The rapid changes in the accounting profession demand that firms must also evolve. Bookkeeping, tax and compliance work are being commoditized at such a rate that it is unsustainable for practice owners to make real money, much less scale their practice if they retain this same business model.
One solution that practice owners are turning to is the “advisory as a replacement strategy.” It’s a business model where you, in essence, replace your existing services (e.g., tax, bookkeeping, accounting) with a focus solely on advisory services.
In two previous articles about the three most popular business models based on advisory services, we addressed “advisory as an enhancement” (where you are differentiating your firm’s services from competitors by enhancing them with an advisory service) and “advisory as an upsell” (where you upsell existing clients to a higher-margin service). But advisory as a replacement is the most radical and transformative of all options.
At their core, advisory services are essentially consulting services offered by trusted financial professionals to guide their clients toward having a growing and successful business. Based on the trust and relationship between a client and their accountant/bookkeeper, advisory services use the financial data of a business to provide powerful and actionable advice.
Unlike the other two business models, advisory as a replacement requires you to take the biggest leap. You have to cut the cord tethering you to the compliance work of old, and completely change the way you do business.
Here’s what that looks like, and why it may be a great option for someone who wants to get out of compliance or transactional work altogether.
Advisory as a replacement
This is a firm that has completely replaced its compliance services and has positioned itself as a highly-sought-after outsourced advisor.
Owners of an advisory as a replacement firm usually spend half their time servicing clients and half their time finding new clients, assuming their firm is not already at capacity. The firm owner is usually the head advisor and also spends time training their team in advisory services.
This type of firm will make all of its revenue by offering advisory services. If it has any clients needing tax and/or bookkeeping, it usually has a small network of service providers whom it will refer business to, or white-label their services.
From the clients’ perspective, they get to work with a firm of professionals who focus exclusively on advisory services. They can trust that they are receiving the best possible advice from a team that has vetted the numbers and forecasted all possible outcomes.
From your perspective, your firm becomes a specialty practice. You have risen above compliance and now offer services of much higher quality and value that are much higher-margin.
You no longer have to worry about dealing with demanding clients and low-margin work.
You also have the opportunity to niche your firm even further. By focusing exclusively on a single industry, you can become the go-to firm for advisory services within a certain sector, which only further increases the fees you can charge.
The ultimate goal is to become a firm that is sought out by clients, eventually reaching the point where marketing and searching for new clients is something of the past. They will come to you — and you may even have to turn some away.
There are further benefits to you as well, depending on the size and reach you desire for your business. It is equally valid to want to remain a small boutique firm that services only a few high-value clients but leaves you with a plethora of free time.
Advisory as a replacement requires the largest change for you and your firm. It also offers the most upside. Many firms will eventually become a “replacement” firm but only after going through stages of “upselling” or “enhancing” with advisory services.
However, advisory as a replacement should be your goal as a firm owner. It requires facing the largest challenges, but it also offers the biggest rewards.
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