Hector is a CPA who was voted a Top 10 QuickBooks Advisors for 2017 and awarded “Top 40 Under 40” by CPA Practice Advisor Magazine. He graduated from Florida International University with four degrees in marketing, finance, taxation and accounting.
Hector has created one of the top YouTube channels for the QuickBooks community with over 2 million views.
[00:00:00] Welcome to THE ART OF VALUE show. My friend Hector Garcia. Hector is a CPA who's been voted one of the top 10 Quick Book advisers for 2017. He was also awarded top 40 under 40 by CPA practice advisor magazine. He graduated from Florida International University with four degrees in marketing finance taxation and accounting. He's created one of the top YouTube channels for the quick books community with over 2 million views. He's married with four kids under 10 and he still manages to maintain his own personal Web site. Hector Garcia got Hector Garcia dot com. Hector Welcome to the show.
[00:00:44] Hi Eric. Thanks for taking me.
[00:00:46] It is a pleasure to have you on the show. We have been connected I guess virtually or probably at least a couple of years. But then I had the chance to meet you in person recently at scaling new heights down in Orlando. And it's a pleasure to have you on the show.
[00:01:02] Thank you so much. My honor.
[00:01:04] Let's dive right in. What's the most important thing you can share about pricing.
[00:01:09] The most important thing is for me to be aware that I can get it wrong almost every time or if not I would say absolutely every time. This is what I mean every time I give a price let's say the high price in the case of options and my client says Yes, I just know that I left money on the table. I know that I could have gone higher. And then every time I give a price let's say on the low side of the options and the client says no. Well that means I definitely either misunderstood understood how the client bothers my service or obviously I got it wrong because I didn't get the business. The funny part is maybe I got it right because I didn't want to take the client that a lower amount. So, this is what I love about options in particular that although you can get it wrong every single time options kind of put a Grayling's guy Grayling's in your margin of error.
[00:02:04] So basically, you're saying pricing is a skill that you have to learn. And one of the best ways you learn is by your mistakes.
[00:02:12] I think you will never stop really learning the pricing skill because pricing is so incredibly subjective that no matter how good you think you are or how experienced you are with it you're going to get a brand-new customer with a brand-new point of view with a whole different way of looking at things that may or may not share with you through the value conversation everything that they're thinking. So then when you come in with a price it could be wrong but you can get better through practice you can definitely get better by start picking up the hints and knowing exactly how to administer that value conversation time by asking the right questions.
[00:02:53] I think you're right it definitely is a learning experience and every time you talk to a customer there's an opportunity that you may encounter somebody with a different personality a different perspective on the value conversation and different circumstances where you're going to have to hone your skills and sometimes the way you hone it is literally by making a mistake. Fortunately, with someone like you you've got hindsight you're actually not just putting the deal together and just work septs or not moving on but you're paying attention to what they choose and learning from that so that the next time you're talking to the next customer you're continuing to build up on what you learned the last time. That's right. Absolutely. So, what was it that caused you to become interested in value pricing. Maybe let's start here. What was your first exposure to that person?
[00:03:45] Honestly my first exposure was without me knowing. So, me giving fix prices to customers based on what I call the retail model that I learned from my previous life. So about over a decade ago I used to work for Best Buy and I used to work for the Geek Squad Department. Yes, I was a geek quite a guy. And I remember we were having a menu price table where you know all of the services were where fixed price. Now when it comes to fixing computers fixing viruses from a computer doing data backup and data transfer nothing could be more individually different. Case by case. But somehow you know this big box retail company figured out how to do a fixed menu price for all the services and somehow you win some you lose some. Like I use oh I used to go to my supervisor all the time and say hey how can we price is so low it's going to take me four hours five hours and they told me Don't worry. You know it all averages out at the end. So, when I came into it somehow, I went from retail electronics into accounting through the history of my own my work in a I wanted to do was give many style pricing. So, I started giving menu style pricing for my bookkeeping services nine years ago when I started my company and that was my first exposure. Now that wasn't value pricing yet but it was my first step into making sure that my customers on the other side they have a predictable price up front.
[00:05:21] As a matter of fact because I started my bookkeeping practice with no accounting knowledge. I didn't come with any of the bad habits of our early fees. Now what's interesting Kirk is that after a while and after I basically underpriced a lot of these services because I had a menu I basically dumped that and went straight to the hourly pricing and it took me like four or five years to go from $50 an hour to almost $200 an hour. And I thought I was doing a great job I thought I was soaring and my brand was increasing because my hourly rate was increasing and then close to 2013 either 2013 2014 I saw a run Baker speak in you know in a big accounting conference call scaling new heights and just the way he explained things. It was just such a huge eye opener for me. And then from there on I would say for the last four years I've been on that journey to kind of marry my two experiences. You know me trying to give a fixed menu price up front and me you know going into that journey of keep increasing my hourly rate every year. So, I'm trying to hybrid the two into a new system which I don't have to reinvent is it's the simple concept about the pricing.
[00:06:43] You have an interesting journey. Very few people that I've talked to kind of started out with some form of fixed pricing then transitioned over to hourly and then back to value. So that's kind of a unique perspective. When you talk about Best Buy you know Geek Squad originally was a separate company and then Best Buy bought it but I've never thought about their type of pricing as value pricing but you're right it is menu pricing where for everybody who has you know one virus that you've got to remove. Right it's a certain fee versus with value pricing where you actually step in and go. What does this particular customer need. Not they have a virus but you could carry the analogy further go with what virus is it and how has their computer used and what's the impact of them being down obviously Geek Squad wouldn't do that. It doesn't fit in that type of business model. But that's essentially what we're doing with value pricing.
[00:07:40] More Not to discount whether the squatter Best Buy with a menu pricing is or is in value pricing. I would definitely agree with you that it's not necessarily a value pricing but in contrast to the alternative from some client's perspective it could be. So, for example if somebody has a virus in their computer and they call it technician they're typically going to charge hour the $100 an hour. Hundred and twenty-five dollars an hour and it could take two hours three hours or four hours. When they do walk into a menu price which is not a value price but it is a fixed price. And by the way there's a premium in there. So, if I'm sure that Best Buy is some sort of analytics and said well the average it takes is I say 1.5 hours. And what they want is essentially let's say $100 an hour. So, they take that and then they add a premium of some sort to make up for the ones that completely. They're not necessarily out of scope but they're one off outlier cases. But for most customers that walk in there getting a fixed price up front they may not necessarily be equivalent to the value they're getting out of it but at least they know up front what it's going to cost. In contrast of paying some hourly rates for a computer guy to go to go to your house or your office or whatever.
[00:08:58] So you mentioned that in 2013 you heard Ron Baker speak which is a common theme on the show Ron's had a lot of influence particularly in the accounting field. What was it that Ron said or that you learn that made you go this is the business model for me. I want to go in this direction.
[00:09:17] The one thing that Ron said was he made that the analogy of the spreadsheet. You know he said that by definition tracking time it's unprofessional and he was kind of going through the background of you know what a professional is a professional is someone that Dad has the knowledge to solve some sort of problem and gets paid to do that. In contrast if you know you have knowledge that could potentially solve some problem but in in terms you don't charge to solve the problem. You charge for the time that it takes you to do it. He labeled that as on professional and as a young account and as a young professional one of the most important things to me is to be a professional a peer professional. And he made such a strong case that tracking time. It's unprofessional that that made me think a lot.