Josh Blanton, Digital Marketing Strategist, Sageworks
There’s been a lot of media coverage the past few years about identifying niche markets and how CPAs should invest resources into targeting/creating them. Given demands already placed on you and your practice, it is important to know why niche markets are worth finding.
To start with, the niche industries you’ll want to identify and target should be highly profitable. This may seem like an obvious point, but it’s an important factor to consider. What’s less obvious is identifying niches from the top down. For example, the construction industry as a whole could be growing at a slower than average rate, but Sageworks data shows that the small business residential building construction industry (NAICS 2361) grew by 14.8% and was the fastest growing industry for small businesses with less than $10 million in revenue for 2012.
It’s important to keep in mind that growth doesn’t always equal profitability, so you should examine both when identifying potential niches. Ideally, the industry will have corresponding high growth and high profitability. Finding all of this information can be challenging though, and will likely require some research and access to an extensive database of industry records.
Aside from fast growth and high profitability, what other advantages are there to targeting these niche markets?
Often times, the fastest growing small businesses are those that are newer, or just hitting their stride. Therefore, competition for their business is more scarce and less cluttered. Businesses that are growing quickly are also more likely to enlist your services, and more of them. New, fast growing companies may have jumbled financials and no in-house accountant with the knowledge base to successfully organize their statements. Your firm could provide a major value proposition for these companies.
The ultimate sweet spot for a niche strategy would be an industry that combines two or more of these qualities – fast growing, new, and highly profitable.
Demand for financial and business advisory services are likely to be higher for these companies. It’s also worth noting that becoming a trusted business partner who offers more financial solutions is also one of the main boosters for client retention.
So consider researching some emerging niches in your area and see how you can mutually benefit from the relationship. Synergies are important in the service industry; keep in mind it’s a two way street. To add value to your firm, you must create value for your clients.
Sageworks, a CPAmerica Preferred Provider, now offers access to their industry data free of charge to US accounting firms. Accounting firms can create an account and generate 5 industry reports per month, including 60 metrics per report, to grow industry experience and reach.