Tolin, CPA Growth Guides
Niches are small segments of
the marketplace. They are most commonly seen in industries, but they could be
any group of buyers that have the same needs and desires. By focusing on a
smaller buyer segment, you are able to become a big fish in a small pond. You will
be the known provider for those buyers, and others (especially those in that
niche area) will recognize you as an expert.
A niche is not the same as a
specialty area. Most firms claim specialties in different industries and
practice areas. For many of them, these specialties include the different types
of businesses they serve, without regard to the quantity served or the depth
and breadth of the firm’s expertise in this area. When properly implemented, a
niche shows the deepest level of specialty.
Whether you are considering
implementing a niche strategy or questioning if your niche strategy is working properly,
you should start by understanding your current strengths.
Segment Revenue to Identify Opportunity
Segment your revenue to get an
accurate look at the extent of your services. Take every dollar of revenue and
put it in a matrix in which the rows represent the services you sell and the
columns represent the industries you serve. Be as specific as possible with
your services. Do not lump all tax together if you can determine an amount for
state and local, international, etc. When it comes to the columns, consider
using North American Industry Classification System codes, which are an
industry standard that makes additional market analysis possible. However, you
also can identify your own industry/buyer groups and assign each client accordingly.
After all revenue is accounted
for in the matrix, add up the columns and rows and calculate how much total
firm revenue it represents. You have strengths in areas where you have the
highest percentages. True strength comes from any column or row that makes up
10 percent or more of your total revenue. Your firm can easily capitalize on
these areas going forward.
Niches Have Dedicated Leaders
A true niche has a dedicated
leader who is responsible for all firm clients that fit within the niche regardless
of whether they are the biller or not. The niche leader is responsible for
helping develop strategies to grow that area and improve profitability. Leaders
of service niches also are responsible for service delivery firm wide.
Since a niche leader focuses
the majority of their work in this space, it deepens their level of
understanding of the unique issues and challenges these buyers face. They will
become a thought leader in this space, writing and speaking on the issues and
being an active participant in niche associations and events. This level of
personal investment makes it very difficult to have one leader responsible for
multiple niche areas. It would be impossible for a leader to gain that deep a
level of understanding in too many areas. That is why firms have fewer niches
than areas of specialization.
As your niche evolves, you may
very well have dedicated staff that serve clients within that area. Most
commonly, firms have dedicated teams that handle all state and local taxes for
firm clients. Many firms also use dedicated industry teams.
A Niche’s Role in Firm Growth
Niches are a great way to gain
additional market share within that specific area, which translates into more
overall revenue for the firm. It helps on the expense side, as well. If you
have niches, you are no longer marketing yourself as an all-service firm to all
buyers. You can maximize the effectiveness of what you are doing by focusing on
activities that put you in front of your buyers, hence, reducing ineffective
spending. When someone asks you to sponsor the local contractors meeting, it is
an easy ‘no’ if that is not one of your niches.
Niches give you a competitive
advantage. They allow you to demonstrate your deep understanding of the niche your
competitor may not possess. This will help you win more work. Your niche also will
present more opportunities for your firm, such as an invitation to bid on an
Firms that implement niche
strategies also have a stronger growth culture. Staff understand how you plan to
grow revenue and where they fit into that picture. It may help with recruiting
and retention as well since people like the idea of being a specialist; it is a
relief they do not have to know everything about everything.
Take Your Firm to the Next Level
Clients are more knowledgeable
and demanding than ever before. They expect a higher level of specialization
from their advisors. A niche gives you that level of expertise. You need to
think smaller to get bigger. You cannot serve all people equally. A niche lets
you focus on a smaller market segment you can best serve, and you will see
quicker and better results.
By carefully selecting niches
and fully immersing yourself into that culture, you can strategically drive
growth and increase your top-line revenue as a result.