using compliance work to uncover business improvement opportunities ric payne principa + 1 775 830...
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Using Compliance Work to Uncover Business
Improvement OpportunitiesRic PaynePrincipa
www.principa.net+ 1 775 830 1925
This is really about defining your business model
Why do people use CPAsWhy do people use CPAs
1. They are required to meet compliance obligations
2. Keep more money3. Make more money
Which of these three reasons are likely to represent the highest value?
If YOU want to make more money
You must become more valuable …. and this has more
to do with massaging perception than anything else.
You must become more valuable …. and this has more
to do with massaging perception than anything else.
1 The Challenge
How do your clients and prospects perceive you?
Number Cruncher?
Form Filler?
Scorekeeper? Bean Counter?
Key business advisorKey business advisor
An important shift in positioning An important shift in positioning Clients’ Clients’
perception of perception of valuevalue
COMPLIANCECOMPLIANCE
ORCHESTRATION OF OUTCOMES
ORCHESTRATION OF OUTCOMES
COLLECTION & CLASSIFICATION OF
FINANCIAL DATA
COLLECTION & CLASSIFICATION OF
FINANCIAL DATA
PREPARATION AND FILING STATUTORY
RETURNS
PREPARATION AND FILING STATUTORY
RETURNS
ANALYSIS & INTERPRETATION OF
RESULTS
ANALYSIS & INTERPRETATION OF
RESULTS
Start here
Transactional Transformational
A Quick Poll # 1
Do you routinely offer your business clients an opportunity to formally
review the financial performance of their business at least once each year?
Yes / No
The Opportunity2
%%
SME’s who believe their accountant should be doing more for them.
The Opportunity2
%%
Accountants routinely undertake a formal annual financial
statement review.
%%
The Opportunity2
We have an extraordinary opportunity to
do more.
We have an extraordinary opportunity to
do more.
• Business owners welcome help from their accountants
• But … we’re not providing all the help they need and deserve
• Because … we’re too busy with compliance matters
The Opportunity: Conclusion2
Valuations, M&A
BookkeepingPayroll processing
CompilationsTax preparation
Audit & reviewTax problem resolution
Tax planningFinancial projections
Business guidance
Retirement / succession planning
Estate planning
Niche services - vertical or horizontal niches
External CFO
Relative Value Added
Price Insensitive
Price Sensitive
Commodity Services
Value Added Services
COMPLIANCE RELIANCE
THE INDUSTRY VALUE CHAIN
•Choose the point you want to be on the value chain and design your service
offering to match
Where do you want to be on the value chain?
If you don’t add more value, the only way to grow
revenue is to add more clients … and THAT is hard.
Strategies for growing your firm …Strategies for growing your firm …
New
Existing
Existing
New
Services
Clients
The popular
but wrong
strategy
Client selection
Service offering
Firm positioning
Communicating value
Client selection
Service offering
Firm positioning
Communicating value
Differentiation is about …Differentiation is about …
Not all clients offer the same opportunity for you
to add value so don’t view them as being the same. Client Selection is Critical
A major success key
A Typical Client Cumulative Profitability GraphA Typical Client Cumulative Profitability Graph
If your graph look like this …If your graph look like this …%
of T
otal
Net
pro
fit
100%
100%% of Clients
It means you’re uniformly adding the same value to
all clients with little or no
differentiation. It’s a commodity
business.
Identify your Prospects
That is, people . . . Who are likely to be successful over the long termBecause of the value you create for themAnd are therefore likely to be loyal advocates
Client Selection
Interpersonal Resonance & Receptivity
Profi
tabi
lity
(to
serv
ice)
and
Gro
wth
Pot
entia
l
Low High
High
Low
Client Selection CriteriaWhat’s the Profit Improvement Potential?
For Example:Fee - $2,000 per month over a 24 month period – look for $480,000 total value added in business value and be self-funding
Increase in NPBIT target (year 1) $120,000Increase in Business Value @ 3 times earnings $360,000
Client Selection CriteriaCriteria Reason
In business for > 3 years Probability of survival is higher
Pleasant personality Winners are grinners
Willing to listen Advice acted on is advice valued
Positive disposition Personal success characteristic
Business is profitable Strength to build on
Not chronically undercapitalised Stronger resource base, capacity to grow
Not dominated by customers or suppliers More attractive industry structure
Established market for product or service Probability of survival is higher
Technically competent Hard to revive the living dead
Scope for marketing leverage Quality earnings come from quality customers
Scope for management leverage Business value is sustained by the integrity of management processes
The service needs of a The service needs of a business are driven by business are driven by
where it is on its life cycle where it is on its life cycle
A Typical Business Life Cycle
Revenue
Start-up Growth Maturity Decline / Renew TIME
Entrepreneurial
Leadership, Management Systems, Cash flow
Frustrations
Management Style Entrepreneurial
Price declineLittle differentiationLack of innovation
Turnaround
Senior Management,
SystemsPlanning
Phases of growth
Innovation and Renewal
Leadership,Systems, Cash Flow
Traditional Growth
The starting point
Where your client wants to be
Financial reporting system & compliance
Business value planning
Customer service system
Organization structure
Operational processes
Management control plan
Succession planning & exit strategy
Leadership
Team building
Team skills development
Key process identification, re-engineering and systematization
Performance measurement metrics
Time
There are needs at every point
This is where most accountants focus their
energy and skill
Moving From Compliance to Reliance: Your Game Plan
• Identify your prospect – run the numbers• Be a problem solver not a prophet of doom• Don’t ad lib - if something’s worth saying learn to say it
well• Develop trust by empathizing with your client• Get attention by revealing hidden opportunities• Explain your action plan for the three possible outcomes
Be a Problem Solver
1. What are your major product or service profit contributors
2. Who are your most profitable customers3. What are your expense drivers4. How to manage cash flow5. What are your Critical Success Factors (CSFs)6. What Key Performance Indicators relate directly
to the CSFs7. How to use a Management Control Plan as a
management tool
Your Game Plan
• Identify your prospect – run the numbers• Be a problem solver not a prophet of doom• Don’t ad lib - if something’s worth saying learn to say it
well• Develop trust by empathizing with your client• Get attention by revealing hidden opportunities• Explain your action plan for the three possible outcomes• Find your fee
Do’s and Don’ts of Business Performance Reviews
• Do NOT talk about the obvious• Do NOT focus on expenses (reduction)
The Don’ts
Do’s and Dont’s of Business Reviews
• Look at the components of profit change• Discuss the 4-ways to grow your business• Discuss the business model from the perspective
of profit drivers• Make expense analysis interesting & relevant• Discuss the relationship between profit and
business value• Discuss the role of a CFO• Explain the concept of a MCP
The Do’s
It all starts with a conversationIt all starts with a conversation
Empathize with your prospect – 5 Killer Questions
How is your business helping your realise your dreams?
If one burden could be removed from you today what would that be and what impact would that have on your life?
What is the one thing you would like to change in your life?
If you had a magic wand, what one thing would you change about your company …. Why did you choose that?
In your present role, what brings you most happiness and what brings you most stress?
How is your business helping your realise your dreams?
If one burden could be removed from you today what would that be and what impact would that have on your life?
What is the one thing you would like to change in your life?
If you had a magic wand, what one thing would you change about your company …. Why did you choose that?
In your present role, what brings you most happiness and what brings you most stress?
Your Game Plan
• Identify your prospect – run the numbers• Be a problem solver not a prophet of doom• Don’t ad lib - if something’s worth saying learn to say
it well• Develop trust by empathizing with your client• Get attention by revealing hidden opportunities• Explain your action plan for the three possible
outcomes
An analytical tool makes life easy
One of our most important roles is to bring your financials to life
One of our most important roles is to bring your financials to life
Sure .. We’ll give you columns of numbersSure .. We’ll give you columns of numbers
But .. We’ll always be looking for your opportunitiesBut .. We’ll always be looking for your opportunities
We’ll show you what contributed to your year-on-year profit change?
And we’ll tell you what’s happening to your financial conditionAnd we’ll tell you what’s happening to your financial condition
We’ll even let you know what you should do nextWe’ll even let you know what you should do nextThis is what we’ve noticedThis is what we’ve noticed We recommend …We recommend …
And we’ll be very precise in our analysis. After all we are numbers people!
And we’ll be very precise in our analysis. After all we are numbers people!
We’ll help you view your business through an interesting lens that you can relate to because we believe in simplicity
We’ll help you view your business through an interesting lens that you can relate to because we believe in simplicity
And we’ll work with you every month to let you know what you need to achieve going forward to reach your financial targets
And we’ll work with you every month to let you know what you need to achieve going forward to reach your financial targets
And we’ll help you strategize your business because we understand the impact of its key profit drivers
And we’ll help you strategize your business because we understand the impact of its key profit drivers
We understand there are just 4 ways to grow any business
… and we’ll always give you a forward looking perspective… and we’ll always give you a forward looking perspective
Poll question # 2Poll question # 2
Would you be willing to use the Profit Improvement Performance software as a discussion catalyst with at least one business client?
Yes or No
Would you be willing to use the Profit Improvement Performance software as a discussion catalyst with at least one business client?
Yes or No
The Two Key Expense Review Questions…
What are we getting for what we’re investing? and
Is there a better way to deploy these resources?
Sales ………..
Less COGS
= Gross Profit
Less Expenses
Net profit
Sales ………..
Less COGS
= Gross Profit
Less Expenses
Net profit
Less the cost of resources used to generate your gross profit
Make Expense Analysis Interesting
Make Expense Analysis Interesting
Non Discretionary Expenses Discretionary Expenses
These are required to produce THIS year’s
income
These are required to produce NEXT year’s
income
Profit and Business Value
Profit and Business Value
Your Game Plan
• Identify your prospect – run the numbers• Be a problem solver not a prophet of doom• Don’t ad lib - if something’s worth saying learn to say it
well• Develop trust by empathizing with your client• Get attention by revealing hidden opportunities• Explain your action plan for the three possible outcomes
The 3 Possible Outcomes From a Financial Statement Review
• Ignore or fire the client• Move to a full business development project
that incorporates a Management Control Plan with you in the role of an external CFO
• Undertake an initial engagement e.g. a Strategic Planning Retreat, a Profit & Cash Flow Plan with a MCP backend
Your Management Control Plan
Meetings
KPIs
Projects
Other
Goals
The Role of an External CFO is to help you …
The Role of an External CFO
The Role of an External CFO
The Role of an External CFO
The Role of an External CFO
The Role of an External CFO
Poll question # 3Poll question # 3
Do you believe you could help more people improve the performance of their business after today’s session?
Yes or No
Do you believe you could help more people improve the performance of their business after today’s session?
Yes or No
Have a go at this .. you’ll be pleasantly surprised … so will the clients who count!
+ 1 775 826 7771
Questions?