Times are changing in the accounting industry.
Lotta talk about business models with the Boomers transitioning out, the pipeline shortage of accountants, next generation coming in and frankly just not enough firms to meet the demand for accounting firms.
The Baby Boomer Business Model is dead. Many a firm made good money being all things to all people and focusing on utilization and realization. The model is dying. It’s very unlikely the traditional model will see much light with the next generation of accounting firm leaders.
What gives?
Firstly, if you are focused on realization then the only way you make money is to work more hours. The hourly model is anti-capitalist. Capitalism states: create as much value as possible with the least amount of resources. Self-imposed constraints such as the billable hour are very limiting, anti-capitalist.
Secondly, people don’t want to work as much as they used to. COVID was the icing on the cake. Firms started by people under 40 are subscription business models with a niche focus. These folks have it right.
A subscription model has many great attributes. You can price for access, get paid upfront, you can work proactively with the right clients and you can work 40 hours or less all year around without sacrificing profits. It’s a win for the firm, it’s a win for the team and a win for the client.
The subscription model entails detailing a monthly calendar of what you will provide to your clients. Examples include tax strategy, business strategy, cash flow projections and tax projections. The service mix is often advisory, accounting and tax.
The old model in many ways is a lazy model. I’m not calling accountants lazy, I’m calling the model lazy. It is driven mainly by tax deadlines and client needs rather than the firm driving the service model.
If you want to implement a subscription model here are 4 things you can do:
Everything starts with mindset and making a commitment. You don’t have commit to going on a diet. Well, a number of people do yet we know the results they get. You must make an emotional commitment to changing your model.
Analyze your client base and determine what percentage of your business is transactional (tax time only) versus recurring throughout the year. The subscription model is not for all clients. You also can list those you are under-serving and determine if you can convert them to a subscription model.
Test the model.
Of course, to do the above you need to create capacity in your firm. The starting point is to alleviate the insanity zone in your firm. The Insanity Zone: Transactional, high volume, low revenue, lots of email, meetings, phone calls, tax notices and free work outside of tax season. Clients in this zone are technically below breakeven for your firm. High stress.
What’s the downside of a subscription model. Nothing, just change. It definitely takes work to transition your model from the old model to the new model. This is not dissimilar to changing a sedentary, poor diet lifestyle to a more active healthy lifestyle. There is zero downside to being and active and healthy. It does take work.
Please visit us at www.renewgroup.com to learn more about how Renew firms have converted their model. Better model, better life.