In the next few weeks we are taking a closer look at a five step process firms can use to evaluate and develop new services to meet clients’ needs and create new sources of revenue by building a more consulting-based practice. In this post we introduce steps 1 and 2: – Research Market Needs and Evaluate and Prioritize. Check back Oct. 3rd for steps 3 and 4 – Define the Scope and Go to Market with Your Service.
Step 1: Research Market Needs
There are a variety of sources you can tap to learn more about the current and future needs of your target market. You have a great source of information to help you get started: your clients. Arrange time to meet face-to-face with several of your clients and ask them a series of questions designed to uncover unmet needs, what kind of assistance they need, and even what they would potentially pay to get this help.
Client Questions to Discover Needs
- What are the biggest challenges facing your company over the next 2-3 years?
- How do you see these challenges impacting your company?
- What obstacles do you believe are or will hinder your ability to address these challenges?
- What outside assistance do you believe would help you address these challenges?
- What would you be willing to pay for this assistance?
In addition to speaking with your clients, you should do some secondary research to back up and add to what you learn. There are a variety of sources to use:
- Competitors: look at what services the Big 4 CPA firms and other large competitors are developing by looking at their web sites and reading about them in accounting industry publications. With their clients and their positions on boards and industry groups, they typically are the first to know what trends, issues and challenges companies are facing.
- Social Media: Review Linked in pages and groups and read industry and business blogs to get a feel for conversation topics, what questions are being asked, and ideas people are discussing.
- Web sites: There are a variety of Web site resources that will contain information helpful to your research, for example First Research (firstresearch.com), IBISWorld.com and AICPA/PCPS (http://www.aicpa.org/InterestAreas/PrivateCompaniesPracticeSection/Pages/PCPS.aspx) . Take some time to browse these sites, again looking for what is being discussed.
- Industry Resources: If you have industry practices, and/or participate in industry organizations, these are great sources for information. Many publish newsletters, hold conferences, and have discussion groups on their web sites that will provide clues as to current trends and issues that drive demand for new services.
Step 2: Evaluate and prioritize
If more than one new service idea bubbles up from your research, you need a systematic process to narrow the list and decide which to pursue. Consider the following factors (explanation of each consideration is discussed below):
The quickest, easiest, least expensive way to grow a new business is to drive sales through your existing client base. It doesn’t cost anything to get in front of your clients – just a phone call – and because of your ongoing working relationships, your clients trust you and will listen when you discuss a new service idea with them. If a new service idea you are considering is targeted to a market different than those you currently serve, this means you will need to earn the right – through branding, marketing and sales efforts – to pitch the service idea to people who don’t necessarily know you or trust you.
One you’ve determined the demand is there, evaluate the revenue stream. Will it be a special project that clients only need once, is it something that will need to be updated occasionally, or is it annual work that will serve as annuity revenue for your firm? When comparing investment costs to potential payback, you’ll want to estimate the lifetime value of the service with each client, taking into account the entire revenue stream and average expected useful lifespan of your clients.
A huge factor in comparing new service ideas is your ability to provide the service. The alternatives range from you having existing personnel who are trained and ready to go (least expensive/easiest) to having to acquire the expertise from an outside source such as a merger or an alliance with a strategic partner (most difficult/potentially expensive). If you want to staff the service internally and need to hire, consider how easy or difficult it will be to find the right person in your market.
There are three basic elements to consider regarding your ability to sell the new service: How effective the marketing message will be, how the market will accept the message, and what kind of sales force you have available. For a marketing message to be effective, it needs to differentiate you from competitors offering similar solutions and include clearly defined and easy-to-understand benefits so the target audience can perceive the value proposition of the service.
This will be tougher to achieve if the service is not something typically associated with your industry brand. For example, a business owner typically will not expect to get human resources consulting from a CPA firm; the CPA brand is more often associated with financial-oriented solutions like accounting and tax. So, a CPA firm pitching an HR-oriented solution will have a harder time differentiating its service from that of a human resources specialty consulting firm and the target audience will likely have a harder time understanding the value proposition of going to a CPA firm for this type of work.
Finally, you’ll need to have professionals who can help sell the service once you develop it. If you rely only on the service provider/service champion for sales, you’ll find growth slows/stops once that person makes a few sales and is busy serving clients. All those who serve clients in your firm and/or speak with prospective clients about your firm’s services should be willing and able to present the new service. Ask yourself how feasible this is given your firm’s culture, the sales skills of your people, and the time you have available to train and manage the sales force.