. I run my own CPA firms. I currently still run a CPA firm and we lead a network of 65 CPA firms around the US and then I do a lot of speaking and writing. My book, Tax Free wealth, is fortunately been number one bestseller for 10 years. Over 10 years. So I'm very excited to be with you, Jodi, because you and I, we align so much on the things that we need to do to improve our practice so we can better serve our clients.

Awesome. Thank you. I also want to give a shout out to our sponsor of today's show, the Wealthability Network, which is a network of CPAs and financial professionals focused on building a profitable business and helping clients build a rock solid financial future. And I know Tom is, like, actively involved in, like, really getting the Wealth Ability Network and giving everyone what they need from him to kind of build their practices better. So I think the, the cool thing today is, is we're going to talk about, like, how you actually can add to your firm, because so many CPAs today are just overwhelmed with, like, I have enough business. Right? Like, I. I can't take on any new business. How do you expect me to add something like tax advisory to my firm when I'm, like, completely overwhelmed with where I'm at and what I'm doing. So with that, let's talk about, like, capacity and pricing. And pricing and how they actually help you build a better practice and add tax advisory services? So pricing and capacity, do they go together hand in hand? I mean, some people say they don't go together naturally. Right. Like, what you price should be separate than how you figure out your delivery. But, Tom, you have different thoughts on that, on how they do, on how they do align.

I do. First of all, I, I think that when we think of, we think of advisory services, you know, we think of a tax return or financial statements, that's a well defined product. We don't think of advisory services that way. And I think that's the first thing we have to change, because we think of advisory as a transactional type of a relationship. What's going on is we feel like, well, if it takes me five hours, I'm going to bill that differently than it takes me two hours. And so we're constantly building. We're billing based on time. We're not pricing it, we're billing it. And that that means that you are, you're subject to your time, you're subject to vagaries of time. If you can change your whole thought process in that, okay, advisory services, how do I break them down so they actually become a product that's well defined. That's that the value of that product is well illustrated to the client. Then the client can say, well, I'll pay this. It doesn't matter how much time it takes. You figured out how much to charge based on what the value is to the client. Remember, value means that it's worth more to the client than you're charging, but it's also got to be worth more to you than the time it's taking. So that's that combination of things. And once we get that down, now we don't no longer, for example, you no longer have to record your time, because why would you be recording time if you're not billing your time? So that right there will free up literally over 100 hours a year per staff member really easily. You're talking about probably a couple of hours a week that they spend just recording their time. And what if you could just eliminate and think about the stress you'd eliminate at the same time?

Well, right. And I think it's important because again, you know, following up on our conversation, it's kind of like, okay, now we're going to productize this offering and we're going to put tax advisory as something that we offer now. We can actually think about how to build it into capacity and pricing. Because before it was productized, it was kind of random acts of tax advisory. Right? So we don't want random acts of tax advisory. We want to be able to figure out how to deliver it over and over and over. Again, and not just have the one tax partner deliver it.

Right.

Like you. You want your whole team to be able to deliver it.

Yeah, we want to be very intentional with it. This is something, and frankly, this is what clients want. They don't want a transactional relationship. They want a true relationship where the CPA is in charge. They don't want to be in charge. They don't want to be in charge of their tax situation. They don't want to be charged of reducing their taxes. They want their cpa. I go, well, my CPA should be handling that. Well, guess what? If we're waiting for them to ask us questions, we. We're not handling it there. We're. We're actually telling the client that the client has to handle it. So now what we do is by. By doing what the client actually wants, which is taking charge of that relationship and taking charge of that tax reduction. What we do is we actually now have control. And when we have control now we can project out how many people do we need. Now we can project out how much is it. Is the revenue going to be? Because we know what the price is and we're not, like you said, subject to the vagari of hourly billing.

Right. So in your experience, how many CPAs do you know who have actually done projections based on what they're going to sell for capacity planning for either tax advisory or even compliance?

I, I don't. Honestly, I don't know any other than us, so don't think so either.

That's a trick question there, Tom.

It's like I'm going, but. But if you think about the challenge that we have as CPAs, we don't think of ourselves as real business, right? We think of ourselves as service providers and not product providers. If we took ourselves, take Apple as an example, right? You walk into an Apple store, do you care how much time it took them to build that phone? Do you care what the inputs were into that phone? No, what you care about is the phone performs and that does exactly what you're expecting it to do and that the price you pay for that phone is less than, than the value you get from that farm.

So I think that's really important because essentially what we're talking about is how you tie capacity to pricing. And it doesn't matter, I'll say, even how you price. Even though we can talk about hourly building, whatever, whether it's fixed fee or value or after the fact or before, because I think too many people get caught up in the how instead of even Thinking about, okay, let's just step back and go talk about what do I need to sell and then. Or what do I expect to sell? Not even need. Let's just say, what do I expect to sell? And now I can actually think about how many people I need and what my people are doing so that I don't have to work 80 hours a week during tax season. Right.

Yeah. I would go a step further and say, what do I want to sell? You know, because. Because I want to look at. First of all, I want to sell something I care about. I want to sell something I'm good at and that my. And that I can have my staff be good at. I mean, I don't sell honestly. I don't sell financial advisory services. You know, we don't sell outsourced CFO services because we're not good at it. So we've been very specific. You and I talked before about niche. Right. We've been very. We're very specific about what we want to sell. So I think you have to look at what. What is it that you want to sell and then who do you want to sell it to? I think you need to actually look at those two things. Once you do. Yeah. I mean, then. Then building it out and projecting out is just not that hard.

Right. And I think that's really important because I think, you know, everybody kind of gets caught up in the whole pricing thing. And I think we have to even step back and say again, like you said, what do we want to sell before we even talk about how we're going to price it? Which leads to are we underpriced our services and that's why we have a capacity problem.

Yeah, exactly. If the clients are too happy with that price up front, then you're probably not billing enough in the first place. But really, honestly, we've got to stop looking at it as. I really think we have to get away from this hourly thought and we really have to get into what's the value to the client? What does the client care about? I mean, for example, we've talked before, does a client care about a tax return? Well, they care it's accurate. They care. They don't get audited or that somebody can now an audit. But they wouldn't do that tax return if the government didn't require it. They will do tax advisory services every day of the week, and there is no requirement. And they're doing it because it will add to their bottom line. Plus, on top of that, the advantage of tax advisory services is Clients hate paying taxes. They just don't like the idea of paying taxes. So there's an emotional aspect. You have an amazing opportunity to sell a product that people are dying for, they have a hard time finding and that they value very highly.

But you also have to be comfortable with those value conversations, right? And you have to have a way to approach those conversations so that, you know. Because I think too many CPAs are of the. The bill and duck, right? Like, because they've done the work and now they're billing and now they're like ducking because they're, they're afraid, like, what's the client going to see or say? Because they haven't had that value conversation. So when we think about pricing and capacity and ultimately the value conversation, right. Is there a way to systematize it, to get that all kind of align together to actually offer consistent tax advisory services? Because I really haven't seen it. You know, like, Tom, I know, like, you're doing it and you're talking about it, but in the general marketplace. I haven't seen it.

No, I haven't seen either. I mean, we do it, you know, I think we're maybe unique in that area, but, you know, the reality is, is that you. 80% of what you do is the same for every client. I mean, if you think if all your clients are entrepreneurs, which most of us. That's the case. If all your clients are entrepreneurs, then 80% of your tax advisory services really are going to be very similar. They all need certain entities. They all need certain, you know, they might all need some kind of a retirement plan. They, they all want, you know, they all want some of the same things. I mean, there's a lot of consistency. When you get to 80%, you can systematize it because that means that you've got. You can you kind of. I, I'd give it this. I put it this way, Jodi, look for the pattern, okay? And create a formula. If you can find the pattern, and one of the patterns we found is 80% of the clients want. Need the same thing, okay, then you can put together a formula. Once you've got a formula, then you put together a system. But it's gotta be in that order. It's gotta start with find the pattern, develop the formula, and then create the system. If you can do it in that order, it's not that hard. It's the hardest part is actually identifying the pattern.

Right, right. And then I would say too, how do you kind of share that pattern with your team, right? Because for many people who aren't sole practitioners, like, it always, tax advisory always seems to land on the partner. And I think that that's not scalable. That doesn't build capacity. Right. So how do you kind of help, kind of shift that to give your firm more capacity to work?

Again, you have to have a system. Because if you don't have a system, you can't shift it because then it's based solely on knowledge base. And the younger staff, they don't have the knowledge base. Okay, but we actually do two things. First of all, you have to have the system so that they know what to expect and they see a pattern, and they follow that pattern over and over again. Accountants, as a general rule, we're very good at following. We're very good at following a system. Okay. That's what we're good at. All right. Second of all, then what you have to do is you have to be willing to train your. Your staff. And the reason you're not willing to train them is because you're billing by the hourly rate, and you. And the client's not willing to pay both their time and your time because they're billing your. They're paying by the hour. If they were paying not by the hour, but they were paying for a result, then they don't care. In fact, they want more. More people on the team, not less people on the team. And so what we do, one of the things we do is every single client meeting that I'm involved in, one of my managers or staff is involved in, that's the training they get. They may be taking notes, they may be handling details. But I would tell you, 80% of the communication also goes to them. I do very. I literally do very little the communication. I only have to be on the call. I don't have to do the research. I don't have to, you know, I don't have to do the communication in between the emails or Alessio or whatever we're doing. Right. I don't have to do any of that. But you, in order to do that, in order to get that leverage, you have to have, A, the system. But B, you've got to be able to price it, because if you're doing it on an hourly rate, you're always going to struggle with the clients going, well, am I paying for this person? And if they're not paying for that person, you're going, I don't want to pay for this person either.

Right, right. And so, like, I'm a practitioner and I'm used to doing it the old way. Where do I begin? I mean, I think this is great. It sounds great. Like, I want to productize my services. I want to build out this capacity plan. But, like, I'm kind of stuffed because I've been doing it for all these years.

Where.

Where do I start?

Well, again, I start. I always start with, what do you want to do? Okay. And then you go, okay, so I really want to do this. XYZ Advisory Services. And I want to do it this way. Okay, this is what I want to do. Well, once you know exactly what you're doing and who you're doing it for, those are the. You have to do that first. Then what you do is you can actually break it down into chunks. If you can break it down into manageable pieces, you can go, okay, what's the value of this piece? What's the value of this piece? What's the value of this piece? So, and then what? All I have to do is I have to just bring it all together, right, And I can price the pieces. But what we don't do is we're not very good at what we call chunking it down into manageable chunks. Once we get those chunks, it's easy. If you look at a typical product, what do they do? You. You think of those chunks as features and benefits. That's what you think of. Those are chunks. Okay, well, it does this, does this, does this, and does this. Okay, well, what's the value of this? And then what's the value of this? What's the value of this? Well, when I add up those values, okay, then I can go, here's the value to the client. Now all I have to do is price it so that the value. It's such an irresistible offer that the client's going, hey, I want that. I'm great with that. On top of that, one of the things that we're doing with. With pricing is we're giving the clients a choice. The problem with a. With a bill and duck is that we are not giving the clients a choice, and their choice only is pay it or not pay it. What a terrible choice, right? Where in this case, we can say, do you want the service or not? Is there if we broken down into chunks, we can even say, which piece of the service do you want? I want this little piece. I want the whole thing, you know? I mean, for example, let's say you're doing income tax plan and estate plan. Okay, well, you've got two identifiable, viable things. I'm going to charge different for estate planning than I am for income tax planning. Great. Now the client can say, well, I only want the income tax planning because I don't care what happens to my money when I die. Either I'm not going to die or I don't want my kids to have it. So it's fine if it goes to the government. Fine, okay, then, then you're done. Okay. But then there are others that go, I want everything. And if you tell them that there's multiple things to get, more often than not there's a little FOMO going on and they don't want to miss out on what else you have to offer, but you have to tell them and give them a choice. You have to give them a choice, and then you're not stuck doing something you're not going to get paid for. You know exactly how much you're going to get paid, and they know exactly how much it's going to cost.

Right. And I think the other thing we have to, like, just mention is just because there's a value attached to what you're pricing it at, that doesn't mean that if it only took you two hours, because I think too many people, like, say, oh, well, it only took me two hours. So that is the same value of the price to the customer. Right. And that is so misaligned. Right. The value is based on what the customer perceives as value, not what a CPA actual cost is. Because I think too many CPAs are cost conscious because it's in their blood or they think they should be. Right. And they forget that the customer is willing to pay significantly more than the CPA is even selling it at because they don't know what it. Not just what it takes. It's hard for them. Right? It's very complex for them. It's not because I think too many CPAs say, oh, you know, it didn't take me that long, it's no big deal. But. But that's misaligning the value of what it takes. And I think we have to just mention it because I think there are so many CPAs who can't get their own perspective of value outside of the customer's perspective of value. And they're very different. Right?

Well, well. And one of the things. But there are some things you can do so they won't be so different. And one is that if you're. If you wouldn't buy your services, neither will they. Okay, so here's what I suggest. I suggest figure out, okay, you need to Be willing. Are you willing to pay for professional services? Now that could be financial advisory services, could be legal services, it could be a car wash. Okay, and go. What are you willing to pay for? Because if you're not willing to value what you, what you buy, then I guarantee you that will come through to your clients and they will not be willing either. And you can never sell it. So, for example, one of the things that completely changed my view of this is I actually had. It was just by fortunate. I was at a seminar and they actually did a makeover of me and they made me go out and spend $3,000 on, on new clothes that day. And I volunteered. Okay. It was a lot of money to me at that time. And. But I. New jacket, new pants, everything that somebody went out with me, we did a makeover, completely changed my view because of the reaction of the crowd when I came back in. So now I always, ever since then, I've spent a lot of money on clothes. Well, why? Because it has an impact not just on the way people see me, but it has an impact on the way I see me. And so we do have to start with ourselves and is it valuable to us? And if it's not valuable to us, we will never be able to win this, this battle.

Right? Right. No, I think these are all like, amazing, like takeaways. I also think about when we think about capacity and pricing and how we build our firms or what we want from them, I think it's important to think about, like, what do you actually want from your firm as well? So when we think about like capacity, do you want to be a boutique firm or do you want to be a firm that takes everybody and anybody and offers, I'll say more of a, you know, a cookie. Not even just cookie cutter, but like, serves a different population. And I think you've done that very well, Tom, as well, kind of distinguishing.

And I think the other thing you have to look at is, okay, so you say, well, I don't really. I'm comfortable with the amount of money I make. Great. Are you comfortable with the amount of time you spend? So, you know, you, you've got time and money. You're talking about, are you comfortable with the type of work you're doing? Okay. Are you comfortable with the 80 hour busy seasons? Would you like, like at our, at our firm, we work 40 to 50 hours. We rarely work more than 50 hours a week. Rarely more than 50 hours a week. And yet we're very successful financially. And I work less than 500 hours. A year. Okay. It's my firm primarily. I have a partner, but. But I work less than 500 hours a year, and we're still able to accomplish this. That's what happens when you do what we're talking about here, Jodi. When you talk about starting to look at pricing, when you start to not attribute your time, just your time to the price, I mean, you're gonna. That's a factor in your price, no question. But you have to look at, okay, ultimately, what's the value to the client? And, you know, we've talked before, Jodi, that the value to the client is just. We're just underpriced, undervalued so much that it would, even if it did nothing else but free up 10 hours a week. Wouldn't that be worth the effort?

Right, right. 100%. I think, too, when we think about price, you do. You have to think about price and you have to think about time. From the perspective of, do I want to go home on time at night? Right? Like, do I want my life back during busy season? What. Especially when we, when we come to these after tax season events, like, what do we want to do for the next tax season? So we're not in the same place we were this past tax season when we're working so many hours, because ultimately that's what pricing and capacity are going to give you back. And especially, too, when we think about, like, advisory, which is the next level, we all know compliance is eventually going to go away. Yes, you need to do it, but, like, you can't say you're not going to do compliance. But again, advisory is where the future is, and how are we going as a profession to get there, to really offer more to our customers, which I think is what they want from us anyways. So I think all of these things are so important, and they're not. They're just not talked about enough, Tom. Right. Like, they're just like, too many CPAs have their heads down, and they're so busy getting the work out the door that they're not, like, lifting their heads to think about, okay, can I add more value to my customer? What does my customer want? And how can I have a better life while I'm doing it? And I think that's something that your network will help provide. So if people want to get in touch with you, they want to learn more about tax advisory, if they want to learn about the wealthability network, how. How do they find you and, you.

Know, get you, get to you, I give you two. Two thoughts here. First of all, go to wealthability.com just schedule a call and we're happy to talk to you about it. Also, I have a podcast, the wealthability show for CPAs and it is specifically for CPAs. We talk about these types of issues on a regular basis, so would encourage both of those. But we are happy to talk to you because I do think that that you really can make an impact. When you get the better clients and you can figure out how to solve the client issue, then, boy, the practice issues get solved, the life issue gets solved and things are a lot better, right?

No, this has been amazing. So thank you, Tom, for joining us again. It's been a wonderful conversation. Thank you to our sponsor, the Wealthability Network. And be sure to turn tune in again tomorrow at noon Eastern for another episode of Radical Ideas where we continue our tax advisory conversation by taking a sneak peek at what goes into an actual tax advisory engagement. See you then.

Sam.