Regional accounting firms have been exceptionally busy attempting to keep up with client demands and finding the right tools to deliver more value-adding services. Most are struggling to get the real growth they desire because it’s difficult to;
- Find the time to make it focus
- Get the team to find and sell the opportunities
- Ensure it’s systemised and resourced properly so it’s efficient and effective
- Create the right marketing to communicate it outside the firm
Because of these difficulties, firms are experiencing that value-add services are just not leveraged and also finding it is not as profitable as they hoped.
Obviously not having a repeatable process (system) is part cause of the problem, but I think the issue is much bigger and deeper entrenched than no system. “It’s not been done with clarity and focus”. In most situations, the business advisory is being done part-time, that is, done by the same people who deliver compliance services! Combining it with compliance is the cause of this lack of focus, everyone in the firm thinks compliance comes first. In addition, it is making our best people even busier as it’s nearly impossible to systemise work when it is done on the run, they just don’t have enough time to develop the systems let alone train others. Worse, this lack of focus portrays a poor message to clients, what they really want and need, is not the most important thing to their advisor.
Therefore, I ask “should value-add services be a separate division in accounting firms”?
Regional firms regardless of location or size are currently experiencing the same key challenges:
- Desired growth has been difficult to achieve, the market has experienced a decrease in compliance fees and value-add services fees has simply just filled the gap. Most regional firms desire greater than 10% growth, this is just not happening and the thought of 30% growth is simply a dream.
- Profitability less than 35% before partner’s salaries, boiling frog effect, this used to be 45% in 2005.
- Key people have no time to do other things. Clients are expecting more and making the key people within the firm even busier, general advice and hands-on value-add services are labour intensive activities.
- It’s getting harder and harder to find the right people, and in some cases, the best people are leaving for other opportunities or to set up dynamic firms.
- Firms are not getting the prices they believe value-add services are worth.
Therefore, with these challenges in mind, firms must step back and reconsider how they operate. Is their business model holding them back and what business model will facilitate the firm of tomorrow. There are 3 models that are currently been used to achieve exceptional results, One Firm One Way, Divisions and Joint ventures, refer to my website for previous thought activators on the different models.
The concept of a division for specialised services is not new to the industry, we have seen other specialised services go that way. For example, financial services, audit and recently superannuation services, almost all firms have moved to division these distinct services with dedicated people delivering. These firms know that division is way more efficient and creates better returns than it did when it was spread around the office and partners.
Creating a division has resulted in firms experiencing;
- Provide a greater experience to clients and in the end, greater results are achieved
- Easy to create efficient service delivery
- Create highly skilled and experienced people
- More enjoyable experience for you and your people
- More time to work on innovating services
- Higher prices and greater profitability
The challenges of setting up a division;
- It requires change, a change in the operational model and more importantly a change in mindset.
- Deciding on who the people are who move to the division?
- What services are offered and what stays with the compliance division?
- Which is the best methodology for delivery?
- What tools to use?
- How do you communicate the services to clients?
- Pricing, will it be different to how you price now?
- Marketing to the public?
Regional firms who have successfully transitioned have followed a 5 step process:
- Design – take a time to step outside the firm and create a vision of the firm of tomorrow, best done facilitated by an external person.
- Map – agree on the activities and set the milestones by road mapping the transition.
- Execute – free the key people up to implement the road map.
- Test – start rolling out a service earlier than you think you should, it’s better to start and see it working than to wait until you think the setup is right.
- Review and tweak – at each milestone review and tweak.
Is it in your firm’s best interest to set up a “value-add services division”?
Based on the success of other multi-partner regional firms, it seems to be the only way to make things happen in a faster way. Doing value-add services part-time is not working and the industry is just not willing to take the risk that a minority have followed, which is to completely scrap the existing model and reengineered the business to create a dynamic advisory firm, one that is highly profitable (50%) and truly enjoyable. Thus, concluding the majority of multi-partner firms are more willing to accept a more palatable risk and transition, creating a division.
How you choose to move should be considered based on what you and your partners believe the impact of each model will have on the business in the future.
- Will the existing model see profitability and growth stall?
- By creating a division, will your firm see greater revenue growth and future profitability?
- Do you need to completely scrap and re-engineer the model in order to create the firm of tomorrow?
Should you wish to fast track this process of evaluation and understanding the real impact or just need to get partner alignment though challenging their mindsets, I invite you to engage my services. I have designed a process “SCALING ADVISORY SERVICES” to do just that. Click the button below to learn more.