As the accounting profession trends towards commoditization and automation, you may have considered how to differentiate your practice from your competitors. Transitioning your practice into an advisory firm is probably near the top of the list — and if it's not, it should be. However, before you pivot, you should consider the type of advisory firm that you want to have.
At its core, advisory services are a revenue stream that you sell to business owner clients. The main offering is your expertise as a trusted advisor who can guide them toward owning a growing and successful business.
Advisory services are also referred to as outsourced or fractional CFO services. They are essentially a consulting service, but, unlike most business coaches and consultants, you are relying on numbers to drive your advice.
From your clients' standpoint, they would prefer the financial professional in their lives (their accountant) to be the one giving them advice.
Why?
- Because they already trust you.
- They know that you know their numbers (an area where they are usually insecure).
- They know that businesses live, or die based on a number (cash flow).
For these reasons, business owners prefer their accountant to be their advisor more than simply ensuring that they are compliant when it comes to taxes or ongoing bookkeeping and accounting work.
The three types of advisory services are:
- Type 1: Advisory as an enhancement;
- Type 2: Advisory as an upsell; and,
- Type 3: Advisory as a replacement.
In this article, we'll look at "Advisory as an enhancement." This type of firm still offers tax, accounting and/or bookkeeping services; however, they enhance their existing services by equipping their team to offer advisory services.
The team members are performing the actual tax, accounting or bookkeeping work and are also trained in performing advisory services.
The practice owner will either train existing staff to be the advisors, or they themselves will delegate all tax, accounting or bookkeeping work to junior staff while they become the firm's main advisor.
The idea is that the existing tax, accounting or bookkeeping work is still being performed as normal; however, from a clients' perspective, they will receive an extra deliverable — namely, a monthly strategy session where their trusted accountant is reviewing their numbers to ensure that they are on the right track towards hitting certain goals as well as giving advice on what areas in their business to focus on to have a growing and successful business.
From a client's perspective, they will get the best of both worlds. They can be confident that their tax, accounting or bookkeeping work is being handled by someone they trust and they are receiving advice from the same trusted financial professional on what to do to have a growing and successful business.
From your (the practice owners') standpoint, a benefit of having a firm that offers "Advisory as an enhancement" is that you will differentiate yourself from your competitors who merely offer a commoditized version of a tax, accounting, or bookkeeping service. You will be seen, in the eyes of existing and future clients, as an accountant who is also an advisor and will be able to provide more than compliance or transactional work.
Another benefit of having a firm that offers "Advisory as an enhancement" is that you will be able to retain clients longer, which will allow your firm to spend less time on marketing and selling and more time to service additional clients.
Since you are enhancing your existing compliance and transactional services in a way that appeals to your clients, you'll have a much easier time demonstrating your value proposition because you can clearly show why you are different from most other accountants.
"Advisory as an enhancement" firms have the advantage of fulfilling both wants for their clients as a one-stop shop. Yet there are other approaches to selling advisory services that could be a better fit for you and your firm, including the "Advisory as an upsell" strategy, which can greatly increase your revenue and which we will cover in the next article in this series.
Look for the next two articles in this series in the coming weeks.
