CPA_Practice_Advisor_July_2020 - 21

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IMPLEMENTING
VALUE BASED
ENGAGEMENTS
IN YOUR FIRM

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based. My recommendation? Once
you go dow n t he Value Based
Engagement road, do not track time
for 15 years. It's a waste (of time)
and you and your team deserve
better. There are "new metrics" to
replace the time metric people are
just padding anyway to meet the
hours goals you set at the beginning
of the year giving you much better
insight into productivity and most
importantly results.
* Visibility of Revenue and across
service lines. Without engagements
signed ahead of time and the corresponding revenue dollars it's hard
to predict with certainty just how
much revenue you've got out there
to be serviced. In an hours times rate
environment you can certainly set
revenue goals and push your team
to bill those hours, however the
method does not provide true visibility into what your actual revenue
is based on the engagements you've
signed, nor does it allow you to see
what you have coming up in your
sales pipeline. Yep, that's right... you
also have a pipeline now.
* Bundling of Service & Subscription
Based Billing is available in a valuebased environment. Subscription
Based Billing is really a form of
incentive pricing, but to get there
you first need to establish your value
base and then you can incent with
bundles of service that are then
"subscribed" to on the frequency
of choice.
Remember in The Lion King
when Simba realizes Mufasa lives
in him? It's the same with Value
Based Engagements. They live in
you. Value Based Engagements
are not dead and it is your destiny
to become the leader you were
always meant to be for your firm,
your team and your clients. Be the
change. Here is a short list of what
you should be thinking about to
start implementing Value Based
Engagements in your firm:
* The Process: What is your process?

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For the expectation of value,
this really comes down to the type
of firm you want to be. Do you
want to be the Wal-Mart or Dollar
General of the accounting world,
primarily focusing on commodity
type services? If so, this will be a
determining factor in your customer base. In this example being
the low-cost leader of commodity
accounting service will lead to a
lower expectation and customer
perception of value, perhaps trading
for volume.
Let's say you didn't want your
firm to be a low-cost leader of commodity account services. Pretend
you want your firm to be much
more. You'll still have some commoditized service, but when you
bundle those services with higher
value services such as Planning,
Advisory, M&A, Marketing, Wealth
Management and the like you've
suddenly upped the ante. Throwing
in some solid processes and integrated software suites, you'll have
greater value to bill for and have the
formula for some incredible profitability. Not only higher profitability
because of the higher value service,
but your commoditized services
also become more valuable and
profitable.
I know what you're thinking...
"Well how do you know?" I know
because I've done it -- any firm out
there that wants to truly do Value
or Subscription Based Engagements
can do it. You only need the knowledge, process and technology to
support it. Oh, and also you must
be willing and your team must be
willing to change. Ouch... did I just
say that out loud? Let's take a quick
look at a few of the benefits of Value
Based Engagements:
* Throw out the time sheet (This may
not happen day one, but it eventually
happens). We started value billing
in 2002 and still tracked time for 15
years and gathered lots of empirical
data on hours times rate vs. value

From the time a lead comes to you
until the client signs on the dotted
line and you have an engagement
which spells out exactly the scope
of service and exactly how much it's
going to cost your customer, describe
in detail what that process looks like.
* The Pe ople: Who w i l l b e t he
champion(s) for the firm such that
the idea and delivery of Value Based
Engagements are a success for the
firm and for your customers? While
it's listed as number two, it may be
number one.
* Technology: What technology will
you use? Does it integrate? Does it
either support or provide you with
a process? You need an integrated
technology to support the process
and the people for Value Based
Engagements to be a success.
* Value Proposition: What is your
firm's expectation of value across all
service lines? What type of value do

JULY 2020 ■

you want to bring to your market?
When you start to think and plan
this through with your firm, begin
with the end in mind.
My goal here is to get you thinking about the opportunity of Value
Based Engagements for your firm.
Not to get into the nuts and bolts.
The first step is to achieve the mindset and then get more focused and
more detailed from there. As such,
look for some future articles where
I start to dig into the components
and their detail as you begin the
journey. ■
Jason Lawhorn CPA,
CGMA, CITP, MAcc is
the President and CEO of
Cloud Practice Accounting,
LLC www.cloudpracticeaccounting.com and is also
the President and CEO of
Lawhorn CPA Group, LLC
which has locations in Tennessee, Georgia,
Wyoming and Virginia.

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