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The 10 Big Advisory Questions: 9 – How Do I Package and Price Advisory Services?

Welcome to the ninth edition of this video series where we talk you through The 10 Big Advisory Questions.

Join Micheal as he answers Question 9 –

The below is a transcript of Question 9 of the 10 Big Advisory Questions Video Series –

How Do I Package and Price Advisory Services?

My name is Micheal O’Neil, and I am delighted to welcome with you in this video series, where I answer the ten big questions about Advisory services.

These are the questions that I get asked by my clients in Ireland on a regular basis and also the questions that my colleagues in the UK, US, Canada, and Africa get asked.

So let’s get started with today’s question.

Question 9, “How Do I Package and Price Advisory Services?”

Once accountants start to get serious about the provision of Advisory, this is very often the first question that is raised. They understand what Advisory is, they have identified that they want to deliver Advisory, they have their Advisory processes in place, they have started putting their structures, in place to deliver, then the very next thing is, oh, well…how am I going to package and price my Advisory services?

This is a relatively simple approach. I love simple and there is no doubt that you can make this highly complex, but me, I just, I love simple.

First thing is, clients like transparency and you want to show them, that you are in this for the long haul and that is why recurring packages with regular ongoing contact are so powerful

Now, we could talk, for hours and hours, in relation to packages, in relation to value pricing, in relation to, generating regular monthly recurring revenue.

But, really comes down to 2 things.

You have distinct fixed pricing Advisory packages, or mixed Advisory and compliance packages.

1.Fixed Price Advisory Packages

Now I do want to make one very cool distinction here at this point.

Because we have one option of a distinct fixed price for Advisory packages, I think one thing that accountants don’t necessarily realise is, you don’t have to just provide Advisory to your own clients.

It is quite possible that you could provide Advisory to other firms’, compliance clients.

Now, eventually what will probably happen if you are providing Advisory to compliance clients of, other accountants, is that they will want to move their compliance to your firm. After all, that would probably make the most sense and, at that point, you have a choice to make.

In fact, I know some accountants who have encountered this, and when they actually looked at how much the other accountant was charging for the compliance services, they said, you know what, you’re getting a really good deal with this other accountant. If you were to come to me, it’s likely that your fees will double, or more than double.

Now, in some instances, when that happens, the client just goes, “oh yeah, “but you’re doing all my Advisory, “so, I don’t mind if it’s double, “that’s perfect, I’ll go with that.” Other times, what will happen is, the client will go, “oh, okay, well… “If it’s going to double the fees, “I’ll stay where I am for compliance, “but I’ll do all my Advisory with you.”

What you tend to find is, as you are in the Advisory role normally all the higher level, higher value consulting and project work will also stay with you, as you are their advisor.

2. Fixed Price Mixed Advisory and Compliance Packages

You can then have mixed Advisory, and compliance packages.

What we tend to see with firms who establish a strong Advisory offering is that it is a prerequisite for all new clients to come in on fixed priced packages. And very often every new client has an element of Advisory included in their package.

This is brilliant for the firm because often the clients are coming in at a higher value and then, they can start shedding some of their lower value, D level clients. Some of the clients that you’re not necessarily really in love with, the clients that you are perfectly happy to see go!

And by exiting these clients you are making space for higher value and more profitable clients.

So it’s also a really, good pruning mechanism to, to shed off the lower value clients from your firm.

Structuring Advisory Packages

It is normally a good approach from a pricing perspective to give people three options to choose from. This holds true across the board and not just with Advisory. So we are going to go with full, targeted, and basic.

So, the full gives everything, that’s all in, this is where you’re looking at all the compliance elements and a full-on Advisory package.

Targeted, is a balanced package. From a pricing perspective, you want to ensure that your middle package is your bedrock one, the one that you want most people to sign up for because from a psychological perspective the middle option is the one that most people will pick.

You want to put the package that you want the majority of people to take, as your middle package.

But then you’re always going to have a percentage of people when they see any sort of pricing menu, “I want the best, “I want the most expensive.” And there should be a good price differential between your middle and top packages.

The basic is your cheapest package with the minimum amount of Advisory contact time.

So what would a minimum package look like? What would we advise?

Well, at a bare minimum you’re going to have your annual strategic event.

So that’s the bedrock and the anchor of every Advisory package. Then, at a minimum, you’re going to have 3 quarterly review meetings.

Depending on how you want to structure your package these could be two to four-hour meetings every quarter. That is pretty much the most basic Advisory package, that you can, you can put in place. Anything less, and I feel you’re doing your client a disservice.

In terms of your target package, what are you going to have in there?

Well on top of the basic package you are going to want to including a wealth review, maybe a top-line growth session or something like a profit improvement session.

The full package is where you’re possibly meeting with the clients on a monthly basis, you’re reviewing their plans, you have a couple of advanced Advisory sessions over and above what you have in the target package with more focused one-on-one review time

Remember the bedrock of any Advisory package is the pivotal annual strategic event. Depending on your client this may be a wealth or a business strategy session but either way, it forms the cornerstone of your Advisory package.

Now, in terms of your business clients, you’ll need to make a decision about your packages, whether or not, you want to include a strategic wealth review in your targeted or full package.

Obviously, the wealth review will form a key part of your Advisory work with high net worth individuals where a specific business review may not be applicable.

And the beautiful thing is, and we see this time and time again, is that your annual Advisory event, it’s going to generate a huge number of opportunities for you, as well as identifying opportunities for your clients, and focusing their minds through the creation of an implementable plan for their business growth.

Pricing Advisory Packages

In terms of actual pricing, we have been through a number of different ideologies in the recent past. Obviously, there is the time based chargeable hour approach, the compliance plus chargeable hour and then the most recent trend towards value pricing.

This is a topic that I will go into much more detail in another video.

For most of the accountants I know watching this video they are probably going to come back to an hourly rate calculation.

I don’t think that you should be looking at pricing your Advisory packages based on an hourly rate, but I also know that that’s the way accountants think about it.

So what we say is, that realistically, your Advisory hourly rate, have a premium of 25% to 33% more than your compliance rate.

I would urge people to take that step and to actually step away from the hourly pricing.

Now, what do I mean by the hourly pricing model?

Well, you can work out your package price based on the number of hours delivery and administration that is going to be included. If we have an annual Advisory event that’s going to be, six to eight hours, then we might have another few hours preparation, and then we have our three quarterly meetings. These are going to be 3-4 hours each. Looking at it in this way you can actually add up the calculate the number of hours in each package and then calculate the overall package price by multiplying out by your designated hourly Advisory rate.

I’d love you to step away from the hourly rate calculation and move to a value-based model, but I also know in a short video like this, that I am not going to have enough time to make that argument.

For now, let’s just target a 25% – 33% premium on your compliance rate and keep an open mind.

Now the beautiful thing about Advisory is it just straight away, it logically points you into looking at recurring monthly fee model.

This is the ultimate goal for many firms, and once you have a client on a monthly Advisory fee it makes sense all round for them to move their compliance onto a monthly model also.

And if you can move your entire client base over onto a monthly recurring fee basis, just think of the release and relief from a cash flow perspective and from a cash flow management perspective within your firm.

You know, you’re no longer going to have, WIP building up, you’re no longer going have, outstanding bills left sitting for three, six, nine months.

Everything is going to be settled before the end of the year. This is the new dynamic for firms and one that we see many accountants moving towards.

The beautiful thing is once you get somebody onto an Advisory package, it’s so easy to bring the compliance in on a monthly basis as well.

So that’s question nine of our 10 Big Advisory Questions.

How Do I Package and Price Advisory Services?

If you haven’t seen the first videos in the series, please do go find them and check them out now.

Make sure to keep an eye out for the remaining series where I deal with some of the other big questions in relation to Advisory.

And from me, good luck, goodbye. Thank you for listening and I’ll talk to you soon.