Tuesday, April 29, 2008

More on Guarantees

In my last post, I wrote about the power of creating guarantees for your business.

Thank you to Dr. Joe Hwang for his comments and excellent question.

Dr. Joe, a dentists, was wondering how professionals who must operate under the restrictions of a governing body can offer guarantees.

As a CPA, I too have restrictions on the guarantees that I can offer. For example, CPAs cannot not guarantee a tax refund when they prepare a tax return. Nor can CPAs guarantees that a business will receive a bank loan as a result of financial statements that they prepare. However, CPAs can provide service guarantees. They can guarantee that phone calls and emails will be responded to within one business day. They can guarantee that work will be completed within a certain time frame. And, they can guarantee up front pricing.

Professionals can create strong guarantees by looking at a combination of their unique value proposition and the key frustrations of their customers.

Professionals who are still uncomfortable with using guarantees can implement something similar through the use of service commitments, performance standards or a customer’s bill of rights.

The VeraSage Institute recommends The Consultant Customer’s Bill of Rights.

Other professionals offering guarantees in some form include:
Biggs Kofferd, CPAs

Fitchitt & Benedict, CPAs

Michael Anderson & Company, CPAs & Business Advisors

RFCO Services, LLC

Contact your local Principa CPA for tools on preparing your unique value proposition and developing the appropriate guarantee for your business.

Wednesday, April 16, 2008

THE HEDGEHOG CONCEPT

Chapter 5 of Jim Collins’ Good to Great introduces the Hedgehog Concept.

Put simply, the Good to Great companies had developed a deep understanding about the intersection of the following 3 circles within their organization.

  1. What you can be the best at?
  2. What drives your economic engine?
  3. What are you deeply passionate about?

Once a business has their Hedgehog Concept in place, they can plan a strategy and a set of systems all around achieving that goal. One of the strategies a business will want to consider is a guarantee.

In 1993, Christopher Hart wrote a book called Extraordinary Guarantees. In the book he outlines the extraordinary power that guarantees have to help businesses build market share. The book details his research into guarantees and their power to also create extraordinary organizations.

Guarantees give your customers a reason to believe your stated benefits. Customers respond well when a business is willing to stand behind its product or service. Consider this additional fundamental point – Whenever a customer makes a purchase, they take a risk as to whether or not the product or service will meet their needs. When you think about it logically, then the fact that they’re taking a risk can hamper the decision making process. A proper guarantee can reduce or remove the risk.

Consider this guarantee from the Valorem Law Group of Chicago:

“If you’re interested in seeing whether we are right for you and your team, try
us on a manner. What separates us from our competitors is that you have
our value promise on every invoice. If you don’t think we’re worth the
amount you agreed to pay, you make whatever adjustment you think is
necessary. If your other firms don’t walk that talk, it’s time to try
Valorem.”

Sunday, April 13, 2008

Business Performance Measures

Our current system of accounting and financial reporting is based on a model created by an Italian monk over 500 years ago, and the modernized version was created over 100 years ago during the industrial revolution. These financial reports are lagging indicators of how the business is doing, and put an emphasis on cost of goods sold, return on assets, and other historical cost measures. This type of reporting often leads business owners and mangers to focus on the wrong aspects of the business.

Business Performance Measures represent the evolution of the accounting process to create meaningful and predictive measures for today’s modern business structures that tend to rely on human capital rather than hard assets and inventory.

Business owners and managers that incorporate performance measures into their business create organizations that are aligned for achievement. They have a set of Key Performance Indicators that are a collection of financial and non-financial measure that measure results against stated goals. And, they have a set of Key Predictive Indicators that are a collection of financial and non-financial measures that provide information regarding where the business is headed.

Last week, the Santa Barbara Chapter of the Institute of Management Accountants invited C.S. “Bud” Kulesza to speak at their monthly meeting. Mr. Kulesza is recognized across the country as an expert on Business Performance Measures. He provided information on the successful criteria for performance measures, proper goal setting techniques and different types of performance measure reports including benchmarking and the Balanced Scorecard.

I was the only CPA in public accounting in attendance.

Hmmmmmm…

When your CPA has the opportunity to learn more about leading edge accounting models – where is he/she? At the event, or back at the office working on the past?

Thursday, April 3, 2008

Walk the Talk

Earlier this week, a fellow CPA sent me and several of our colleagues a link to a Simple Truths video. Since I am an avid fan of Simple Truths, I was interested to see which link he sent. He sent Walk the Talk.

Two of the statements from the video struck me.
Integrity –
Choose rightness over ease and convenience.

I immediately thought about how CPAs bill their customers.

I wonder, where is the integrity in hourly billing. Is it really “right” to take a customer’s information, rack up some hours, and send out a bill. In this scenario, the customer has no say as to the price until after the fact.

Would it not be more “right” to provide customers with up front pricing and payment terms regarding the services to be rendered?
Courage –
Follow your conscience instead of “following the crowd”.

Currently in the CPA industry, “the crowd” is billing by the hour. Yet, there are CPAs and Chartered Accountants around the world who are following their conscience and providing up front pricing.

Ask your CPA about their core values. Are they “just words”, or does your CPA “Walk the Talk”?