Your new Cashflow Positive Revenue Stream
14 Feb, 2018 by David Seamans
Elements is a phenomenal tool for supporting the delivery of effective and reliable Advice products. However, when people throw around the idea that you need to get into the Advisory space there is one thing they'll always leave out-- the how! How do you become an Advisor? How do you structure an advice product? How do you charge for advisory services?
Below we explore these questions at a high level, and provide some direction that can help you as you build Advisory service into your business.
The first key concept to understand when building an Advisory is that you don't want to be billing out hours. Its a well understood idea that billing hours has all kinds of problems including:
- Difficulty during the sales process.
- Possible blowouts in your customers cashflow.
- Negative impressions of your own value.
The worst one of all though, is that billing by the hour resigns ownership of your time and effort over to the person who's paying you! You are no longer in control of how long you work, when you work, and what you deliver. Your only recourse if a customer wants something that you don't want to do is abandon them all together.
Instead, the modern wisdom is to design your advisory service as if it were a product, carefully considering the features it will include and those that it won't! For instance, your advisory service might include:
- Monthly call discussing numbers and surfacing issues.
- Quarterly planning meeting to set reasonable management level targets.
- Prioritisation of next step business tasks.
- Email or live chat response to day to day questions.
and might explicitly not include:
- Any phone calls outside those defined in the included list.
- Direct contact / management / interaction with employees.
- Day-to-day interaction with the business.
- Representation of the business in any context.
As you can see the lists above start to frame exactly what your customer is going to receive as part of the product. You can then start building up your internal processes and the actions you're going to perform. For instance, you might schedule a monthly call 7 days befor your invoice goes out. Before this call you might always schedule half an hour to review their numbers and assemble a list of leading questions to help build your customers mindset and establish context for the discussion.
We don't really want to go deeply into designing productised services here (there are plenty of places out there that do a great job of this). The important thing to understand is, through carefully setting parameters and boundaries you can systemise the delivery of your advice and build some certainty for your customers and yourself. Then you can iterate on your products over time, adding new features and exclusions to get the most for your customers and yourself.
This is how you build up a repeatable, effective and successful advisory business.
A Note on Pricing
One of the most common problems that any business has when first taking a new product to market is trying to figure out how to price it. You've seen it happen-- the worried look in a supplier's eyes, the apologetic tone of voice. It doesn't fill the buyer with confience, it doesn't get better with experience or age, and Accountants and Bookkeepers do it just like every one else. In fact, its one of the big friction points preventing Accountants and Bookeepers actually getting into the space.
So its time to change your thinking on pricing! The key thing to remember is that as an Advisor you are performing a revenue generating activity. This means that if you are having the described effect, your advisory activities pay for themselves. If fact, they'll often even make a profit for the customer.
Whats more, discounting or undercutting your pricing in any way that is going to make it more stressful or difficult for you to deliver (and evolve!) your services is actually going to reduce the quality of advice you can give. As a direct result it will reduce the value they can get back from their investment in you. Not charging enough can mean that you're ripping them off!
Think about it-- Pricing too timidly means you won't be able to try new things. You wont be able to do adequet research and development on your own techniques and the market. You won't have the flexibility and time time to give your customer a little bit of an extra push when they need it. You will become distracted by other things that are going to generate you more money more reliably, and they will no longer be the focus of your attention.
Is this the sort of product you want to offer? No? Then don't sell yourself short on price. If a customer is not in a position to pay you what you need to be paid to deliver a great service, then they are not a customer that you want.
Three Tiers of Advisory
You can break down the Advisory market into three key tiers that are roughly aligned with the amount of value that is being provided.
Time Allowance: 1 - 5 Hours a Month per Client
Monthly Billings: $300 - $500 per Client
Basic advisors are where you begin when you start to add advisory products to your practice. They tend to offer products that are more restricted, and advice that is more generalised. That said, they're still extremely valueable to customers that don't have a business background. They bring systems and processes required for stability and growth, and understanding around how to interpret signals, and plan for tomorrow. The basic advisors job is to take a business from a state of perpetual worry, and help build out certianty and optimisim around their future.
Time Allowance: 5-10 Hours a Month per Client
Monthly Billings: $500 - $1500 per Client
General advisors are an evolution of Basic advisors who have been in business long enough to have their processes and systems build out. They have a keen eye for problems on the horizon, and can speak the language of the clients that they're talking to. They've started to explore a few niches, and might even have a roadmap around how they're going to continue to specialise.
A General Advisor will also (somewhat counter-intuitively) tend to be able to support more customers than a basic advisor despite the allowed time commitment. This is through the quality of their systems, the adoption of their own automation techniques, and the sheer amount of material they have on hand.
Time Commitment: 10+ Hours a Month per Client
Monthly Billings: $1500 - $5000 per Client
Specialist advisors are those who have niched down into a specific industry and have unique knowledge, systems and techniques making them extremely valuable. They have their fingers on the pulse of the industry that they serve, and are often influencers in the space giving keynotes, participating in industry and government panels and generally helping set the tone and direction of the market in general.
Given their capacity to offer a lot more certainty in the outcomes they provide, they tend to charge more. The flow-on effect is the freedom to spend more time on activities like research, networking and analysis helping deliver even higher quality results for their clients.
Specialists also tend to be in the upsell and spinoff space, leveraging the wealth of material that they have developed over the years to create courses, write books and generally provide their knowledge to as wide an audience as possible.
How does Elements help?
Elements provides a workflow and set of techniques and are both foundational and critical to the running of all three levels above. It provides fine-grained alerting to help you stay in touch with your customers data. Business analysis workflows that follow industry patterns and tooling to surface key issues. It provides out of the box communication rhythms, and helps give you context for the discussions that need to be had. And every step of the way Elements provides expert tips, education and support to help you create value for your customers and get the most out of your Advisory business.
Just like your advisory services, Elements is designed to be cost-neutral to you. It should cost you nothing before you add your fist customer, and profitable once you've got them on board. In this way we see Elements as a no-brainer toolkit for all Advisors.
Think of Elements as a hub that brings together and systemises all of the basic parts of running an advisory business. On top of Elements you can build something that leverages your unique knowledge and background, knowing that a solid set of fundamentals are in place to help you build better businesses.
Sounds good! But where do I go from here?
Building an advisory business as described above is an incremental process. The best approach is to start slow and get the basics in before diving in the deep end.
Our challenge to you is this:
- Open an Elements account, and have a play with each of the reports and screens so you understand how each page works and what it tells you.
- Build a list of simple actions that you could provide as part of an advisory service.
- Build a list of things that won't be included in that advisory service.
- Reach out to one of your customers who you know can afford it, and pitch it to them by the end of the week.
If they don't like it, ask why and use their feedback to review the lists and pricing, iterate, and go again. If they do pick it up... Congratulations, you're up and away!
This is just the beginning and we're extremely excited to see where you take it!
As always we'd love to hear from you with thoughts and feedback on how Elements is working for you, and any way we can help you to build better businesses.
David, and the Elements team.