Adding Advisory Services to a Small Practice

Mark HoltonDirector - Smithink

Introducing your presenter

• Accountant, MCom, FCPA, FIPA & Tax Agent for over 35 years

• Director of Dynamic Taxation & Training Services

• Director of Smithink

• Board Member and Honorary Treasurer of Ronald McDonald House, Greater Western Sydney for 24 years

• Chairman of NSW Central Coast Academy of Sport Australia for 14 years

• Board Member Ronald McDonald House Charities Australia

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Mind Stimulation Exercise

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Mind Stimulation Exercise

Please select a card and concentrate on it…

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Mind Stimulation Exercise

Now on the count of three… Shout the name of your card out loud!

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Let’s try it again with a bit of enthusiasmWe are Accountant’s and Advisors after all!

Mind Stimulation Exercise

I have selected and removed your card from the pile…

Surprised?

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Creating Business Advisory Success

The accounting dilemma…

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Work less hours?

Have a lot more fun doing it?

Make more

money?How do

you?...

What business advisory services do you think clients will expect from us in the next three years?

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Business advisory service examples

• Financial health checks

• Business value indications

• Pre-lending assessments

• Board of advice meetings

• Review of debtor / creditor balances

• Managing cash flow

• Managing inventory / WIP

• Performance to various KPIs• Lending covenant

• Liquidity ratio

• Profitability

• Asset management

• Return on investmentSpecific measures for the client’s business

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Business value indications

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Business value assessment pre

Determine the true value of your clients business

Value gap analysis

Determine gap + future value + profit needed

Financial Analysis

Identify areas to improve profit + cash flow

Business value assessment post

Quantify improvement in value + reduced gap

Lending pre assessments

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Analyse Banking Covenants

Interest Cover > 2.0Debt Service Cover > 2.5Effective Gearing < 1.5

Capital Adequacy < 40%

Bank gap analysis

Determine lending analysis gap + future improvements required

Financial Analysis

Identify areas and strategies to improve lending covenants

Loan Submission

Client lodges application with some expectation of success

Opportunity to develop additional lucrative services

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Estate planningSuccession

planning

Provide regular

reporting actuals vs

budget

Three way

cashflows

Business planning

Assisting with

Government grants

Scenario planning examples

• Price and volume sensitivity

• Margin and profit analysis

• Working capital management

• Return on investment

• Premise acquisition

• Capital equipment financing

• New employee, products, locations

• Any key debit and credit!

Will I or Won’t I?14

2018 Smithink Technology Survey

Usage of business advisory software

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% of firms that use software

0 10 20 30 40 50 60 70 80 90

Cashflow/Budgeting

Tax Planning

Scenario Planning

Dashboard reporting

Benchmarking

Needs Analysis

Business Planning

Valuations

Board of advice reporting

Estate Planning

Retirement Planning

Government Grants

2018 2017 2016 2015 2014

The accounting industry and advisory services

The current environment….

• We do advisory services often when asked by the client or a third party like a Bank

• We do not track it separately on our profit and loss

• It is not promoted proactively to clients

• It is often linked in with compliance services

• It is often a look at the past on a quarterly basis

• We tend to give it away for very little of nothing

• The client really does not value the service as they think it is part of the compliance system

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Why is this happening?

• No immediate desire to change existing service model

• Lack of strategic direction in the firm

• Wrong people doing the wrong jobs

• Core business inefficiencies particularly in compliance model

• Key person dependency

• Measurement and accountability needs improving

• Confusion with the business advice product

So how do we address this…

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The seven steps to success

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The Enabler system

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Prepare your firm for success… lack of:

• Time

• Lack of commitment and capacity (the two C’s)

• The right segmented client to start with

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The right client to start with…

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A CLASS B CLASS

C CLASS D CLASS

Client Behaviours

- Wants to grow

- Good payer

- Listens

- Good revenue

- No BMW

- Advice seeker

- Partnership

Missing many

A class

behaviours

Opposite of

A Class

Missing one

A class

behaviour

Prepare your firm for success… lack of:

• Time

• Lack of commitment and capacity (the two C’s)

• The right segmented client to start with

• A proven implementation system

• Confidence to deliver business advisory services

• Desire to move from my comfort zone

• The right staff and practice champion

• Training and development of key staff

• A proven implementation plan

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The four key steps

1. Implement the structured Trusted Advisor Model into the firm

2. Develop the right Infrastructure(who will do what, when, how)

3. Create an engagement model and offer for the client

4. Deliver services using client centred models

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Trusted Advisor Model

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Succession Estate Planning

Financial Planning

SMSFConsulting/

Business Improvement

Tax + compliance

TRUSTED ADVISOR OFFICE

CLIENTS / PROSPECTS/ SUSPECTS

PROJECT MANAGEMENT

INTERNAL SERVICES

EXTERNAL SERVICES EXTERNAL ADVISORS

Bookkeeping

Legal Services

Lending Services

IT/ HR Services

The key firm model

Engage Clients

WITY

(3 Key Issues)Needs Analysis

Customised Proposal

Sign

Deliver

Cash Flow Story

S + W = C

Prospects

Suspects

ClientsProjects

Actions

Outcomes

Opportunities

Financial Non-Financial

Client Relationship Management

Start up Questions:

• S - strengths

• W - weaknesses

• R - risks

• F - funding

• S - succession

Proposal Contents:

• Issues

• Actions

• Timing

• Cost

Where to from here…

Take a COMPLIMENTARY Business Advisory Assessment

• An obligation free teleconference/ webinar (45 mins) that will identify among other things:

• Your firms numbers and future goals

• Your firms risks and issues

• Your aspirations

• The pathway to advisory success

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Grow the size of your practice revenue without

increasing the % of your compliance work.

Take the challenge

And have a lot of fun doing it!

Questions?

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Mark Holton

Director – Smithink

www.smithink.com