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Ron Baker

Ron Baker is a writer, speaker, educator, and recovering CPA. He is the author of seven best-selling books, most of which cover economic topics—specifically, value and pricing. In this episode, Ron and Chris dive deep into value, pricing, and the relationship between the two. Ron shares some great stories that clearly illustrate why value is determined by the utility it provides the consumer.

What makes something valuable?
What makes something valuable?

What makes something valuable?

Ep
183
Apr
06
With
Ron Baker
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Cost does not determine price.

Ron Baker is a writer, speaker, educator, and recovering CPA. He is the author of seven best-selling books, most of which cover economic topics—specifically, value and pricing.

Throughout history, value has always tied itself to labor. These many work hours cost this many dollars, also known as billable hours.

The counter to this method is value-based pricing. This thing costs this many dollars because it is valuable to you.

So, which is correct? Which is fair?

In this episode, Ron and Chris dive deep into value, pricing, and the relationship between the two. Ron shares some great stories that clearly illustrate why value is determined by the utility it provides the consumer.

They also discuss the concept of subscription-based pricing and why that model may find its way into everything from cars to creative services.

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Episode Transcript

Ron:

The fact is if you don't know the job that you're quoting or bidding on or filling out an RFP for, then possibly, maybe you shouldn't be doing it. I don't want to go to a heart surgeon who dabbles in it on the weekends. We don't hire firms or agencies or professional firms for a wide array of full service offerings. We hire them for so on things specific.

Chris:

Before we get started in today's podcast, I want to thank a mutual friend for connecting us together. Hector Garcia, for which, if you didn't introduce us, I would not be speaking to my guest. And also for author Blair Enns for introducing me to you Ron in his book, Win Without Pitching Manifesto. On today's episode, we're going to be talking to CPA, Ron Baker. Who's got a mission to once and for all bury the billable hour and time sheet in the professions. He's a speaker, writer, educator, and he is also the host of a radio talk show called The Soul of Enterprise. He's the author of seven bestselling books, including Professionals' Guide to Value Pricing, The Firm of the Future, Pricing on Purpose, Measure What Matters to Customers, Mind Over Matter, and my favorite Implementing Value Pricing and The Soul of Enterprise. Ron, for people who don't know you, can you please introduce yourself?

Ron:

Wow. Ron Baker, recovering CPA, started my life in a Big eight accounting firm. And by the way, Chris, I'll tell you carbon data CPA. You listen to what they say big eight, big six, big five, big four, well, I'm big eight. So that gives you a sense of the era I'm from. But I knew I wanted to be a CPA at 15. So went through college and got my certificate, worked a couple years in public accounting then went out, started my own firm. And it was there that I realized that billing by the hour was a really crappy customer experience. And so in 1989, me and my then partner, we just decided, you know what, we're going to do fixed prices. There was nobody out there talking about it, at least in the professional space, there were no books, there were no courses, no consultants ever advocated it.
Everybody was into the billable hour and the time sheet. And we just said, this is a crappy customer experience because the unpredictability of a price is just unacceptable. It just goes against everything we know about how consumers buy and how humans buy. We want to know the price before we buy so we can make that all important value, price comparison. And we just started doing it. We made every mistake under the sun, but it was a customer service that got me into this. It wasn't the economics, I got into the economics later, as you see in the book, but it was really customer what we now have to call experience but back then we called it TQS, total quality service. I was studying companies like Nordstrom, Lexus, Disney, L.L.Bean, FedEx, I wanted to emulate their customer spirit, their customer service spirit. And that's why we did it and it worked great.

Chris:

Wonderful. There's so many things here I want to just dig into a little bit. You said at 15, you knew you wanted to be CPA, that's unusual for a lot of different reasons to have that kind of clarity, but why CPA? What is it about your life and your life experiences that told you this is what you needed to be?

Ron:

It probably goes back to middle school. So ninth grade for me, probably sitting at my dad. My dad was a barber. So I learned business from the inside of a barber chair, essentially. And we were sitting at the kitchen table and I was pretty good with math and I would help him fill out his deposit slips because I could add really fast. And I saw an envelope there and it said Pisenti and Brinker, certified public accountants. And I looked at my dad and I said, "Dad, what's a certified public accountant?" And he said, "Somebody who charges a lot of money," and that stuck with me. And so when I went into high school, had a great accounting teacher, his name was Angelo Cataloni, and he had a two year, not just a one year, but a two year accounting program, which I did. And then the third year I was his teacher's assistant. He would bring in CPAs. He taught us how to do taxes so I started the tax business in high school. I started an accounting practice in high school.

Chris:

Oh my God.

Ron:

I did my dad's books, I did a bunch of his friends. I represented people before the IRS, all at 16, 17 years old. That's how I put myself through college and I was doing a time sheet because every CPA I talked to said, well, you got to track your time. You got to have an hourly rate, blah, blah, blah, blah, blah. Get into the big eight, do a time sheet, hourly rate, never questioned it until I started my own firm. And then I said, this is the most ridiculous thing I've ever seen and we changed it.

Chris:

Now, I know your background is as a CPA and you also minored in economics. In the book and I love the book and I tell people when anybody's willing to listen to me, you need to read the book, Implementing Value Pricing. And the reason why is because every single page, it feels like I need to stop, pause, reflect, write down, understand, process. And it's that kind of book. And it's a little intimidating, I have to say, for a number of different reasons. One, is it's listed as $85 on Amazon, which is pricey for a book. But I got to tell you what's inside is worth 10X that, maybe 100X that, if you implement just a few of the key ideas and concepts. And for people in my world that are in the creative services space, the ideas that you talk about in the book are so counter at what we've been taught in our lives.
It is so revolutionary for people in the creative space to think like this. And I want to tackle some of that. And the reason why I want to do that too, is because I've been talking about getting away from an hourly billing. And to my surprise people in my own community, they call me all kinds of names, not very nice names. And I'd like to adopt some of their attitudes for you to be able to address so that I can then just point to them and say, look at this video, listen to this podcast and you're going to be set. Don't even take my word for it, take it from a person who's lived in this space who is as qualified as anybody ever to speak about this. And so can we jump into this?

Ron:

Oh sure, sounds fun.

Chris:

So here's the thing is that for whatever reason, I think historically speaking, and I think you talk about this in a book is that value has always been tied to labor. Tell me about that thought and then please guide us through this process.

Ron:

Right, I think in medieval English acre, the word acre was how much land you could plow in a day or something or in a morning? Yeah, we've always tied labor to value. This goes back you can read things out of Aristotle and Plato on this concept, but the person who really put a framework around it was Karl Marx but basically positing the labor theory of value. That basically said, look, the value of anything, a commodity, a product, or service is solely determined by the labor that goes into it. Well, okay, that's an interesting theory. The question is, does it explain how you and I spend money? So if Karl Marx was right then a diamond or a rock found next to a diamond in a mine would be of equal value. After all, it took the minors just as much time and billable hours to find the rock as it did the diamond.
But yet, I don't see many rocks in jewelry store display cases. Raw land that has no labor and it trades every day for a fair market price. It's got no labor. If Marx was right, then the 20th slice of pizza that you eat or your 20th tequila shot should be just as valuable as your first or your second. Well, obviously over time as you consume more, it becomes less valuable. So marks didn't take into account the customer. He only looked at it from the labor side and said labor hours. So it was really overthrowing that theory. And when you replace a theory, you got to go somewhere. And the only place to go from one theory is to another theory. And so the correct theory of value is the subjective theory of value that says no, no, no, no, there's nothing intrinsically valuable about anything except human life.
Let's put that aside, we're talking commodities. There's no such thing as intrinsic value. People challenge me on this all the time, what about gold? What about Bitcoin? It's got no intrinsic value. If tomorrow we learn that gold was, I don't know, a carcinogenic, its value would drop to zero. There's nothing intrinsic about value inside of a product or a service, it depends on the utility it provides to the consumer. So I think I was the first guy to really pull out the labor theory of value and equate that to the billable hour. And that branded me a heretic. I mean, I got a lot of enemies because of that call, basically, essentially, you're calling business people, your fellow colleagues, Marxists.

Chris:

And it's a hard thing to get around because we continue to look at it from what we put into something versus what the customer gets. And this is a big part of your book, because this isn't necessarily a blueprint on how you can take in reams and reams of money. It's really about how you can create greater impact and transformation for your clients and amount of money that you're able to bill because of that is based on the impact that you create. I want to get back to this thing about this labor theory of value. So a common argument that's made within my community is this, is that well, and it seems to make sense from their POV, the harder it is for me to do something, the more valuable it should be. It feels like that, right? So if I have to get a degree to be able to practice something or a graduate degree, I put in a lot of time and energy and therefore my price should be higher.
Seems like that seems reasonable. And if I really work on a piece of design, a drawing, a blueprint, it takes me a year to design for a client, it should be worth a lot more in theory. So the example is something like this, a logo is relatively simple to create. You have some software, you pick out a nice typeface, you might tweak it a little bit. And so they think then it has a very low market cap. And so when I tell them large corporations like something that you mentioned, Nordstroms, FedEx, they pay a lot of money for that logo. They can't understand this. So can you do a little deeper dive up and just pretend like I'm one of those creative people that are like, no, it's unethical, it's immoral to charge more than $400 for a logo because that's all it took to make.

Ron:

Yeah, this is really interesting. And this again goes right back to the labor theory of value versus subjective. But basically when you really look at the chain, costs are determined by price. So price justifies the cost that a business can expend. So I'll give you an example, take a manufacturer that makes hats and coats. Well, we all know the coat's going to probably be 10 times the price of the hat. Is that because it costs the manufacturer 10 times more to make the coat than the hat? No, it's because consumers value the coat 10 times more than the hat. They're willing to pay a price that justifies the business spending the costs, the additional costs, to make the coat. And so just like going to med school, people go to med school because the value of a doctor is so high people are willing to pay a price that justifies their human capital investment going into debt, buying insurance, all the things doctors have to do.
So I think this is one of the hardest things for people who bill by the hour to get their head around. But cost does not determine price in the real world, price justifies cost, because if it was true that cost plus say a profit margin. And then that determines a price, if that theory explained the way the world works, cost plus pricing, then no business would ever go bankrupt. After all it doesn't take a rocket surgeon to put a price above a cost, right? Yet, why do businesses go bankrupt? Well, because value is subjective and customers change their mind on a dime. And one minute we're fondling our iPhones and the next we're off to something else and you changes because it's completely subjective, it's in the hearts and minds of buyers. It has nothing to do with the effort.
I mean, the books I've written, Chris, if I spent 10 years on them and didn't sell one and then ran around with a cheeseboard sign on me and said, you don't understand how hard I worked on this. Nobody cares. It's what have you done for me lately? What's the utility? What's the value for the customer? Stop boring me with your internal costs, your efforts, your struggles, I don't care. I care about the outcome. Nobody cares how long it took Toyota to build their car.

Chris:

So is it too far to say that then those people who are fixated at what it costs them to make something, the labor that they apply to something irrespective with the context and the value to the buyer, that they're actually being selfish and myopic in understanding this?

Ron:

That's a great point, I believe so. I believe people who engage in cost plus pricing, think the world owes them a living. Because I've got overhead, because I signed a lease, because I've hired employees, because I bought equipment, you have to pay for my costs. Plus give me a decent profit. Now, we can argue over that profit margin. But yes, I do think it's an entitlement. There's an entitlement mindset to it, whereas in the free market, you got to produce value. Your customers are the ultimate sports fans, what have you done for me lately, right? And if you don't provide that value, then they decide which businesses go out and which businesses don't make it. You got to please the customer.

Chris:

I love that. It's a nuance way of looking at things. And I hadn't heard this before that if truly value is equated to cost plus profit, then why do companies go bankrupt? It's because sometimes, and actually often is the case, it costs you more to produce something and more labor involved than what the market is willing to pay for something. This happens all the time with cars, with real estate, with everything. And I love that and I want to talk about it a little bit more before we get into the solutions, because I think people are really in love with this idea of labor and value, right? Another question I had for you is if the idea of labor is attached to value, how does one explain luxury goods?

Ron:

Oh, you can't, you can't even explain Apple. I don't think it costs Apple much more to produce my laptop here that I paid, I don't know, $3,500 than it does for HP or Dell, right? Sure, there may be some cost differential, but it ain't a lot, certainly not with the iPhone or the iPad. Yet, why does Apple have such command and pricing power? And they can charge five times, seven times more than Dell. Why does Disney command higher prices then amusement parks that are right down the street, SeaWorld, Universal Studios. I mean, there's a ton and what is it about these companies? Well, it's because they're focused obsessively on value to the customer and the customer experience. And that's what gives them that pricing power.

Chris:

Yeah, so I guess you're you're right. So assuming that we're fairly rational, logical creatures, that you have two similarly spec laptops, one from Dell, which is drastically different in price than Apple. So why does a rational person say same processor, same amount of RAM, same video card, why would I be willing to pay maybe $800 premium? Or maybe even more for something that has a logo on it that looks like an Apple? What is the psychology behind that?

Ron:

Yeah. Well, I think it shows you the power of brands. People say brands are dead, I think that's the furthest thing from the truth. I think brands are important, they represent a promise as you know. I think, the price does reflect something about how the company perceives its own value, right? You never see Apple go on sale, you never see them offer Mayday parade sales or something. No, because they keep their pricing integrity aligned with their value. You never see Apple justify price increases because their costs went up. Every time I read in the paper and now every day now you can read stories, Starbucks is raising their price because the cost of coffee went up. Well, I'm sorry, I'm the customer, I'm not Starbucks' cost accountant. I don't care about their internal cost, stop boring either. Either just shut the hell up and raise the price or don't sit there and try and justify it on cost because I don't care about your cost. And dear Mr. Starbucks, I'm not buying your costs, I'm buying a great cup of coffee or whatever it is or a place to go.

Chris:

I'm glad you corrected it as all the coffee efficient adults' like woo, spitting out their coffee.

Ron:

No, I know, it's a third way, the whole third way thing between home and office, yeah.

Chris:

Right. So for you make the determination on whether the cup of coffee from Starbucks or anybody else is worth it to you. So at some point they're going to raise that cup of coffee to a price point which you're like, you know what, the experience, the feeling I get, the great place to go, the friends I might bump into, it's just not worth it to me anymore. And you the buyer, you get to determine the value to you, right?

Ron:

Absolutely. And Starbucks has to continuously test that and see how price sensitive their customers are and what the effect is on demand if they were to raise the price. And trust me, they know that, they study that continuously. I mean, it's a continuous process, but the point is that when I walk into a Starbucks and spend five bucks on a latte, I only did that because it was worth more than $5 to me. Because if it wasn't, I could have stayed at home and made a cup of coffee for a dime. And yeah, Starbucks coffee is good, but is it 50 times more valuable than what I can make it home? No, so really what's going on is anytime you see a transaction, both the buyer and the seller are making a profit. And how do we know this? Is very simple, it's that double thank you moment. You get the coffee, you hand over your five bucks, you both say, thank you. If you both didn't think you were profiting from that transaction, wouldn't one person say, you're welcome.

Chris:

Right, I love that, the double thank you. So is it then possible for such a thing to exists as an unfair price?

Ron:

Yeah, this is why I have an ethics chapter in all the pricing books I've ever written, because this, the just price has been again, go back to St. Thomas Aquinas for this and a bunch of Greek philosophers. I think a just price is one that buyer and a seller freely agreed to. Now, it's easy for a third party to come in afterwards and say, well, that was an unconscious of a price or you took advantage of the person. Obviously, if there's fraud, coercion, violence, anything like that, that's an unjust price. Obviously, if there's price fixing or any violation of antitrust, that's not a fair price. But the problem with fair is there's no definition of fair. It's what a willing buyer and seller agree upon. I remember we had Reed Holden on who's one of my pricing mentors on our show.
And he was complaining that he was at his second home somewhere throwing a big party and his ice maker went out on the refrigerator. And he called a repairman and the guy said, well, oh, I can come out same day, couple hours, but it's going to be $300. And he thought that was unbelievably unfair. And I said, "Did you pay it?" And he said, "Well, yeah." Well, then by definition you must have thought it was more profitable than the $300 you paid them. So, no, I even would go so far as to say anti-gouging laws are a stupid policy, after hurricanes, because prices send signals about how we allocate resources.
And when you've got a hurricane and you need lumber and generators and water and pop tarts, and other things, the only way to incentivize the person sitting on the couch in Ohio to get up from the football game and get in his truck and drive overtime down to a disaster zone is if the price goes up high enough to justify those additional costs of paying him over time and all of that. So, no, I think it's a fair price is what takes place between a willing buyer and a willing seller. I call it capital stacks between consenting adults.

Chris:

Okay, all right. I want to go back to your statement, pricing sends signals. So when we go and buy something, theoretically a commodity, and we look at something that costs a lot less and something that costs a lot more from the buyer's perspective, what signals are being sent to them? How are they receiving that?

Ron:

Well, that's an interesting question because if you're talking about comparisons between companies or comparison within the company, most companies will offer us three options, right? I just bought an Apple watch and I heard there's the Apple, I don't know, SE five and seven, right? And then of course there's options within each one of those. So that's comparison within companies, but between companies, economists love to see markets that have a wide array of pricing. Think if that didn't exist in restaurants, either everything would be McDonald's or everything would be Ruth's Chris and there'd be nothing in between. Well, that's a healthy, dynamic, robust market. We'll have a panoply of price points and value propositions. Just look at the hotel industry with all the different brands, Hilton Garden Inn, or Marriott Courtyard, or whatever, all the way up to Ritz-Carlton and Four Seasons, that's a healthy market.
So we like to see wide variations in price points. And then that means the business is going to have to figure out where they position themselves. Are you a Ruth's Chris, or are you a McDonald's? And by the way, as Tim Williams taught me, my guru when it comes to the marketing world, is your brand can only stand for one thing. So you can't be Ruth's Chris and McDonald's, stop trying to be all things to all people. He's a big believer in niching, putting yourself in the box, specialization. And by the way, he did that campaign, "what happens in Vegas stays in Vegas," which of course changed the zeitgeist of the culture. I mean, movies were made in that title. They put together a clip, a five, six minute clip. I've seen it, of comedians, late night comedians.
All right, [unintelligible 00:23:10], I don't know at the time, I forget who was on Johnny but around the world using that, what happens in Vegas stays in Vegas as some type of joke. And when I first met Tim, I believe in 2003, I had read his first book and I looked at him and said, "I just, I have one question, Tim, how did you price that campaign?" And he looked at me and then almost looked down at his shoes and just embarrassment and said, "By the hour," and I said, "How much money do you think you left on the table?" And he said, "Millions," they're still using it. I think it was the Las Vegas Convention bureau or something that they did it for.

Chris:

That was a great story, I love that. That goes back to some of the points that you were talking about, which is why we have this practice, this mindset around our value in billable hours. There's something here that I wanted to just kind of dive a little deeper in, which is Seth Godin wrote this book called All Marketers Are Liars. And we, as the buyers of the stuff are complicit in the lie. When we pour an expensive bottle of wine or a Brandy into a very expensive glass, we tell ourselves that it's going to taste better. When we go to an expensive restaurant or amusement park and we pay more for it, we tell ourselves this is worth it. Otherwise, we wouldn't pay for it like your friend who had his refrigerator repaired. And so one of the things that I like to talk about is if you want better clients just charge more because the clients are going to say, you must be worth it. What are your thoughts on that?

Ron:

Oh, I think there's some definite truth to that. I mean, high prices send a signal that this is... I got to be high quality, right? It's a heuristic we all use, even when we're comparing something within a company, like back to the Apple iWatch, I figure, well, the Apple seven is the $700, $800 watch. It's the most expensive, it's got to be the best. It's the latest technology. It's the fastest. It's got the most features, blah, blah, blah, blah, blah. So that's a heuristic that we all have high price equals high quality, great experience, whatever it might be. We need to tap into that, but we also need to deliver, right? And it's got to be consistent with our positioning and our strategy and our purpose. There is nothing wrong with being a low price leader. It is a incredibly viable business model. Costco, Walmart, Southwest Airlines, H&R Block, McDonald's, we can go down the list of companies that don't necessarily compete on price. But offer kind of, what's called penetration pricing, where they come in really cheap. And that's very viable.
Problem is in any one industry, there's not room for a lot of those folks. And it's a completely different business model. They have to be completely efficient, they have to constantly be on the lookout to save costs. And then not only save costs, but then pass those savings to their customers in the form of lower prices. And that's a tough way to live. And I think it's no way to live for people in knowledge work where it's creativity and we're selling our minds, not our hands, we're not making a product necessarily. We're trading an intellectual capital, we just can't do that because we're not machines.

Chris:

Okay. One more question in regards to this mindset, you've written that value is subjective and that price is contextual. So if you interpret that, it means that you price a customer and not the job. So charging someone based on what they can afford, the relative impact it'll make on their business, it sounds like charge rich people more, charge poor people less. Is that the idea? And if that's the case, is that immoral and unethical?

Ron:

Well, no. When you look at price discrimination is as it's called and I mean that in the purest economic logic to a vernacular sense, that term has been around since the 20s. So there's a lot of scholarship on it. If you look it up, Google it, you want to Google price discrimination, you'll see it's got a rich history. And if you think about it without price discrimination, the ability to charge different customers different prices, irrespective of cost to serve those customers, there's incredible welfare effects to an economy from price discrimination. If it wasn't for price discrimination, you wouldn't have seen your discounts, you wouldn't have coupons. You wouldn't have children getting into Disney for cheaper or flying on an airplane cheaper. You wouldn't get expensive drugs into poor countries at cheaper prices because we price the richer countries more. So I think there's enormous welfare benefits from price discrimination.
And when it comes to a business, my guess is you're probably not serving the poor and the rich. Now, you may be servicing businesses that are in startup phase with no money and more well established companies or more profitable steadily and all that. But I do think you have to take into account the customer's situation and their context for value, otherwise, how do you know if you can even adequately service them, right? If I go to a general physician and say, I need heart surgery, he's not going to be able to help me. He's going to refer me to a specialist, blah, blah, blah. But it's just, if you're staying in your lane, then you have a very well defined customer. And I don't think the price discrimination is that big of a deal. You're still going to have variations in prices because different customers are different, but it's just not that big of a deal. And I don't think there's anything immoral about it.

Chris:

Okay. So if I'm listening to this now, I'm like, okay, Ron makes a great point. I've been looking at this all the wrong way. I've been focused too much on this very self-centered idea of what it cost me to make in the labor and what I should charge. What is the path forward? What should I do next? How should I look at this? If I'm not going to price based on labor and effort in the billable hour, what should I be doing?

Ron:

Well, if you follow value pricing, you price the customer. So you have a value conversation and then Blair in's book, he's got a great... I think he's got a three step process to the value conversation, which I think is brilliant and works really well in your space. And just make sure that you understand what it is the customer is trying to achieve. So I'll give you a real quick story. I need a landscaper, I've been in this house for 20 years and I think I've been through about a dozen landscapers, okay. They frustrate me to no end. I can't even begin to tell you. And I go and I find three landscapers, talk to neighbors, oh, try this guy, try this. So they come out to look around, give me a bid. First guy gets out of his truck, he's got clipboards walking around the place, checking the backyard, checking how big the lawn is and the trees and the shrubs and all of that.
And he says, "Ron, we can do this." He says, "We'll be 40 bucks an hour. And we'll come out once a week. And we're 40 bucks an hour." Now he's pricing me based on inputs, right? Pure case of he's selling me his costs. And of course it leaves me with more questions than answers because I'm thinking, well, you're going to send a bunch of eight year olds out here and mow my lawn with a BB gun. How long is it going to... It puts my mindset right away, well, how long is it going to take? I don't care how long it takes, when I'm trying to get at is a price. The second guy comes out, gets out of his truck. Same thing, he's got a clipboard, these are pros, they know what they're doing.
They're scoping the job, they're pros, they've seen a million yards. He walks around, he looks at me at the end, he says, "Yep." He says, "We can do this. We'll do the edging. We'll do the mowing. We'll take care of the bushes and the trees, $100 a month." Okay, he's not charging me based on inputs, he's charging me based on outputs. He's giving me a defined scope of work, if anything pops up outside of that scope, I'm sure there would be a change request and okay, that's good. That's a step up from the input guy. The third guy comes up, gets out of his truck. He's got a clipboard too, but he starts talking to me. So Ron, tell me about yourself. Well, I'm a consultant writer. I travel a lot. Yeah, you're not home a lot.
This was Pre-COVID, and I said, "No, I'm not home a lot." And he said, "And I take it you're not Martha Stewart. You don't enjoy yard work." No, I hate yard work. I'm absolutely bored with my yard. I don't want to think about it. I don't want to have to look at it. I don't want to see a dead shrub, dead tree. Don't make me even think about it. If it hits my radar, you're in trouble. That's why I've been through 12 of you people. And he said, "That's very frustrating." He says, "Why did you fire so many landscapers?" I said, "Because I have to go out and tell them things. And I'm not home a lot, I'm on the road 200 plus days a year. So if I happen to be home, when they're there, the once a week that they're there, it's kind of like every Halley's Comet happens.
I have to go out and point to a sprinkler that's not working or a tree that's dead. Why? They're the pros, they're out there. They should just be able to fix this and not bug me about it. He said, "Yeah, it's very frustrating." So he looks at me and he says, "I'm going to give you three options." He says, "I can provide you with basic maintenance," basically the scope of work that the output guy gave me. And he says, "And that's $150 a month." He says, "Or a middle package is I can bring your yard up to neighborhood standards so you stop getting nasty letters from the HOA and that's $225 a month. Or if you go for our top package, I can give you the best curbside appeal in the neighborhood. And over time we will upgrade, we will plant new bushes and new trees and we'll do different landscaping. And that's going to be $300 a month." And that three times more than I'm paying now, at the time I was confronted with this decision. Which guy do you think I hired?

Chris:

Without a doubt guy, number three. But which option did you pick?

Ron:

Best curbside appeal. How did he know that? He asked me what my intention with this property was. I want to sell it in a couple years, bingo. If he didn't know that, he wouldn't have put in pro... He might have, he still might have put it in there for an anchor. But I will tell you if he goes next door to my neighbor who loves yard work, that's going to be a totally different value proposition. That guy does care, he's out there every day fiddling with his yards. So he's probably going to hire the landscaper to do specific things, or maybe just one thing. That's a totally different value proposition for me. Why? Because value's subjective and context matters. But here's the moral of the story, I know it was a long-winded story, but I'm paying three times more to this guy. He's slowly upgrading my yard.
However, he's not doing this upgrade all at once. And I'm a happier customer and I'm paying three times more than I was and I'm happier. What better win-win situation could you fathom than that? And I believe that all of the people who listen to you in their business, they have the same best curbside appeal. There's a best curbside appeal for every customer. It's going to be different, but it exists, find it. And the only way you uncover it is through that value conversation. And that's why the value conversation, I think Blair calls it the closest thing that business has to religion, because you need to be in the choir every week to really practicing, and get good at it, it's an art. But it's really important because if my expectations are too high as a customer, or you're not the right provider for me, whatever, you have to figure that out as the professional.
That's why I always quote the second law of medicine, prescription without diagnosis is malpractice. And we tend to just dive into the work as professionals because that's our comfort zone, that's what we're good at. We just want to get going on the work. Lawyers do this, accountants do it, and it's wrong, you got to take a medical history, you got to do diagnostic tests, you got to have that value conversation to figure out what their expectations are. Because if you don't do that, it's the equivalent of me going to a contractor and saying, build my dream house. Well, what the heck do you mean by a dream house? Where are your architectural plans? So the value conversation are the architectural plans.

Chris:

Time for a quick break, but we'll be right back.

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Chris:

Welcome back to our conversation. I want to ask you a couple of questions or at least confirm a couple things. In this situation of the third landscaper, they needed to understand your pain point. I travel a lot, I don't want to deal with any of this, you guys should do your job and be professional. And they also found out that you're interested in selling your house. And they tied at least in some degree, although it wasn't illustrated an example in that curbside appeal has a lot to do with property value or at least the way that we perceive it. That's why it's called curbside appeal.
And so then once he knew that, he was able to kind of understand your needs and your threshold of the pain and price, and he gave you multiple options, which I believe allows you to say, okay, of these things now have context. I know what the cheapest option is, I don't want that. I know what the middle option is, and that sounded pretty good. But this other thing where you anticipate my needs and you are a collaborator in the curbside appeal department here, I liked that a lot. And for me, I'm speaking for you there, 300 bucks, even though it's three times as much as you were paying before was solving your problem. Did we get this right?

Ron:

Yes. I should have said the third guy's charging me based on outcome. It's actually what I like to call transformation. He's actually transforming me from somebody who has a decent yard, but wants to take it to the best curbside appeal. So he's charging based on the outcomes. The other thing is, I don't think he's just solving a problem. He is solving a problem and we professionals we're great at solving problems, but I think we get too hung up on pain points and solutions to problems. And Dr. Peter Drucker makes this point is absolutely we profound, if all we're doing is solving our customers' problems, we're just reverting them back to the status quo. We're not progressing them. And this guy's progressing me, he's giving me best curbside appeal. So yes, he's solving my problems, but he's also helping me pursue opportunity.
And I think all professionals across all professions, especially marketing, build brands, do logos, branding power, and pricing power, and all of that, we help our clients achieve their dreams. We really do and we don't talk about that enough. We're too busy focus on what you're paying, why do you stay in bed in the morning, type of thing. And I don't think that's a good enough language. I think our language needs to encompass, we're not just problem solvers, we're possibility pursuers, or some type of language that indicates that we do more than just revert you back to this status quo.
The other thing is if I move after selling, assuming I stay in California, which most people don't, but assuming I do, who am I going to hire for the new place? Now I might slide down to his middle level but that's still two times more than I was paying the prior guy. Noticed that all his prices were more expensive than every other landscaper? Well, the hourly guy, I don't know, because he could have piddled around, right? And charged me a fortune. But that shows you that if you frame and articulate your value well, you can command premium prices.

Chris:

So alliteration to sign, the possibility pursuer is that also the same concept as some desired future state? He's able to help you and him realize this.

Ron:

Yeah, that's the goal of the transformation. When you're providing transformations, the customer is the product. It's not about my yard work, I don't care. In fact, he's coming out tomorrow. Usually I'm on a podcast or something like this, I don't want him here very long because they make a ton of noise when they're out here. So I don't care about the labor, I care about that he's slowly but surely upgrading me to best curbside appeal, a desired future state. That's what we need to get from our customers, that's what I mean by best curbside appeal. So I'm glad you said that, future desired state.

Chris:

Yes, okay. So there's an interesting thing that happened in this illustration. The first one where the person came out, looked at your yard and ultimately just told you their hourly price. So then it begs the question, did they even need to come out? Do they even need to look at the yard? Why not just tell you, you want to hire me, it's 40 bucks an hour?

Ron:

Right, it's a great question. Maybe they just wanted to make sure something, or maybe they have different hourly rates. And they think that's a form of price discrimination, depending on how big the yard is or how nice the neighborhood is. Could have been a million things, but it's not sophisticated pricing. And I see this in the trades a lot, I'm amazed by it. I had my house painted a few years ago and I've got a ton of windows and it's a big two story house. And when I had three quotes and not one of them, not one of them offered me options. And that is such a serious mistake. You've got to offer your customers options because it changes the frame of mind and the customer from, should I work with Chris to how should I work with Chris? And that's very, very powerful. And if you're not offering options, then you're not doing that. And this is why every business on the planet gives us options, except businesses that build by the hour.

Chris:

It's the opposite. It's like a bizarre world when it comes to people in the professional services space, right?

Ron:

Yep.

Chris:

Where everywhere else we have pricing certainty and we have pricing options. And we understand that we participate in that. And then for some reason, when we enter into our own business, we put on a special invisible helmet that says in this world, those rules do not apply. And we're asking our customers all the time to say like, okay, so I have no idea how much this is going to cost. I know what it's going to cost you and I have no certainty of outcome. And you want me to sign on the dotted line, why would I do that? But that's what we're asking people to do.

Ron:

It is,

Chris:

It sounds pretty insane.

Ron:

And you've probably heard this from your detractors, but, well, I can't possibly give a fixed price because there's so many things about an engagement that I just don't know, or the customer could change their mind or we could have scope creep, whatever. It's like, listen, if I'm on the stretcher and being wheeled into the ER, the last thing I want to see is the surgeon standing over me going, oh, wow, look at that, I've never seen that before. I mean, the fact is, if you don't know the job that you're quoting or bidding on or filling out an RFP for, then possibly maybe you shouldn't be doing it.
I don't want to go to a heart surgeon who dabbles in it on the weekends. I want somebody who does this for a living, has done it a million times, knows what they're doing. I think that's a function of positioning and specialization and all of that. Because let's face it, we don't hire firms or agencies or professional firms for a wide array of full service offerings. We hire them for something specific and we want the best in class and we need it.

Chris:

Shots are fired. You're opening up another can here, which I'm in the same camp as you as whether you should specialize or generalize. But if I were to say, okay, Ron, I hear you. I believe in you, I believe in this idea. You're preaching to me, I get it. I'm feeling the faith, the spirit move in me, but I'm a new person in a business. So what am I supposed to do? Do no business, or is there a way that I can progress from one model to the next?

Ron:

It looks, it's a great question. And we've all been through this and I'm the worst defender. When I launched my practice, I was young, hungry and the customer criteria was, do you have a checkbook? And the mirror test, if I put a mirror in front of you, does it fog? And if you met those two criteria, then you were a customer, as far as I was concerned. I didn't care anything else. Now, even if the mirror didn't fog, CPA, so we can still do some estate work. But what happens when you have that mentality of taking every dollar, chasing every customer, I've never met a billable hour I didn't like, which is why, because our business model incentivizes activity and it incentivizes billing to time. Then we're going to look at every possible hour as a good thing, even though we all know not all clients are equal.
What will happen over time is you'll get a practice of very low value customers. They'll refer other low value customers, other price sensitive customers. And if you're in that situation, there are some strategies that you can do. But if I was starting over, I realized that if you specialize, it could be slower growth, but it's going to be more profitable growth. And it's going to enable you to have a bigger impact. I remember a guy who started a CPA firm with nothing, and all he did was breweries. And today he has breweries around the world. Why? Because he speaks at their conferences, he writes in the magazines that they read, he pushes out content that is really, really relevant to a micro brewery. And so he's perceived as the expert. Now, it took him a couple years to build it up, but he was able to build it up. And I think with the internet now and all the technology we have, you could probably do it even quicker.
But when you think brewery, you think this guy, and that's the kind of positioning in the market that you want. I mean, Chris, you and I will fly to Rochester, Minnesota to go consultant an oncologist that deals with a specific type of cancer that we might have been diagnosed with. We're not going to do that for a general physician, we're going to Google our zip code. So when you're a specialist, you attract from a much wider geography, if not the whole world. You work on more interesting cases and you can charge higher prices because you're perceived as delivering higher value.

Chris:

Okay, and there's so many different ideas here. And I'm trying to imagine myself as the person who's still holding on with their fingernails to these old ideas. For whatever reason that their mindset, or maybe a set of limiting beliefs tells them that this not possible, I can't choose a field to specialize in because I'll lose out on customers. I can't ask the customer for more money or to value based pricing, because that doesn't work. You talk about this in terms of self-esteem as a big part of pricing. Can you expand on that?

Ron:

Yeah, self-esteem, this is something that I learned early on after teaching this and publishing my first book was that I would get those types of reaction. I think a lot of professionals really question their ability to add value. And I think that's a self-limiting belief, obviously. I mean, it's not an expansive mindset to think that you don't add value. Obviously, if you're serving customers and they're paying you, each dollar they pay you is kind of like an applause. There's certificates of performance where you serve somebody else to the point where they voluntarily turn over to you more cash or less cash than the value that you brought to them. So obviously it's a win-win but self-esteem or if you want to call it self-respect or something else is basically the reputation we have with ourselves. That's your first sale.
If you don't believe you're worth 10 times, 20 times, 100 times your hourly rate, whatever that may be, then guess what, your customers will never think it either. Apple certainly doesn't have that limiting belief. Any other, like you mentioned, luxury good company doesn't have that limiting belief. Certainly Porsche, Lamborghini don't have... I wish Lamborghini had that limiting belief. Like, here's just a car, come on. Look, I can get a Kia for 20 grand. Come on you guys, it's just a car. No, they understand their value. But I do think self-esteem is a big thing. I also think there's some people and I'm not sure how many, but it's quite a few who think that, kind of been taught, brought up money is the root of all evil. And those types of, whether it's religious or some other type of thing, the rich man will never get into the kingdom of heaven and all that.
But it's the love of money that's the root of all evil. Making money is, whether it's biblical or whatever, but it's a way that we serve one another. It's the most noble thing in the world to be able to serve a stranger. I get on an airplane, the pilot doesn't know who I am. We may have different political beliefs. We may be have different religions or ethnicities. He doesn't even know why I'm flying to where he's go or where we're all going. But he's enabling me to earn money. I'm putting my life in his hands, my life, my trust in my airline is probably greater than my trust in my doctor when you really think about it.
We get on an airline and we really don't think about this and that's a good thing. But when you step back and think about it, you're like, whoa, wait, wait a minute, that's kind of amazing. And all the engineers at Boeing who designed that plane and built that plane and the ground crew and the maintenance people that keep it up, they're all serving me. And yet we may be completely different, but when it comes to commerce, they're serving me and they're providing me with more value. And I think that's kind of amazing, it's a miracle when you think about it.

Chris:

Okay. Tying it to an idea in the book is that if we focus on creating value for the customer and transformation, that's how we're able to get to a place where we're valued more and get paid more. And I hear this a lot, like, no, I'm really taking care of my customers. I'm creating a lot of value for them, but yet I'm not making any money. So something is off there. Ron, do you have any ideas as to what might be wrong?

Ron:

Yeah. When I hear that I'm not making any money, it's usually indicative of a pricing problem. I mean, sometimes they've got bloated overhead or they bought too big of a office space or something entered into a lease or whatever, but it's usually a pricing problem. And there could be multiple causes, self-esteem being one of them, just not being specialized or niche enough to recognize the type of customer that you want. I mean, I do believe all professional firms are defined by the customers they don't have. We really are, we're defined by the services we don't do and the customers we don't have. Just like a generalist versus specialist doctor is defined that way. And if you're trying to be all things to all people, that's not a great business model at all. It's never going to get anywhere. And so if I hear from some by I'm not making enough money, they're probably undervaluing themselves.

Chris:

So that gets into the self-esteem part, right, once again. Or perhaps they're actually delusional and actually not creating the value that they think they are.

Ron:

Sometimes they price too high, but you know what? 95% of pricing mistakes are because of the price is too low. I very rarely see anybody going bankrupt because their prices are too high. Concord might be an exception, that thing was not economically viable. Again, proving the point that price justifies cost and what justifies a price is the value. And the customers didn't see the long term value in the Concord.

Chris:

Right. You've authored seven bestselling books. A rumor on the street is there's another book that you're working on, is that true?

Ron:

That is true. And it's going to be on what I'm just affectionately calling with people I talk to about this, Value Pricing 2.0, which is really a different business model. It's not really fair to call it just pricing, it's a different business model. It's a subscription business model because I believe we're living in the subscription economy and it's just a tsunami. We're seeing more, I can't even keep up with this, it's like drinking from a fire hose. I believe, Tien Tzuo, who is the author of Subscribed, the book Subscribed and also the founder of Zuora, which is a subscription based software platform that enables you to run a complete subscription business.
Now, of course, he's got a vested interest in saying this, but he says in five years time, you won't own anything, you'll subscribe to everything. You won't buy everything, you'll subscribe to everything. Now, I'm not willing to go that far because I think ownership on some things is still kind of important to people, but I will say this, in five years time, you'll have the option of subscribing to everything.
And even if your business doesn't move to subscription, it's going to be confronted with it via your competitors. And so it was really interesting to read and I forgot, I'm sorry, I think it's called Shuttlerock. They're creative agency that is offering subscription. And so we're starting to see this in accounting firms, law firms, across professional, we're kind of laggards. But the big example that I hold up and talk a lot about on the show with Ed Kless, my co-host is concierge medicine and direct primary care. When you subscribe to the firm, rather than being engaged in a transactional relationship, you move from transactional to relational, with subscription, and everything's about that relationship. And it basically that doctor is telling you whatever you need medically that we can do under our roof, and there's the scope. It's only things we can do. If you need an oncologist, if you need a cardiac surgeon, we're going to refer you out and that's not covered.
But anything we can do, and by the way, what we can do is continuously expanding as we add MRIs, as we add pharmacology, as we add other services. And by the way, when that happens, we don't necessarily change your price. Just like Amazon doesn't change our price when they drop a new show that we love that we're binging on. And what I love about that is it just says whatever you need, you're covered. Stop trying to look at the math of the moment and compare the lifetime value of that relationship. What you're doing there is creating an annuity. It's going to make your firm more valuable. It's going to command a higher sales price. It's probably going to be more profitable and it's as scalable as you want. But it just gives that customer peace of mind, convenience, and a completely frictionless relationship. Anything I need, I'm covered. There's no hurdle, there's no friction to, oh, I cut my hand. Should I call the doctor and go get stitches?
No, he'll come out to the house. Now they're able to do that because they work with fewer patients, they control their capacity. So the average general physician in the US has 2400 panel of patients. That's why you get to spend a total of seven minutes with your doctor. Half the time, they're looking at a screen typing in on your electronic health records. A concierge doctor only has 600 patients at most. And that way they can provide you office visits and home visits and same day visits. Talem, they were doing telemedicine, texting and email long before COVID, they've been around since 1996, that's the model.

Chris:

This is super fascinating, Ron. I'm trying to get my head wrapped around this. I can feel inside my body some concepts of resistance. And I know that means that this is a powerful idea. And I want to ask you a couple of questions about this. I think a lot of us who grew up in the eighties and the nineties and before then, ownership was a big idea and we wanted to own things. I bought albums, I bought CDs and cassette tapes. And when things went streaming, I'm like, no, I'm going to continue to buy CDs. And you know what I do, I buy the CD and then I download the digital version. And so we're moving in this way where we're becoming, I guess, more and more dematerialized in terms of what we physically own. And we're okay with the concept.
If you think about movies, you think about music, ride share, right? A lot of young people don't need to get a driver's license, they don't need to own a car and deal with insurance, someone else can pick them up. They don't have to worry about parking. We're sharing homes in Airbnb, and so it's like this concept is taking root. But I see these things as products, not so much as services with some exceptions, obviously. Do you have some examples that you can point to say, here's someone who is on the edge, who's in the creative service professional space, or just the professional space that are moving to this where you can cite specifically how they're doing cause I'm so curious about this concept.

Ron:

Yeah. There are many examples, actually, there's a lot of law firms doing it. And just like we saw at the value pricing, 1.0, it's being the innovation, the experimentation is being done at the small firm level. But we had a CPA on from Summit CPA, Jody Grunden, he moved to subscription. Now he provides part-time CFO services. So they'll do all your accounting and tax work and all of that. And I think when you converted to subscription, his revenue was 600 grand under fixed pricing, he used, I think. And then he started to do subscription and kind of moved up market. He specialized in... I think he specializes in marketing agencies actually. And he has different packages, so he offers different packages, which you can see right on his website at Summit CPA. And he has a weekly payment schedule, which is interesting.
Most subscriptions are monthly, he does weekly. And I believe now his firm is up over seven million dollars in the interim. So he's really scaled. And he says, it's all due to subscription because with the subscription, that puts the relationship at the center. And so I'll give you a couple of examples of this, of how this is different than a transaction. Today, if you go to Porsche drive, you can subscribe and you will get depending on the package that you pick. But I'm going to look at the top package, which I think is 3,500 a month. It'll give you access to, I think it's six or eight models of Porsche. There's an SUV in there, there's convertible, different cars. And you can swap out cars as much as you want. And they'll white glove out the new one and take away the old one.
They pay for everything except gas and insurance... I mean gas and tolls. They pay insurance, they pay everything. If you need maintenance, they just come out, take it. And white glove a loaner. And you can trade out as much as you want. So I can say, hey, I got guests coming this weekend, they want to go wine tasting, I need an SUV and I'll get an SUV and they'll take my convertible. And then Monday I call and say, I want my convertible back and they'll bring it back. This is great. People say, well, how's it different than a lease or buying a Porsche? It's not tied to a car, you're subscribing to Porsche. You now have a one to one relationship with Porsche. They know everything about you. You buy a Porsche, they don't know anything about you. You subscribe to Porsche and now they have all these analytics.
They know where you drive. They know where you go. They know how much you... They know everything. They know what kind of music you like. They may know other things about you. That relationship is completely different than a transaction, completely. Psychologically it's completely different to subscribe to a business rather than buy something from them. Apple should be doing this. Apple does do this with services, iCloud, iTunes, iTV, blah, blah, blah, why can't I subscribe to Apple? And apple just says, oh, you need a new watch, here you go. Need a new laptop, here you go. Now, they could put some rules around it, I can't do it every day, every two years or whatever, but why can't I subscribe to apple? That's a different relationship and it's more valuable. And it locks in loyalty and it's an amazing thing.
The other one, and this might apply more to... This is a version of subscription I think some professional firms could use. There's an outfit called Hassle Free Home Services, you can go on to look this up. It's a franchise and you subscribe to these guys. I think it's like $250 a month. And they come out and they hand handle your weekend to-do list. All the crap around your house that you do not want to do. Fix the broken light outside, change the smoke detectors. They drain half a cup of water from your hot water heater, which I didn't even know you needed to do. Check your filters, just all the piddly stuff that you just have to do on the weekend.
And then if you want to say remodel a kitchen or remodel a bathroom or build a deck, they'll do that too. And you'll probably get a preferred price and they'll manage it and take care of the contractors and all of that. And of course, if you're subscribing to these people, who are you going to hire? They're in your house once a month doing all this, who are you going to hire to do these bigger jobs? Each franchise on average earns 50% of their revenue from those one off projects. But the way they get them is they subscribe.
My colleague talks about this, he loves it. And this is more internet of things, but this is fascinating to me. He's got one of those iRobot vacuum cleaners and it does everything. You have an app on your phone and it maps your upstairs and downstairs even. And it figures out where everything is. And then when it's done vacuuming, it goes and plugs itself back into its port. It empties its bag and it talks to the mothership at home. And they figure out if you need new brushes, and if your bag's almost full and needs to be empty, they'll send you text messages. And they just mail you the parts. He subscribes to his vacuum. I forget the amounts, I want to say it's 30 bucks a month.
But here's the thing, first off, he'll be subscribing for the rest of his life probably as long as he's got a house that he has to vacuum. And second, they just didn't go to the market with their standard offering. They plused it as Walt Disney would say constantly, plus you can't do subscription without upping your game because it's a different business model. And common services don't command uncommon prices and that's what I love about the concierge service. If you tell a customer, hey, anything you need, you need a logo, you need... just going to start a new business or whatever, you need a logo over there. Now, you can still have options, you can still put some boundaries around it, just like the home service outfits do.
But just telling them, giving them that piece of mind that, hey, you're covered if you need this. And that way you don't have to go to the department of paperwork and fill out a change request when there's scope creep and have a conversation, blah, blah, blah. It's just no, no, we're just going to do a series of serial transformations to continuously help you. Because the thing about a subscription is all about recurring value, recurring frictionless peace of mind value, who better than professionals to do that? And there's lots of ways to do that. And I think customers will pay for that peace of mind. We all buy insurance and we love it when we don't use it. It's a fascinating psychology if you think about it.

Chris:

I am in Ron, I am in. I might have been a little resistant at first. When the heck is this book coming out? I need the blueprint.

Ron:

Yeah, probably the end of 2022. I'm actually writing it with Paul Dunn. And he's the guy that I wrote The Firm of the Future with. And that book was published in 2003. And that book was one of the first to kind of introduce the concept of intellectual capital and human capital, social capital, all of those effectiveness for sufficiency, which we didn't have a chance to talk about. But that's another part of all of this.
And I'm really excited about it because I do think that the concierge's medical practice and the direct primary care, which is kind of like a cheaper price point, remember we talked about a market having a wide array of price point. You have McDonald's, Ruth's Chris, DPC is kind of like... There's probably the cost of a cell phone per month to subscribe to a DPC, $100 to $200, sometimes $300 per month. Concierge, they go after the CEOs, the top 5%. You could pay a Concierge doctor 40 grand a year for coverage for you, your wife, maybe your two kids. But there's a lot of people willing to do that because that doctor will be there whenever you need them.

Chris:

Okay, how about this? When you're closer to publishing the book, I'd love to invite you to come back.

Ron:

I'd love to.

Chris:

I'm going to work on understanding this service, a subscription model myself, and we could then come back and maybe pick up on some of the other topics. Because the book Implementing Value Pricing, there's so many concepts in here. I'm not yet done reading it and I'm really savoring this one, this is a book that I think it's going to take me a while to read because I like to read a few pages or a chapter at a time, just stop and diagram and think about it. There's the smile curve, which blew my mind. We need to talk about that, that was nuts. And when I tell people this, especially in our industry, their heads melt, it's just too much to process-

Ron:

It is.

Chris:

... a few pages in the book.

Ron:

That's the Ron Baker headache, is the guy who wrote the forward... Actually, it's not the Ron Baker headache, it's the VeraSage headache because we talk and play with these concepts all the time. But I will give you a great resource that you and your listeners can go to. For more about the subscription economy on the radio show that we do, the soulofenterprise.com. There's a tab up there, favorite shows and you can pull down a subscription model and you'll get all the shows that we've done on subscription. Now we've done a lot, we've also interviewed the four top authors I believe in the space. We've had on Tien Tzuo, author of Subscribed. We've had on John Warrillow, author of The Automatic Customer. We've had on Robbie Kellman Baxter, the author of The Membership Economy and also her book, The Forever Transaction. And we've had on Anne Janzer, who wrote Subscription Marketing.
Those four are the leaders in my mind, in this space in terms of authorship. I recommend all of those books highly. And then we've had on Dr. Paul Thomas, who's a direct primary care physician out of Detroit. We've had him on three times. He's coming up again in a couple weeks. I love talking to him. When we first interviewed him, he was one guy, didn't have a secretary, didn't have a physician's assistant. It was just him, sees a panel of 600 patients, which is where he maxes out at. I think he charges around $120 a month so you can do the math. Very little overhead, no billing, coding people to bill because these guys don't take insurance. So they get rid of a ton of bureaucracy. And that's how they're able to get the cost to a reasonable level for this population.
And now, since he's been in practice now, I think a few years, he's got three doctors working for him and he's opened up another office. So he's scaled it. He's added more services and just he's flourishing. And he has a great quality of life. He's not burnt out like a lot of physicians are that have 2400 patients. And they spend a total of seven minutes with him. And the big thing, because I focus so much sometimes on the business model and the economics and the pricing, I want to say this, ask yourself why you entered this profession or this industry. When you ask a doctor that, it's like to help people. How can you help people if you have 2400, 3000 patients and you're spending five minutes with them? That's not why these guys entered this profession. And so we've got to readjust I think the capacity to our purpose, which is making an impact on people's lives.
And you can't do that if you have too many customers, because you're just not spending enough time with them and you're not getting in depth with them and you're not doing all that you could be for them. And I think that's a problem. And that's why we see burnout and depression and alcoholism and divorce and even suicide in some of these professions. It's amazing to me because if you talk to a lawyer, a doctor, a CPA, architect, anybody and say, why did you become your profession, they'll say to help people. But that's not what we're living.

Chris:

So good. Ron, it's been just a real delight and an honor to talk to you. I feel like now when I'm reading the book, I'm going to hear your voice in my head. And I'm always happy to have an ally in this and because this is such a big issue that people in our creative community can't get their heads wrapped around. So I'm hoping that this is one additional weight on that scale where it puts you over the tipping point. So if you're listening to this, listen to the man, check him out on his podcast and most definitely pick up his book. And I'm just really anxiously looking forward to reading your book Value Pricing 2.0:The Subscription Model. I'm really excited about that. Ron, for people who want to know more about you, where's the best place for them to find out more about you?

Ron:

The Soul of Enterprise would probably be where I'd start because we've been on the air since 2014. I think we're up to 360 and some odd shows. Usually, if we don't have a guest on, we usually have one topic that we dive deep in. So we've done shows on pricing, we've done shows on the subjective and the labor theory of value, we've done shows on the ethics of price discrimination and just a ton of different topics that Ed and I cover. We've also had on many business authors that we admire. And it's a labor of love, we do it every Friday. You can subscribe to it on any place you get your podcast.
And we also have a Paton channel for the show, which is paton.com/tsoe. And we have different tiers and there's different benefits. We have an active community and we get together for wines and cheeses on Zoom or whatever. And hopefully we'll be able to get back to maybe doing some live events. But that's one place I'd probably go is The Soul of Enterprise. The other thing is the think tank I run, which is VeraSage Institute. So you can find that @verasage.com. There's lots of resources and stories up there and you can find me on LinkedIn. I'm one of the influence bloggers so I've got lots of posts up there on all these topics. And I'm on Twitter @ Ronald Baker and I'm happy to carry on the conversation.

Chris:

Wonderful.

Ron:

And it's so great because I entered this and there was nobody out there talking about it. And one of the reasons I built Verasage, I wanted a think tank. I didn't want a consulting firm. I wanted a think tank of like-minded people like yourself, that live and breathe this stuff and are out there proselytizing. Cause we do, we still need to proselytize.

Chris:

We do.

Ron:

People say, well, you're preaching to the choir. No, well, listen, the choir needs to be preached to too. They don't get up and leave when the sermon starts. And so we tackle these problems internally at VeraSage. And there are now lots of people like Blair Enns, like Jonathan Stark over at Ditching Hourly. I mean, there's people in every sector now with the mission to kill the billable hour and the time sheet. And I declare victory, but now we have to recognize that the external world has changed and we're living in a subscription economy. And we better start skating to where the puck's going to be and not where it's been.

Chris:

You all heard it here first. I'm hoping that in a matter of months or maybe a year's time that I'll be happy to report back how we've incorporated some of the teachings and learnings from what I've picked up in the book. And also this forthcoming book and how we're going to transform our business. Ron, it's been a real pleasure. Thank you very much.

Ron:

Thank you, Chris. Thanks for having me. I'm Ron Baker and you are listening to The Future.

Chris:

Thanks for joining us this time. If you haven't already, subscribe to our show on your favorite podcasting app and get a new insightful episode from us every week. The Future Podcast is hosted by Chris Do and produced by me Greg Gunn. Thank you to Anthony Barrow for editing and mixing this episode and thank you to Adam Sandborn for our intro music.
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