the move requires commitment and resources.
by gary bolinger
most all cpas in public practice talk about transitioning away from traditional compliance services to offer more advisory services.
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when i have talked to firms in the past few years and i ask about percent of total firm revenues in a&a, tax and advisory, the percentage for a&a and tax constitutes a significant majority of total fees. but advisory alone is usually 10 percent or less.
even then, those advisory consulting fees are generally closely tied to some aspect of compliance. so, i’m not sure that i would really say that’s advisory. so, with all the talk – for maybe the last 20 years – about the need to grow advisory revenues, why are the revenues so low in relation to compliance services?
well, there are multiple reasons.
first, business is good. for the time being, clients are continuing to pay significant fees for services that they would not ask for if they didn’t have to have them. when is the last time a client called and said, “i want to get an audit” and your response was “why do you want an audit?” client response: “oh, no reason, i just thought it would be a nice thing to have.”
of course, that never happens. but clients do pay handsomely for services that a third party requires. will the profession enjoy this situation forever? perhaps. but it is difficult to predict the future.
the second is the risk. yes, risk. there is a risk in doing something new. risk in how to sell advisory to clients. there is risk in successfully developing a repeatable methodology that can be applied throughout the firm with a variety of clients. there is even risk in figuring out how to bill for advisory services. however, billing will be a little easier if you develop a repeatable methodology and it is deployed relentlessly by all professional staff delivering advisory services.
next is commitment. will all partners agree to committing to expanded services? someone will need to oversee the new service line. probably an owner. it will take time. where will the time come from? that partner will need some support and that will take some money. that is an investment in the future. are the owners willing to commit to that or will the annual distribution be the priority? if so, that is not very forward-looking.
as you think about succession, current owners should be focused on positioning future owners to buy current owners out. positioning future owners to enhance revenue. so, current owners should be thinking long and hard about the future business model that has the highest probability of paying off current owners when they exit the practice. what worked in the past might work in the future, but if you look back at the history of the profession, things sure are different today in terms of cpa firms’ economic models. and it will likely be different in the future when compared to today. your firm needs to embrace the future.
your firm will need to decide on the commitment. then allocate the necessary resources. part of the resources will be the development and deployment of an advisory methodology. if you don’t feel that you can develop your own, there are tools available in the marketplace. see which one fits your needs the best. finally, develop a plan with timelines and criteria for success. enjoy the journey and best of luck in your transformation.