Why Sell Fruit When What Your Advisory Clients Crave is Chocolate?
A recent study quantified the incremental revenue opportunity for advisory services in the small to medium enterprise market at $1m per annum, per three hundred clients. For the average accountant or bookkeeper, this is a highly desirable, significant and achievable target. It also explains why there is so much emphasis at industry conferences, in publications and in our training bodies on shifting practices from compliance to advisory services.
Unless you have been hiding under a rock, you know there is enormous pressure to move away from low margin, compliance work — which is disappearing rapidly with the movement of data to the cloud and the introduction of machine based learning. The change is already upon us… it’s inevitable.
However, the challenge remains —> “how do you shift the focus of your practice towards strategic and advisory services”? The proposed shift makes perfect sense in theory, but it also means that you must learn a whole new way to communicate with and market to your clients.
Therein lies the real dilemma…
Thankfully, in most cases, you are already a trusted advisor. However, there is no denying that you face stiff competition from other parties (who are far less qualified) but much better at marketing themselves as having the answers to important questions such as:
- How do I grow my business?
- How do I get more leads and customers?
- How can I use technology to increase my competitiveness?
In this new, highly competitive world of advisory opportunities, you must find unique and valuable ways to solve the big problems that keep your clients awake at night. But here’s the problem — business owners are already overrun with data and spreadsheets they don’t really understand.
An Inconvenient Truth About The Financial Literacy of Your Clients
Last year, we conducted a study with 5000 business owners and discovered, to our dismay, that 93% of them thought they could safely and successfully run their business off only an income statement and aged receivables report each month. They were unable to answer basic questions about the difference between profit, cash in the bank and cash flow. Most also assumed that more customers and sales was the ONLY and best solution to fix a cash flow issue. This research squarely put into focus the seriousness of the financial literacy problem amongst our clients.
Truth is, at least 90% of the entrepreneurs you interact with each day are financially illiterate. They cannot read their financial statements so creating beautiful graphs, dashboards, forecasts or key performance indicators (KPIs), may not be as useful or helpful as you think.
In addition, neuroscience has proven that the part of the brain that makes decisions and acts, struggles to understand numbers and words. It is primarily a visual beast and is strongly influenced by pictures, video, storytelling, strong contrast, emotions etc. This is a huge challenge for us as a profession because most of us have never been taught how to explain financial concepts to our layperson clients, in the language they can understand.
Your clients desperately need strategies to fix the problems that keep them broke and awake at night. They need to know HOW to provide a better living for their families. And you need to find better, more impactful technologies and training to deliver these insights in a way that your clients can actually grasp, digest, and implement.
In a nutshell — “it doesn’t make sense to sell fruit, when what your clients really crave is chocolate.”
Deciphering the Difference Between Fruit and Chocolate
According to Xero’s Make or Break Report in 2015, 65% of business owners blame financial mismanagement for the failure of their business. Most of your clients are in financial pain and searching for the solution that will fix it now. More often than not, this pain will be directly related to cash flow or working capital deficiencies.
They will pay any price for step-by-step instructions to fix this specific problem, but they will only pay pennies for dashboards, KPIs and graphs. Dashboards only diagnose pain. To successfully shift your practice to high margin, advisory services you must go one step further: You must provide a clear path to curing that pain.
The key to building a successful practice in this new, highly competitive world, is to step back and recognize when you might be trying to sell fruit (i.e. dashboards etc. that are meaningful to you) when your client really wants chocolate (i.e. two-three simple, actionable strategies to unlock cash that is trapped in their business).
How Can You Deliver Two-Three Simple, Actionable Strategies?
Let’s take for example the case of one of our clients Steve, a commercial tradesman, who makes custom cabinets, counter tops and other kitchen installations for businesses in the hospitality industry. When he came to us, his business was experiencing revenue growth of 17.17% and he couldn’t understand why he was struggling to pay his bills each month.
After analyzing his financial statements, here’s what we discovered:
- his total receivables had increased over $36,814 in the six month, year to date period;
- Steve’s customers took on average 29 days to pay;
- while his sales were growing at a rate of 17.17%, his receivables grew at a rate of 131.22%;
- two of Steve’s regular customers were in fact the worst payers; and
- if Steve didn’t make changes immediately to the way he operated his business, his cash balance was going to fall below zero in at least three out of the next twelve months.
Now it would have been easy for us to throw together some beautiful graphs, dashboards and a twelve month cash flow forecast and deliver it to Steve along with our recommendation to “collect your debtors quicker” and “reduce your total outstanding debtors by $36,000 in the next 30 days”.
In fact, the software that we use with all of our clients produces all of these in a matter of seconds.
However, here’s the important point…
If we had done that and simply walked away, there’s a very good chance that Steve would have been in exactly the same position, and possibly even worse off, when we caught up again with him next month. Here’s why…
Steve hates looking at and dealing with his numbers. He often gets the terms receivables and payables mixed up, he is embarrassed to admit that he can’t read the dashboard, and he doesn’t know how to implement the instruction to collect his debt quicker.
While the graphs, KPIs, dashboards and forecasts make perfect sense to you or I, they mean little or nothing to most of your clients. I discovered this the hard way, when I became a business coach eight years ago, after having practiced as a lawyer and chartered accountant for many years. Like most of you, I just assumed that if I simplified the numbers, put them into some sort of context and packaged them up in a way that looked colorful and beautiful, our clients “would surely grasp the insights” and be able to implement strategies to fix the problems.
Truth be told, if we are going to be effective and make a difference, we must do a whole lot more than that. We must not only deliver the “nuggets of chocolate gold” hidden in the numbers, but also present clear strategies and step-by-step instructions so that they can take purposeful action that boosts their bottom line and cash flow.
How Can You Deliver Chocolate & Ensure It’s Still Nutritious?
In the case of Steve, we had to do a whole lot more than just present the KPIs, graphs, and forecasts. In order to make the insights accessible and actionable, we first stripped out all the accounting jargon and showed him in plain language which two or three strategies would have the biggest impact on his cash flow in the next 30 days.
Here is an example of an expert tip and step-by-step instructions that we delivered to Steve. In addition to explaining what the problem was in numerical terms, we gave him a clear explanation that he could refer back to at any time, 4 simple steps to take, and 2 additional coaching resources that he could refer to for guidance on how to implement. These supplemental resources link directly to video training, webinars, photos and case studies which clearly communicate concepts in a way that our clients can grasp.
The key to empowering your clients to take purposeful action often comes down to two simple factors (1) leverage and (2) focus. The quickest way to gain leverage is to quantify the size of the problem and put the cost of continuing to ignore it into perspective. Rather than just instructing your clients to collect debt quicker, you must find new and innovative ways to show them how much they are wasting by continuing to let people get away without paying on time. Similarly, we achieve focus by only presenting the two or three strategies that will have the biggest impact. We avoid overwhelm by pairing back what we share – which in turns allows the client to focus on what is urgent today.
That is the sole focus of our approach – it goes beyond just sharing numbers and metrics and into the realm of coaching and supporting them to fix the financial pain and build businesses that have strong systems and strategies in place to grow safely and profitably.
While the numbers often highlight challenges and opportunities, the solutions are not always limited to the realm of accounting and finance. As our industry evolves, you will no doubt find yourself increasingly asked for advice and support around pricing, technology, systems, sales, marketing and leadership. These are not disciplines which have been traditionally taught to accounting students but the new frontier we find ourselves in, will increasingly demand it of us if we are to remain relevant and valued.
When In Doubt, Find and Sell the Chocolate
Remember, if you client is in financial pain, and most of them are, they will only listen to and pay for insights they can understand and implement immediately. This makes it imperative for you to get to the point quickly and ensure you are delivering only the information (in layman’s terms) that they need to act and cure their pain.
While it’s easy for you to fall in love with beautiful graphs and dashboards, it’s important to remember that they are desperate for clear, simple instructions and tangible strategies that will boost their bottom line and cash flow quickly, cheaply, and easily.
When you take a step back and identify the chocolate each client is desperately searching for, it will also become a whole lot easier to attract more ideal clients, accelerate your growth and profitability, and command a premium price for your advisory services!
For more content on this topic see also Have You Hit This Common Stumbling Block Trying To Shift to Advisory?