The First Aspect: Defining Strategic Focus
The initial step in advisory services is helping clients define their strategic focus. Paul explains that all businesses can fall into one of two main categories:
- Add Value – Businesses whose products or services are bought primarily for the benefits they provide, requiring a focus on adding value.
- Price-Driven – Businesses that operate primarily on price sensitivity, requiring a focus on efficiency.
For accountants, understanding this focus is crucial. For example, tax planning falls under an add-value approach, while compliance services, like tax returns, are typically price-driven. Mixing these approaches can lead to inefficiencies and reduced client satisfaction, so Paul recommends separating them into distinct areas.
Identifying Strategic Focus Quickly
Paul suggests a straightforward approach to identifying a client’s strategic focus. Begin by asking why people buy their product or service. If the primary reason is cost, the business likely needs an efficiency focus. If it’s for the product’s benefits, adding value is the right path. With experience, accountants can recognize this distinction quickly, enabling them to steer clients down the appropriate advisory path.
The Second Aspect: Identifying Areas for Profit Growth
Once the strategic focus is clear, the next step is to grow profit by addressing two main components: revenue and costs. Paul breaks down revenue into three elements:
- Number of Customers – Increasing customer base.
- Number of Transactions per Customer – Encouraging repeat business.
- Average Transaction Value – Raising the value of each transaction.
These three elements create multiple avenues for growth. Paul suggests accountants begin with existing clients, adding value through additional services or increasing transactional prices, before focusing on acquiring new customers.
On the cost side, firms can focus on reducing either direct costs or overheads. Paul emphasizes that if a business’s focus is efficiency, reducing costs should be the first step.
Practical Application for Accountants
For accountants working with tax return clients, efficiency improvements are essential. For advisory clients, focusing on value-adding services like tax planning is more effective. This distinction not only clarifies the growth path but also aligns clients’ services with their strategic focus.
Conclusion: Building a Strong Foundation in Business Advice
In this first part of the six-part framework, Paul emphasizes the importance of defining strategic focus and identifying growth areas. These foundational steps enable accountants to provide clear, effective advisory services that align with clients' goals.
