How can you tell the difference between a firm that is only claiming expertise as an advisor and one that is truly the earned expert? It’s hard for the client to discern this difference from outside the firm, but there are some distinctives that can help identify those that are true experts.
Two distinctives can point to this reality: (1) the number of clients in the firm, and (2) the size of the firm’s invoices.
The Number of Clients
True expert firms can support a team, service, support, and quality control with just a handful of clients (e.g., a team of 12 to 15 can be supported by just 20 to 30 clients). The work is so deep that clients are paying at the level which allows just a few clients to support a fully committed team. While firms that need very large, broad pools of clients reflect the reality of clients paying smaller prices spread out over a volume of clients to make enough revenue to support the efforts of the firm (e.g., hundreds of clients). This large pool of clients creates voluminous movements in work, complex operational systems, fast work with the hands (not the mind) based on external deadlines (from compliance agencies), and not a lot of extreme profit.
The Size of Invoices
Secondly, the invoices of true expert firms will typically be in the 5 to 6 digit lengths per client (as measured on an annual basis) while non-expert firms (even if niching) typically create invoices in the range of 3 to 4 digits in length. This is truly anecdotal but one we have seen many times. Small invoices reflect transactional billing, while large invoices represent deep relationships that clients can’t find elsewhere. Advisory firms are demanding engagements and services in the $10,000 and higher levels (measured annually), while non-expertise firms sell services for $500 to $2,000 per transaction. As mentioned, the $10,000 represents a relationship (which commands higher prices), while the $500 represents a transaction (which anyone can deliver to the client).
To be clear, your goal as a firm owner shouldn’t be to reduce the number of clients in your firm, or to increase the size of your invoices. Both are good results if you are seeking to be an advisory firm. But these results are simply byproducts, or indicators that you are already differentiated as a firm. If you can support your team on a few clients, and tend to price with fewer invoices and larger amounts on the invoices, then it simply represents your recognition in the market you serve. These questions can help you know where you stand as an advisory firm:
Are our clients willing to pay a premium price for a specific service that few perform?
Are we known for a particular service that can generate above average prices simply because they can’t get it elsewhere?
Do the things we sell require us to devote a whole team to serve one client?
Does our sales process usually talk about transactions rather than value and relationships?
Jason is the Founder of Thriveal and the Chief Innovative Officer of his CPA firm, Blumer & Associates. He is the co-host of the Thrivecast and The Businessology Show and speaks and writes frequently for CPAs and creatives, his firm’s chosen niche. Jason loves to watch documentaries on just about anything. He lives in Greenville, SC with his wife and their three children.