If you want to increase your profits, you can:
1. Increase your client count
2. Reduce the costs of providing services
3. Charge more for the services you provide
Increasing client count is a matter of spending time on marketing and generating leads. But there’s one strategy that can help you accomplish both points 2 and 3: choosing a niche.
If you’re looking to increase your margins on each client in your portfolio, you need to know about the efficiency and value that comes from becoming specialized. We’ll cover what you need to know to get started.
What is a Niche in Accounting and Advisory Services?
A niche in accounting or advisory services refers to a specialization in a certain industry or business type. It typically refers to the makeup of a firm’s client base.
Maybe you specialize in working with construction companies or the hospitality industry. As you work more within it, you start to know what makes these businesses tick.
Having a niche in advisory services helps you understand and meet the needs of your clients. It’s something we see in all kinds of services, like a mechanic who specializes in motorcycles or foreign cars. People whose needs fall into those categories are more likely to choose the specialist than someone with general skills.
But having a niche in accounting and advisory services is more than just lead generation. As we’ll cover, there are many benefits to niching down, all of which can increase your bottom line and untap new growth opportunities.
The Benefits of Niching Down
Scalable Processes
Every month, accountants and advisory CFOs work with their portfolio of clients to complete and provide deliverables.
Having variety across clients means doing tailored work for each. It’s difficult to standardize a process when it’s different for everyone you’re working with. But with niching down, you start to get overlap in the work you do, opening up the opportunity to use templated workflows.
Any learnings you have with one client spill over. When you find a new efficiency, it doesn’t apply to just one client, it applies to all of them.
As you start to expedite the process for each client, you get massive cost savings on the work you provide. This labor efficiency is one of the best ways you can increase margins without increasing prices.
Industry Benchmarking
Businesses have two ways of defining success.
The first is the success they define for themselves. These are their goals, what they value, and what they ultimately want from their business.
The second is success relative to others in their industry. It’s through understanding the performance of others that they can gauge whether their business is performing well.
When business owners are thinking about how they’re performing and what initiatives they should take, they value expertise from someone who gets the lay of the land. At a glance, you can start to identify parts of their financial reporting that are above or below averages across your portfolio.
Benchmarking also shapes how you provide advisory services. You’ll know what initiatives people are taking and what the outcomes are. It’s powerful to be able to say “this is what others have done and this is how they’ve benefited.”
Using Non-Financial Data To Complete the Picture
Understanding operational metrics and how they tie to financial performance is essential for businesses to survive. These are the levers they can pull to try and pump profits and maximize returns.
By working within a specific niche, you start to understand what non-financial metrics are an integral part of the story. These are the stats you should be regularly checking in on and bringing into your analysis.
This is how you show an understanding of your clients beyond the dollars and cents. By going beyond what’s on the financial statements, you foster a better understanding of the causal connections between their operations and their bottom line.
Improved Lead Generation
As you niche down, you start to develop a reputation within the industry. Lean into that identity as a specialist as much as possible and leverage what you know about the wants of your clients in your messaging.
With a specialization, your clients become vital resources for finding new leads. They have connections within their industry and can be used to get references for outreach. Go a step further by setting up a referral program that incentivizes your clients to help.
Ask for testimonials that can be used on your website and marketing. This taps into the psychological phenomenon of social proof: the act of copying others, especially when they resemble us.
By seeing your clients speaking highly of your services while being in the same industry, other businesses will see the signals that you know how to provide a stellar service based on their unique needs.
Examples of Leveraging Vertical Niches
To showcase real-world ways a vertical niche helps firms improve performance, let’s look at three examples that were discussed as part of our webinar, How to Scale & Optimize Your FP&A Practice with a Vertical Niche Strategy.
Speaking the Language of Your Clients.
When a business owner is looking for a partner to help them take on their challenges, they don’t want to educate their collaborator on how their business works. They want someone who knows the nuances of their operations.
Speaking their language means both literally speaking the language of their industry and also knowing everything that comes from being in it.
By niching down, you know what their struggles and immediate pain points are. From the first conversation, you’re exhibiting know-how and knowledge of their day-to-day without asking a single question.
Reference specific terms or non-financial metrics that are essential to business outcomes to show your investment beyond the financial reporting.
Zebulon LLC works with outdoor experience providers. This is an industry where businesses make the bulk of their revenue in four months, and then spend the rest of the year planning.
By understanding this seasonality, Zebulon formed a cadence to their services that delivers what’s needed when it’s needed. Often, clients don’t even know when they need specific services which Zebulon helps them navigate.
Through delivering a stellar service tailormade for a specific industry, Zebulon increased revenue while decreasing client count. They’re able to cut through the noise and find what matters most to their clients and have fostered a community of outdoor service providers.
Creating Demand Through Reputation
Every firm would love it if they had a constant flow of potential clients coming through their door. The best way to achieve this is through word of mouth and referrals.
Think about if you have clients that all occupy different industries. If they love and talk about your service, that’s one voice within an industry that’s talking about you.
Compare that to clients that all occupy the same industry. A portfolio of twenty clients means having twenty voices within an industry talking about you. If you were a business owner, which accounting firm would you opt for?
Creating demand through reputation helps you achieve sustainable growth and be selective about who you bring on.
Arkona originally started with offering boot camps that taught businesses about valuations and growth. In 2020, they needed to digitize their services which kept demand coming even through difficult times.
Over time, many of their boot camp attendees would reach back out looking for help with their accounting or requesting CFO services. What they created was a pipeline of demand where boot camp attendees would spread word of the classes creating more attendees who would then request services after.
Building a reputation takes time. But when you’re niched down to a specific industry, your reputation grows quicker by having multiple voices backing your services. With a service tailored to that industry, you have a high chance of developing demand with no extra work.
Higher Prices From Higher Value Services
Putting a value on your services is a tough task. CPAs typically undervalue themselves due to a variety of factors that cut down potential revenue on each client in your portfolio.
The best way to test prices is to run with them and see if the demand is too high or too low. Over time, you’ll start to see how the value you provide is perceived by clients and can set prices accordingly.
That was the experience of Summit CPA who started out providing year-round support to clients. They found that simple things that accountants take as givens, like short-term cash flow forecasting, are considered high value by clients.
Through a process of refining their niche and their services, they found a cadence and set of deliverables that would show clients how they can hit their goals. It launched as underpriced while getting off the ground, but as its services evolved, demand started to pick up.
As demand increased, they began to realize they could be selective about who they bring on and raise prices to generate more revenue while bringing on high-intent clients.
What they noticed was that a business was willing to pay more for an accountant that’s within the industry. With this in mind, they focused their advertising and marketing efforts on that vertical to create traction.
This strategy proved to be a winner. What started with underpricing turned into high growth with a high closing ratio and a constant stream of new opportunities.
Even if there may be some bumps along the way, transitioning to a vertical niche opens up these higher revenue opportunities where you’re pocketing a greater margin of what’s being earned on the same amount of work.
Once you’ve established yourself, there are new marketing and growth opportunities by flexing your know-how with messaging that resonates.
How To Define Your Niche
If you’ve decided you want to develop a niche, the next step is choosing one.
The best starting point is the client base you already have. If there’s an industry that’s most prominently represented, that could be the starting point for niching down.
If you don’t have a specific industry you’re already trending towards, you get to choose the direction you want to take.
There are two main approaches to take when choosing a niche:
1. Choose an industry based on what’s around you: Take a look at what local industries are prominent in your area. If there’s a common business type, they’re all prospective leads that you can tap into once you’ve refined your services to their needs. Keeping your work local also helps with getting a word of mouth reputation.
OR
2. Choose an industry based on interest or experience: If there’s a specific industry you have experience (even outside of accounting) or maybe a general interest in, you already have a loose understanding of their needs. This is a head start on developing your services and the language you use when talking to clients.
Technology That Streamlines Your Services
As you take steps to increase margins and find new efficiencies, it’s time to look at your tech stack for room to improve.
With a platform tailored for FP&A services, you get access to tools that streamline your services with templates and reports that can be customized for whichever industry you focus on. This means hitting the ground running with every client and skipping the setup.
Jirav has the tools to help you scale up your services and find new efficiencies that increase your margins on every client. Reach out today to learn more about how we can help you reach your growth goals.