Welcome Guest

Birth of a Business Model

Share:






More Solutions:

Paul Miller discusses why Business by Design, Inc.'s fee-based billing model works.

Download the podcast

Paul Miller

When Paul Miller decided to go into business for himself about 18 years ago, he quickly discovered a shortage of advisors to help him. So he capitalized on the do-it-yourself spirit he learned from growing up on a dairy farm, and taught himself how to create a company.

Since then, Business by Design, Inc., his Edina, Minn.-based firm, has evolved into a company that provides exactly the kind of guidance he was looking for then. "Our primary engagement is in business coaching and planning for small business owners," says Miller. "Our secondary engagement is the tax planning piece."

Through his own experience getting his firm up and running, Miller identified an opportunity to provide resources for small business entrepreneurs who need guidance in planning and running their operations. Details such as incorporating or long-range tax planning aren't something many small business owners have time for. And many businesses don't know quite where to find the help they need.

"A lot of clients tell me their accountant just can't answer all their business questions, but I defend the accountant by asking the client if they've ever paid their accountant for anything other than tax preparation," says Miller. "When the client says 'no,' I explain that if you don't engage in a different kind of relationship, you're not going to get a different end result."

Self-Made Strategies

The word "different" is a good one to describe the approach Business by Design uses when serving clients. "We're not in the accounting business, we're in the relationship business," says Miller. "I've never solicited tax work. We solicit an engagement for business planning, and then based on that relationship and the positive results we deliver, clients are going to come back and use other services like tax preparation."

The firm currently works with about 600 small-business owners. Each relationship starts with the firm assessing the client's current business structure and needs, whether it's setting up a corporation or a basic bookkeeping system. Miller uses the example of one new client who is a real estate agent. "Based on her earnings and expenses, I can save her about $7,000 to $8,000 in taxes by understanding and maximizing her business structure compared to what she'd been doing before," he explains.

Business by Design approaches its clients' needs from a business coaching and planning perspective. As Miller notes, he's less interested in preparing tax returns than he is in creating valuable relationships. "Before this real estate agent came to me, someone asked her why she would pay anyone to incorporate when she could do it herself," he says. "It didn't take long for her to see her time could be much better spent doing other things."

Billing Practices

Because Business by Design doesn't operate like a traditional tax and accounting firm, it doesn't bill its clients the same way, either. Instead of billing by the hour, the firm uses a fee-based model. A typical engagement fee is between $4,000 and $6,000, which includes the initial planning and implementation of the agreed-upon strategies, as well as related services such as phone calls, meetings, and emails.

Paul MillerThe firm's approach is to continue building the client relationship from there, adding on other services for which it can charge a fixed fee. Handling payroll or bookkeeping for a small business might run about $200 per month, and that generates additional revenue. The combination of the initial fee and additional services is the firm's long-term profit model.

And it's something clients appreciate, Miller believes. "It's a lot easier for the client if they never have to be concerned that the clock's ticking the moment I walk into the room."

What's more, clients do see the difference, both in the level of service and the value. Using the same real estate agent as an example, Miller says she met with five or six other firms before coming to him. After their initial meeting, she told him no one had ever gone beyond the basics of accounting to discuss other aspects of running a profitable business, such as recordkeeping and bookkeeping.

"Clients like her may be paying us an up-front fee of $5,000, but when they realize that our comprehensive approach can save them $7,000 a year in taxes, it's pretty easy to see the value," Miller explains.

Fearless about the Fees

Paul acknowledges that moving to an entirely fee-based billing model might seem intimidating to traditional accounting firms-not to mention that it takes effort to make the transition.

His advice? "You have to have a leap of faith that you can go out and generate fee-based income," says Miller. "The trick is to get beyond the mindset of everything being tied to your time and production so you can find a different outlet."

He adds that some firms might consider hiring someone to go out and generate other kinds of revenue, in order to transition to a fee-based model.

Opportunity Knocks

Miller has found additional value in his own business by operating as efficiently as possible. Using Thomson Reuters products, particularly Practice CS, is the "cornerstone" of the efficient integration of systems. It also helps the firm provide a consistent experience to clients. "Any time clients call, I want them to be able to get the same information no matter who they talk to," Miller explains. "It can be a challenge to get everyone doing the same thing, and that's a huge advantage of Practice CS."

Business by Design also uses a combination of web-based technology and phone calls to communicate efficiently with clients. For example, the firm regularly reviews clients' tax returns with them online, instead of in person. This way, they can discuss any open items and make necessary adjustments before the return is finalized-saving everyone time and effort.

"I handle about half my appointments by remote access right now," says Miller. "But even if a client isn't coming into the office, I still have an opportunity to cement that relationship by showing them what we saved them on their taxes through good planning."

Would you ever consider a fee-based billing model for your firm? Why or why not? Share your thoughts with Solutions readers below.

Go to more: Latest Articles
Tags: