Most firms are discussing higher-valued advisory services, yet few have succeeded at scaling and building a team of successful advisors. Granted, some partners have developed niche markets, but few have leveraged technology and truly captured the potential of the advisory services market. Five primary obstacles often paralyze firms. They are the lack of:
- An economic or pricing model;
- The skills required in this team sport;
- A focus on the future; and,
- A collaborative technology platform.
Before we address the obstacles with strategies to overcome them, let's clarify the definition of advisory services. There are three levels of service:
- Performance; and,
Many firms are so focused on compliance that they ignore the opportunities for performance and strategic services.
At the compliance level, technical advisors offer services that are typically commoditized (e.g., tax return preparation, accounting and auditing). High-level advisory services typically require a different professional skillset than compliance services. Many firms are offering limited services in the performance area (adjacent services), but few are addressing the strategic needs of their clients. Therefore, these higher-value services are often provided by advisors outside of the CPA firm, generally at higher rates and margins, and often because no one at the firm has taken the time to have a strategic conversation.
Why does this happen? Each case is different, but too often technical advisors are focused on compliance and deadlines, rather than the bigger picture and what the client really values. Technical advisors often work at a level lower (administration, accounting, etc.) than the leadership group or owners. The point is not about which service is more valuable, but about how, if services from all three levels are packaged and the focus is on value, rather than the time required to deliver, the client will be more satisfied, stickier, and the firm will be able to grow and provide improved opportunities for quality personnel. Another advantage is that the workload is spread throughout the year, resulting in better cash flow and margins due to improved utilization and mixture of skillsets.
Back to the obstacles the firm must overcome. The leader must be capable of assembling and managing a diverse team. This is unlike audit and tax, where compliance is the primary focus. The advisory service leader is typically not the tax or audit expert, but rather someone with leadership and management skills who is capable of focusing on the big picture, rather than the details. These people sometimes leave the firm or are terminated because they have different skills than the technical professionals.
The pricing and economic model must also change from hourly billing to value-priced, fixed-fee engagements. This requires more communication on the front end and agreement as to scope. Simply having a conversation with the client regarding their dangers, opportunities and strengths will generally answer the question about what services they want and need in the coming year. We suggest a "New Opportunities Worksheet" to structure the conversation. By packaging services from all three levels, margins will increase and the client will typically purchase between two and 10 times the services prior to this approach. Many of the advisory services should be provided by non-CPA advisors, resulting in reduced cost of delivery and improved team synergy.
The required skills are generally in the areas of planning, performance measurement and evaluation, technology, human resources and training. Some firms have the resources, and others should build alliances to provide services at all levels. The question is, do you want to play the position of quarterback or be a member of special teams? Compliance focuses on the lower level, while advisory services focus on higher value. Remember, value is determined by the client and not by the time or effort invested in the project.
The higher-value services are also future-focused, rather than an analysis of the past. Yes, our profession has been known for its score-keeping abilities. Focusing on the past will only lead to increased commoditization and loss of relevance. Call this the re-invention of the profession, if you wish. I prefer to use the term "transformation," as we are moving to a higher value of service based upon the well-earned status of the most trusted business advisor.
Technology is the enabler and accelerator of collaborative services. Until the cloud, it was impossible or at least difficult to provide transaction-based services (client accounting, payroll, bill payment, etc.) on a timely basis at an affordable rate. Today's real-time, cloud-based accounting platforms have changed the game. Higher-value services are now more automated and reliable due to the accuracy and timeliness of the information. Transferring of files and hosted client-server applications are obsolete and restrictive in the new advisory service model. Cloud-based platforms reduce friction and provide information faster, better, cheaper and easier.
As CPAs, we should take our role as the most trusted business advisor seriously. We owe it to our clients, our firms and ourselves to play the game at the highest level. This requires thinking about the future, planning your strategies and growing professionally. In many firms, it will require new thinking (perhaps new leaders) and an improved culture of diverse skills and people.
The role of the most trusted business advisor was not earned overnight, but could be lost rapidly if the profession resists change and does not improve its relevance.
Here are some action steps to consider:
1. Evaluate the relevance of your current service offerings.
2. Develop or update your strategic plan and technology roadmap.
3. Identify and support your advisory services leader in building a synergistic team.
4. Hire or source identified skills.
5. Hold quarterly accountability reviews.
Remember that advisory services are about progress and not perfection. Don't procrastinate: You have clients who need and want your advisory services.
L. Gary Boomer, CPA.GMA, is the president of Boomer Consulting, in Manhattan, Kan.
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