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700_0661A friend emailed me the other day asking what I thought about his idea to create a new online ‘Accountant Marketplace.’ Sort of like 99Designs for accountants. In effect, it would be a place where those needing accountants could search for the best accountant, and pick the one they want. Maybe the price would come from a bid type system, or something similar.

This is definitely one type of business model. And it works too. Teaspiller was one such example. Teaspiller was purchased by Intuit, and now the url www.teaspiller.com redirects to this site:

Intuit pays attention to business models that work, so they purchased Teaspiller. So obviously this business model works. And there’s always a new model popping up. Now Prosado.com seeks to take over where Teaspiller left off. Maybe Intuit will purchase them too.

Let’s take a strategy diversion…

As made popular by Michael Porter’s 5 Forces (of Harvard School fame), there are 3 basic business strategies within Porter’s Five Forces:

1. Overall Cost Leadership (i.e. maintain a lower cost than your competitor – an example is Walmart)

2. Differentiation (i.e. you offer a substantially different type of product within your market – a non-commodity)

3. Focus (i.e. building a niche)

The Teaspiller and Prosado model seems to perpetuate business strategy #1 – “who can offer the lowest price?” And this model works. It is a “low cost, high volume” strategy. You have to feed the machine with tons of customers, serve a few well, and hope the others won’t talk bad about you in social media. Effectively, it is a race to the bottom because it is the easiest business model to disrupt. All your competitor has to do is lower their price and they will attract your customers away from you. Low price wins, nothing more matters to the customer. Your customer came for the low price, and they will only stay for the low price. In this business strategy, you will need to focus on marketing and getting in front of as many eyeballs as you can. The more eyeballs, the more you can grow. But now you must consider that you are competing with Intuit and Prosado. They are going to push this through every pop up in their tax software, hit all social media marketing channels, and use the lowest amount of labor possible to deliver the service as cheaply as possible.

But I want to perpetuate strategies of #2 and #3 above, where CPAs seek to differentiate themselves from their competition and focus on a particular niche of the market place. This is a “high cost, low volume” strategy.

This too is a strategy, and it works as well. Frankly, it is a harder one to maintain than the “low cost, high volume” strategy of Teaspiller and Prosado because it takes a tiring focus on strategy, assessing your strengths, constant internal business model innovation, and hiring the best rock stars out there (it’s hard to find them). It takes constant work and focus.

Here are a few points to contrast this tale of two business models:

1. The “low cost, high volume” ideas cap how much we can make as CPAs. As you can see in the Intuit image above, prices are pre-published (a poor idea when seeking to apply the strategy of Value Pricing to your customer). You can’t sell high value services on a site like Teaspiller when prices are given to the customer up front. This counters the pricing strategy of Price Anchoring and gives a low price ‘anchor’ to the customer, effectively preventing you to deliver more value, and thus get paid more money.

2. Sites like Teaspiller leave no room for innovation. That is, as entrepreneurial CPAs, we can’t create new products and services on these platforms and get paid for them. As you can see in the screenshot above, all services are predefined and there is no room to sell new services and deliver additional value for higher prices. Effectively, if a customer wants to buy more from us, the platform is built so that they can NOT.

3. The 99Designs for Accountants leaves no room for strategic customer selection, a cornerstone to building a sustainable, and very profitable, firm. Bringing in the wrong customer is one thing wrong with our profession. Our profession will serve anyone! We are finding in our research in customer selection (and the testing in our own firm) that choosing a niche, strictly committing to that niche, and saying ‘no’ to more customers than you say ‘yes’ to will build a differentiated firm that competitors cannot match. As Tim Williams says, “the essence of positioning is sacrifice,” and I believe knowing what you do NOT do is more important than knowing what you do. The strategy of customer selection ultimately leads to a Blue Ocean Strategy, where competitors simply can not follow.

4. These models perpetuate the idea that all we do is accounting, taxes, and payroll – when we really need to be doing so much more. Our business coaching services are actually changing lives, and stretching us as we deliver these services. But when we build platforms like Teaspiller.com or Prosado.com, we tell the world that all we do is what you can choose above.  “Just pick a radio button to get started!” We can now outsource accounting, tax, and payroll (which we do partially) really inexpensively and offer higher level services that allow us to really serve our customers. In that, lives are changed. They come for taxes, but stay because they associate us with a transformed life. Pretty cool!

5.  These models prevent us from selling knowledge. Our greatest ability to change lives is to be able to price our services in a way to sell knowledge to our customers. We work hard to obtain specific knowledge to serve our niche, and our greatest joy is in giving that knowledge to others.

So our two models can be:

“high volume, low cost” like the Prosado or Teaspiller models, or

“high cost, low volume” where we can sell knowledge and change lives.

Both work, both have value to someone. I’ll opt for the latter. Which one do you prefer?

Jason is the Founder of Thriveal and the Chief Innovative Officer of his CPA firm, Blumer & Associates. He is the co-host of the Thrivecast and The Businessology Show and speaks and writes frequently for CPAs and creatives, his firm’s chosen niche. Jason loves to watch documentaries on just about anything. He lives in Greenville, SC with his wife and their three children.

Category:
Business, Pricing
Comments:
7
  • On 03-25-2013 at 5:57 pm, Michael Wall said:

    I’m signing up for the low volume higher price model. It’s more fun that way.

    Reply
  • On 03-26-2013 at 1:02 am, Jason M. Blumer, CPA.CITP said:

    I agree with you Michael! Thanks.

    Reply
  • On 04-05-2013 at 12:46 am, Will Lopez said:

    Great analysis Jason! I would agree, Intuit and Prosado are definitely going towards the low cost, high volume model. But i’m sure TeaSpillers goal was just to build business valuation. That is you don’t need to make a great deal of net profit just show you have a different viable product and wait to be bought out.

    I will admit though, that they are doing a great job at putting the competitive market price pinch to non-low-cost-high-volume firms. I wouldn’t be surprise if accountants didn’t start posting tax gigs on Fiverr.com saying that they will “complete your Federal 1040 for $5.” I don’t mind the price competition because it propels me to become even more innovative and try to meet the consumer in the middle. lastly, one huge factor to the low-cost-high-volume model that customers fail to realize is poor-quality-control. You can’t have all three perfectly; fast, good and cheap…. Prime example, Intuit is fast and cheap, but rarely good.

    Reply
  • On 07-08-2013 at 10:20 am, Andrew said:

    In all due respect your entire commentary is based on assumptions & flawed understanding. CPA Select is Intuit leveraging their brand, not pursuing the lowest price (as you claim). You later say, “All your competitor has to do is lower their price and they will attract your customers away from you.” Again, it’s a brand driven model, not a price driven model, and Intuit through acquisition of Teaspiller has figured out a way to compete against HR Block and their Brick and Mortar store front space/model, again, something you’ve completely failed to recognize.

    You say, “Your customer came for the low price, and they will only stay for the low price. ” Incorrect. The customer came for the branding identity and they will stay if served well. Prices/fees are not fixed, sure, Intuit offers guidance, but the CPA quotes the final price before the service commences. The CPA is in control and turn down a person seeking their service. Also, for the CPAs every client they serve is an opportunity to develop and grow a new client in areas away from Tax Service. What happens is a client initially comes to you for tax service, do a great job and that client may well have you handle their bookkeeping, their tax planning, their retirement planning (if you for example also serve the CFP or CFA space, etc. very common with CPAs).

    Yes, for a CPA, you may have a client ‘on-boarded’ to you through CPA Select and Intuit’s branding. However you have a good shot of expanding the relationship to many service areas beyond the initial tax servicing.

    I like you Mr. Blumer, I think you’re generally insightful and bright…..however….this commentary above is flawed on just about every level.

    Reply
    • On 07-09-2013 at 12:35 am, Jason M. Blumer, CPA.CITP said:

      Andrew, thanks for the comment! I appreciate you reading, and I appreciate you leaving an awesome comment.

      I agree with your first point that Intuit is leveraging their brand. Actually, I believe they are leveraging their brand of selling commodities. They essentially sell software, and can offer a tax return done by end users for the lowest price. I believe that is their brand.

      Your reply is differentiating the brand from the price they sell their products at. I believe how you sell your products, and what price your sell them for is the very definition of your brand.

      Intuit is simply branded as a low cost provider, offering the end user to do their own technical tax, accounting and payroll (and avoiding the accounting profession). That is what I believe. Their advisor network, CPA Select and Pro Certifications are parts of their strategy to ultimately sell their software. That’s not bad, it’s just good to know. Intuit sells software.

      You state, “The customer came for the branding identity and they will stay if served well.” I assume you mean the customer came because of the Intuit name (the branding identity). But I don’t believe that. When selling commodities (which I believe Intuit does), customers choose by price. Poor service can drive them elsewhere, but I do not believe great service can keep them there. Low price is all that drives a commodity-based business model strategy. If the user of CPA Select gets a tax return from Intuit for $200, and H&R Block offers a ‘review of last year’ and a final return for $175, I believe the user will switch to H&R Block, or be greatly tempted to. Regardless of service.

      Andrew, you also point out the ability of the CPA to expand the breadth of services offered once Intuit brings them in. I agree that probably happens. But that is not how you build your own company’s own high-value strategy. As a table stake, Intuit is attracting people based on paying a low price (which I believe you disagree with). If these are the kinds of clients Intuit is bringing to you, then I believe your ability to expand valuable services to the user at substantially high prices is limited.

      Again, this post was about two different business models. Neither are wrong, I just made clear which one I desire (and the firms in Thriveal desire).

      Thanks Andrew!

      Reply
  • On 07-10-2013 at 12:52 pm, Andrew said:

    Mr. Blumer when you say, “[Intuit] …can offer a tax return done by end users for the lowest price. ” That’s an untrue statement and you use that untrue statement as the foundation of your argument.

    Consumers have access to unlimited tax prep shops, enrolled agent shops, bookkeepers, franchises, both brick & mortar and online that are a lower price than what they can obtain through Intuit’s CPA Select program. Example: H&R Block and many other businesses offer free ‘reviews’ of tax filings. That’s not true with Intuit’s CPA Select, a review of a tax filing cost money if you go with Intuit’s CPA Select.

    Also in your argument you’re incorrectly combining apples & oranges. Intuit’s program consist of exclusively licensed Certified Public Accountants who are in control of final price quotes to consumers (though Intuit offers guidance – it’s only guidance, not the final price a CPA has to honor). In Intuit’s CPA select program, Intuit itself has no say and does not control or dictate the price the consumer is quoted. That’s a fact and in itself illustrates it’s not possible for Intuit to have the ability to be the “low cost provider” (your words).

    Furthermore the “Lowest Price” in tax service is generally provided by tax preparers, enrolled agents, and the like and certainly not by licensed CPAs.

    It’s your opinion and you believe “Intuit is branded as a low cost provider”. Mr Blumer, there is no nexus between your opinion and the facts on the ground of Intuit’s CPA Select program – yet for some reason you make this flawed broad leap.

    Intuit, the company you refer to as the “lowest cost” provider is also the company of LaCerte & ProSeries tax prep software. Are you going to argue that with LaCerte & ProSeries is too an example of Intuit aiming to be the “lowest cost provider”? Even on a consumer level, QuickBooks is very very expensive compared to numerous perfectly fine alternatives like Freshbooks or Wave or Outright, etc. and so forth.

    It’s simply incorrect to characterize Intuit itself as a “lowest cost provider” driven company. You know it’s not true with ProSeries, LaCerte, Quickbooks, yet claim it’s true with CPA Select? I’ve had my say, thank you and good luck!

    (I have no affiliation with Intuit or CPA Select, I am a consultant in the space).

    Reply
  • On 11-04-2014 at 2:10 am, Carmen said:

    I started my own virtual CPA firm in January 2014, and used Intuit’s Tax Online (ITO) program for 2013 returns. This week I logged into ITO and saw a link on the side bar titled “Want Clients?” I clicked on it, and it took me to the Intuit Personal Pro signup page. I was doing research on this program (formerly called CPA Select) and came across this blog. Thank you for writing about this topic.

    I was curious to learn more about the Personal Pro program, because I liked that the potential clients were already willing to work remotely. What I didn’t like right away was that Intuit would not give me “the fine print” details of the program. I even registered thinking I would get more information. Nope. They required me to send them a W-9 and background consent form before I could see the contract (which I did not complete). Today I received a call from an Intuit Personal Pro representative asking if I had questions about the program. Yes, indeed I do. I learned that not only do you have to work with their below market estimating for tax preparation, but if you continue to work with a client after the tax engagement you must continue to run it through their platform and use their pricing…for tax planning, bookkeeping, etc. for two years!! The representative would not tell me their estimated bookkeeping rate and said it’s in the contract.

    Based on my research this is the breakdown of what a CPA would get paid through this program for a basic individual tax return – Intuit’s estimated price $90, minus $22.50 (Intuit’s 25% fee), minus $40 the cost of your tax program that you use to prepare the return (ITO cost for an individual return). The net is only $27.50!! Even if you are doing more returns and your tax software costs are much less per return, the most you could make on that return is $67.50. Yikes! You can argue that you can charge the client more than the Intuit suggested pricing, however the client is going to think they are getting ripped off and will just pick another Personal Pro CPA who will do the work for less.

    I completely agree with you in that Intuit’s Personal Pro program is devaluing the work and value of CPA’s. After learning more details about this program I suggest that Intuit is not only devaluing CPA’s in general but is hurting the very market that is building their cloud business…virtual CPA firms, because this program is driving potential customers to have a mindset that remote work is cheaper! This is not good. Yes, I have less overhead than brick and mortar firms, but I’m not charging significantly lower fees. I’m providing the same product (tax return) and am using remote products, so I can be more efficient, more available, and more involved. I use remote products, so I can provide my client’s with MORE VALUE than just a tax return. Why would I charge lower fees?

    I think a program like Intuit’s Tax Pro could be great for a lot of CPA’s looking for new clients and a way to shift clients into using remote tax and accounting systems. However, it’s a terrible program as is because of how they are combining their marketing of this program by using CPA’s to attract customers with pricing so below market.

    As CPA’s we need to protect the “CPA” brand diligently, so we continue to be relevant and valued. I understand that many CPA’s have found this Intuit program good for them, and I respect that. What I don’t like is Intuit marketing CPA’s in a low value, low cost program. I worked too hard for my degree, certification, continuing education, and reputation to be marketed in a program like this!

    Reply

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