John O’Donnell, a practice consultant at ICAEW Members’ Department, explains what he sees as the many benefits of specializing as an accountant.
Finding a niche is an excellent way for accountants to unlock new, profitable opportunities. So it’s no surprise to hear that more and more practices are identifying and focusing on niche markets as a way of optimizing budgets and boosting internal efficiency.
What do we mean by a niche market?
Many firms will say ‘I specialize in SME clients’ without realizing that most other practices will say the same thing. As such, their clients have little to differentiate them from their competitors. Defining yourself as a niche firm, servicing a niche market, is a way to help you stand out from the crowd. While brand image, good marketing and so on can help you celebrate your unique selling points, perhaps one of the most effective ways is to focus on one or more niche markets, a move that brings additional advantages too.
What are the advantages of serving niche markets?
There are two fundamental advantages to serving niche markets and specializing as an accountant – optimized marketing and internal efficiency. From a marketing perspective, you can become one of the ‘go-to’ firms for clients in your sector and focus your marketing budget accordingly. This will be more effective than a general ‘scatter-gun’ approach and should bring greater success. Networking can be more targeted too. If the niche sector has conventions or meetings, you can attend these and expand your client base. Marketing via publications (such as the magazines or articles your niche uses) can also be quite focused, to make the public aware of your firm and specialization.
The second advantage is in the area of internal efficiency and will help improve profitability considerably. If you are processing accounts and tax returns for similar clients, you can use efficient processes. This should be considered carefully in your staff recruitment, operational requirements and software choices, ideally prior to marketing yourself in this niche in the first place. You should also consider informing clients in the sector of the way you want them to keep their records (to make both your and their job easier) and incorporate this into your engagement terms with them.
Are there other considerations?
If you focus on a transactional specialization (such as corporate finance or strategic tax advice – as opposed to providing compliance advice), your income may not be recurring. So you may need a good network of client providers who recognize your expertise so they provide clients referrals and ensure you have a continuing supply of new business.
Are there any disadvantages to tapping into a niche market as an accountant?
There may be, particularly with changes to tax and accounting requirements. Concentrating all your efforts in one area may also leave you vulnerable to economic change – for example, if a particular sector is hit by a recession. One particular specialization years ago (dealing with small subcontract builders) was affected quite significantly by a change in tax laws. So your niche may lead you to need to swiftly rethink your firm strategy.
How do I turn my practice into a niche firm?
Consider areas where you are technically competent or have an interest. We also recommend that you plan carefully in terms of resource and put together a strategic plan for expanding your firm. We have advised firms in this area in the past (from sole practitioners upwards) in order to ensure they plan for their futures. So consider, will you need to recruit additional staff? How senior do they need to be? Are they available or close to you?
More information about joining SIGs (Special Interest Groups) can be found at www.icaew.com/sigs.
Four ways to grow your practice
Building a successful practice goes beyond great client service. It’s equally important to spend time marketing, selling, and embracing efficiencies.