AAM Minute - Topic At Hand

How to Strategically Drive Revenue Growth

Katie 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 engagement.

 

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.