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Content, tips and best practice for the Accountant Strategic Advisor

Productize Your Service Offering: The Why and How

[fa icon="calendar"] Mon, Dec 26, 2016 / by Kathy Gregory

Pricing Advising Services

I have done financial modeling and forecasting in one way or another for my entire career. I have performed this work for a vast array of business uses: management departments within private companies, project based companies, public companies and their boards, and companies seeking IPO.

It doesn’t really matter the application, the work is essentially the same: (1) understand the business model, goals, and potential of the client, (2) represent it all in a financial forecast, and then (3) use the forecast and the month end actuals to manage the business.

This is a great method for business management. And it’s a fantastic service offering for folks in the accounting space. We call it Strategic Advising at LivePlan, and it’s the fastest growing component in the umbrella of Trusted Advisor services.

Pricing your Strategic Advising services

Beyond learning how to do the work, the issue for many is how to offer and price your Strategic Advising services. We all know the importance of value based pricing, and I fully support the methods of folks like Mark Wickersham and Ron Baker. Their advice and insight in this subject area is second to none.

That said, value based pricing is not enough by itself to ensure you are profitable. To maximize profitability, I believe it’s important to think of the work of Strategic Advising (and really all the services you offer) as a product.

Productizing services: The why

On the sales side, products are much easier to communicate, package, and market. You can’t really explain time and materials services. They aren’t unique, and more importantly, they don’t offer a solution to a problem.

But a product does. A product solves a problem. In your own life, when you have the ability to choose between a random hamburger or an In & Out Burger, I bet you choose the latter. Or, random coffee from anyplace, versus Starbucks—I bet you choose Starbucks (or Dunkin Donuts if you live in the NE—I know you)! It’s more than just their branding—it’s that they have a product that is consistent. You know what to expect.

On the operations side, products can be managed and tracked; they have components (labor tasks in this case), direct costs, and a gross margin, all which can be optimized for maximum return. And the icing of this scenario is that you will reuse your product over and over, making it more efficient, and therefore more profitable each time.

You will never be able to maximize your margin in the hourly billing scenario. Your efficiencies will not lead to greater margin. Plus, the dynamic of the billable hour can lead to two major hazards: innate scope creep due to lack of definition or standards, and worst of all, it can actually detract your client from wanting to engage with you, because they know that every time they do, they will be billed. It’s the opposite of what you want to happen in your client relationship! Advisors must have open lines of communication and know their clients well.

Productizing services: The how

For all of these reasons, you should work your Strategic Advising service offering into a product. Here’s how to do it in a broad sense:

  • Look across your service offerings for repeat need, develop a solution (a set of work tasks), and then standardize.
  • Take the solution that repeats most often and call that the standardized solution.
  • Write up the tasks in a process.
  • The next time you have a similar need, show the client that this solution will work for their unique problem and sell it that way.
  • Eventually that solution will become your product.
  • Develop marketing and packaging around this product.  
  • Over time, as you become more efficient at producing the product (your work tasks become optimized) the gross margins on your product will grow.
  • When gross margins start to become maximized and you feel growth is slowing, tweak the product a bit, enhance it, to allow for further growth and a higher price.

For Strategic Advising services, we’ve developed The LivePlan Method, which offers a very defined set of phases and tasks, to act as your standard solution and become your product. You can marry these tasks to your current workflow and business processes.

Over time, as you become more efficient at doing the work, a custom process will likely emerge that fits your business and your clients best. That’s wonderful and it’s the thing that makes Strategic Advising so exciting.

Beyond Strategic Advising

I encourage you to think of all your service offerings in this way, not just Strategic Advising.

Define what it is you specialize in, call it a solution set for your client, treat it as a product, stay strict to your standard scope, and show the client how your solution will solve their problem—keeping in mind that your goal is to standardize on something that you can scale. This will make you efficient, which means increased profits, and also give your client peace of mind that they will know what to expect.

What are your other solutions? Well, that depends on you. What do you specialize in? What sets you apart? What is your passion? What are the special market needs in your area? Who are your resources and partners that will help round out your solution?

Then, what are the solution sets (the tools, the software) that you need in order to get that work done? How do those solutions work together to help you deliver your service? Most importantly, will those solution sets (especially the software) help you to be scalable? Is it something that aids you in establishing standard processes for making your work more efficient? When you determine that, you wrap your product around it.  

Maybe you have a few different products; likely you will. Your products will be a combination of labor you perform, and tangible things that are delivered. Your products should have direct costs, those things that are necessary in order to deliver the product. You should know what your gross margin is for each of your products—you’ll want to know where you’re making your money, after all.

It’s not enough to know which clients you make money with—you need to know which product offerings make what gross margin. You must be strategic.

The bigger picture

Lastly, I believe it’s important to point out the necessity of productizing to the overall health of your business.

During the 2016 conference season, I heard many speakers talk about two primary things: the need to optimize your client base with the “best clients” (the ones you enjoy working with and that best fit your business culture), as well as the need to move to value based billing.

It is my firm belief that if you focus instead on moving to productizing your service offering, both of those things will happen naturally, and your business will be more profitable—and frankly more fun for you.

If you simply focus on getting rid of the bad clients, you aren’t necessarily left with a service offering that makes sense or is profitable. In addition, taking the product approach will, by default, turn you to value based billing. You’ll have something obvious to bill for, as well as get your ideal clients in line, because the product takes the mystery out of the service offering.

Because you will have aligned your offerings into products that make the most sense for you, the clients will align with the products. Finally, because you’ll know the gross margins on all the products you offer, you’ll be left with a more profitable business. It’s a win-win-win!!

Kathy Gregory

Written by:
Kathy Gregory

Topics: Growth & Productivity , Strategic Advisor Method