Source: CPA Practice Management Forum

Don Figura, managing partner of Wolf & Co., Oakbrook, Illinois, shares his firm’s extensive and valuable experience in developing niches. Before entering a new niche, ask these questions:

·    Will this niche increase partner income?

·    Will it protect the firm from losing clients to competitors?

·    Will it generate referrals?

·    Do we have enough information on the economics of the niche?

·    Is it compatible with the culture of the firm?

·    Will partners commit to it?

The answers must be yes to these questions.

If growth is the objective of starting a niche, consider that growth can come in other ways. Existing services can be sold to existing clients or new markets, and new services can be sold to existing clients or new markets. The most challenging of all is providing new services to new markets and this is where many firms have failed.

A major obstacle is partner commitment, which can be mistaken for support. Support means the partner is in favor of it if someone else makes it happen. What is needed is commitment.

At Wolf & Company, the strategy has been to sell new services to existing clients. Several years ago the partners discovered many of their clients would soon be approaching an age that required a transition of the business. They believed this to be a threat that could be turned into an opportunity by starting a merger and acquisition niche. They hired a Big Eight partner with experience in the field and assigned a talented staff member to assist him. They have enjoyed 10 years of success in M&A.

Firm meetings at all levels include a significant amount of time on brainstorming to find ways to add new services. An administrative person once suggested devoting unused administrative time to offer a payroll service to clients. The result was very profitable.

Follow these guidelines to developing a new niche:

·    Write a plan covering a description of the service, the market and its size, the needs of clients for the service, the skills and training required, and the ancillary benefits that might be derived.

·    Make sure the niche is compatible with the firm culture.

·    There must be a dedicated leader with enthusiasm for the niche.

·    Calculate the expected ROI and make sure it meets the firm’s standard.

·    Set up a profit center, and make sure the following costs are included: marketing, technology, management, administration, supplies, printing, and rent. Most of these will be allocated.

From CPA Practice Management Forum, CCH Incorporated, 800-449-8114, March 2005, p. 6.