Why You Need To Start Niching This Year For Riches Three Years From Now
On this week’s Grow Your Firm podcast, we’re talking with Hugh Duffy. Hugh is the Chief Marketing Officer of Build Your Firm, a marketing agency that focuses on accountants and CPAs in North America. He’s also the host of the podcast “Accounting Marketing Doesn’t Suck” and is the founder of the Dental Accounting Association.
Our main topic this week is the importance of niching down your practice and why it’s the road to making your firm wealthy. This is a big hurdle for many accounting firms. Maybe this week’s episode will help you start making the journey.
- About Build Your Firm
- Why is niching so important?
- Considerations for choosing a niche
- Strange niches
- Why you should pick something you know
- Automating your niche
- Why ten niche clients should be your goal
- And more!
Pick Your Niche Now For Riches Later
Hugh’s mission is to take small accounting firms and help them from a marketing practice, development, pricing, and selling perspectives. One of the big things that they teach in marketing is that differentiation is everything. You want to excel at something that your competition does not. That sets you apart. This is what developing a niche is all about.
What happens when you do this right is that the variety of work you have to do goes down. It makes things simpler, easier, and narrower in scope. When you narrow your scope, you can deep dive into that scope to create specialized services for that niche. This also reduces the number of competitors you have so you don’t have to compete on price. This lets you charge more and raise your profit margin.
Over time, like many of the guests on this show, you get to be known for being the best at something. Your niche could be in a particular industry or a particular service. It doesn’t really matter, so long as you differentiate yourself.
Also, by niching yourself down you make yourself more attractive to buyers. You won’t be a jack-of-all-trades firm with a lot of different clients. You’ll have a small focus that’s deep, and quite likely you’ll have automated a lot of the process along the way.
Choosing A Niche
The primary consideration is choosing who you want to work with, rather than trying to hop onto some sort of trend. However, there are three tendencies that come up for many of Hugh’s clients.
- First, they want their clients to be single business owners. Working with multi-partner firms makes it much tougher to get a business decision out of them. Thus, good industry niches are ones that have a single owner.
- Second, most of Hugh’s clients do not want to get involved with compliance activities. Working in that field opens firms up to liability issues.
- Third, they want cash-based clients with a simple balance sheet.
This means a lot of simple clients that can pay your fee on a monthly basis and grow in lifetime value as your skills improve. Instead of going for a few big clients, Hugh recommends going for a lot of small clients inside your niche.
A Slow Process
One of the interesting things Hugh mentioned is that it takes the average firm about three years to transition completely into their chosen niche. This may be a relief to some of our readers and listeners! Often when we hear advice to niche down, there’s an expectation that it has to be done all at once.
Instead, it’s a slow defining of what kinds of businesses or services you don’t want to do and cutting them out over time. Keep the things you’re best at and what you enjoy doing and start to discard the rest.
Hugh also says that it’s okay if it feels fake at first to claim that you’re a specialist. Your first goal is to get efficient with your niche clients enough that you can grow past ten of that kind of client. That gives you enough data to know how to work well with your niche.
Once your client base is big enough, then you can delegate tasks for servicing these clients to your staff members. Gaining confidence in servicing your niche will give your foundation you need to start saying no to the kinds of clients you don’t want to work with. You can also start diving into the niche more by attending events and educating yourself until you become an expert.
One of the best things about niching down in today’s environment is that it makes things really easy to automate. Firms with a wide range of clients have to create processes and workflows for each type of client. It makes it difficult to scale upward. But if your clients are the same kind of business, you can lean into tools like Jetpack Workflow and other automation tools to reduce your labor costs.
Think about if you did accounting for a particular franchise. Each operation is exactly the same, and they all have to be serviced the same. This makes it really easy to automate. You can do the same thing by niching properly.
Also, by automating you can then focus your energy on creating higher-margin services like brokerage services, mergers, or whatever else your particular niche needs a specialist for.
Simplifies Your Marketing
Here’s another bonus to niching down. It makes your marketing much simpler. You can ignore marketing to everyone else and focus just on that niche through online marketing, direct marketing, or whatever works for that niche. By making them aware of your specialty over time through advertising, you can cement in their minds that you’re the go-to business for accounting in that niche. Plus, by specializing you can charge more right out of the gate, which will pay for the ads.
If you’d like to know more about this topic, take a listen to the full podcast linked above. If you have further questions, Hugh has provided his email, which we’ve linked here, and his personal phone number in the podcast. We want to thank Hugh Duffy of Build Your Firm for taking the time to speak with us today. Now go forth and niche your firms!