More recently when developing an advisory proposition within an accounting business a discussion ensued as to why a client moved to another accountant? The reason cited by the client for the move was that the compliance work the accountant offered was too expensive.
This then led me to ask “Do accountants provide a service or commodity when it comes to compliance work?”
I believe to answer this question we need to explore what a service and commodity is and then correlate that to an accountant’s value proposition.
A Service by definition has no transfer of possession to the client other than the output. Basically the ownership of that output only occurs at the point of sale. Generally a service cannot be stored or transported and is usually extinguished at the time it is acquired or sold.
Now let’s explore the key features of a service and a service-based business. In most marketing texts you will find a definition that describes a service as intangible, it cannot be separated from the service provider and the output or experience of the purchaser will “vary” depending on the service provider. This is what I call the “human factor” as service variability will be dependent on the person providing the service.
So what is a commodity?
Investopedia defines a commodity as “A process in which goods or services become relatively indistinguishable from competing offerings over time.”
So given the above, let’s go back to the question again, “does an accountant provide a service?”
I believe the answer lies in one major feature of a service; “Variability”.
“Variability” is not just about having a varying service, it is also about value. The service must be valued by the client and at its core that experience must be a quality experience. When there isn’t a quality experience in the service provided and there is no variability, then there is no value and the service in my view becomes a commodity. This is because the service provided by one accountant compared to another becomes a mere output, a function of the service, and therefore becomes indistinguishable from one accountant to the other.
Accountants then need to ask themselves; ” is the service I provide viewed as a true service or a commodity”?
The question I often get asked from accountants is: “Why do so many clients undervalue the service I provide? Why do they go to other providers that offer a cheaper service?” In other words, why do they treat my service as a commodity?
Sadly, the differentiation from accounting firm to accounting firm is negligible, creating a commoditisation mindset in the client about the services offered. When this occurs, the client seeks out the differentiators from other providers of similar services and inevitably focuses on price. So, without value-based service ‘variability, price becomes the differentiator.
There is an underlying perception by many clients that any accountant can produce the same output (commodity) and as such the client will focus on the price they are willing to pay for that service or output.
Essentially the client believes that all accounting outputs are the same, so why not seek out a cheaper service? In essence why pay more when they can get the same service cheaper somewhere else?
The obvious solution for the accountant is to offer something different, differentiate their services so that they do not perpetuate the commodity trap.
To amplify this, without differentiation and “variability” business owners will define an Accountants fee as a cost to the business, not a value-add service to the business.
Business owners would much prefer to pay for something they want than something that they need. Unfortunately for Accountants business owners believe compliance work is more a ‘need’ than a ‘want’
The solution for the accountant is to offer services that help clients increase their profits, create wealth and improve their lifestyle. These are services that their clients want rather than something they have to comply with; (need). When an Accountant assists their clients to grow their business, fees are no longer looked upon as an expense. They are viewed as an investment in improving the business prospects.
So, as an Accountant, are you described by your client as an investment in their business?
When ICS discussed this question with accountants we distilled five key areas that were a challenge for them in moving away from pure compliance work to more value adding services: –
- They don’t have the time to deliver these services
- They don’t know how to market these services to clients and prospective clients
- They need to increase their sales and communication skills
- They don’t have a structure for the delivery of these services
- They don’t know how to get paid for these services
If you would like to know how to overcome these challenges for your practice visit our web page at www.insightfulcoachingsolutions.com or e-mail Brad Collins at brad@insightfulcoachingsolutions.com
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