Bet­ter Every Day: Cash­ing in on ad­vi­sory ser­vices

Find a bal­ance that’s right for your firm

Accounting Today - - Contents - BY DARREN ROOT

The topic of higher-value ad­vi­sory ser­vices is noth­ing new. The American In­sti­tute of CPAs, state CPA societies, soft­ware ven­dors and con­sul­tants have been ad­vo­cat­ing for firms to move out of trans­ac­tional work and into value-priced ad­vi­sory ser­vices for years. Yet, even with all the talk, many firms have yet to make a move and are still some­what un­sure if it’s the right move at all.

Part of the con­fu­sion, I be­lieve, is a lack of clar­ity around bal­ance. That is, what is the right bal­ance be­tween trans­ac­tional/ com­pli­ance work and busi­ness ad­vi­sory ser­vices? Or, is the answer to aban­don trans­ac­tional work al­to­gether?

The short answer here is that there is no de­fin­i­tive answer. First, trans­ac­tional work will likely not go away com­pletely, and cur­rently there is more trans­ac­tional work than most of us can han­dle. Sec­ond, every firm is dif­fer­ent and will need to cre­ate a bal­ance that works for its unique sit­u­a­tion.

The key is find­ing the bal­ance that works for you and then build­ing and re­fin­ing a model that al­lows you to de­liver your tra­di­tional trans­ac­tional work and busi­ness ad­vi­sory ser­vices in a man­ner that max­i­mizes rev­enue and prof­itabil­ity.

It’s what clients need and want

Be­fore we dive into the dis­cus­sion on find­ing your bal­ance, it’s im­por­tant to un­der­stand the great need for high­er­value ad­vi­sory ser­vices.

Busi­ness clients re­ally do seek a deeper re­la­tion­ship with their ac­count­ing pro­fes­sional. From ini­tial busi­ness launch through to suc­ces­sion plan­ning, busi­ness owners re­quire reg­u­lar strate­gic guid­ance to stay on a healthy fi­nan­cial path. For ex­am­ple, con­sider a few com­mon items tied to busi­ness startup:

En­tity struc­ture;

Owner salary struc­ture;

Em­ployee ver­sus in­de­pen­dent con­trac­tor rules;

HSA and other health ben­e­fit op­tions;

Talk around busi­ness ad­vi­sory ser­vices has in­fil­trated nearly every trade and so­cial me­dia chan­nel. There are those who say ad­vi­sory ser­vices are the way of the fu­ture. And while this may be true, prac­ti­tion­ers first need to un­der­stand what is the right bal­ance of ser­vices for their firm.

Re­tire­ment plan­ning;

Fed­eral and state laws for rev­enue recog­ni­tion, de­duc­tions, doc­u­ment re­ten­tion and proof; and,

Best tech­nolo­gies for busi­ness op­er­a­tion.

Most busi­ness owners don’t know where to start with this list. Or, if they choose to go it alone, they are sure to make costly mis­takes. For ex­am­ple, choos­ing the wrong busi­ness en­tity can potentiall­y cost an en­tre­pre­neur sig­nif­i­cantly more in taxes, and even open them up to un­fore­seen li­a­bil­ity.

Firms that of­fer high-value ad­vi­sory ser­vices like a busi­ness startup pack­age are bet­ter po­si­tioned to keep clients long term, be­cause they are pro­vid­ing im­mense value from the start of the client re­la­tion­ship.

Many firms are equipped with the ex­per­tise in-house to of­fer high-value ad­vi­sory ser­vices — yet so many do not (at least, not for­mally). A lot of firms sup­port clients with guid­ance through­out the year, but this of­ten oc­curs only when they are asked for it, and is billed on an hourly, one-time ba­sis. The key is get­ting to a point where ad­vi­sory ser­vices are pro­duc­tized, re­peat­able and highly prof­itable.

Tra­di­tional ac­count­ing firms typ­i­cally work in a re­ac­tive, rather than a proac­tive, model for ad­vi­sory ser­vices. The com­mon modus operandi is, “If a client needs some­thing, they will ask for it.” As a prac­ti­tioner, I know that com­pli­ance work is front and cen­ter, es­pe­cially dur­ing tax sea­son. This means that fol­low­ing a proac­tive ad­vi­sory model is put on the back burner — and will of­ten re­main there through­out the year.

As a re­sult, the tra­di­tional firm ends up heav­ily weighted to­ward com­pli­ance work.

Find­ing your bal­ance is a big task, and it will take time to get to your sweet spot. To get you started, here are a few ini­tial ques­tions to ask:

Do you want to pri­mar­ily be a trans­ac­tional- and com­pli­ance-driven firm, or do you see value in di­ver­si­fy­ing to in­clude more ad­vi­sory ser­vices?

If you want to move more heav­ily into ad­vi­sory ser­vices, are you will­ing to change the com­pli­ance cy­cle that con­sumes your firm?

The fact is that trans­ac­tional and com­pli­ance work come more nat­u­rally for firms. But why?

My ex­pe­ri­ence is that it’s eas­ier to de­liver a “pack­aged” prod­uct (i.e., a tax re­turn or fi­nan­cial state­ment) than a higher-value ad­vi­sory ser­vice, which many firms sell based on bill­able hours and are recre­at­ing with each new client re­quest. We grav­i­tate to selling prod­ucts that are pre-pack­aged — those that we are in­ti­mately fa­mil­iar with how to price and de­liver.

The good news is that ad­vi­sory ser­vices can be pack­aged as well — of­fered as “off-the-shelf” solutions that are re­peat­able and highly prof­itable. Con­sider just a few of the ad­vi­sory ser­vices re­quired by new busi­ness star­tups (as listed above): en­tity struc­ture, owner salary struc­ture, re­tire­ment plan­ning, and tech­nolo­gies for busi­ness op­er­a­tion.

Now, what if you had a pack­aged prod­uct for busi­ness startup clients that al­lowed you to market, sell and de­liver ser­vices con­sis­tently across clients … just like with your trans­ac­tional/com­pli­ance prod­ucts. This ad­vi­sory pack­age would in­clude:

1. A sales kit, com­plete with a sales pre­sen­ta­tion, a short in­for­ma­tion sheet and a sales pro­posal (com­plete with fee).

2. Ed­u­ca­tion as­sets, used to ed­u­cate clients on each com­po­nent of the busi­ness startup ad­vi­sory prod­uct. You will prob­a­bly tweak your pre­sen­ta­tions and re­ports for each unique client, but, ul­ti­mately, you can ap­ply the same prod­uct over and over.

3. A rec­om­men­da­tions re­port, com­plete with key find­ings.

With a pre­de­fined set of tools, ad­vi­sory ser­vices can be de­liv­ered as eas­ily as any trans­ac­tional- or com­pli­ance-based prod­uct.

The next step is to com­plete a quick ex­er­cise: Con­sider all the ad­vi­sory ser­vice-based rev­enue your firm earned in 2018 and then cat­e­go­rize those rev­enues into like-kind cat­e­gories. How many dif­fer­ent cat­e­gories make up your list — 15, 20, 25? Now, con­sider tak­ing each of these cat­e­gories and re­fin­ing them into off-the-shelf prod­ucts that can ac­tively be mar­keted and sold. What does your ad­vi­sory of­fer­ing look like now? What feels like a good bal­ance with trans­ac­tional/com­pli­ance work?

The goal here is to move away from one-off, billed-hourly ad­vi­sory en­gage­ments and into a de­fined set of prod­ucts that are re­peat­able and pre­dictable. You can start with a busi­ness startup of­fer­ing and then move into other ar­eas that most busi­ness clients both need and want, in­clud­ing out­sourced client ac­count­ing, on­go­ing tax and fi­nan­cial ad­vis­ing, and suc­ces­sion plan­ning.

In sum­mary

Talk around busi­ness ad­vi­sory ser­vices has in­fil­trated nearly every trade and so­cial me­dia chan­nel. There are those who say ad­vi­sory ser­vices are the way of the fu­ture. And while this may be true, prac­ti­tion­ers first need to un­der­stand what the right bal­ance of ser­vices (trans­ac­tional/com­pli­ance ver­sus ad­vi­sory) is for their firm.

So, what is your bal­ance? Once you know, you’ll be in a much bet­ter po­si­tion to move for­ward with busi­ness ad­vi­sory ser­vices and get to a model that will drive growth and prof­itabil­ity. AT

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