Revenue Streams – where does your money come from, and where does it go?

Okay, if you’ve been reading this series, I’ll bet you thought you were never going to get to the good stuff, did you?

Up until now we’ve been working to understand who your customers are and why they retain you as their accounting services provider. Along the way, we discussed the value they put on your services. I think it’s about time you tried to figure out what they were truly willing to pay you for the services that they value. thebusinessdays

When you segmented your clients by services you offer, and by the channel through which you reached them, you began to create a model for defining your revenue streams. Each channel, each segment, each service you provide can have it’s own pricing mechanism, and from that, it’s own pricing model and level.

You can have fixed price lists for fixed services, such as writeup, payroll or transaction recording, you can have contingent pricing for non-tax related advisory services, such as time and motion studies and yield management, or you can have value pricing for niche services such as cost segregation studies and loan packaging. Your choices are limited only by your imagination. bareng88

Your revenue streams will generally be composed of two different types, the unitary transaction model, where each transaction is negotiated as a standalone service, with a fixed term based on a named milestone, or they will be subscription based with recurring revenues resulting from an ongoing or open ended service, such as payroll or monthly accounting services.

The pricing mechanisms for each revenue stream will also depend upon whether your pricing is fixed or dynamic.

Fixed pricing are “list” prices is based on static variables, such as a product feature, the client segment, or the volume of services sold. Dynamic prices are based on market conditions and may be negotiated and based on factors such as yield, market, or auction. storygame

Today, I want you to take the time to list the categories of revenue you offer. Your list can include everything from your monthly accounting and payroll services, to your quarterly and annual tax services, to your software and IT consulting services, and your project services such as loan packaging, cost segregation studies, of annual audits. If you offer physical products, such as computer or POS systems, make assets available for use, such as online payroll or SAAS (Software As A Service), lease assets or even lease employees, or even if you are licensing branded products, list each revenue model or stream. sportsyearly

Once you have defined each of your revenue streams, create yourself a spreadsheet of each streams contribution. In this spreadsheet, enter estimates of what you think your clients would really be willing to pay for a product or service (Value Pricing), and compare that with what they are currently paying. Note your current billing terms, and list how they would prefer to pay versus how you would prefer to collect. And, of course, calculate how much each of these revenue streams actually contributes to overall revenues. knowledgehype

Once you have completed this step, you should have a good picture of how your firm relates to and profits from your clients, and will have a good tool for understanding how to begin positioning your business and generating revenue.

We’ll talk a little bit about that in a future lesson, see you then.

You can continue to learn about Practice Marketing For Busy Accountants by visiting Secrets of Marketing Accounting Services  gossipcare

Kirk Ward is a retired tax expert, accountant and auditor. He provides the same resources he used in building his practices to startup accountants through his Secrets of Marketing Accounting Services website and creates all sorts of marketing goodies for accountants who really want to build their practices.