Before COVID-19, CPA firms were trending away from reliance on compliance services toward growing advisory services. As firms addressed the inherent value of CPAs in terms of business strategy and growth and looked to fill the growth revenue stream when compliance just wasn’t enough, advisory services became the mission and strategy of firms nationwide. Those who’ve embraced the move to advisory services have projected higher growth each year.
Business ramifications surrounding COVID-19, however, have shaken the anticipated growth from advisory services and otherwise, as reported in our May 2020 CPA Growth Amid COVID-19 survey. While firms saw a tax deadline delay that halted their traditional busy season, they have been anything but slow. Firms’ time has been taken up by Paycheck Protection Program (PPP) consulting and other opportunities helping clients weather the storm. While business has been busy, income deferment resulting from tax deadline delays and stay-in-place orders have created revenue gaps. It’s anticipated that Qs 2 and 3 will be filled with compliance work related to various government stimulus plans, so where are firms falling in terms of their efforts to grow despite COVID-19? What services are they creating or enhancing to fill in those revenue gaps?
The short and longer-term impact of COVID-19 on services
Not surprisingly, in the last 30 days, 55% of respondents indicated that they’d created (or enhanced) and launched new services, with 84% of those adding services related to PPP and the other 16% weighted heavily in wealth management, client accounting services, and business advisory. The latter services present ongoing advisory opportunities for firms that embrace the potential and pivot to a post-pandemic conversation.
Interestingly, for firms with 15-29% of their revenue tied to advisory services, 69% had launched new services in that timeframe.
While we would expect to see firms with over 30% of revenue tied to advisory services trending in that same direction, it wasn’t. We believe that these firms took a wait-and-see mentality when adding new services based on experience.
When we take a longer view, only 38% of firms anticipate creating and launching new services within the next 90 days. While many firms will focus on PPP loan forgiveness/certification, others see opportunity in the overall impact of COVID-19 on business and how services like advisory, fraud, and restructuring could come into play.
In this timeframe, 56% of firms with over 30% of their revenue tied to advisory are planning on launching a new service, confirming the wait-and-see mentality inferred above.
We have long seen through our work that firms with strong advisory practices tend to think differently. This data encourages this theory those with stronger advisory practices have a different outlook and perspective on growth, and that’s translating into how they’re investing in their growth.
The catalyst for advisory
Clients will be evaluating the level of service and attention they received through the pandemic, and if it wasn’t enough, they will be looking. Firms will either be on the receiving end or the passing end of that transaction. How firms pivot from the compliance pieces of COVID-19 toward ongoing advisory will likely have a major impact on client retention and long-term success. While firms have shared concerns that clients will be unable to pay for advisory services, that’s turning out not to be true. Firms that have remained focused on growth in advisory are finding that clients are willing to pay when they see the value. The key to a successful implementation and launch of advisory services is in how they’re packaged and tracked.
Firms are either going to survive or thrive during this time and while we don’t know what the world will be like post-COVID-19, the very nature of this event creates a tailwind into advisory services. Every single firm will take a hit when it comes to revenue as a result of COVID-19, but that percentage will come down to how they position themselves and their services now and how well they recover as the economy reopens. Firms adding or enhancing services and investing in business development during this time are the ones that we can expect to thrive as we exit COVID-19.
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