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Closing the Guidance Gap: New research on advice business owners need–and how much more they’d pay accountants for it

Luke Pardue Economist, Gusto 

Key Findings:

  • Business owners see accountants as trusted, valuable partners: 2 in 3 business owners say having an accountant has made their business more competitive. Another 76% who receive proactive advice from their accountant say their business is more competitive because of their accountant. 
  • In a tight labor market, owners need guidance on how to retain their employees: 69% have improved pay or benefits in the past year, largely to retain or attract staff. They have seen the positive impact on employee satisfaction and productivity and want guidance on what to do next. 52% need help developing an affordable benefits package – but only 10% currently receive that advice from their accountant. 
  • During an economic downturn, owners also need help finding additional funding and sources of revenue: 69% were not fully confident in their ability to navigate an economic downturn. 36% of owners said they need help finding additional money in the form of tax credits, but were not always aware of what they were eligible for — e.g. 62% were not aware of the Research & Development tax credit. 
  • Accountants are leaving money on the table by not offering these services – and risk losing a competitive edge: Business owners are willing to pay as much as 10% to 20% more for financial and people advisory services. 44% of owners would pay more for people advisory, and nearly half said they would consider switching to an accountant that advises on people operations.

Introduction:

Over the past two years, there has been a revolution in the way we approach work and its role in our lives. This pandemic has brought about decades’ worth of changes, transforming how businesses operate and upending the expectations of employers and employees. Remote work has taken hold throughout the economy, with Gusto platform data showing that nearly 6 in 10 companies have at least one remote worker now. Furthermore, as businesses emerge from the pandemic, there remains a near-record number of open jobs: for each unemployed person, there are two job openings, meaning employers must work harder than ever to retain and attract talent.

These changes have brought new opportunities in redefining work and in renegotiating the relationship between employers and employees. But they have also brought new complexities to the task of operating a business in the modern economy. In particular, hiring and people management have become much more complicated. Businesses face numerous challenges, including determining competitive compensation in today’s tight labor market, ensuring payroll compliance amid an increasingly geographically distributed workforce, and maintaining company culture as hybrid and remote work takes hold.

However, in the face of these challenges, accountants have a major opportunity to help businesses make sense of all of this complexity.  Accountants are uniquely positioned to support business owners with not just financial advice, but guidance on businesses’ most critical assets – their people. 

In both good and bad economic times, owners look to accountants for guidance on navigating the complicated landscape of federal support, including new tax credits and aid programs that are available. Most importantly, these owners are looking to accountants who can provide a suite of execution and advisory services together. Gusto research finds that they are willing to pay significantly more for those who can step up in this way – and that many would be willing to switch accountants to get the full scope of financial and people advice.

Our methodology

Gusto surveyed 1,135 owners of small- and medium-sized businesses about the type of support and guidance they need from their accountants. Our report found owners are looking for accountants to use their expertise to provide proactive business advice on how they can hire more effectively and retain their existing people.

The Power and Potential of Accountants as Holistic Business Advisors

First, we asked business owners about the services they already receive from accountants today, and the perceived value of those services. Many owners said their accountants primarily provide them with time back and peace of mind. When asked to choose the primary benefits of working with an accountant, 55% of owners selected “peace of mind with compliance” and 50% said their accountant “takes tasks away from me so I can focus on other parts of the business.” 

Second, owners see that accountants open access to government funds and tax benefits, as selected by 23% of business owners. Finally, between 10% and 20% of businesses receive business or financial guidance from their accountant, in the form of cutting costs, raising revenue, maximizing efficiency, or advice on benefits.

Figure 1: What are the primary benefits you receive from working with your accountant?

Furthermore, owners see these services provided by their accountant as adding significant value to their business. As displayed in Figure 2, 43% of owners say that working with an accountant has increased their competitiveness by 50% or more; 26% say that working with an accountant has helped cut business costs by 50% or more; and 17% say that working with an accountant has doubled their business’s productivity.

Figure 2: Business Value of Working with an Accountant

In Figure 3, we look at the differences in value provided by accountants based on the services business owners receive from them, as selected in Figure 1. Specifically, we can examine the effect of accountants who are more “Financial Experts” compared to accountants who are more “Business Partners.”

Financial Experts provide one or both of the top two benefits — time and peace of mind. They are experts in the technical aspects and know the numbers forward and backward. Business Partners are those that provide one or more of the other services (access to government programs and tax credits, guidance on where to cut costs, advice on maximizing efficiency, etc.). While they provide traditional accounting services, they have also expanded the scope of their services and client relationships to provide strategic, holistic advice on their customers’ businesses. 

Among owners with “Business Partners” as accountants, there is a larger return in each of the four value areas we examined. The portion of owners who say their accountant has made their business more competitive was 55% higher among owners with accountant Business Partners, and the rate of owners whose business was more productive due to their accountant was 30% higher among “Business Partner” accountants.

Figure 3: Owners say Business Partners have a greater impact than Financial Experts

These figures make clear that owners view their accountant partners as a trusted resource, providing not only time and peace of mind, but also opening access to financial resources and delivering concrete business value – and that return is significantly larger when accountants provide business advice.

As the economic landscape continues to shift, there is an opportunity for accountants to leverage their unique position to provide more proactive business advice – and indeed there is an increasing need and expectation among business owners that their accountant will do so. In this survey, 83% of business owners said that it was important that their accountant offers business advice in addition to their financial and accounting work, showing continued demand for these services when compared to the 79% who responded that it was important in our survey last year.

Unlocking the Tools Business Owners Need

Amid the upheaval in the labor market, business owners identified people and workforce advice as one of the top areas where they need guidance – both for talent attraction and retention. They are facing a more complex landscape when it comes to taking care of their teams, setting competitive pay, and maintaining company culture, but they have also seen how valuable these steps can be in fostering a productive, committed team. 

Overall, 69% of business owners have taken steps within the past year to improve pay or benefits, with 41% of business owners increasing pay in the past year. Significant portions of businesses have also taken other steps, such as increasing flexibility in work location or hours (26%) and adding or increasing health insurance offerings (18%). More than half said they made these changes as part of their strategy to keep existing employees onboard.

Figure 4: Steps taken to improve compensation in the past year

Most importantly, business owners who took these steps in the past year have seen concrete benefits afterwards: nearly 80% of owners who improved pay or benefits noticed their employees were less likely to leave for another job; 66% noticed that employees were both more productive and provided better customer service; 53% noticed less burnout and exhaustion among employees; and 32% noticed that employees took fewer days of leave – likely a reduction in sick leave as a result of improvements in employee health.

Figure 5: Results of improving pay or benefits

These steps to remain competitive pay concrete dividends, but business owners say they still need help in identifying what employee attraction and retention strategies will work best. As Figure 6 makes clear, business owners need guidance on setting compensation, developing benefits packages, and improving workplace flexibility. And with the labor market continuing to be tight, they must continue adapting and competing for talent.

Accountants are well-positioned to provide this advice because of their unique insight into company operations. They can not only observe the outcomes, such as reduced attrition, but they also understand the costs associated with these steps, allowing them to provide guidance on the most effective steps to take. These forms of guidance are also a major opportunity for accountants to differentiate themselves. As Figure 1 showed, only 10% of owners currently receive advice on benefits from their accountant – despite more than half saying they think it would be valuable to have an advisor on benefits packages.

Figure 6:  Which aspects of workforce practices would be most valuable to have an advisor for? Select the top 2.

The complexities of the economic landscape extend beyond the battle to retain and attract talent, however. In good economic times, and especially in downturns, business owners are in need of proactive advice to improve their business operations. In this survey, 69% of respondents indicated that they were not fully confident in their ability to navigate a potential economic downturn – meaning a large swath of business owners need guidance to prepare for such an event.

Specifically, during down times, business owners shift priorities to shorter-term income generation needs, looking for advice on raising revenue and finding new sources of funds in the form of government programs and tax breaks. Thirty-six percent of owners indicated that this advice would be most valuable to them in a potential downturn, second only to advice on finding new customers (39%).

This gives accountants opportunities to provide proactive advice on how owners can take advantage of tax credits, like the federal Research and Development tax credit. This tax credit is a tax incentive for U.S. based companies that innovate within their industries and can be applied directly to payroll or income tax offsets – yet every year, more than $60 billion is left unclaimed. Many owners who are eligible for this credit do not claim it, leaving money on the table for their business. In fact, 62% were not aware of its existence.

Figure 7: In a potential economic downturn, what advice would be most valuable to your business?

Finally, more than any individual service an accountant could provide, business owners are looking to accountants who can provide the range of both strategic advice (e.g. which benefits to offer) and execution services (e.g. processing payroll, administering benefits) for people operations and workforce practices. Forty-seven percent of owners indicated that such a service would be valuable, and when asked which service would be more beneficial – execution or advisory services – 56% responded that they would need both together.

The Business Case for Advisory Services

Business owners already view their accountants as valuable partners who deliver concrete, significant business returns. As they increasingly look to accountants to provide proactive business advice, they’re willing to pay a premium for guidance that will increase those returns. A majority of owners are willing to pay more for a wide range of people-related guidance services – and even more are willing to pay for the entire range of services. Moreover, these advisory services are beginning to shape the competitive landscape in accounting, as many business owners are looking to switch to accountants who offer more holistic advice around people operations.

First, business owners were asked whether or not they would pay their accountants more if they offered each of several services. Notably, there is enormous demand from business owners for advice on taking advantage of tax credits and government programs. Seventy-two percent of business owners said they would pay more for those services, and 48% of those owners said they would pay 10% or 20% more for such advice. Likewise, owners are in search of advice on navigating this new labor market landscape, with compliance and compensation being top of mind. Forty-four percent of owners would pay more for an accountant who offered people advisory services – such as advice on benefits, onboarding and offboarding employees, setting compensation, and building team culture.

Figure 8: Would you pay more if your accountant offered the following services?

Figure 9: How much more would you be willing to pay if your accountant provided proactive advice on the following:

Furthermore, when asked if they would pay more to their accountant for the full package of advisory services listed above, 72% of business owners said they would, with 30% indicating they would pay 10% more and 13% paying 20% more.

Finally, these advisory services are now becoming an expected part of the portfolio, rather than being seen as nice-to-haves. Forty-one percent of owners would consider switching to an accountant that provides proactive advice on people operations and workforce practices. The demand for these services is even higher where the ongoing disruption has been felt more acutely: Professional Services. Among owners of Professional Services firms, 52% said they would switch to an accountant who provides these services.

Conclusion

The economic landscape business owners face today is orders of magnitude more complex than it was before the pandemic. Entrepreneurs have more questions than ever about managing an increasingly distributed workforce, competing in a historically tight labor market, and doing this all compliantly and while maintaining a cohesive, positive team culture. 

Accountants are uniquely positioned to step in and provide guidance to business owners in each of these areas – not only because of their familiarity with the ins-and-outs of each business they serve, but because of the trusted partnership they have developed with these owners. Ultimately, however, offering these advisory services is not only a way for accountants to increase revenue, but also to enable them to evolve in their roles and transform the future of the accounting industry.

Luke Pardue
Luke Pardue Luke Pardue is an Economist at Gusto, researching how public policies help small businesses and their workers thrive. He received his Ph.D. from the University of Maryland, where he studied the effects of government programs on disadvantaged populations' housing and labor market outcomes. Luke currently lives in Washington, D.C.
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