Key Starting Point: We have previously looked at the profit principle establish by the ‘Rule of Fee Flexibility.’ This rule suggests that clients have a potential additional service budget of up to 100 per cent of the compliance fee provided they derive value that exceeds the cost – a minimum value might be illustrated as not less than three times the cost of the service.
This key point illustrates the revenue potential and importance of developing robust future advisory services and specialisations. In an industry where service margins are decreasing and services are increasingly being delivered by technology new revenue sources must be developed that deliver a return to the provider and value to the customer/client. In other words we have to decide and invest in these ‘Aladdin’ services.
Key Point: The above is fine, understood and obvious (as it has been for decades) but the reality is that most firms generate less than 5 per cent of revenues from these type of advisory services.
This series of articles seeks to provide insight and enlightenment to provide a framework to creating a structured approach to building your non-compliance services and increasing your average revenue per client.
Key Questions: What is your revenue per client? How does this compare with last year? How can you increase this?
Key Reality: The future demands investment. In time, cash, training and perseverance. Are you up for the challenge of developing your accountancy business?
Key Challenge: You might be busy today, but where will your growth come from tomorrow?
Our journey to date
In my first blog I looked at aspects of your initial client meetings, moving out of your comfort zone, having a higher charge rate for advisory and the ice cream lesson.
In my second blog we took a look at aspects of growing your advisory services, the restraining impact of high lock up, developing service and industry expertise and a series of opportunities and threats to take note of.
In this blog we will look closer at some specifics. Ready for the journey? Good. Let’s get started.
A review of over 150 accounting firm websites reveals that – 84 per cent of firms focus primarily on their ability to deliver core compliance services while the remining 16 per cent offer a range of services beyond compliance. Approximately half of those firms (8 per cent) have a very robust service offering supported by images of those team members offering those services.
It’s time to advance
So let’s, once again, go forward and explore some components of your advisory service offering.
- Firstly, what non-compliance services are on offer from your accountancy business? Just for one moment take a look at the restaurant. The restaurateur’s menu displays all the starters, mains and desserts they are offering for sale. Your website, firm brochure (if you still have one), your reception service leaflets (recommended) should likewise display all of the non-compliance services you are able to offer. This is the first opportunity on your ‘window to the world’ to highlight your capabilities and your solution solving services.
- Secondly, what services do you have where you have systems, policies and procedures that can serve in economically delivering value?
Key Point of Resistance: One of the reasons that accountants fail to do well in the arena of advisory services is that, by and large, these services are all one offs that require energy and effort. That is not always what accountants seek or desire when there is an overload of compliance work to review and sign off. But, this resistance must be overcome if you are to maximise your revenue potential, better serve your clients and be your clients most trusted advisor.
Key Action: What training is required to equip your team to deliver a range of these services?
Exploring a few of these services
Let’s look at two of these growth potential and essential non-compliance services.
1 Client accounting services
Many firms already have a robust service offering in this area. With Cloud access now common in most countries online services are increasingly making paper redundant as well as spreadsheets such as excel and in-house software applications.
Key Challenge: Which Cloud services do you/can you support? There are so many options and unless you strongly recommend and point clients in the ‘right’ and preferred direction you will most likely endure the frustration reported by firms who have to work on packages and reporting systems they are not familiar with. Further some of those firms report that the Cloud systems do not have all the necessary functionality, or are replete with bugs.
Key Recommend: These are services (accounting and payroll) that MUST surely be top of your client service offering. They are services that are 100% within your existing competency. They are services that are staff led. They remain a growth service area.
2 Business advisory meetings
It’s time to be your client’s most trusted business advisor.
I meet with my accountancy business owners on a regular basis. Today, this is [almost] exclusively online. I still meet face to face with my UK clients – and I even enjoy the driving, while not, yet, missing the flying. The fact is that accountants value business advisory meetings – so would some of your clients.
Meet Graham Lamont, partner in a three partner firm in the north west of England. This is what he reported as achieving in his relatively small firm:
“We have developed an outsourced Finance Director Service for clients providing:-
- Monthly management information and monthly meetings with directors
- Quarterly management information and monthly meeting with directors
- An annual Profit Improvement Day
These services represent about 20% of our fee income and are provided to about 200 clients each year.
We quantify the value added during these sessions and it is more than three times the fee we charge and in many cases is over 10 times the fee we charge. In many profit improvement days the client earns over £5,000 per hour of his involvement with us [i.e. 5 hours work with the client at a profit improvement day normally generates over £25,000 of profit improvement ideas – which we usually find are implemented in the next financial year which shows through in over £25,000 of improved sales or net profits]
In one example we have worked with a client for the past 5 years, our initial fee 5 years ago was £1,800 and net profits were £80,000; now our fee is £16,000 and net profits are over £300,000!”
Well done Graham.
Surely, if Graham can provide this service to 200 clients you could find 10 – maybe more?
Key Question 1: What does being the most trusted business advisor look like?
Key Question 2: How can you advance client’s advisory relationship from ad hoc at the compliance meeting to strategic and an ongoing service?
Key Question 3: What is holding you back? If is being busy today – then delegate. Remember it is essential to work smarter not harder.
Key Recommend: Invest in my Delivering your Business Advisory Services webinar and power your team to success in this area. Invest by 31 May for a 25% discount (Use coupon code MAY25 at checkout).
Key Advice: You want to implement something akin to these recommends but feel restrained. Remember that it is always important to live in accordance with your priorities. Post the initial impact of Covid it is key to strategically plan what your future service portfolio and partner advisory emphasis look like.
Key Action: “If you can’t measure it, you can’t manage it.” [Peter Drucker]
You might recognise that management principle. You might not agree with it 100% – not so sure I do, but there is wisdom within.
- So, with that in mind can I encourage you to set some targets for the services you wish to deliver more of and the revenues you wish to generate?
- Then, look at your client list and identify those clients who you consider are candidates for these services. If you cannot find prospects within your client base then review your service offering until you do.
- Then, establish a range of revenues and break this down into monthly targets – annual rarely motivate in this context.
- be clear on the value delivered
- the problem you are solving
- establish your systems, and procedures – what can you systematise?
- set your pricing
- determine your ‘sales’ strategy
- determine your timeliness of delivery
- ensure sure your team is trained and fully on board
- encourage people to achieve their targets
- applaud them when they succeed
Final Action Pointer: Make sure you seek client feedback and maybe even testimonials for your website.
Up Next Time: When I started this series of articles on developing business advisory I was not sure how many I would create. This is the third – the fourth will appear next time and then I will move on to other areas. But, if I am asked to pick up the reigns on developing business advisory then I most certainly will. There is much more to be considered to succeed in this area.