Step One: Conversation
Language was invented to ask questions. Answers may be given by grunts and gestures, but questions must be spoken. Humanness came of age when man asked the first question. Social stagnation results not from a lack of answers but from the absence of the impulse to ask questions.
––Eric Hoffer, Reflections on the Human Condition, 2006a
After returning from the seminar I attended in June 1989, “Increasing CPA Firm Profitability” (as explained in the preface), I enthusiastically began implementing fixed-fee engagement letters (what I called them at the time). I selected a few good customers (based on my relationship with them, not necessarily the size of their revenues), and offered to enter into a fixed-fee arrangement with them. They were very receptive to the idea, as it allowed them to budget exactly their accounting and tax costs. I had no idea why I was doing this (e.g., provide a better experience, remove risk from the customer, etc.) so I did not engage in any price discrimination or charge a premium for the risk I was assuming.
Worse yet, I drafted these agreements in a vacuum, without any customer involvement. This was my biggest mistake, and it caused most of my early attempts at value pricing to fail dismally. I would meet with the customer, explain the concept, and say something to the effect of “I’ll go back to my office and draft the agreement with what I believe your accounting and tax needs will be in the forthcoming year, price it ...