Two respected strategist friends and I had lunch discussing new service businesses. Erik asked how much a person should charge when creating a newer field. Robert responded that there is no magic “price,” but that you should base it on the value you are creating (or saving) the client. In other words, if your services are saving the client $1 million dollars, a fee of $50,000 is not unreasonable, especially if nobody else has your skill set.
Being a CPA/Strategist, The Blue Ocean Strategy popped into my mind. In a blue ocean, you are selling a unique product or service in an “ocean” that was not previously inhabited. If your product or service is offered by others, you are swimming in a red ocean where sharks are eating each other to lower their value and personal worth. These concepts are outside the normal business mentality usually used by CPAs.
In other words, when you swim in a red ocean where you compete by price, you have reduced yourself to the level of a commodity. When that happens, it is time to change your product or service. Even though you might rely on your CPA (as your business consultant) to tell this, he/she probably won’t be able to because they deal in historical financial statements.
Very few people look at their careers in such a light. Their strategy, if they even have one, is sometimes to do what someone else has done, but cheaper. Sure, you can say they want to perform “better service,” but even that has limitations. As a CPA, I have seen companies wither away because they cannot get out of this commodity rut. Eventually they lower their prices so much, they lose sustainability.
So in this economy when everyone is changing so quickly, what can a person do in business? One way is to follow Jim Collin’s business suggestion, The Three Circles of the Hedgehog Concept. One circle is “What you are deeply passionate about,” the second, ” What drives your economic engine,” and third, ” What you can be the best in the world at.”
Consulting as a CPA, I have found these circles to work with personal careers, not just businesses. Where the “hedgehog” part comes in is the hedgehog outsmarts the fox by just doing one thing: rolling up in a ball. The fox is very intelligent and tries many things, but the hedgehog just does one and survives.
But what is the intersection of the three circles? Jim Collins could say that it is the Big Hairy Audatious Goal mentioned in his Built to Last book.
I am not saying that the metrics that you CPA provides to your company are not valuable. But, these are indicators of whether you are following your vision. You need the vision, the strategy, the tactics, and then the benchmark metrics. To do otherwise is running your business blindly.
As a CPA, I tell young business and individuals, that you must find your Blue Ocean before waisting money on a business plan. To dive into a Red Ocean is an hour glass for failure. Once you find your Blue Ocean, you can measure your value to the client and adjust your fee accordingly.