Building a Lucrative Niche Practice
This article is an overview of a recent panel discussion at Winning Ways 2022, the accounting profession’s only conference on practice management.
The riches are in the niches.
So the saying goes. And for many accounting firms, it’s a saying that’s proven to be true. By prioritizing a highly specialized focus on a particular sector or practice, firms across the nation are building up commanding positions in all sorts of niche markets.
Whether you’re starting a new niche practice within your firm or allocating more resources toward a fast-growing practice, there are a number of advantages to adopting a more specialized approach. Among those is the fact that your firm will benefit from increased pricing power and a predictable pipeline of new business. Other benefits include an ability to adopt and experiment with new value billing models and the ability to recruit and nurture a diverse pool of talented, highly-focused professionals.
But as any practice leader, Managing Partner, or other member of a firm’s Executive Committee will attest to, building a highly specialized firm is not an easy journey. Carving out a leadership position within a certain sub-area takes a deliberate, patient approach anchored in thoughtful strategy and a real passion for the niche.
In this article, we’re sharing insights from a recent panel discussion between two niche firm pioneers: Brandon Hall, Managing Partner of Hall CPA, and Randy Crabtree, Co-Founder and Partner at Tri-Merit. Their conversation explored both why and how accounting firms should approach building a niche practice.
About Hall CPA
Hall CPA is a modern accounting firm focused on helping real estate investors reduce taxes and gain increased financial clarity. They provide accounting, advisory, and tax services to real estate investors, syndicates, and funds all across the nation.
Tri-Merit is a specialty tax firm that initially began in 2007 solely as an R&D Tax Credit Firm. Since then, the firm has expanded into a range of specialty tax services and today, partners with CPA firms across the country to provide specialized advice on a wide range of tax credits.
Why Should Firm Adopt a More Specialized Approach?
The vast majority of accounting firms are generalist firms. They provide a wide range of services, typically including accounting, assurance, advisory, tax, and transaction advisory. They may cater to several industries at once and work with both private clients and businesses.
At a certain scale, this model works. The largest accounting firms have the resources to develop expertise in practically every area of accounting, with dedicated practices, regional offices, and the reputation to attract new clients.
Most firms lack the resources to take that approach however, and would be better served by adopting a more focused approach towards niche selection. Maintaining a disciplined focus on a particular practice or industry enables your firm to build true expertise in that one domain, rather than stretching your resources thin trying to serve every potential client.
By establishing a true leadership position in a given niche, firms can create a market position that’s very difficult for their competitors to challenge. Your firm can be seen as the expert in a particular domain – such as real estate investing or specialty tax credits – and will be viewed as the most desirable option for potential clients in that market.
That position affords your firm significant pricing power and a thriving sales pipeline that frees your firm to take more risks. It’s possible to A/B test different pricing strategies that increase margins, experiment with new product lines, and say no to clients that don’t align with your direction. Combined, these benefits make for a much more profitable, happier firm.
Selecting the Right Niche for Your Firm
You shouldn’t just pick any niche when deciding where to focus your efforts. The decision is a highly strategic one. The niche must align with the firm’s overall growth objectives and have the support of leadership. In addition to that, you need a practice leader who’s equipped with both the mindset and the resources required to execute a niche strategy.
As you work to identify that leader, focus on finding someone who is truly passionate about the niche your firm is choosing to pursue. Building a niche practice within a firm is not easy. Choose a niche that your team is happy to spend hours and hours working on, week after week, month after month, year after year. You need to be sure that everyone is committed to sticking with things through the tough times.
It’s also worthwhile researching which niches may experience an increase in demand in the coming years. Tri-Merit was founded after significant changes to R&D Tax Credits in the early 2000s, and Hall CPA has benefited from significant changes to real estate tax laws passed by Congress in recent years.
If you’re unsure which niche to pursue, consult people within your firm. It might be the case that an up-and-coming partner has a real interest in craft breweries, technology companies, or some other niche. Give this person the autonomy and resources to pursue building a niche practice within the boundaries of your firm.
Building a Commanding Position in Your Niche
Once you’ve selected the niche you’d like to pursue, the real hard work begins: building a commanding position in that niche.
Both of our panelists followed a similar approach to this: investing time and resources in providing free, value-add education through a variety of channels. By becoming “influencers” in their niches, both Brandon and Randy were able to cast themselves, and by extension their firms, as the ‘go-to guys’ in their respective markets.
Brandon and Randy have both built significant podcast audiences, but it was far from an overnight process. Consistency was key: publishing high-quality episodes on a regular cadence.
Brandon’s podcast, the Tax Smart Real Estate Investors Podcast, has tens of thousands of listeners, gained over hundreds of episodes and years of weekly publishing. Tri-Merit’s podcast, The Unique CPA Podcast, is also in the top 5% of all podcasts and has been an extremely valuable relationship-building tool.
Podcasts offer firms a fantastic opportunity to build an intimate relationship with their audience, but they’re far from the only way to build a commanding position in a niche. Firms should also invest in other media: Tri-Merit hosts regular webinars and writes articles for various accounting publications while Hall CPA has a YouTube channel with close to 12,000 subscribers and invests heavily in digital marketing.
The best approach is to openly share your knowledge in as many different venues as possible. The content you share must be interesting, relevant, and valuable: transactional, self-serving content will only turn your audience away from you. If you can consistently deliver value to the same audience, you’ll quickly build strong relationships that fuel significant growth for your firm.
Final Thoughts: Taking the First Steps
Building a commanding position in a niche takes time, but like any other journey, it starts with taking your first steps.
Both Brandon and Randy recommended firms start with small incremental steps. Choose a particular industry or client and give it heightened focus. You don’t need to jump in fully from Day 1: trying things out and gradually building over time is the best approach.
Many firms might have an existing niche within their firm that’s already profitable. Analyze your business and determine which practices or industry groups are the most promising. If you’re a larger firm with multiple areas of expertise, assign one person from each area to be the face of that niche practice and give them the freedom required to grow that business.
Consistency and patience are key. Building a niche practice takes time and investment, but in the long run, it’s a strategy that can pay serious dividends for your firm. There’s no better time to start planning than today.
Want more insights like this? Sign up for the Winning Ways mailing list now to be notified when applications open for Winning Ways 2023.