Cloud Accounting Podcast

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During Sage Intacct Advantage 2019, we took some time to speak with David Appel, Head of Software and Saas Vertical at Sage Intacct about how maximizing value creation for clients takes precedence over billable hours, or recurring revenue. David discusses some different revenue models, and we also discuss how to know when you've outgrown basic accounting systems, and need to graduate to a more robust accounting system, like Sage Intacct.

Show Notes

Show Notes
  • 01:10 – What does David Appel do, precisely? 
  • 02:15 – If accounting happens in Vegas, does it have to stay in Vegas? 
  • 03:28 – Repetition is key to creating job satisfaction, personal validation, and economic value for your clients
  • 05:30 – It's not about billable hours and recurring revenue, it's about creating the most economic value for not only your clients, but as many people as possible
  • 09:19 – David A. gives some examples of successful subscription-based models 
  • 11:15 – How do you know when you've outgrown your first accounting system? 
  • 13:37 – An ounce of prevention really is worth a pound of cure when it comes to moving to a new accounting system
  • 15:31 – When you provide value, using whatever it is you're selling, that thing tends to sell itself
  • 16:28 – Find the value you can add by talking and LISTENING to your clients
  • 19:01 – Focus on solving client problems, and billing models will fall into place 
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Episode Art Photo Credit: 
  • April Blankenship
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David Appel: It's not about billable hours, or about recurring revenue, it's about how you think about how you're gonna create the most economic value for your [00:01:00] clients.
David Leary: I'm David Leary.
David Appel: And I'm David Appel from Sage Intacct.
Blake Oliver: David Appel from Sage Intacct, what do you do at Sage Intacct?
David Appel: Well, it's a fantastic job that's got a title, but what I really do is spend time talking to our customers, and industry thought leaders, and investors about how do you build a great business, and what do people need in order to become successful there? Then we take that into the product because there's this [00:01:30] old adage - the best salespeople don't sell; instead, they help people buy. So, I get to spend all day long finding out what people are really hoping for and accomplishing, and then we put that into a great product and help them be successful with it.
David Leary: You're like that guy that was in Office Space that talks to the customers, and takes that note, and then delivers it over to the engineers.
David Appel: I'm probably like a lot of characters in Office Space. That was a funny movie. 
Blake Oliver: That's one of my favorites. I should mention that we are here, live, at Sage Intacct [00:02:00] Advantage at the MGM Grand Conference Center in front of the big, beautiful digital Intacct Advantage sign in the rotunda, here, and- 
David Appel: It's Vegas, baby!
Blake Oliver: Vegas.
David Appel: We're sorry all of you listening are missing out because we're having a great time.
Blake Oliver: Well, you know, the thing about the MGM Grand that I don't understand - from just a design perspective - is that they made it so people for coming from the hotel have to walk past the pool to get to the conference center. You're watching everybody out there- 
David Appel: Yeah, that's a problem-
Blake Oliver: -having fun ... [00:02:30]
David Appel: And for those of you haven't been to Vegas, 'walk' is the operative word, because ... I talked to somebody yesterday, who had 21,000 steps. I was just like, "My goodness ..."
Blake Oliver: But it's good because then, when you go out, and you indulge - dinner, and drinks, and whatnot - you've already burned the calories.
David Leary: The calories are there.
Blake Oliver: So, it's good.
David Leary: You know, I like to look and see what interesting things people are talking about. I think I noticed that you're talking about SaaS and subscription businesses, and I'm like, "Great! That's ... Everybody's like, "Go, move, kill the billable hour! Go to subscription businesses!" So, I'd love to get your points of view [00:03:00] on it; what's your thoughts on it, and we'll kinda wiggle around a conversation-
Blake Oliver: Yeah, so just a little context, right? Folks listening are generally accountants and bookkeepers.
David Appel: Hi, everybody.
Blake Oliver: Hey. Yeah. There's all these thought leaders in the profession talking about we've gotta move to subscription-based pricing. I imagine there's a lot of parallels between what you do, talking to people in the SaaS world and the software world, and the subscription economy. What should accountants learn from that world?
David Appel: Oh, man. Well, having [00:03:30] spent a lot of time with a lot of you, you're already well on top of a lot of the things. So, maybe some of this might be sharpening the saw for you, but, it's just- if you can do something one time versus doing something once and it continue to repeat, there's just a lot of lift that comes from that. There's economic lift. There's a lot of personal validation that comes from it. All of you who've got great skills, where you're helping your clients, if you could do it once, but then have it be repeatable value for them and everybody else, why wouldn't you do it? That's how you create not only job [00:04:00] satisfaction, and sense of personal validation, but a lot of economic value.
David Leary: I like to take it further because I don't think people have ever put in that perspective before, because it's always been like, "Oh, the more efficient you get, you can't really bill for less time. You'll make less money." I like this concept - reading between lines of what you just said -  this concept of think about it as not only are you billing your revenue on a monthly basis, you're providing value on a monthly basis. I don't think ... Blake, have you ever heard anybody phrase it that way before?
Blake Oliver: Well, it's about charging for your knowledge, not for the work that you're doing; not [00:04:30] for the plugging in the numbers, and- 
David Appel: Mind if I tell it in a story?
Blake Oliver: Yeah, please. 
David Appel: I'm blessed with five mentors 20 years older than I am, and one of them told me this story once. Those of you listening may have heard it before, about the French cathedral builder. In the 14th century in medieval France, there was a cathedral builder hustling down the dirt road. He passed three people stacking bricks. He said to the first one, "What are you doing?" He said, "I'm stacking bricks." "Oh, okay ..." Passed the second one; "What are you doing?" "Oh, I'm stacking bricks to build a wall." "Oh, okay ..." Passes the third one; "What are you doing?" "Oh, I'm stacking bricks to build a wall in order to learn [00:05:00] how to build a cathedral one day!" You fast forward into the future. First person's dead. Second person's barely scraping by. Guess what the third person's doing?
David Leary: Building the cathedral.
David Appel: Building cathedrals. So, for all of you out there, delivering some sort of asset and billing in return for that time, it's great. It's critical. It's stacking bricks. You can't build anything without it. Doing that in a way in which you can provide some long-lasting economic value because you're helping the client understand the problem is critical. That's building the wall.  [00:05:30]
Doing it in a way in which it's long-lasting and it gets shared across multiple people, so the company don't just solve a functional problem, but really build a better business by understanding their economic model and how they're bringing it to their customers to maximize value creation and then share it across to everybody - that's very charismatic. It's very fulfilling, and that's building the cathedral. I'd challenge the notion - and I know that you guys asked the question the way that you did - to me, it's not about billable hours, about recurring revenue; it's [00:06:00] about how you think about how you're gonna create the most economic value for your clients and for as many people at once, as possible.
Blake Oliver: I like that. Do it once and affect many clients with that one action.
David Appel: Yeah. Let's just use a classic- the mid-sized accounting firm, for those of you that work at that. You've got an audit team; you've got a tax team; you've also got an advisory team; perhaps, you have a M&A transaction services team. How do you do an M&A transaction services advisory job, but then take that asset to understand how maybe you're great in life science [00:06:30] firms, so you can bill better for that, but then you also build an asset that they can use in order ... Like whatever their cap tables are gonna look like or something; that gets repeated and used over and over because that's how the partnership builds maximum profit.
Blake Oliver: That's an issue in a lot of firms is the silos that exist. Tax doesn't talk to audit, doesn't talk to M&A, doesn't talk to the outsourced accounting folks, really ...
David Appel: Yeah, it comes down to compensation models. I would challenge, and I don't know if the people on the phone agree with me, but I've spent a lot of time with accounting [00:07:00] firms. The model that was built in the '60s and '70s that still serves as the limited liability partnership model for a lot of firms, they're not finding it as compelling in the wealth creation for a lot of newer employees; isn't as compelling for that. You see these profit models, they're getting shared across the partnership, across divisional lines, in order to encourage selling multiple service lines to any one given client. You're seeing the comp models change that way. But then, again, to maximize it, do it with recurring revenues.
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David Leary: What are some of your favorite subscription businesses that you've seen out there?
David Appel: Us! Sage Intacct! If you don't already have a relationship with [00:08:30] us, BOOM! GO! Call us! Call me right now! Operators are standing by.
Blake Oliver: What's that hotline number?
David Appel: Yeah but do it from The Cloud Accounting Podcast web page, so they get their traffic up.
Blake Oliver: Lots of our listeners are familiar with the-
David Appel: I didn't answer his question [crosstalk] 
Blake Oliver: Oh, no, I thought you were pivoting away. Please go ahead.
David Appel: Oh, my gosh. You name an industry ... I am, of course, very excited about a lot [00:09:00] of our customers. I could go on down the list about the ways that they're building their businesses. Of course, many of our partners that are out there, they're great firms. I'll pull one out that I'm ... We've got many of them. So, the ones that I don't mention right now, please don't send me hate mail that I didn't mention you.
I'm just gonna pick one of CliftonLarsonAllen - fantastic firm. Several of the ways they've built recurring revenue is, first off, they have an outsourced accounting platform, which the Shared Service Center gives some labor [00:09:30] arbitrage. But then also, they've built a very great practice in nonprofit with their Sage Intacct practice, so they've got a lot of intellectual property that they bring from not only deploying us, but then, advising different sectors in the nonprofit industry with a lot of the competency that they had before. That's an example of one partnership.
Let me just give an example. We're doing this at Sage Intacct Advantage. In my industry keynote that we did yesterday, I had a firm come up called Acquia, and Acquia is a leader [00:10:00] in Drupal deployments and marketing assets for how you really build big web pages. They were challenged with how they were gonna adapt their billing model in order to change - without getting too complicated - how the marketing department spend was going. 
They put us in place and created some really innovative billing models with a revenue model that worked for them. Doing both of those allowed them to - let me think about how to say this the right way - understand their [00:10:30] cash flow and be able to forecast their cash flow because it was a recurring subscription model. With that competence, they had a competitor coming in to one of their niche markets and trying to box them out, and they were able accelerate funding and headcount in marketing to have a competing product to that, which fended off the firms, which got churn up, and then, customer lifetime value up. 

That, and many other things that they've done as a great culture, they just had a billion-dollar unicorn exit with an acquisition by Vista Equity. [00:11:00] There's CliftonLarsonAllen as an accounting example. There's Acquia as a recurring revenue model example  because we're able to think ahead further on forecast and cash flow, in order to make big business decisions. There's a million examples like that.
Blake Oliver: For those not as familiar with what Sage Intacct is, I often hear it described as the second accounting system that a company will use. They'll graduate from something else, right? For small business ... I'm an [00:11:30] accountant advising my clients on what software to use. At what point have they gotten too big for that first solution? I'm thinking specifically for software and SaaS and whatnot-
David Appel: Yeah, yeah, and again, to those of you listening, I'm trying to keep this very straightforward ... We found a number of triggers that happen. People start off on QuickBooks or something like. It's very simple. It's cash-based accounting. They're trying to get product market fit to design a product that customers are gonna want. But then, knock on wood, that happens, and they get [00:12:00] excited. Now they make a couple more finance hires ... 
One of three triggers, generally, happens; four triggers, pardon me. First off, they hire somebody with a great accounting and finance background that says, "Boy, we gotta put the infrastructure in place to scale." That's straightforward. So, you, as the accountant, when you see those hires start coming in, let's go.
Blake Oliver: They got the controller, the VP - Finance-
David Appel: Second is when they have multiple entities that needed to consolidate. The third thing is some volume item happens, either a number of invoices [00:12:30] or number of revenue schedules, and you just want to get out of doing it with elbow grease and Excel. The models start breaking down. The spreadsheets start getting complicated. Fourth is you wanna start being able to plan further ... You wanna think ahead and not look backwards. So, again, those of you listening right now, and you're advising your clients, look for one of those four triggers, and that's generally the transition point.
Blake Oliver: That is super-helpful. I, myself, even though I live in the world of accounting technology, it's hard to know when [00:13:00] something that's really fun, and shiny, and does a lot of things is appropriate. When do you make that move?
David Leary: It's interesting to put it into a spreadsheet perspective. I remember a few years back, talking to our QuickBooks customer at one time. It was like, "Oh, I had a spreadsheet with 50 tabs in it. That's how we knew it's time to get off of that and move to a small accounting package." Then, one of the customers today, I think, at Sage Intacct, in the keynote had ... It was ridiculous. They had 700 spreadsheets-
Blake Oliver: 400 workbooks, I don't know ...
David Leary: Thousands of tabs in their spreadsheet. It's just like the perspective is [00:13:30] completely different. That's where you probably ... If you're into hundreds and hundreds of workbooks, you probably need to jump up to something bigger.
David Appel: My father would say, "People change with pain, and that's only when the pain becomes unbearable do they make the change." But there's that class of buyers, and there's other classes who've been through it before and don't wanna put themselves through that pain and do it proactively on the earlier side, because an ounce of prevention is worth a pound of cure.
Blake Oliver: When we started recording, I think you said something along the lines of the best salespeople don't [00:14:00] sell, they help people buy.
David Appel: Yeah. 
Blake Oliver: What do you mean by that?
David Appel: Well, everybody's in sales, right? So, everybody listening to this ... You're always trying to help make something happen. But I think sales has gotten a really bad rap with a bunch of schwarmy, "Hey!!! ..." 
Blake Oliver: Used-car salesman?
David Appel: Yeah ... "Boy, I got a deal for you!" That's not what happens. People create their own interests because they wanna solve something in their lives; make something better; then [00:14:30] they go looking for answers, in order to find it. Then, you help them problem-solve to see how they're really gonna get there better. The trick really is to understand that Wayne Gretzky quote, "Skate to where the puck's going;" where I spend a lot of my time, and then, in order to help people fulfill it ... I hope- is that example ... Did that answer your question? 
Blake Oliver: I think so. I've seen this happening more and more because I'm on the marketing side of things a lot, these days, where- 
David Appel: If you guys haven't seen some of Blake's marketing, [00:15:00] you've gotta check it out. It is top notch! 
Blake Oliver: Well, so ... I did a lot of CPE webinars the last two years, and I found that people really liked when we offered as much educational content as we could possibly stuff into our webinars. Instead of trying to stick the product in unnecessarily and really sell that product ... Because, a lotta times, I think, in webinars, it's a bait and switch. You sign up for the webinar, and you end up just getting a product demo [crosstalk] It's advertisement- 
David Appel: Are these [00:15:30] your webinars?
Blake Oliver: No, no ... The way I approached it was, "Well, I'm a CPA, and I want actual CPE." I feel like if we're gonna have this requirement to get 40 hours of CPE every year, or whatever, then we should ... We shouldn't just be checking the box. We should be actually getting meaningful content. I view that as my mission when I create CPE. It's not just checking the box for people, it's giving them good, informative content. When you do that on the marketing side, when you actually just educate people, [00:16:00] and you ... The product is just there as the platform, and you're teaching them something; you're not giving them a demo, you're just teaching them something, and you happen to be using whatever it is you sell, that sells itself, right? 
David Leary: That's the providing value.
Blake Oliver: Yeah. I don't know, it's like that- 
David Appel: If we take it back to our point in this discussion - do it in a repeatable way so it's recurring value. 
Blake Oliver: Yeah. We never got down to the on-demand webinars, which I would love to be able to do - do them once.
David Appel: See, to oversimplify the world, [00:16:30] most people go through three stages of ... All the sudden, they have, "Oh, my gosh, I have a problem" stage. Then, they're like, "What are my options?" stage. Then, it's, "How do I pick from my options?" stage. For all of you listening to this, right, and you're trying about adding more value to your client, interview some of your clients to say, "What problems did you realize that you had?" Then look for those ... That's back to the triggers of, "Oh, my gosh, I got a problem." Then, have the ideas through that next step of, "What are my options, and how [00:17:00] am I gonna choose?" Because all of you ... All is a big word ... Most of you are independent, and you're just trying to help your client find the best solution. So, have some preparation on how to help them make the decision. That's where you bring a lot of value.
Blake Oliver: Talk to your clients-
David Appel: Listen to your clients. 
Blake Oliver: Listen to your clients. That's much better.
David Leary: Everything's changing to a subscription economy. Do you think there's gonna be any point where it starts to tip to where there's subscription fatigue? What I mean by that is like ... I think I screwed [00:17:30] up, and I had my Amazon Subscribe and Save ... I got a bunch of stuff shipped to me that I really didn't need right then because I didn't have time to manage the subscription. It's almost like are subscriptions actually causing me more headaches now? I don't know? 
Blake Oliver: Well, I hear this from folks who have a dozen accounting and finance applications in their team now. They're like, "Whoa! My spend on software has suddenly jumped annually. I've got 10 things I'm paying for. I used to be able just to pay for one."
David Leary: Well, there's apps that have popped up now that will [00:18:00] let you track all your SaaS subscriptions. Then, they'll help you cancel them if you have too many. And that's just software SaaS. I mean, I'm getting razor blades ... At what point-
Blake Oliver: You're talking about on the consumer side-
David Leary: On all sides. Just ... I'm subscribed to 500 things, it feels like. It's hard to track. It really is.
David Appel: I'd slice that from one time, from subscription, into, instead, of thinking about it of opt out versus opt in. I'm a very big fan, personally, and on the business side ... It's opt in. So, for those who don't know, opt [00:18:30] out means you're automatically committed, and you have to say that you don't want it. It's like a privacy statement from your financial institution. Opt in is it's not coming unless you choose. Then, at that time of choice, be thoughtful.
Blake Oliver: Well, speaking of subscriptions, actually, a company that's doing it right ... I love Expensify's model because - we've talked about this before on the show, I think, David - you can sign all of your employees up for their app, and you only pay for the ones that use it that month.
David Appel: Nifty. 
Blake Oliver: So, you don't have to think about how many users do I [00:19:00] have? Am I gonna have to upgrade ...? 
David Appel: That's where a lot of my time goes is advising clients on what the potential billing models are. People sometimes spend too much time looking at their belly button on trying to pick which billing model to choose. Instead, you think about what business problem your client's trying to solve and then, how they're likely to best solve that. Then you match your billing model to that decision-making process.
Just to say one thing is back to the recurring revenue model - once you solve that problem for them, then you can just keep [00:19:30] driving recurring revenue time after time, because, in that example with Expensify, as word builds that this is, oh, my gosh, a great way of doing expenses, then more and more people just sign up.
David Leary: I think a firm owner could actually utilize that with trying to reassure their own clients. Like, "Hey, here's our base subscription fee, and we charge subscriptions for these other services, but if that month, or that quarter, you don't need that service, don't worry. You're not gonna have to pay for it" Kind of have a scalable subscription model would make sense-
Blake Oliver: Yeah, I like that. That makes sense, because I [00:20:00] think that's one of the big hesitation points for clients that you're trying to switch from an hourly to a subscription is they think, "Well, maybe, I'll be better ... Why are you trying to switch me? Maybe I'll be better off if I don't; if I just use you hourly."
David Appel: I'd challenge the firm owners and the leading partners at the firms to only try to solve problems in a lasting long-term need so that it's not going to happen because any given accounting firm has many, many service lines, but a few are the big profit drivers, and [00:20:30] they're the big profit drivers because they're the biggest problems people want to have solved. So, create your business model and culture to solve those problems.
Blake Oliver: That's what I've seen some firms doing is giving away the bookkeeping that they used to charge hourly for and putting clients on a subscription for VCFO consulting, right? 
David Appel: Yeah, that's a great idea. 
Blake Oliver: It ends up- maybe it ends up being the same, but psychologically, it's very different when you're getting that bookkeeping for free now. You're not afraid to call your bookkeeper every [00:21:00] day if you need to, I guess. Proactively solve problems.
David Leary: So, if people wanna continue this conversation with you and track you down on the interwebs, how would they get a hold of you, Dave? 
David Appel: Shoot me an invitation on LinkedIn. David Appel@Intacct. I'd love to get engaged. 
David Leary: It's spelled how? 
David Appel: Sorry, David, and Appel is A-P-P-E-L ... Looks like [crosstalk] je m'appelle Appel ... 
Blake Oliver: You and Tim Appel are not- no relation there?
David Appel: No, it's actually a pretty popular Danish last name.
Blake Oliver: Interesting. Cool.
David Appel: Well, guys, I had a great time.
Blake Oliver: Thank [00:21:30] you very much.
David Appel: Thank you, guys. 
David Leary: Thank you. 
Blake Oliver: Bye.

What is Cloud Accounting Podcast?

The Cloud Accounting Podcast is the #1 accounting and bookkeeping podcast in the world! Join Blake Oliver and David Leary at the intersection of accounting and technology for a weekly news roundup, plus interviews with industry leaders.