The impact of COVID-19 on firms: An interview with Ron Baker
Q – What lessons do you think firms have learned from COVID-19 so far?
A – Bookkeepers and accountants are needed now more than ever. We are not commodities, no matter what people mindlessly say. Just as the men and women in the medical and first responder community are putting their very lives at risk to keep people physically healthy, accounting professionals will be needed to keep their customers financially healthy.
Q – What lessons should they be learning?
A – The need to change our profession’s predominant business model. If you are still hourly billing, your firm is mired in a transactional relationship with your customers based on inputs, and those are easy to sever when times are tough. Further, there aren’t many strategies you can deploy under this model in a time of crisis, other than the usual ones: reducing costs, capital investments, and talent, or increasing efficiency and hourly rates. The problem is, none of these have anything to do with the actual relationship with your customer.
Accountants are in a relationship-based business. What matters is not the math of the moment, but the lifetime value of those relationships. Too many of our leaders are focused on selling time and transactions, rather than developing deep, trusting relationships that create annuities of lifetime value for both the firm and the customer.
Q – Other than embracing remote work, what’s one major change you expect to see in the profession once COVID-19 is over?
A – There’s no such thing as “remote” work. Work is something you do, not where you go. Knowledge workers are not confined to working in any one place, and it is results that matter, not where they are produced. You can write a book in a coffee house – ask J.K. Rowling. The profession should have embraced the Results Only Work Environment (ROWE) years ago, and perhaps they will now, though I would not bet big on that happening. Too many firms are still stuck in the business model of trading hours for dollars and tracking every six minutes of their employees’ day.
Even more important, this COVID-19 crisis is the perfect time to reevaluate your entire business model and consider adopting one that is relationship-based. Think about how we are all trying to help our favorite restaurants, coffee shops, and other small businesses weather this crisis: ordering takeout, buying gift cards, and supporting them in other ways. But, what if you could subscribe to them? A subscription model provides many benefits, including the following:
- Providing predictable, annual recurring revenue.
- Seeing increased customer loyalty.
- Creating annuities with a lifetime value that far exceeds the cost of acquisition.
- Enabling a transformation: We aren’t pricing a service or even the customer, but rather a transformation, moving the customer from where they are to some desired future state. The customer is the product.
- Ensuring the relationship is at the center of the business in a subscription model, not the scope and type of services.
- Taking responsibility for results – the very definition of a professional – and for helping your customers transform, rather than performing tasks.
- Allowing you to plan cash flow and capacity more effectively.
- Establish a truly “one-firm” model, shattering silos.
- Taking a portfolio approach to analyzing profit, annual recurring revenue, and lifetime customer value, rather than profit per hour, job, or customer.
- Getting paid automatically, with less financing and collection costs.
- Better preparing the firm for a crisis, such as a recession, health crisis, and the like. The companies still growing through this crisis are predominantly subscription-based.
Q – What do you want firms to take away from this Q&A?
A – Similar to the adoption of ROWE, I’m not certain how many firms will actually change their business model after this crisis is over. The status quo is deeply entrenched. The 100-year old business model of “We sell time” is completely archaic and an electric fence around the profession, in terms of attracting the best talent.
If this crisis doesn’t prove that, I don’t know what will. I challenge the leaders of the profession to embrace the vision expressed by the motto of Jeff Bezos’s Blue Origin space startup, “Gradatim Ferociter,” which means “step by step, ferociously.”