Shifting to a membership-based subscription model

The tax and accounting world is at a crossroads.

The age-old tradition of billable hours and annual contracts is facing a new and intense challenge—not from a regulatory body or ruling from the top, but from the way other sectors have transformed their business models: The membership-based subscription model (MBSB).

And it’s rewriting the rules of what it means to be a competitive, modern tax practice. Let’s explore how this new model can bring about financial stability, enhance client relationships, and simplify the often-complex world of tax services.

Understanding the MBSB

At its core, am MBSB is a simple concept: Customers pay a recurring fee for ongoing access to a product or service. Software companies such as Adobe were among the first to make this shift, offering subscription access to their suite of creative tools. Netflix, Amazon Prime, and other streaming services followed suit, disrupting traditional cable and video rental business models.

Now, this model is finding a promising place within tax and accounting, and the key to making them work is recurring revenue. Instead of starting at zero each fiscal year with revenue derived mostly from transactional work, firms on MBSBs retain and build on a consistent revenue stream. While this predictability has many benefits, it cushions the firm against unknown economic turbulence and allows for more confident long-term planning.

Transforming tax and accounting practices

Traditionally, practices have operated on fixed-price or time-based billing for their services, or by charging per tax form filed or audit conducted. However, the MBSB flourishes by refocusing the value exchange to a longer-term relationship. This psychological shift is significant, not only in accounting for revenue, but also in accounting for service delivery. It pushes firms toward a more proactive stance, aligning their services to help their clients’ businesses grow and thrive, instead of just reacting to yearly tax requirements.

The shift might sound daunting, but when you break it down, it’s all about staying aligned with your clients’ needs. What services do they need regularly? How can we make accessing those services more convenient than anywhere else? That’s the core of this shift: continuous, value-added service.

Advantages for firms and clients

For firms, the MBSB model is a breath of fresh air. It offers a predictable inflow of revenue, reducing the pressure to constantly chase down billable hours. This leads to a more relaxed, confident work environment, which arguably makes for a better experience for clients and employees. It ensures that the focus can be on delivering quality service and building relationships, rather than on billing.

For firms, the MBSB model is a breath of fresh air. It offers a predictable inflow of revenue, reducing the pressure to constantly chase down billable hours.

Clients also stand to gain quite a bit. With flat-rate, predictable pricing, they can budget for accounting costs annually. More importantly, MBSB opens the door to more consultative work. The real value in tax and accounting is often not in historic reporting, but in proactive tax planning, financial strategy, and business advice.

Client retention skyrockets when you’re in the weeds with them throughout the year, instead of just during tax season. You become an integral part of their team as a strategic advisor and not just someone they call once a year.

Embarking on the MBSB journey

Here are a series of steps for firms wanting to make this transition:

1. Recognize the present: The future is here. Firms should recognize that the MBSB model is not an idea for tomorrow; it’s a strategy for today’s competitive landscape.
2. Start small, scale smart: You don’t have to transition your entire client base immediately. Start with new clients and over time, and migrate existing ones.
3. Appoint a champion: Someone within the firm needs to take ownership of this model, learn it, and champion it.
4. Identify core competencies: What does the firm excel at? How can these areas become the focus of the subscription plan?
5. Segment clients: Not all clients are equal. Identify top client segments and tailor service packages to meet their needs.
6. Craft service packages: Develop comprehensive service packages based on high-value offerings for targeted client segments.
7. Commit to change: This is the ultimate step. Begin the transition and stay the course. Consistency is key for clients to understand and adopt the new model.

5 keys to success in MBSB implementation

The transition to MBSB can be fraught with pitfalls, but with a structured approach, these hurdles can be overcome. Here are 5 keys to success:

1. Designate a firm champion: Consultation and pricing for these models need to be managed by someone who believes in them.
2. Create appealing packages: The services offered must be of high value and visually appealing in packaging.
3. Efficiency in acquisition: New client onboarding should be seamless and efficient.
4. Pricing structures: Ensure the subscription fee is not just competitive, but also reflective of the services offered and value provided.
5. Scalability: A subscription model should be scalable both in terms of clients and services.

The future waits for you

The MBSB model isn’t just an interesting concept to explore; it’s positioning itself to become a standard practice within the tax and accounting profession. By taking the leap and shifting toward subscription-based services, firms can future proof their business, and provide a more committed and valuable service to their clients.