A Tale of Two Business Models


A 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.

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