Many firms find they're hitting a major hurdle when it comes to taking advisory services to the next level; Sarah Dobek of Inovautus Consulting shares why, and what to do about it.
Transcription:
Dan Hood (00:03):
Welcome to On the Air with Accounting Today. I'm editor-in-chief Dan Hood. Everywhere you look, including on this podcast, accountants hear that they need to be focusing on consulting and advisory services. So they invest in some new services and they promote them heavily to clients in the market and then sometimes they find that they can't get any traction and that the growth they hoped for and were promised isn't materializing. Here to talk about why your consulting and advisory practices might not be growing is Sarah Dobek. She's the president and founder of Inovautus Consulting and a well-known consultant to accounting firm. Sarah, thanks for joining us.
Sarah Dobek (00:30):
Thanks Dan, for having me.
Dan Hood (00:32):
Let's talk about this because a issue... do you find a lot of firms are having this difficulty in growing their advisory practices. Is this a problem that everybody's having or is it really just a few?
Sarah Dobek (00:43):
Yeah, I generally find that there's often a lot of low hanging for most firms end up starting their consulting advisory practice and there is definitely a need, but a lot of them hit trouble when they're trying to scale it, especially when we're talking about scaling it be beyond an individual in the organization. And we see a lot of firms that have specialties that when that individual retires, they have not sustained it into an actual practice area. And with most firms today, we see a lot of big visioning and strategic planning around growing those advisory practices. And so looking at that a little bit differently and we take it through a lens of not just an individual in the organization, but making something that's sustainable for the organization, they do start to hit some hurdles in what they're doing and the ability to grow it into multimillion dollar practices.
Dan Hood (01:35):
Gotcha. So it sounds like it's a lot of, that is the issue of the, it's taking it to the next level. It's like a lot of accountants are doing advisory work with their clients sort of on a ad hoc basis as it is, but it to grow it to that next level, to take it to, I should say, to scale it up, sounds like the, that's the inflection point that that's a problem for a lot of firms.
Sarah Dobek (01:53):
Yeah, absolutely. It's not that they don't have any business, but I think we have a lot of conversations with firms around really wanting to grow a practice area and they do struggle with it for a lot of different reasons. And so it's not that it's totally failing, it's just not going where they want it to go, or maybe as fast as they want it to go.
Dan Hood (02:14):
Right. Yeah. We should be clear. We're not talking about a disaster here. Accounting firms are not failing left and because of this. No, no, not, but as you say, they're not getting what they wanted out. And I thought it was fascinating the idea that it's, some of this is practice areas that are pioneered by an individual on the night when that individual retires or leaves or whatever the case may be, they're not able to reproduce it. Yes. Because that's a key element I think for a lot of firms of the consulting advisory practice is finding a way to bring other people in who aren't necessarily the first person who did it.
Sarah Dobek (02:43):
Yeah, 100%. And that's been a risk for years, but especially now with the investment that firms are making and the reliance they're putting on that as part of their vision for the future of the firm, it's so critically important that we have to think about it differently than we thought about it in the past.
Dan Hood (03:01):
Excellent. Alright, well let's dive in. What's the problem or what are the problems? I imagine it's probably more than one thing, but why it is it so difficult for firms to this? I mean, again, to be as fair as we need to be, this is a problem a lot of businesses have to figuring out how to scale a service or scale an operation. So in the way,
Sarah Dobek (03:20):
So there's a couple things that we're seeing. One is, and this is a really common thing that we hear, is we have so many clients that can use this service, but our partners aren't necessarily making introductions or you're hearing from the internal practitioners that are leading this service. We just don't get that many referrals. It feels like it's pulling teeth to get that in. So this cross-selling concept is one of the places that a lot of firms struggle. And one of the reasons is inside of an accounting firm, a lot of accountants have this tendency towards perfectionism. It's one of the reasons you're a good accountant and you're good at what you do, but inherently that impacts an ability to trust because we feel like we have to know how to do everything in its entirety before we're even willing to raise the conversation with our client, even mention a word around something in there.
(04:15)
And so really being able to bring people in and talk about something that you don't know how to do is something that culturally has to be overcome inside of a firm and with individuals. And they have to really be taught how to have these conversations. Sort of tied into that is this concept of sales skills and sales skills really are a lot different. And firms don't like it when I say this, but I'm going to say it anyway. Most of them are not as good at sales as they think they are at the end of the day. There you go. And the reason it's not their fault at the, it's not their fault at all. So much of tax and audit work is compliance based and there is another governing body that is dictating that that has to be done. So the sales process looks a lot different. They don't have a choice about having this done. This isn't a want that they're choosing to buy. They're being required to file their taxes. Well required might be a struggle. Courage, you'll be heavily fine if you don't. You may,
Dan Hood (05:18):
You'd be surprised at how many people managed not to file their taxes. But yeah, there's a few
Sarah Dobek (05:22):
That pushed that line, but we won't talk about that today. But at the end of the day, somebody's dictating this for them. And so they don't have a choice. They have to pick somebody in most cases, and they've got to do it. If you need an audit that's being required by a bank or a bonding agency or an external party that is requiring that for whatever purpose. And so that sales process looks a lot different. And in a lot of cases that is referrals. And anytime you get referrals in, you're skipping a whole piece of the buying process. You're getting them at the very tail end of it. And so we have this inflated sense of our business development skills as a result of that. And so when we start to enter in to things that actually require us to sell at the beginning of the buying process, not just the end, all of the sudden we start to see that we don't have some of those more complex selling skills that are needed on the front end. And so that's impacting this, but it's also just impacting mindset around something that is a want, not a need. Most advisory services aren't being dictated. The benefit of that is there's a much higher threshold for pricing that you can get for those services. And one of the big appeals to a lot accounting firms, the other being we don't need CPAs to do all of that work either. So it helps.
Dan Hood (06:50):
I say, that's really interesting. I hadn't thought about the fact that for all that compliance work, you, you're born on third base in a sense. You've somebody they've already been convinced of the need for it because the government says you have to have it or your lender or whoever. So that's a really interesting way to put it. As you say, it's not really their fault. You never had to do this because the compliance work was pre-sold for you in a lot of ways, and all you had to do was prove your technical competence as opposed to proving why somebody might actually want this service in the first place. That's a neat distinction.
Sarah Dobek (07:21):
Yeah, absolutely. And then that sales thing impacts marketing because even as marketers and born and bred marketer inside of an accounting firm, you market that differently. You market the compliance-based services differently and you don't have to educate the market on why you have to file your taxes. You don't have to educate them on why you need an audit. Sometimes you have to educate them on why you don't need an audit all the time. But for the most part, there's a base level of understanding because that is being dictated by a governing body. And when you start to look at consulting services or any service that is optional at the end of the day, on the buyer's side, you have to educate around pain points. You have to tell them how you can solve the problems that your service provides. We actually have to build a service line and be clear on what our deliverables that isn't being handed to us. And so there's this marketing piece, this product development piece, this sales piece that firms are just not used to dealing with, new to territory for a lot of them. So is mean if we look across what are the core buckets that are impacting this, there's just a lot of things that they haven't had to do until they entered into some of this stuff. And so it's no wonder that we hit a stalemate in our growth cycle with it.
Dan Hood (08:44):
Alright. Mean those are two or three really powerful reasons why it might be difficult to grow if you're not out there finding clients and not doing it in the right way and not training everybody in the things they need to do to it, those that's going to get in the way. Are there other things that people should be looking at as possible barriers to growth?
Sarah Dobek (09:02):
Yeah, I, so I think if we think about it, maybe some of the things that they can use to achieve growth. So knowing that what some of these challenges are, how do we start to overcome those? We're really big on practical advice. What do we do now with some of this? I think the first place that I usually recommend firms start is let's get a hundred percent clarity on what we're actually delivering. Because generally when I go and I talk to firms, we're not really clear on what that is. Most of the leaders have a vision for what they want, but it's not clearly articulated what we're providing and not in the sense of what can we actually productize to at the end of the day, which is really important to consider is that offer. And it's not just for marketing materials, although that really helps if we can be clear on what we're offering to the market.
(09:54)
And many times we'll go in and I'll talk to 'em about what they're doing and then I'll look at all the external things that they use to communicate what they do. And there is a complete misalignment around that. So the more clarity that we can get and the more alignment with any communications that we have that describe what we do in an external fashion, that's important. But it's also important internally because those other partners who don't do what you do need to understand it. And a great example of this is Cass, right? Everybody's like, yeah, I know what accounting services are. But there's still a big misconception that I talk to every CAD leader, it seems like in the us and there's like a point where they hit this, that explaining what the difference is between outsourced C F O services and outsourced accounting services, totally different services, but they all lump it together until you start educating internally about what that means. And it's oftentimes just scope, not that A C P A doesn't understand the concept of it, but they don't offer that service. So what's in scope and what's out of scope for some of those things. So the clearer that we can get on that, I think the more helpful that's going to be and bringing people along inside of the organization because as they understand it, they're going to feel naturally more comfortable being willing to have those conversations around it.
Dan Hood (11:13):
And since we're going to be forcing them to cross-sell. Yeah, well, yeah, it's the way, I'm kidding. We're not forcing, but we are. That's something we're going to have to deal with. It's get them to cross-sell and clarity of what they're actually offering has got to help. It can't hurt, but part of it is, as you say, that they're not sure about it. They want to be an expert if they're not expert. But even just some concept of what's going on. I want to dive more into this, but we have to take a quick break.
(11:38)
Alright. And we're back. We're talking with Sarah Beck, VIN about Consultanting about why firms may find it difficult to scale or grow their advisory services. As we talked about, often they have a core or a foundation for it, but it's difficult to take it to the next level. We've talked about some of the reasons for that and now we're talking about some of the possible ways to get past it. But we were just finishing up or talking about, I should say, I dunno if we were finished on it, but the importance of clarity in the offering. And it's not just the firm should know what they're offering anyways, but you want to make sure it's so that you can communicate it to other partners, you can communicate to the market, you can keep it in your, get it into your marketing. So you're clearly offering, and people know when they buy a service from you that they're going to get what was on the marketing material. So what else should we be thinking about in terms of getting these things to grow? What else is standing in the way or what else can we do to help get past these hurdles?
Sarah Dobek (12:28):
Well, I think the other piece of that and tying off the clarity piece is we've got to be able to scale what we're doing, which means we have to standardize it. And that's the other big hurdle that we see with a lot of consulting and advisory practices is once we have clarity on what we're offering, we also have to be clear on what the deliverables are and what the process is around that. In compliance services, we inherit that, right? We can tweak it a little bit. We can make it a little bit more efficient, a hundred percent. We can use technology. All those things in consulting advisory, we're building that even if we have a certification in something, let's just take valuations for example, or exit planning to common areas you can go out and get certified in. We still have to build the process for the firm even if there is kind of a standardized framework that's being given to us.
(13:14)
And so that is really important when we kind of underestimate the value of that in the other areas of the practice. But every single leader that we've worked with absolutely hits that point where they have to standardize what they're doing and they have to develop the product that they are delivering to the client at the end of the day. And so we have to make it scalable. Once we have that clarity, we can start to begin to make that scalable and say, here's what it is that we're doing. Here's how we offer it, and here's what the end result is to the client. It's not just a conversation or if it is, how are we memorializing that conversation and actually making it a deliverable around mean? That's a big piece of it and it's a big lift. I mean, if you just think about it, the idea of this can take firms a year or more to really figure out what they're doing and each time they hit a growth cycle in that, it seems to change like everything.
Dan Hood (14:13):
Well, and that's got to be particularly, you talked about the difficulty when somebody who built a practice when they leave or retire or whatever, that's got to be a particular issue there because they're just, oh, I just do it. I know what it is. I don't need to share it with anybody. I've never had to write it down all in my head. So when you've got that sort of soul, soul siloed thing, when you want to grow it out, the person's got to get it out of their head and get it into some kind of format that other people can deliver.
Sarah Dobek (14:36):
Yeah, absolutely. The other thing that we often see is when you start thinking about how we communicate this and grow a practice area, two other buckets, both I mentioned. One is marketing. We market differently. We can't wait just until referral comes in. You'll absolutely get referrals for this work. We never want to stop that. But what we generally find is that there needs to be more reliance on creating a lead generation engine for these services that are not being dictated by somebody, which requires much more advanced marketing than most firms are used to, and it's going to require more content development, a lot more education of your clients. We still see firms that are afraid to educate their clients primarily because they're like, well, we don't want that many leads. And I always remind them
Dan Hood (15:30):
There we're not marketing and business development people across the country just fainted with the notion of, I don't want that many leads. But yeah,
Sarah Dobek (15:38):
I'm, I always remind them, I'm like, it's not like we're going to turn on the spigot and all of a sudden you're going to get 150 leads through the door. And the other thing I can tell them too, this is a sales piece. When we're working earlier in that process, it's a much smaller conversion. Our conversion rates aren't 50% when we are at the beginning of a sales process. There are a lot of unqualified leads. You have got to dig through those and comfortable knowing that you are going to get unqualified leads and that a percentage of those will be qualified. A percentage of those qualified are actually in a buying process and might move into some sort of scoping process beyond discovery. So this idea of like, okay, well we close 50 or 60% of what we get, that's totally fine when it's a referral and they've already made a decision to purchase because they're in the last stage of the buying process.
(16:27)
So marketing really has to be there to funnel and fill from a lead generation standpoint. And that's going to mean a lot more advertising, a lot more digital marketing. Things like lead magnets and white papers and social advertising and things that firms were just really quite honestly never had to do in order to sell that. And so that includes your client base too. And so you can't be afraid to educate them. And I promise you, I don't know a single firm on earth that said, we're get, we're just going to talk to all of our clients that have actually been able to execute on that because we don't have enough time in the day. And so not to say that we don't want our partners talking to them, we absolutely do, but we cannot, what I call have this hope and pray strategy that we have a great service and we're going to hope that we get the leads. We're going to hope that we get the referrals that we've got to do something to create that.
Dan Hood (17:22):
Right. Oh, I always go mean, this always brings me back to the whole, something like 90% of accounting firms rely on referrals for 90% of their new business, but only 20% of them actually ask for referrals, could go out to clients, Hey, would you give us a referral? They're like, no, we just need to say, we just hope that this comes in. So there's probably a lot of general work in all areas of accounting practices that could work on their marketing and referral strategies. But this has been great. We've laid out a lot of problems and a lot of potential solutions. I think a lot of 'em sort of go hand in hand, but I just want to see if I've got most of the ones we were talking about. There's obviously the issue of cross-selling, making sure that everyone in the firm understands what the service is, making sure that everyone who's delivering the service understands what it is, making sure it's standardized, because that's going to help scale it beyond a certain point.
(18:09)
Getting people to understand that, as you say, the marketing, the pipeline calendar is a lot longer than accounting firms are used to. They're used getting, as you say, coming in right at the end and knowing somebody's already been sold. They already know they need to get a tax return or audit, whatever the case may be. So people helping people understand the length of that actual pipeline for a service like advisory services where they're not necessarily have to sell it or have to buy it. I'm trying to think what else. Oh, just generally getting the marketing, marketing work done much earlier, accepting that there's going to, you're need to reach out to a lot more people than you're used to and that you're not going to be flooded by leads. That's not usually a problem that anyone needs to worry about. Have I missed any of the big points here?
Sarah Dobek (18:49):
Yeah, I think the last big point, Dan, is really just the sales skills to accompany all those things that we just described. And again, I said this, it's, it's not your fault if you grow up as a traditional C P A, right? We're used to selling something different and that process looks different. But I think the reality is that if we're going to be exceptional and if we're going to grow these services, these consulting and advisory services, we have to have recognition that we need stronger sales skills than we've had and not business development. Business development is about nurturing sales, actually working it through the sales process and handling the negotiations and dealing with complex selling, preparing proposals. I can't tell you how many firms are like, oh yeah, we don't send proposals, which is totally fine in referral situation, but a complex selling where you are competing against other people or you're, you are having to create a need to act on a want that it's needed at the end of the day. So I would say don't, don't be afraid to roll up your sleeves and get humble and realize like, Hey, I probably need to be better at this.
Dan Hood (19:59):
Well, let me ask you just real quick, would it be, I mean, is it safe to say that maybe for a lot of firms, and I don't know, I'm just that some of the issue is that they go into this, not only do they not have the sales skills, but they may not also have the marketing team there right in place to particularly, obviously larger firms would, but for smaller firms that are looking to grow, that might be, is that a hurdle you run into where they just don't have the support there and maybe that that's part of their plan to build these out needs to include a higher level or a larger marketing team?
Sarah Dobek (20:29):
Absolutely. We have a lot of firms that need support on marketing that they don't have anybody or they're one person department and they just don't have enough bandwidth to do what's needed mean. By and large, we've seen the number of marketing professionals double inside of accounting firms over the last couple of years. So absolutely marketing support as well as the sales skills to critical components.
Dan Hood (20:58):
There you go. Awesome. Well, that, I think we've solved everyone's problem here. They can go out and start growing those, seeing the scalability they want in their advisory services. I think we didn't really go into making the case for this, but it does seem as if that's the future of the profession is building on the compliance relationships they have and building compliance skills, but then to take it to the next level, to turn it into actionable advice and to direct that all into areas that'll hopefully be more profitable, more exciting, more interesting, draw more people under profession, solve every problem we have. I think we solved it all. There you go. Alright. Excellent.
Sarah Dobek (21:28):
Alright, that's great. We can all go home then.
Dan Hood (21:30):
Exactly. Sarah Dobek of Inovautus Consulting, thank you so much for joining us today.
Sarah Dobek (21:35):
Thanks for having me, Dan.
Dan Hood (21:36):
And thank you all for listening. Obviously you'll never lead to listen to another podcast because we've solved everything today, but thank you for joining us and we hope you'll join us again. This episode of On the Air was produced by Accounting Today with audio production by Kevin Parise. Rate or review us on your favorite podcast platform and see the rest of our content on accountingtoday.com. Thanks again to our guest and thank you for listening.