The rise of X-as-a-Service
Thanks to the rise of cloud computing, we can now access software (SaaS), or spin up platforms (PaaS) and infrastructure (IaaS) on-demand. And the best part is, we can scale up or down as required, and only pay for what we incrementally consume – no upfront CAPEX, no stressful implementation. The popularity of this consumption based business model has even spawned the term X as a service (XaaS), where X stands for anything.
In recent times, we’re seeing usage of XaaS outside of technology and being adopted by various services based industries. So the question then becomes, can this model work for accounting – let’s call it Accounting-as-a-Service?
What would Accounting-as-a-Service business model look like? To easily conceptualise this, let’s use SaaS as a reference point.
In the SaaS world, pricing is structured around tiered plans or packages with the option for ‘add-ons’ as required. In the Account-as-a-Service world, your practice could offer similar service packages, perhaps segmented around your clients’ revenue figures, or some other useful measure to logically group buckets of work by order of complexity or effort.
As an example, you could offer 3 service packages called Startup, Growth and Mature, with each package having clearly defined modular services. You could then offer add-ons for additional business advisory type or ancillary services such as quarterly or annual business performance reviews.
Nailing your pricing construct will require some serious service design thinking.
The subscription economy has taken the world by storm. Clearly, the concept of pay-by-the-month has resonated well with consumers. The thought of shifting your accounting practice from charging hourly or by 15 minute increments to a monthly subscription model might sound like a bridge too far, but should it be?
Let’s firstly consider the key benefit of subscription based revenue for your practice. Given the target audience of the article, the next statement might sound obvious: predictable recurring revenue boosts your business valuation. This is the reason why successful SaaS companies sell at such high multiples. According to SaaS Capital the median SaaS valuation multiple for public companies was 16.6x Annual Recurring Revenue (as at 31 December, 2020).
But of course this is not an apples for apples comparison, since the reason why SaaS businesses can fetch high multiples is because of the high degree of automation built-in. Let’s acknowledge that accounting is a human advisory business at its core, and not likely to be replaced by robo-advisers anytime soon. We should also acknowledge that human processes are dead, but human advice and interaction is still very much alive. Moving to this new Accounting-as-a-Service model will naturally require you to rethink how you can systemise your practice.
Technology to deliver incremental value to clients
There is one big caveat with subscription revenue – you need to continually deliver value to your clients. In SaaS, one of the key metrics we measure is active users. If the percentage of active users relative to total users is high, then it’s a positive indicator that users are engaged.
For the Accounting-as-a-Service model to succeed, it must be paired with technology to deliver incremental value to clients. Here are some examples:
Video conferencing – Have more regular check-ins with your clients via video conferencing so you can fit in more facetime with more clients. A quick 15 minute video meeting with each client per month can go a long way.
Client portal – Offer a secure client portal solution like Portalstack, so your clients can access their own data and documents. Rather than the back and forth with emails, your clients complete their onboarding online and can upload or download sensitive financial files and documents online 24/7.
Proactive financial health monitoring – Through the client portal, you can offer a real-time dashboard that proactively monitors the clients’ financial state. Also, financial or business goals can be established and tracked online.
Live chat – Why not just allow clients to call you? Having a live chat does not replace the phone, it’s just another channel for clients to contact you – and one that’s rising in popularity, In tech support, live chat is preferred over calling a company. This trend will continue to rise for use cases beyond tech support, particular among the digital native generation of business owners.
Forward thinking accounting practices should consider the merits of Accounting-as-a-Service. Yes, it may require major surgery to your current business model. If you don’t have the appetite to change your entire practice, perhaps create a separate business unit to test and validate if the concept can work for your firm.