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 higher-value 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 start-up:
- Entity structure;
- Owner salary structure;
- Employee versus independent contractor rules;
- HSA and other health benefit options;
- 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 start-up package are better positioned to keep clients long-term, because they are providing immense value from the start of the client relationship.
Find your balance
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 towards 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:
- A sales kit, complete with a sales presentation, a short information sheet and a sales proposal (complete with fee).
- Education assets, used to educate clients on each component of the business start-up 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.
- 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 start-up 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 is the right balance of services (transactional/compliance versus advisory) 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.
For a deeper dive on this and other topics, listen to Darren’s Better Every Day podcast on iTunes or at
