How to Research and Plan for a New Niche

Source: CPA Practice Management Forum

This article is based on interviews with Gale Crosley (Crosley+Company in Atlanta), Jeff Rattiner (JR Financial Group in Denver), and Sam Allred (Upstream Academy in Helena, Montana).

Steps in researching a potential new niche include:

• Find out if there is a market. Don’t start a niche solely because you have a couple of clients who need the service.
  • Survey your clients—ask them if they’re interested in the service.
  • Offer them a free consultation—if 80 percent of them accept the offer, a good market probably exists.
• Determine whether competitors are offering this service and are profiting from it.
• Make sure the firm has the basic skills to deliver the service.
• Talk to people in the industry or field. This includes “thought leaders,” competitors, and prospective users of the service.
  • Are there unfulfilled needs?
  • Is there an opportunity to form an alliance with a competitor to provide the service? Alternatively, can you pattern your service on its?

If many firms in your area are providing a particular “hot” service (e.g., cost segregation), that may be a good reason to avoid it.

Your goal need not be to achieve a certain number of clients in a niche, but to become the acknowledged authority in it.

Here is what you need to succeed in a niche:

• A team that is passionate about the niche.
• Superior expertise.
• Billing codes specifically for the niche.
• Standardized systems and processes. Standardize everything—the type of clients, proposals, engagement letters, engagement planning, progress reports, and tools.
• Benchmark information.
• Authors and speakers on the niche.
• Copyrights and trademarks for products.
• Partners who are committed to, not just supportive of, the niche.
• A good leader. Avoid the mistake of expecting the newly appointed leader to continue to manage a large book of other business.

Getting off to a fast start:

• Your first clients should be “raving fans.”
• Bring in an outsider to run the first few engagements.
• As an alternative to the preceding, tell the first client you are new at this service and would like help. Then you don’t have to act like an expert when you’re not. The trade-off for the client is a lower price.
• Achieve some successes before making an announcement that you’re in the business.

Set aside a sum of cash at the start, to be used to fund the niche operations. This avoids partner decisions based on the effect on their compensation.

From CPA Practice Management Forum, CCH Incorporated, 800-449-8114, October 2006, p. 14. To read the complete article, click here.