Deciding on the business model for your accounting firm is an important choice.
You might be a new practitioner starting your solo practice. Or you might be a more established firm looking to grow and want to update the types of service you offer to your clients. But whatever your starting point, as an ambitious, modern firm, you’re faced with a question:
‘What’s the most effective business model for our firm?’
It stands to reason that you want to offer accounting services that meet the expectations of your target customers. But it’s also essential to think carefully about how you’ll acquire and nurture customers, which services you want to offer and how this will drive your profit margins.
At the base level, this comes down to one fundamental consideration: Are you aiming for value, or are you focused on volume?
To help you pin down the answer, we’ve highlighted three of the most common business strategies for your firm to consider.
1. The compliance model: high volume, low value
When you ask the average person in the street what an accountant does, they’ll probably tell you that an accountant produces accounts and files tax returns. After all, these are the main regulatory tasks a business owner will be concerned with.
Under a compliance model, this is precisely what your firm can offer – fast, accurate and efficient bookkeeping, accounts and tax filing.
The value that you’re contributing to a business client is minimal here. You’re helping them tick the correct compliance boxes and meet all their regulatory requirements.
However, because the workload is minimal, you can easily take on many compliance clients. Being able to service a high volume of clients brings in multiple fees for minimal outlay – and that’s the real advantage of a compliance model.
To make a compliance model work, you’ll need:
- Highly effective processes, systems and automation to deliver efficient services at scale while generating limited workload for your practice team.
- A large number of clients who understand the limited scope of the engagement and just want to meet their regulatory requirements.
- Lower fees that attract a large volume of customers but still deliver a meaningful profit margin for the firm.
2. The financial management model: medium volume, medium value
In today’s business world, many clients expect more than just a pure compliance service from their accountant.
Cloud accounting software now offers many tools for tracking financial performance, running detailed reporting and collaborating online. Because of this, business owners are looking for a more proactive kind of accounting service.
You can really add value for the client by helping them improve their financial management. This means focusing on cashflow management and forecasting, reducing costs, improving spend management and assisting the business in refining and enhancing its internal financial systems, recordkeeping and reporting.
To get the most from a financial management model, you’ll need:
- Excellent tracking, reporting and forecasting tools to monitor the client’s finances and offer improvement strategies.
- A selective client base that wants deeper financial services and reporting to help them become more financially stable and agile.
- Fees that are higher than compliance prices but still affordable for the client while delivering a good margin for the firm.
3. The advisory model: low volume, high value
When truly offering value to a client, the advisory model sits at the top of the tree.
Where clients want more than just compliance and financial management, there’s a perfect opportunity to offer advisory services and become a key adviser to the business.
We’re talking about assistance with strategic thinking and business planning, helping the client find the best routes to funding and becoming an essential coach and mentor for the owner, MD or CEO.
Advisory work is undoubtedly the most satisfying and challenging service but also the most time-intensive to deliver.
As a client’s trusted adviser, you and your team will spend a lot of face-to-face time with the business, which means labour costs will be higher.
To make an advisory model work effectively, you’ll need:
- Well-connected practice systems that can help you share data and reporting with the client while also helping you manage utilisation and job workflow.
- An ambitious client base looking to enhance, grow and scale their business and has the budget to pay more considerable advisory fees (plus an awareness of the value your firm is adding to their progress).
- Higher fees that reflect the increased hours, staff utilisation and scope of the engagement, while achieving a price point that still brings in excellent profit margins.
The Advantage of Choosing a Flexible Practice Management Platform
Whether you opt for a compliance, financial management, or advisory business model is down to your firm's unique needs and the expectations of your clients.
You can even categorise your client base into different groups, offering services and packages at various price points.
But, whichever model you opt for, having a flexible, well-connected practice management system at the heart of the firm will make a massive difference to your productivity, efficiency and organisation as a modern accounting firm.
Instead of relying on multiple, outdated legacy systems, today’s practice management solutions fully bring your firm into the cloud and digital age.
With practice management software like Pixie at the centre of the firm, you have the benefits of:
These features offer a significant benefit to the firm, whatever business model you’re operating:
- Compliance Model - workflow management efficiencies, automation and automatic client notifications reduce the manual tasks needed for a high volume/low-value model. You can easily streamline the processes required for each client, helping your team become more productive and service a larger number of jobs.
- Financial model – integrating with the client’s accounting software, alongside detailed job reporting and performance tracking, helps you stay in complete control of a client’s finances. Automating essential tasks also frees up time for more proactive advice around cash flow, expenses and revenue generation.
- Advisory model – When your systems can handle most low-level engagement tasks, you can take on the trusted adviser role better. You have detailed reporting, management information and key insights to help the client’s decision-making. Plus, a holistic overview of engagement tasks, staffing and job deadlines.
The Pixie advantage
Pixie is the answer to your practice management challenges. Our platform offers all the advantages of a modern cloud practice solution, helping you drive your firm's growth. Book a demo today to experience the difference for your firm.
Where to from here?
To dive further into the world of improving profitability for your firm, check out our popular resource:
