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The Boomer Bulletin - 2014
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Playing Above the Line

Posted By Scott Morrill, Tuesday, August 12, 2014
Updated: Wednesday, August 13, 2014

Photo of Gary BoomerFirms today are constantly challenged to avoid commoditization and remain relevant. At the same time they have the greatest opportunity to position themselves as the most trusted business advisor and offer higher value services that clients want, need and are willing to pay for. In other words, are you too busy doing traditional compliance work in order to play above the line where the margins are greater, and there is less competition, especially when services are packaged for the client. Let me explain the above and below the line services with the following graphic.

First, let me say this is an "and”, not an "or” proposition based upon several factors in today’s market.

  • Availability of talent
  • Competition from within and outside of the profession
  • Technology is making many services below the line obsolete or less valuable
  • Demand for real time data via mobile devices

The old saying that clients often value what CPA’s give away more than they value the services they charge for is certainly true. Most CPAs admit they are capable of playing above the line, but not generally by design and often don’t charge what their advisory services are worth. Why not? Most will answer they either haven’t thought about it or have been too busy focusing on below the line services to formalize and price their above the line services.

Any good marketing or sales person’s approach would be to start at Level 3 with Strategic Advisory Services. Through the Strategic Planning Process, most clients will identify their top priorities and frequently there are services from all levels involved. Traditionally the majority of CPA’s approach has been to start at the compliance level thinking they can expand into the higher value services, but too often they get trapped in the compliance level services and never seem to escape. Often they may wonder why other advisors get the opportunities to provide these services when they or others in their firms could have provided the services at a competitive rate and with the same or greater degree of professionalism. The answer is generally attributable to the fact most accountants are focused on chargeable time and not on marketing and sales. I know there are those who are exceptions, yet one of the first questions asked in firm meetings is about whether time spent with clients in conversations about new opportunities is chargeable! Too often the question comes from a partner.

To escape from the commoditization trap, firms don’t need the full-service brand, especially if the brand is based upon commoditized services. In fact, a common error that many firms make is to focus on too many niches and therefore have little or no specialization. More importantly they need to listen to their best clients and see what services they want. Clients will pay more for something they want than for something they need. Remember Pareto’s principle or the 80-20 rule? 20% of your clients produce 80% of your revenue, yet many firms are allowing the other 80% to create a work environment where young talent is often leaving the profession. I suggest a three-step approach that sounds relatively easy, but is often difficult for smaller and medium sized firms to accomplish.

  1. Determine your top 2-3 market niches and focus on them
  2. Identify target clients and filtering criteria for new and existing clients
  3. Filter clients who do not fit the above criteria

While this sounds relatively simple, it is generally a difficult change due to existing partner compensation plans, relationships and fear of the unknown. In order to change, you must generally give something up and in most cases it is the smaller clients that only utilize one service. In many firms this may be the small 1040 tax preparation work. Just remember, what got you to your size today won’t get you to the next level. It will take different strategies, and often times different clients and people.

Your thinking will determine how you solve the problem and the results. "10 X Thinking" will produce better results for the clients, opportunities for your talent and growth for the firm. Ask what value you can provide in order to grow the existing client revenue 10 times. You will find there are many services the client needs and wants above the line other than tax return preparation.

Here are some criteria you might consider in developing a filtering system and identifying your target client.

  1. Utilize – do they utilize more than one service? (The more services they use the sticker they are.)
  2. Appreciation – do they appreciate and follow the firm’s advice?
  3. Reward – do they pay promptly and willingly?
  4. Enhancement – do their services enhance the firm’s capabilities and niche markets?
  5. Risk – are potential risks manageable?
  6. Referral – does the client have a good reputation in the business community?

Regardless of the niches or industries, you should plan to offer services in all three levels: strategic, performance and compliance even if you only start with one or two services in the strategic and performance levels. Firms of all sizes can easily start by offering strategic planning services at Level 3 and CFO services at Level 2. You should have these skills even if you have to work on your packaging, pricing and delivery skills. By listening to your clients you can quickly add additional services within your firm or by meshing (sourcing) with others. Strategic planning makes sense as you formalize a process that technical advisors often touch upon, but don’t really address the client’s real business concerns and allocation of resources. By going through this process with the client you identify ways your firm can provide resources to expedite their achievement of goals.

Packaging and pricing services from all levels makes the aggregated services more valuable, saves time and strengthens the relationship. To remain relevant and future ready firms must meet the needs and wants of their clients. That requires:

  • Planning
  • People
  • Processes

We often refer to this as P3 Leadership. The platform (or collaborative technology – often called the Cloud) is the accelerator and your talent must learn faster than the rate of change and the competition in order to remain successful and future ready. If you don’t know how to get started or have differing opinions in the firm, start with a Strategic Plan.

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