The Truth About Foolish Forecast: Intuit Closes the Books

Foolish Forecast: Intuit Closes the Books is the title of one of two recent foolish Motley Fool article on Intuit. The Fool clearly did not get it, with statements like “Time to go back into wait-and-see mode”  and “Honestly, I'm not quite sure what Intuit means when it says it's "embracing social networking and mobile technology trends."

Mike Block, a Fort Lauderdale CPA, has an national reputation for QuickBooks. Unlike the author of the Foolish Forecast: Intuit Closes the Books, he knows investors and Intuit product users can rely on Intuit CEO Brad Smith. For investors, the Intuit small temporary earnings drop was due to, “The 2008 loss includes a $23 million pretax charge for severance and facilities closures. The 2007 loss includes a pretax gain of $31 million from the sale of outsourced payroll assets.” Intuit would have $58 million more comparative profit if it did not substantially increase future earnings (with a one-time severance) and did not previously make money by dumping a bad business. This  is far more than the loss, which the Fool did not mention.

Also unlike the author of Foolish Forecast: Intuit Closes the Books

, Block knew how social networking will soon give QuickBooks, Quicken and TurboTax users much faster and better service, while substantially cutting costs. He built his QuickBooks reputation with 9,000 web forum and newsgroup answers, after seeing that many QuickBooks users prefer answers from other users, not Intuit. The Intuit focus has been  on consumer-directed innovation since its initial usability tests revolutionized software development. Brad Smith spoke about new examples of this at a recent Fortune Brainstorm Tech Conference (see linked video). Surveys made Intuit gave 7 million TurboTax users in-program forum links to each other. Users then helped with 40% of questions from other users, before Intuit personnel could help. Intuit also found that average user answers were better than average Intuit answers.

 

The real Foolish Forecast would be that Intuit would keep paying employees and deny users the satisfaction and fame they get by helping other users. Instead Intuit will cut costs by emphasizing user-to-user help. It also is helping former employees run a new company. They will be able to support those who do not want user-to-user help. Block expects the 40% user answer share to rise substantially, as knowledge of the availability, speed and quality of user-to-user help spreads beyond traditional early adopters. He also expects natural language technology to soon suggest answers, even before other users see questions. Optional detailed user, program and system profiles and filters should lead to much better answers, including guaranteed paid answers from Intuit and third parties. The many users who should be available from all geographic areas, at both offices and homes, also should facilitate answers during extended periods. 

Embedded Intuit-assisted remote computer control software, web calls and web video also should soon facilitate the fastest and easiest quality user-to-user help.

 

Again, unlike the author of Foolish Forecast: Intuit Closes the Books, Block and Smith know all about Metcalfe's Law. It says that the value of a network is proportional to the square of the number of users of the system. Intuit has around 15 million users, employees, ProAdvisors and developers of companion programs. Connecting many of them in these and related ways will greatly instant increase the value of intuit products, for a company already dominant in consumer tax, home - investment accounting and small business accounting.

 

This is not theoretical. Intuit is now helping solve what has long been the biggest problem for CPAs, by matching accountants with too much work with those wanting work, regardless of location. It also is not theory to an army of more than 75,000 third-party program developers, who have been making QuickBooks add-ons for up to 7 years. QuickBooks add-ons lets users never enter data twice, while making sure QuickBooks data matches data in other programs. Intuit avoids related developer programming, administrative and sales expenses, while advertising and support charges to developers more than cover related costs. This helps Intuit decide how to update QuickBooks, while serving small companies with diverse needs and larger companies than it otherwise could. It also has long known that QuickBooks add-ons users update QuickBooks more than twice as often as non add-ons users.

 

The current Intuit Connected Services effort also is not theoretical. It involves the use of the fast growing Software as a Service (SaaS) sector. This is not to replace programs, but to use Intuit and third-party web services to vastly increase user choices and the security of data. Intuit already has some SaaS revenue that is increasing 50% a year, partly due to its unequaled privacy and security reputation.

 

A U.N. Committee report long ago outlined the ultimate Metcalfe effect on the value of Intuit. The report said Electronic Data Interchange and standard forms would save trillions of dollars annually. Big businesses increasingly use EDI and require if for suppliers. The EDI to communicate to and from big and small businesses has long been available to QuickBooks users. However, Intuit only recently helped to  integrate it with its high-end Enterprise product. Intuit already supplies easily customized switchable forms. The QuickBooks market share of small business accounting program sales at retail is now 94.2%. Microsoft Money, the one significant Quicken competitor, recently ended retail sales. This means users will have few problems in trying to communicate with users of other programs. QuickBooks add-ons already include web records to facilitate customer and vendor communication. Therefore, Intuit Connected Services inevitably will involve integration of EDI, standard forms, ACH and credit card payments, the Google - Intuit - Yahoo Product Listing Service and using Intuit user-to-user help networks to automate finding customers and suppliers and integrating them into supply chain networks. Intuit's low priced approach may then lead to it becoming the preferred small business click by click paymaster for its users.

 

Finally, unlike the author of Foolish Forecast: Intuit Closes the Books, Block knows why Intuit often gets mutually beneficial results like this. An inspiring Intuit Mission and Operating Values statement concludes, "Simply put, living and working by our operating values will create customer wow and shareholder value." Intuit should derive unique benefits from this company-assisted / user-to-user help and exchange model, due to the passion of many of its customers (witness this article) and top NetPromoter scores. However, this also should revolutionize the efforts of many software and non-software companies, in ways that will involve much more than money. That is is one example of why Block has been asking Brad and Intuit founder Scott Cook to make a small change in the Intuit Mission,

 

“Revolutionize how people manage their financial lives.”