The Challenges
Let’s do a quick run through a few challenges facing firms today:
- There aren’t enough people to do the work. Hiring is nearly impossible and there’s no change in sight.
- You’re busy but firing clients is really really hard.
- Raising prices on clients is uncomfortable but costs are going up for salaries, software, rent, energy, basically everything.
- Clients are coming in from referrals, which means you get what you get based on what people think you do and who they know. This leads to a broad range of clients across industries and sizes and services.
- There’s not enough time to serve every client as well as you’d like. Many firm leaders are working a lot of hours. Up the ranks, people are choosing to work varying amounts, which is a reality that also has no change in sight.
- If you had any extra time, you’d probably spend it working for a client, not on your own firm (ahem - marketing).
- The regulation and tax law changes are still coming and the guidance is often unclear and late, leading to compressed time to get the work done.
- Clients are slow to provide documents for tax returns and chasing them down is time consuming.
I’m sure there are more - but that feels heavy already, so let’s move on….
The Solution
Niches.
Now, I know when you hear ‘niche’ you immediately start thinking, “Firing clients!”, “High prices!”, “What about…?!” But go with me here. You can’t be everything to everyone, and if you’re like MANY of your peer firms, something’s gotta give.
Consider this. If you can’t hire more people, specializing in specific industries will allow your current team to deliver excellent work, efficiently and consistently. What they learn by serving one client will be applicable to many, so research time is a good investment. The same trends, regulation changes, and opportunities, and challenges facing one client are being felt by many, so your ability to understand and help will be magnified.
Because you know what these clients need, you can move into the infamous “CAS” (client advisory services) space to be in the position many of you strive for, which is helping clients reach their full potential, not just satisfying the regulators.
Here’s how to focus your attention on making the most of your current team and doing it well.
The Who
When people think about niching they tend to focus their attention on two errant issues; (falsely) thinking that they can ONLY serve clients in their niche at the exclusion of all others, and the clients they have to fire.
Instead, think about what your days would be like if your entire book of business was made up of your best clients. It’s not an overnight change, but it is possible! Start by getting clear on the profile of your ideal client. Make a list of your absolute favorite clients. What traits do they share? Maybe they bring you interesting work, appreciate the ways you help them, always pay their invoices, are your largest engagements so you talk with them year-round, etc. Now turn to your time and billing system to run a report of your clients by industry. In what industries do you have a concentration of clients? Look for emerging patterns between the industries you serve and clients with favorable attributes. Be sure to solicit input from your team. You are going to be asking them to dedicate their time and energy to these clients, and you want to make sure their interests are taken into account. Ultimately, you want to be as specific as possible about your ideal client: Industry, revenue, geography and so on.
Now, pick one industry to build a niche around. All this means is that you’re going to focus on getting more clients with attributes you like in the chosen industry. Put a page on your website for this industry so you can look credible when prospects check out your site. Like karate, there are levels of mastery when it comes to niche development. We’ll give you a marketing While Belt for this. Congrats!
The How
Now that you have that industry in mind, let’s talk about how you are going to serve the clients. One of the greatest benefits of niching is that it allows you to develop repeatable service models that you can apply to most if not all of your clients in that industry. Write these down and start offering them to current clients so you’re doing more year-round advisory (CAS) work to earn your marketing Red Belt. (Oh, and of course, any new client in the door also gets offered the full suite of services that apply to them.) Include bookkeeping, access to payroll, and processes for collecting documents throughout the year as appropriate (including the time it will take your team to reach out to stay on schedule), a schedule for strategic check-in calls, and a few hours for unpredictable “stuff that comes up”.
You get your marketing Blue Belt when your proposals are essentially three options of pre-set available services at three cost levels moving from compliance only with minimal access to you at the low end, to full service with lots of touchpoints and plenty of value-add at the high end. When you’re known for an industry, prospects will be glad to choose from among your options instead of your firm vs competitors. Keep in mind, you’re still taking on “other” clients at this point in your evolution - though you’re probably starting to get even pickier!
Not every firm chooses to be known for just one industry niche. It’s not essential, but it can be done very successfully. We’d be honored to give a marketing Black Belt to the brothers at Schwartz & Schwartz, who work exclusively with medical practices. They designed a way to provide superior service to clients AND eliminate tax season extra hours.
Pricing
Your pricing and packages will vary based on the services you choose to include and the industries you specialize in. Remember that your clients will see you as a specialist and will expect you to be on top of their needs, so set yourself and your team up for success as you work on this. Think about how you can bring value to your clients and how you are going to articulate it to them. In this way, you can decide on the cost of the packages based on the value you’ll be providing, not the hours to get the work done. The clients will be glad to pay for the value, you won’t have to track time if you don’t want to, and you’ll always be at 100% realization or higher because packages eliminate scope creep.
Figuring out the packages is the first part, incorporating your team is the second. Train them on the package offerings and how to stay in scope. Let them know what to do if they think a client needs more than what their package offers. Steering the team towards efficient, repeatable and minimally-surprising work flows will be best for the business, the team and the clients in the long-run.
Reviewing Current Clients
I’m not going to use the F-word here. The word “Firing” makes it seem like the client did something wrong, which is just not true in the vast majority of cases.
Every single CPA firm has clients it would NEVER EVER EVER IN A MILLION YEARS fire. Maybe they helped you get started, they’re a little old lady, they’re the next door neighbor of your second grade teacher. Totally fine. I get it and I won’t ask you part ways with a single one of them. I promise. The one thing I will ask you to do is to make a list. Anyone on the list gets to stay - no one is added to the list.
You know who you CAN (SHOULD) fire - the ones your team hates to work with. Given the choice of your team or the dollars in the door, I know you’d pick your team every time… so ask your top employees who they dread having on their schedule and start seriously considering making a change.
We know how hard it is to part ways with clients. But consider this, if you’re feeling like you’re not serving every client as well as you’d like because of time, maybe you’re doing everyone a favor if you help some clients find a better match. If you’re going to make the most with what you’ve got, keeping clients who are the only or one of a few in any industry causes more of a drain than you may realize. Time that a team member spends on research, creating a plan, or finding a solution for one client that can’t be applied to others is a poor use of time compared to implementing a solution that will serve your entire niche (and you may not be billing full for it). Also, you don’t know what you don’t know in that industry - so if a client’s needs are outside of your niche, help them find a new advisor who knows that space well.
Secondly, if a business is so small that they will never be able to pay your desired rates, let them go to make space for a client who can. If you need motivation to part ways, ask yourself honestly if you’re under-serving them because they’re at the bottom of your priority list. They deserve good service from their CPA, so consider introducing a smaller firm that will think they’re a great client!
Figure out how much business you can shed in order to drive your motivation to bring on new business, but not desperate. That will determine a goal for culling clients.
A Note on FOMO
Fear of missing out is real. Saying “no” is one of the most important principles of niching, and also one of the hardest. Developing a niche and sticking to it means that there will be wonderful businesses out there that you will turn away, or who may never even approach you because of your offerings. It can be easy to be swayed by these feelings. Making the most of what you’ve got means giving your team the time and tools to provide the level of service you know you can be providing consistently for every client. In time, your niche will help you feel excited about your clients and how you serve them, and actually help you feel less emotional about turning away prospective clients.
In Conclusion
Building your business around a niche is one of the singularly most impactful business decisions you can make. It definitely requires some work, and a strong commitment to sticking with it, but your happy team and satisfied clients will make it all worth it. Ready to get started? Contact me today.
