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Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa www.principa.net + 1 775 830 1925

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Page 1: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

Using Compliance Work to Uncover Business

Improvement OpportunitiesRic PaynePrincipa

www.principa.net+ 1 775 830 1925

Page 2: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

This is really about defining your business model

Page 3: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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?

Page 4: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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.

Page 5: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

1 The Challenge

How do your clients and prospects perceive you?

Page 6: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

Number Cruncher?

Form Filler?

Scorekeeper? Bean Counter?

Key business advisorKey business advisor

Page 7: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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

Page 8: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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

Page 9: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

The Opportunity2

%%

SME’s who believe their accountant should be doing more for them.

Page 10: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

The Opportunity2

%%

Accountants routinely undertake a formal annual financial

statement review.

Page 11: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

%%

The Opportunity2

We have an extraordinary opportunity to

do more.

We have an extraordinary opportunity to

do more.

Page 12: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

• 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

Page 13: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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

Page 14: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

•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.

Page 15: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

Strategies for growing your firm …Strategies for growing your firm …

New

Existing

Existing

New

Services

Clients

The popular

but wrong

strategy

Page 16: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

Client selection

Service offering

Firm positioning

Communicating value

Client selection

Service offering

Firm positioning

Communicating value

Differentiation is about …Differentiation is about …

Page 17: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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

Page 18: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

A Typical Client Cumulative Profitability GraphA Typical Client Cumulative Profitability Graph

Page 19: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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.

Page 20: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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

Page 21: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

Client Selection

Interpersonal Resonance & Receptivity

Profi

tabi

lity

(to

serv

ice)

and

Gro

wth

Pot

entia

l

Low High

High

Low

Page 22: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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

Page 23: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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

Page 24: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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

Page 25: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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

Page 26: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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

Page 27: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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

Page 28: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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

Page 29: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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

Page 30: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

Do’s and Don’ts of Business Performance Reviews

• Do NOT talk about the obvious• Do NOT focus on expenses (reduction)

The Don’ts

Page 31: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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

Page 32: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

It all starts with a conversationIt all starts with a conversation

Page 33: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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?

Page 34: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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

Page 35: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

An analytical tool makes life easy

Page 36: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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

Page 37: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

Sure .. We’ll give you columns of numbersSure .. We’ll give you columns of numbers

Page 38: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

But .. We’ll always be looking for your opportunitiesBut .. We’ll always be looking for your opportunities

Page 39: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

We’ll show you what contributed to your year-on-year profit change?

Page 40: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

And we’ll tell you what’s happening to your financial conditionAnd we’ll tell you what’s happening to your financial condition

Page 41: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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 …

Page 42: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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!

Page 43: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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

Page 44: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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

Page 45: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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

Page 46: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

We understand there are just 4 ways to grow any business

Page 47: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

… and we’ll always give you a forward looking perspective… and we’ll always give you a forward looking perspective

Page 48: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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

Page 49: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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?

Page 50: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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

Page 51: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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

Page 52: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

Profit and Business Value

Page 53: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

Profit and Business Value

Page 54: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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

Page 55: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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

Page 56: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

Your Management Control Plan

Meetings

KPIs

Projects

Other

Goals

Page 57: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

The Role of an External CFO is to help you …

Page 58: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

The Role of an External CFO

Page 59: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

The Role of an External CFO

Page 60: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

The Role of an External CFO

Page 61: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

The Role of an External CFO

Page 62: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

The Role of an External CFO

Page 63: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

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

Page 64: Using Compliance Work to Uncover Business Improvement Opportunities Ric Payne Principa  + 1 775 830 1925

Have a go at this .. you’ll be pleasantly surprised … so will the clients who count!

[email protected]

+ 1 775 826 7771

Questions?