Katie Tolin, CPA Growth Guides
During his state of the profession update at the Digital CPA conference, American Institute of CPAs President and Chief Executive Officer Barry Melancon said that the accounting industry will look totally different in 10 years. However, he shared that it is really five years, but he says 10 not to scare people. Technology is driving a lot of this disruption. Artificial intelligence (AI), robots, augmented reality, blockchain and virtual reality will change not only how firms operate, but what they do. Because the hours spent doing basic compliance work will be reduced, firms must replace this revenue with other services, and high-realization consulting services are on everyone’s list. The good thing is that technology is opening the door to a wealth of potential new advisory services
Client Advisory Services Laid the Groundwork
Over the past few years, many firms have taken their accounting to the cloud to provide client advisory services (CAS). This service truly extends beyond basic accounting work. Successful firms have added an advisory component to the offering and provide C-level services. Consulting on areas like cash flow, benchmarking, key performance indicators, and much more, has allowed firms to charge a higher amount for the advice that accompanies the proper tracking of transactions.
“CAS is 10 percent of firm revenue today”, shared Erik Asgeirsson, chief executive officer and president of CPA.com at the Digital CPA conference. He also noted that there has been 20 percent growth in CAS this year. The reason the industry is seeing growth in this area is because it is something people need and are willing to pay for. By adding consulting services to a standard business function, firms increased their profitability. This is a model that can be used with other technologies that come into play as firms try to figure out how to add more consulting revenue to their top line.
Data Will Open Many Doors
Big data – It is everywhere! Today, machines and AI are great at processing and analyzing large amounts of data. The area where they do not excel, or that buyers are not as willing to accept, is explaining what this means in terms of a business strategy or decision. Machines do not have a deep understanding of a business. They do not have compassion or empathy nor do they have intuition. Without the skills and experience you have, the data is not as meaningful.
You will soon need to count on technology to pull and analyze the data. Your role as a trusted advisor is to advise on the findings. When the client applies what you say, you truly make an impact on the organization. That is the value you provide and the concept you have to capitalize on.
Think about the data that can be compiled to which you can add insights. How can you turn these areas into a packaged service; one you can sell repeatedly? Does this data vary by industry? Perhaps an opportunity ties to one of your specialties. Because data is everywhere, the places you can use it and provide advice around it are countless. As a result, the number of consulting services using data as the foundation will grow exponentially.
The Key to Your Future Revenue
Consulting is what will replace lost revenue that will occur as a result of the disruption technology is creating. As you read about mergers and acquisitions happening in the accounting industry, it is often because the combined firm has more to offer its clients from a consulting perspective than the two firms have on their own. You also see firms acquiring non-accounting firms as they attempt to help clients while diversifying their revenue streams. The race is on as firms try to build or buy consulting service offerings.
As you look for new consulting areas, you should focus on:
- Solving Pain. This relates to the challenge or pain specific buyers faces. When you can improve something for a larger group of people, you have found an offering worth selling.
- Finding a Blue Ocean. In the book ‘Blue Ocean Strategy’ by W. Chan Kim and Renee Mauborgne, a “blue ocean” is defined as an uncontested market space – one where there is not a lot of competition and you can truly differentiate yourself. Brand new innovations have the biggest potential revenue for you as the rest of the market attempts to catch up.
- Explore New to You. If you cannot find a “blue ocean,” you also can look at consulting services other firms offer that you do not currently offer. You also might consider improving one of your existing offerings. While it is not new, it is new to you. And it too can open up new revenue streams for your firm.
- Testing New Ideas. You can come up with a great idea inside the walls of your conference room, but that is not where your clients’ buying decisions are made. You must take your ideas to the market and test them with early adopters, also known as “guinea pigs.” For preferential pricing, the feedback you get from the buyer will help you refine your offering so you know you are going to market with an advisory service people want at a price point you are comfortable with.
Think Beyond Compliance
Traditional CPA compliance services are changing quickly. Consulting is what will change your firm’s trajectory. You can sit around and do nothing but, without a miracle, you are setting yourself up to fail. You need to be talking about these ideas in your firm today so you have time to prepare before the new reality hits
Why you? That is a fair question. Recognize that innovation is on very few job descriptions at accounting firms. A few lucky firms have someone earmarked for that position, but it is a role mostly left unfulfilled. So, if not you, then who? This is an opportunity for you to demonstrate that you understand what is happening at a higher level and care enough to push (or drag) your firm into the future. If you care about your firm and want to make sure it continues to be successful in the future, step up and start the conversation.
Your firm’s ability to drive additional consulting revenue by adding more services to your product mix will increase your profitability and lifespan. Yes, technology is forcing it. But technology will also provide your new solutions.