Are You Too Big for Quickbooks?

Accounting software blogger Austin Merritt at Software Advice recently wrote a post and solicited my feedback regarding "Horizontal" or "Generic" accounting systems and their decline in the  marketplace. Austin raises some great points and I agree with him on some of the reasons behind the shift. I won't recount everything he says because I think it's worth your time to read it. I will say that I believe the five trends that Austin proposes are killing generic systems are not new. It's just that the current environment allows these trends to play out more quickly.

For instance, executives have always wanted integrated systems but when SAP was the only game in town and it took six figures to play ball they learned to live with stand-alone solutions.

IT buyers have always wanted unique solutions because they think they're special. But now the cost of new software is the cost of it's development. There are literally zero distribution costs for software developers today. The cost to customize or add a needed feature is the cost it takes a designer and programmer to change the code. One great advantage of SaaS models is their ability to iterate every day at midnight if the developer so desires.

So I do think Austin is on to something. Generic packages like Quickbooks are being abandoned in favor of so called "customized" solutions. But in most cases Quickbooks is abandoned prematurely after a sales rep from a competitor promises that their software will make life so much easier. Before you make the jump consider the following. 

1. Customization is now a feature. "Generic" software manufacturers have built in at least a limited ability for users to "customize" the package themselves. Defining custom fields, changing the layout and structure of forms and input screens and exporting data to spreadsheets are all common features of leading generic accounting programs (yes, I'm talking primarily about QuickBooks). But most businesses don't take advantage of these features. They don't even know they exist.


2. Accounting software features won't fix workflow process deficiencies. If it takes you three days after shipment to issue an invoice or if closing the month is a week long process guess what? Accounting software is not your problem. Fix the processes first then decide how the software should record, track and possibly automate or shorten part of the process.


3. You are rarely, if ever, special. We have a tendency to think that our problems are world changing, never before seen phenomena and that the solutions must be developed by individuals possessing equal parts genius and divine revelation. Rest assured that most of the time one, or two, or five thousand users have gone before you and had to solve that same or a very similar problem. Before you jump to a completely new software package see if there is an add-on, work around or third party plug-in to help you out.

Of course all of this costs money. It will either cost you money in terms of the time you sacrifice or the dollars you pay someone else whose time is sacrificed. And this is why vertical/integrated/customized packages are picked up by companies once they pass the $1 million mark. They have money to spend. They could spend it on the three ideas above. But it's more fun to spend it on something shiny and new than it is to make the most out of that boring old software package you have been using since day one.

Don't misunderstand me. I think businesses can definitely outgrow QuickBooks. It is just that I have seen very few businesses do so in a logical and planned progression as they exhausted their options to customize features, improve workflow and use add-ons to make the most of their original purchase. 

We usually see growing companies upgrade to a new "stand-alone" system. They do this to keep up with higher transaction volume, to take advantage of a true SQL back-end, and to achieve better security and internal controls. 

You Get What They Pay For (the problem with Demand Media)

One of my clients had an interesting problem crop up. Their one and only customer decided to cease doing business with LLC vendors and is requiring my client to convert to a corporation. During the course of working with the client to find a solution I came across this article from eHow. I couldn't believe what I was reading. Whoever wrote this article didn't have a clue what they were talking about. The point of this post is not to point out the article's errors. All I want to do is highlight the fact that in the midst of this new era of user generated content there is a cancer and it's called Demand Media (DM).

DM purports to use the idle cycles of journalists to produce content that is in demand on the internet. Using algorithms companies like DM identify what users are searching for as well as what advertisers are willing to pay for. They then offer a journalist with a free afternoon a few bucks to write that article. DM has little interest in whether the content is good or not (as evidenced by the above article). All DM needs is for that article to show up in search results so that there is enough traffic for advertisers to find attractive.

This is the opposite of the "content is king" model that saw the rise of blogging and niche experts. These folks created content because they cared about it. Advertisers found them eventually (sometimes) but it was the content that came first. Now it seems we are entering an era where knowledge is created in $15 chunks that aren't worth the ink toner they'd take to print. In my opinion DM is the snake oil salesman of the internet. You might get better if you buy what they're selling, but only if your problem wasn't that big of a deal in the first place.

My advice when searching for knowledge on the internet is to steer clear of any resource where the only attribution given to the expert you'll be following is that he or she was a "contributing writer."

Why Discounts are Killing Your Business (and your soul)

I've made many mistakes as a business owner. Some of these I can laugh about. Some nearly bring me to tears. One of the biggest mistakes I've made is offering discounts to customers who can't afford me. Sooner or later these interactions end badly and looking back over the whole of the relationship I can't see where the good experiences outweighed the bad. If you want to work with someone who can't afford you then do it for free. Otherwise charge retail. That sounds harsh, but here's how discounts can kill your business if you let them. 

1. Discounts encourage customers to use price to determine value. Customers who can afford you judge your work by its outcomes. If you must offer a discount to enable a customer to do business with you that customer will judge your work according to the price paid. They will never understand your value and you will never get over their inability to appreciate it.
2. Discounts to the wrong customer invalidate your pricing strategy. Good businesses put thought into why they charge what they charge. When they offer improper discounts these businesses thumb their noses at all that planning. Soon they find themselves doing the type of work they intentionally planned NOT to do.
3. Discounts are unfair to your ideal customers. Your best customers hire you with an expectation that you spend your time and energy working with other people like them. They expect that all this time around like minded customers makes you better at serving their interests. When you work with people who can't afford what you sell you become less valuable to those customers who can.
4. Discounts cripple morale. When you routinely make price concessions for people who can't afford your work you begin to resent not getting paid what you are worth and you question your ability to get your asking price. This resentment and questioning slowly eat away at your confidence and it shows whenever you sit in front of a new prospect.
5. Discounts never go away. Allowing the wrong customers into your business is very disruptive because they never volunteer to end the discount and pay full price. Instead they stick around and take up valuable space. They take more time to service and you will never be able to get that time back, until it ends badly. Eventually you will get fed up accepting less than you're worth or (more likely) they'll think even your discounts are too expensive. When they leave you will look back on the day you first allowed them to do business with you and you'll wish you'd thought twice about walking them through the door with a discount. 

What the Health Care Reform Act Means to Your Business

I have received a lot of literature, email, newsletters, updates and invites to webinars over the last week all pertaining to the Health Care Reform Act and the HIRE Act. I've been through a lot of these and frankly, there's a lot of stuff in there I don't care about because it is not relevant to my clients. I spent about 15 minutes boiling down the salient points in common sense language.

The New York Times also has a great article with Q&A from real business owners.

Focus on Outcomes to Deliver Value

Your customers have no business asking how you deliver value. What do they care how you do it? The only thing that should matter is that you deliver what other people cannot. This sounds harsh, and perhaps it is a little overboard. I like our clients to see how we work through problems and business strategy sessions in real time. It gives them a sense of what is happening. But it is also dangerous. In our business the danger lies in having a client watch what we do, put us on the clock, and say "that took you about 4 hours and it cost me $5,000. How can you possible be worth $1,250 an hour when everyone else is charging $200 or $300 or $400 an hour?"

This happens to me all the time, and it happens more often on due diligence engagements than any other type of work we do. Due diligence is the process of examining a business that is about to be purchased, kicking over every rock you can find, and basically trying to avoid any nasty surprises for the purchaser. Due diligence from the legal side involves making sure that the contracts, corporate documents and legal track record of the target company are all in order. From the financial side it involves a gut check to say "Is this business worth buying?"

Just this week I was meeting with a potential client regarding this type of work and when I told him how we typically quote our fee (1.5% of the asking price) his response was typical. "That's a lot of money." He then proceeded to tell me that he had budgeted about three times as much for legal fees as he had for financial due diligence. Understand his position. He was willing to spend a lot of money to make sure the contract was written correctly, but comparatively very little to determine whether the money he was going to spend would be a good investment, whether the business had a reasonable chance of success and whether or not the financing terms were something the business could afford.

When customers don't understand outcomes they skimp on $15,000 in due diligence and invest $1 million in a failing venture. They save $500 or $1,000 on a logo for their startup and have trouble landing their first big contract because it looks like they're operating out of the student union.

Customers need you to teach them why your outcomes are so much more valuable than your competitors. They don't need to know how your process or product is different from your competition. In sales they call this focusing on benefits rather than features. In service businesses it is sometimes hard to describe features and benefits but everyone understands the difference between process and outcomes.

The next time you draw up a professional services proposal avoid the temptation to spell out HOW you are going to go about your job of delivering value. Instead explain exactly what the customer is going to get in the form of tangible and intangible outcomes.