How advisory can bring in additional revenue to your firm
Traditional, or more common, tasks like bookkeeping and compliance are becoming so efficient because of technology you may notice your billable hours have started to decrease. Offering higher-value services like advisory help fill this gap. But when you’ve embraced advisory services, what’s best practice for pricing them out?
Sell your expertise and your time
You’re opening clients up to different ways of thinking. They’ll be armed with more information than ever when it comes to decision-making, which will strengthen their businesses and help them dodge risk. This is what’s valuable to clients, but as with anything based on value, it’s not simple to price out.
The problem with changing pricing is starting the conversation. Many accountants and bookkeepers can find approaching the issue quite a worrying thought. Accountants Daily report a huge 84% of clients don’t want time-based pricing. They cite All That Counts director Lielette Calleja, who noticed a trend at this year’s Accounting Business Expo:
“Speaking with several bookkeepers at the Accounting Business Expo, I found that they were reluctant to shift to value-based pricing as their long-standing clients prefer they still bill by the hour. It’s a legacy issue and many just don’t want to have that confronting conversation with their clients.”
One of our clients, Fresh Financials, are a bookkeeping company, which have kept pace with industry changes. Owner Emma Fox is always looking for exciting ways to combine their existing services with those which are often considered to be in the advisory field. Emma says:
“We do training for bookkeepers and they worry automation will lose them revenue! They need to think about it completely differently: think about the things you can offer, this type of analysis of figures and cash flow, helping them make decisions, that’s a far more lucrative area of the business than the data entry side of things.”
Consider your client’s perception of value. If they need a report because the bank demands it, they may see that as a necessity rather than something valuable. Running variables through scenario planning, however, may alert them to potential dips in sales or revenue. That is undeniably valuable to any business owner.
“Change the focus from billable hours to deliverables. I think the customer will be happier — they’re paying for a product. It should only matter how good your work is, and if you get it done on time, and to the quality that is expected – that should be the focus.”
This came from investment analyst at Duxton Asset Management, Lauren Thiel, as reported by Accountants Daily. At the time of interview last year, she was a senior consultant at KPMG Australia.
“The main goal is to move away from being valued for your time – into a role where you’re valued for your financial expertise.” – Xero
A few key points to consider when restructuring your pricing:
- Pricing is set by your firm but it’s up to you to recognise your fee earning potential
- There are two clear fee-earning sources from every client: monthly recurring revenue (MRR) to cover monthly review meetings, and one-off costs which will probably grow over time
- If you’re offering anything like a health check for free, limit it to that – you’re not a charity!
One-off or recurring revenue?
Adopting cloud-based technology means this, and other manual tasks, have been automated (or will be soon enough). When practice changes, it’s vital you adjust your pricing too.
When the main focus for firms was compliance, billable hours made sense. Billable hours pricing creates inefficiency and the firm could lose the client, and potentially a member of staff who’s sick of working hard for little reward.
To business owners, you’re a cost if you are billing hourly. Any business owner would jump at the chance to quash unnecessary outgoings, so will try and minimise your contact time. This is why demonstrating value is key – clients will make better business decisions, therefore your knowledge and guidance become more valuable.
Satisfied clients will likely go for an MRR pricing model. As mentioned earlier, demonstrating the value that comes with advisory is key to really get this going. Once a client is pleased with your work, you can introduce more services to them.
There’s a lot more information on pricing out advisory services in the Futrli Advisory Certification course. Speak to one of our team for more information.