A common challenge that many accounting firms face when adopting a niche strategy to increase revenue is trying to determine which niche they should focus on. Obviously, being able to serve a niche for profit is the primary goal of a niche strategy, but selecting an industry vertical simply because you think there’s money to be made in it fails to take into account some other key criteria which can impact the level of profit your firm can achieve serving it.
You may have already crunched the numbers on your preferred niche based on market size and penetration along with your firm’s pricing strategy, but these hard numbers are only part of the profitability equation. The following questions can help your firm evaluate other factors which may impact the profitability of a specific niche:
1. Does your firm already have deep expertise serving your chosen niche? If your firm isn’t experienced serving the specific industry vertical that you want to target, you’ll need to develop it over time. This means you are unlikely to create significant short-term revenue. While this shouldn’t prevent you from targeting a specific niche, per se, you’ll need to be cognizant of the fact that profitability based on this approach will be a longer term endeavor.
2. Does your firm have a passion for serving the niche in question? Like any other business endeavor, the sweet spot for profitability lies where you excel in serving a market from an experience and technical expertise perspective and where you find energy and enthusiasm in doing so. The more passionate your firm is about a particular niche, the more effective and engaged you will be in scaling your profitability within it.
3. How high is the propensity to buy your specific services in the niche you want to pursue? It’s one thing to make projections about the revenue potential of a niche but it’s quite another to actually realize revenue by closing sales. In order to do this, you’ll need to have a strong sense of the propensity of the members of your niche to actually buy your services. For example, if your firm wants to target medical practices within a certain geographic area with monthly accounting services, but the majority of these businesses have in-house accounting departments already, it will be a more difficult close sales than finding a different niche that is willing to pay to outsource their accounting function.
4. Are you prepared to go deep in the niche? The results you get when pursuing a niche strategy depends not only on the market size and purchasing capabilities of your niche, but also on how deep you go within it. If you are just “testing the waters” and dabbling in a chosen vertical as opposed to taking a deep dive to truly understand and meet the unique needs of it, you will get very different levels of profitability. The deeper you go the more value you can provide which increases your chances of tapping into higher levels of profitability.
5. Have you done your online audience research? Unless your firm already has a significant base of clients in a particular niche and a steady stream of referrals to fill your sales pipeline for this vertical, you’ll need to have a digital lead generation strategy to attract new clients online to tap into the profitability potential of the niche you want to serve.
This requires understanding how your niche prospects are looking online for your specific services, since market research indicates that the majority of prospects will conduct their search for professional services this way. The more visible your firm is online, the more effective you will be at winning the new clients and creating profits in your chosen niche. However, you’ll have to balance the cost vs. benefit of your marketing compared to the revenue potential of these efforts.
When your firm first considers serving a new niche, it’s easy to evaluate the potential profitability only on a surface level based on the market size, the penetration you project you can achieve in it and your pricing strategy. Asking yourself the five questions above can help you understand and appreciate the
Having this information, along with a clear niche and purpose for your business, will make the process of launching and growing your audience quicker, smoother, and more profitable.
Author Bio: Gaynor Meilke, MS, CBC is the Chief Guide at The Bona Fide Business Guide, a business consulting firm and owner of Charisma Ink, LLC, a digital marketing agency specializing in niche marketing and sales strategy for the accounting profession. She is a certified business coach and has over 20 years of experience in providing business strategy and B2B marketing services to professional services firms in the accounting and finance sectors.
Her clients include independent CPA firms, vendors serving the accounting profession, and community banks and credit unions.