New accountancy firms are always faced with conflicting advice about niching: choose yours as soon as possible, or take on every client that comes your way to build your firm first? Or is there a middle ground? While taking on every client ensures your survival, it can be extremely detrimental to your firm as you grow. This article aims to show you why even as a start-up, you should be choosing your accounting niche sooner rather than later.
Don’t be all things to no-one
I read an article on AccountingWeb in which the number one advice for new startup accountancy firms was “don’t niche.” I was flabbergasted. The reasoning was that survival is your main priority in the early days, so blast your social media and your networking and take on everything that comes your way. (Wouldn’t you rather win bigger and better clients?)
Now, I get it, as a startup, you need to pay your bills and put food on the table, but I couldn’t help thinking about how bad this advice was to firms that want to grow, firms that want to compete in the market, firms that want to become a million pound practice.
My thought process was “why make your life harder by trying to go after everything that moves?” If accountancy firms were to do this and not think about an accounting niche, then they would suffer in two ways:
- They would pick up the price-sensitive clients that nobody else wants
- They would end up with a core of low fee, low recovery clients which would make them very busy
When you’re trying to be all things to everyone, you’ll be all things to no one which means that your firm could only differentiate itself on price. With the good clients seeking out the go-to experts (your competitors), this leaves your firm with the ‘business dregs.’
To niche; always to niche!
For the reasons I mention above, I would always, always recommend that startup accountancy firms look to choose their accounting niche as soon as possible. Before I explain why, it’s important that I mention that committing to a niche doesn’t mean that you can only accept work from that niche.
For example, if you want to work with businesses locally between half a million and a million but a friend is a property landlord, you can, by all means, take their tax return jobs to help them out. The difference is that you narrow down your focus to a particular set of clients, these are the type of clients who are most likely to lead to referrals. Whereas your low fee clients, low recovery and needy clients (who you take on to because you want every job) are likely to cost you more when it comes to time, energy, and money.
It’s not uncommon for us to help our members, who have grown to £150-300k turnover, to ditch their low fee, low recovery clients or AKA legacy clients. These are the members who find that 50+% of their clients only account for 10-30% of their income. And of course, these low fee paying clients account for even less of their net profit. Ditching legacy clients or trying to hike up their fees is a hard and long-drawn out process. If you can avoid getting a large mass of these clients in the first place it becomes much easier to grow.
Determining an accounting niche in the early days doesn’t lose you business or prevent you from taking on clients, it actually does the following:
- It helps inform your marketing decisions - when you choose your accounting niche or at least your ideal client, this gives you a target to hit. It helps you understand exactly who you need to reach and where and how you need to reach them. Targeted marketing doesn’t mean less opportunity, it means less unnecessary activity for you. The result? More work that you actually want.
- It makes your marketing activity and communications far, far, far more effective - people pay attention to what is relevant to them, so if you’re putting out a general message in your marketing, people are going to assume that you’re not for them. With a clear marketing goal, you will not only be putting out the right message but that message will reach the right people. Why wouldn’t you want that for your marketing?
- It differentiates you the right way - you don’t want to differentiate yourself on price, we’ve already established that all that will do is win you low fee, low recovery clients. You want to be memorable. You want to stand out and differentiate from other accountants based on your niche. If your competitors have better credibility or more experience, but you have the niche and therefore expertise that a client is looking for, that’s your point of differentiation that will result in the client choosing your business over theirs. Choosing a niche helps you build your profile and makes you visible a lot, lot quicker, significantly quicker, so why wouldn’t you want that?
Niching is a mindset issue
So why should you take our advice over others when it comes to niching as a startup? That choice is completely yours.
Remember that when your fellow practitioners have strong views over what you SHOULD do they are basing their advice on their own experiences. They, of course, have the best intentions when they are giving out this advice. However, you have no idea how well they are executing their marketing or even indeed running their practice. This means that their advice to ‘only do this’ or ‘don’t do that’, may be based on their own experiences which could be the net result of poor implementation or execution.
The reality is that most small accountancy firms have a niche - they just haven’t realised it. For example choosing to focus on small businesses within a 20 mile radius, that want to use Xero, and are between £100k-£2m is actually an accounting niche. Whilst it may be an accidental niche to start with, it’s still a niche.
We think it's worth noting, however, that choosing whether or not to niche isn’t just a simple yes or no answer. Many accountancy owners make the mistake of making survival their priority and assuming that choosing a niche will be limiting when in actual fact, you can do both things at the same time.
Choosing a niche and marketing to your ideal client will only make your marketing efforts more effective; this wins you the business you want, while at the same time, you could also be taking on any client who comes through your door to make sure that those bills are being paid.
As a startup accountancy firm, looking at narrowing down your target market could really help your practice grow the right way in the direction that you want it to. You just need to change your mindset about niching and ask yourself “do I want to make my marketing more effective to win better business?” and “why wouldn’t I want to do this in the early stages of my business?”