Guide to increasing revenue with advisory, Part 1

Over the past few years, there’s been plenty of talk about the need for accountants and bookkeepers to offer advisory services.

Even before 2020, the market for accounting services was shifting, then a global pandemic brought a step change in digital transformation and significant economic turbulence. The war in the Ukraine and related events are also pushing up inflation and curbing economic activity worldwide. In the United States, the near future might look challenging, but accounting and tax firms of all sizes have increased expectations of growth in 2023.

According to Accounting Today, “Accountants have realized that they can do better than other organizations, even in the most difficult of economic environments. While growth rates shrank over 2020 and 2021, they stayed positive and firms had more work than they could handle.”

One of the major focuses for firms this year will be the shift away from “a compliance-first mindset to one that focuses primarily on higher-value advisory services,” the report says. “Firms increased their time spent on advisory work in the past year, and fully half of them expect to increase it again in 2023.”

These services are typically the most significant accounting challenges that clients face in their businesses. These are priorities that keep clients up at night:

• How do we manage cash flow?
• How do we best pay our people?
• How do we build a business that we really want to build?

In this article, I’ll look at how to choose services to offer your clients, how to price these, and how Ignition can help to maximize your profits in this area. In part 2, I’ll provide actionable ways you can pitch your services to clients, create sales workflows, and use proven marketing tactics to reach and engage new and existing clients. I’ll also show how automation can streamline your processes from proposals and engagement letters to getting paid on time, every time.

How to decide which advisory services to offer 

Key takeaways:

• Start planning which services to launch by asking six key questions to find your firm’s sweet spot.
• Inform your research with market insights about the advisory services clients are likely to demand in 2023.
• Use your existing compliance work to consider if there’s a clear need for advisory.
• Choose the advisory services to offer using a simple four-step process.
• Using Ignition to automate tasks can free-up time to offer advisory services.

Sean M. Duncan, CPA, is founder and president of SMD Consulting & Accounting, LLC, and creator of the Chief Proactive Advisor program. He teaches accounting and tax firm owners how to find their sweet spot, and recommends that accountants wanting to generate more lucrative and meaningful work start by asking themselves:

1. What kind of work do I want to do?
2. What am I good at?
3. What type of client do I want to help?
4. What do those clients need?
5. What does success look like for me?

And then create a business plan based on the answers. Accomplishing the answers does inevitably involve challenges and some investment of time and energy. But it could be a catalyst to many advisory opportunities. Sean pivoted his firm from performing strictly tax prep work, which brought in on average $800 per client per year in 2017, to more specialized services, such as wealth management and estate planning. He now makes more than $10,000 per client, per year.

The shift has been a win-win for him, his firm, and his clients. He’s achieving his own personal goals to provide more meaningful and impactful services to his clients, and have a positive impact on their lives and their businesses.

In my own firm, Lance CPA Group, we’re niching down into craft breweries and digital agencies. This allowed us to become experts in those industries. We’ve made it our business to get to know these types of businesses, pairing our expertise to meet their unique demands and help ensure their financial well being.

At the same time as laying the groundwork for your niche and researching suitable advisory services to launch, it pays to also know which services clients will be clamoring for in 2023. These services are likely to include the following:

Tax advisory: Helping your clients optimize their tax situation is a service they’re likely to want during the downturn. We did this in my own firm and found we got an overwhelming number of clients that wanted that work and signed up for it. If you’re just doing tax returns, ask yourself how you can expand, so you’re working with clients throughout the year, helping them with tax planning or tax estimates.

Cash flow forecasting and advice: If business owners didn’t want this before 2020, they definitely did after lockdowns started happening. The issue here isn’t likely to be convincing clients they need the service; it’s making it clear that it’s a service they need to pay for.

Technology advisory: Many clients are likely to need help with their tech stack; business software is rarely plug and play. You’ll need someone with technological expertise to take on this work, but if you already employ such a person, or can hire or partner with one, this could offer significant revenue opportunities.

“You’ll be a hero to your clients if you can handle the tech side of things,” says Sean. “If your firm can advise, for instance, a medical practice on what practice management software they should buy, then install it and make sure it integrates with their other software, then provide IT support if any issues arise. That’s something you charge a lot of money for.”

Client advisory services (CAS), such as virtual CFO: The cloud and the software-as-a-service products it has enabled, means it’s never been easier for businesses to outsource back-office functions, such as finance, to their accounting and tax firm. Few businesses can afford $300,000 for a full-time CFO, but if they want to grow they need strategic advice.

“Many businesses want a virtual CFO, and this is something my firm generates a ton of money from,” says Sean. “But be it a fractional CFO or controller or anything else, you have to establish clear boundaries around how big the fraction is. Are you spending a few hours helping the client understand their financials and make management decisions every week, month, or quarter?”

How to use compliance work as the basis for your advisory services 

Advisory services don’t have to be separate services from those you already offer. In fact, these services could come out of your existing compliance work. If there’s a clear need for an advisory element, there could be an opportunity to service clients in a much better way.

Think about accounts payable. You could just be paying bills, but if you think about the process of paying bills … that really lives in cash flow management and cash flow advisory, which is a huge pain point for small businesses.

Managing cash, having enough cash for payroll, and ensuring the owners get an actual wage that makes sense for them is critically important to have someone who manages and understands when cash is coming in and when it’s going out, as well as how to best optimize that. That’s a huge advisory need that clients are wanting and willing to pay for.

Selling additional services to existing clients could allow you to increase revenue. This means leveraging your client relationships, but many accountants struggle with putting it into action because they don’t know where to start or try to do too much at once. The key is to start small. Don’t try to sell every service to every client right away. Even if you are successful and they all agree to it, you may not have the ability to fulfill what you’ve promised.

Here is a simple four-step method to help you kickstart the process for choosing advisory services to offer in your firm:

Step 1: Understand your client service matrix

First, gain a solid understanding of your current client service matrix by listing all of your clients against all of the services you currently provide. Mark off which of these services your clients are currently using.

Step 2: Identify services to sell 

Next, ask your team what you should be doing for your clients that you’re not currently doing and would provide a lot of value. Also identify with your team the typical areas where clients are pulling the firm out of scope. This is a great way of identifying a potential need for services. The services you pinpoint should be ones your team is trained, or can be trained, to deliver.

Step 3: Expand your current offering

When you’ve identified services you could offer, revisit your matrix looking at the industries your clients are in. Consider if your other clients in the same industry have similar demands for the out of scope work you identified in Step 2. This may be an indication that this industry has a certain need, and you could look at expanding to include this offering.

Step 4: Automation and training play a key role in capacity planning

Reviewing your current capacity and your team’s overall capabilities is vital in deciding how many of your existing clients you could feasibly provide this service to. Capacity is a precious resource and safeguarding it is essential. You don’t want to overcommit yourself. 

Automation software such as Ignition plays a key role here. Automation is actually really important because firms don’t have much time. It’s not like we can hire where we want when we want – and firms are struggling to provide advisory services because they’re busy doing the basic work.

CPA.com’s report shows firms that automated highly manual tasks “opened up time for them to provide more advisory type work.” It also allows you to respond or be more proactive with the clients you currently have.

One of the other capacity challenges firms have with advisory is that it’s still being carried out at partner level or senior level. As a result, they have a lot of requirements on their plate, such as trying to manage the practice, people, and clients. They can never get to that work or feel constrained about the amount of advisory they can really do.

To overcome this problem, I recommend training staff to do advisory work. This opens up the ability to scale it better, but also makes this a more viable opportunity within your firm. It’s less reliant on the partner, and more reliant on the staff and the firm to do it.

Related article: Find out more about how to sell and market your services in Increasing revenue with advisory services: Part 2.

How to price your advisory services

Key takeaways:

• If you use value pricing for advisory services, you’re able to take on less clients, ultimately do more work, and get paid for the value you’re creating.
• Prices for advisory services differ from firm to firm because of the variables involved, so there’s no “correct” price for a service.
• Your clients will almost certainly compare the market, so being clear about how and why you’re pricing services a certain way is essential.  
• You can use Ignition to upsell your services and grow revenue by presenting clients with up to three proposals to choose from, ranging from basic to premium.
• Soft launch your advisory services to iron out any potential issues.

The aim of your pricing strategy is to earn a healthy margin on a service there’s consistent demand for. There are several models you can use to do this. In this Ignition article, I explain the various pricing models available to you, while this article describes the benefits of charging a monthly subscription fee for your advisory services, which can work well for CAS, such as virtual CFO. 

How value pricing introduces benefits beyond the bottom line

Of all the ways you could price advisory services, I recommend using value pricing. I know this from my own experience. When you value price, you’re able to take on less clients, ultimately doing more work. And you’re actually getting paid for the value you’re creating for your clients, so you don’t need as many clients.

Using value pricing means you’re not racing to get the number of clients you need to make your practice viable. You’re also less stressed, working normal hours during tax season and not running around all the time. Ultimately, it’s a better result—and not just from a bottom-line perspective, but from an employee morale and employee experience perspective as well, alongside customer experience.

When you combine value pricing with automation, you have a winning formula to make advisory work really well.

How do you know what to charge for advisory services?

Deciding how to price your services goes hand in hand with the question of what to charge for them. The answer is different for every firm: “Anyone who claims there is a ‘correct’ price for a service is lying,” Sean points out. “You can ask other accountants what they charge. You can ask new clients what their old accountant charged. But given the variables involved, there’s no way to work out what you should be charging other than by trial and error. Pro tip: If you’re not getting much pushback from any clients, you’re charging too little.

How to present your pricing to clients

Regardless of what you charge or how you charge, it’s important to clearly communicate the specific factors that went into determining the price. We want clarity around price, and this is a big reason why I’m not a fan of hourly pricing. There’s no clarity around it. Okay, it’s great it’s $250 an hour, but what does that mean for me as a client? It can take two hours, it can take 10 hours, it can take 200 hours … I have no clue.

When you’re presenting pricing to your client:

• It should be clear what you’re pricing.
• It should be clear why you’re pricing tasks a certain way.
• Your pricing should show the schedule of your prices. Are they recurring, one-time fees, hourly, retainers, or estimates?
• Your pricing should provide the total investment for the proposed period of time.

Why tiered pricing packages and free trials are popular 

Three-tier pricing structures can help you clearly present your pricing to clients. You might want to offer a bronze tier, where clients pay a modest amount for basic services; a silver tier, where they get the basic services along with some advisory ones; and a gold tier, where the client gets the full concierge experience. Nobody wants to be wondering what the bill will end up being with hourly pricing, which is why tiered pricing is so popular. 

You can use this feature to supercharge your sales process in Ignition by offering clients the option to choose from up to three proposals. This makes it easy to guide clients to select the recommended option that best suits their needs.

Ignition makes the transition to engaging advisory clients easier. By linking your accounting ledger, practice management software, and other crucial business applications, you can automate processes. such as client onboarding, invoicing and payments. This reduces administrative work and allows you to focus on what truly matters. Want to find out more? Watch this online demo today.

This article was originally published by Ignition