Accounting firms today are having a harder and harder time trying to stay profitable while keeping their overhead low. The tax and compliance industry has become saturated with H&R Block and other large preparers that smaller accounting firms are having an increasingly difficult time competing. So, what is the answer to growing a more profitable accounting firm? Think niche.
Local CPA firms can’t be everything to everyone. That’s what H&R Block specializes in. They do a great job at preparing a while variety of tax returns, but they don’t specialize in anything. Smaller accounting firms that specialize in niche industries tend to have an easier time attracting new clients and keeping existing clients because their practice is focused, but that’s not all. Here’s are five more reasons why you should think about turning your general accounting firm into a specialized, niche-specific firm.
1. Client Retention
I touched on this point briefly, but it should be explained in more detail. Most businesses have some type of oddity in their industry. This could be the way certain revenues are accounting for or the way inventory and equipment is used. These clients need an accountant who understands their business and can help them save money either operationally or through taxes. Once clients understand your special skills and good fit for their business, they won’t want to go to anyone else.
For instance, a firm that specializes in tax consulting for music recording artists and record labels understands the unique oddities of record advances, publishing royalties, and other income streams. Labels are much more willing to keep sending their artists’ tax work to a specialized from like this than an ordinary firm.
2. Increased Billings
Clients who understand your firm’s value will be willing to pay more for your services than other firms. Going back to our music industry firm example, record labels and other music industry accounts will likely be willing to pay a premium for a CPA firm that knows how to navigate their unique business.
Having a specialized firm will allow you to increase your billings simply by charging a higher premium for your services without doing additional work.
3. Less Staff
Usually more revenues is synonymous with more accounting staff. Thus, the only way to increase billings is to increase payroll. In a specialized firm, this isn’t always the case. Since niche firms are able to charge a premium for their work, they are also able to maintain their staff and payroll at a significantly lower rate than most other general firms.
4. Better Educated Staff
The only way to become a niche firm is to have an educated staff in the industry. Because the specialized firm requires less staff in general, they can afford to offer educational incentives for all the staff members. It goes without saying that each staff should have access to a CPA courses that will help them pass the CPA exam.
Beyond that, educational materials about the industry, it’s specialized accounting needs, and the clients themselves should be provided to the staff. For example, the music industry firm should know who its record label clients are in the industry and the contributions they make. If each staff member has this level of knowledge about your clients, your services will be valued higher.
5. Keep the Right Clients
Not all clients are created equal. Some clients are difficult to work with and some don’t pay their bills on time. Neither of these types of clients is good for a practice.
By keeping a firm specialized, you are more likely to attract clients who value your services and are willing to pay for them. You will be able to slowly get rid of your difficult clients and replace them with more preferred ones. Better clients also means less staff needed to manage them.
If you are a struggling CPA firm, you should look toward the niche specialization strategy to start growing your business and your profits. Find something that you are passionate about and look for a way to add specialized value to clients in that niche. Then build your practice around that.