All accounting firms want to be more profitable. But how?
How can accounting firms become more profitable when the commoditization of compliance work is forcing fees lower and lower?
Well, to become more profitable firm owners need to look to new services. Specifically, firm owners need a new service that has higher margins, cannot be automated, is in demand, and is something that a financial professional is uniquely suited to provide.
The perfect answer? Advisory services.
Simply put, advisory services (sometimes referred to as outsourced or fractional CFO services) are a consulting service in which you use your expertise and knowledge to help guide your clients to create a growing and more profitable business. Crucially, advisory services differ from business coaching in two major ways:
- First, you rely on the financial data of your clients to drive your advice.
- Second, you're already a trusted financial professional. From the perspective of your clients, you're ideally suited to provide the advice they desperately want.
In a
Advisory as an upsell
A firm using the upsell model of advisory services offers tax, accounting and/or bookkeeping services. However, it has the explicit goal of upselling its clients to higher-margin advisory services.
These firms will either train existing staff to be advisors or they'll delegate tax and/or bookkeeping work to lower-level staff, and more senior staff will handle the advisory part of the service. The firm's owner will usually become the main advisor.
Firms that upsell their existing tax, bookkeeping or accounting clients to advisory clients will see an improvement in their profitability because of the simple fact that advisory services have much higher margins than traditional transactional or compliance work.
In the minds of your clients, advisory services are more valued because your clients want (not just need) someone like you (whom they already trust) to guide them on having a growing and successful business.
This is because the firm's clients already trust their accountant and, once advisory services are explained in detail, clients will be more willing to pay for the advisory service.
It works this way for a simple reason: The client wants your help in having a successful business, even if they don't know what that looks like until you explain it.
In addition, by upselling your existing clients to advisory services, you can position your firm as a one-stop shop for all of your client's financial needs. Compliance and advice under one roof — you can never overstate the importance of convenience in a client relationship.
There are many similarities with this type of firm and a firm that offers advisory as an enhancement (which I covered in my
Remember, most business owners don't really care about compliance or bookkeeping work. It's something that must be done, a necessity that comes around every month and culminates during tax season. For your clients, it's a burden that they are happy to offload.
Except now, they know that compliance work is being funneled into a service they truly care about: getting actionable advice from someone they trust during monthly strategy sessions.
This is a great benefit to your clients, as they are getting what they need and what they want. They can be confident that the compliance work is being handled by someone they trust (which is what they need) and that the numbers provided are then being translated into advice that can be used to build a growing and successful business (which is what they desperately want).
From your perspective as a financial professional, you get to offer a wide range of services to your clients, upselling when you can and offering only compliance work as an alternative. More importantly, you differentiate your firm from your competitors, becoming a highly-sought-after firm that provides more than just a commoditized version of compliance work.
Yours becomes the go-to firm, positioned as the only firm a client requires to fulfill their needs.
Another added benefit is that your firm will retain clients longer, allowing you to spend less time and money on marketing and more time on servicing those clients.
By continuing to offer compliance services, you also keep more options open to your firm by retaining clients who only want tax or accounting services. However, you also have the opportunity to upsell these clients, potentially increasing your revenue further without the need for any additional marketing.
"Advisory as an upsell" as a service model is perhaps the most flexible of all the options for the firm owner. You get the benefits of all firm types, while having the flexibility to transform your business into an advisory as a replacement firm with relative ease.
Look for a third article in this series next week.
