Building a Successful Niche

Source: CPA Practice Management Forum

In this interview, consultant Allan Koltin shares his thoughts on industry and service-line specialization, which he feels are huge differentiators with clients. To determine the viability of a particular niche, a firm should first ask whether there's a market need for the service in its territory. Next, it should find out which firms are "famous" for that niche in the market -- those whose professionals speak at trade conferences, write for trade journals, and so on -- and determine their market share

To be successful in a niche, a firm needs the support of its partners, with their capital as well as with their client base. Partners must be willing to refer clients to the niche, even though it may come out of their own book of business. A firm also needs to have a champion -- "an individual who has a burning passion to build and excel in this practice area." Champions must be willing to take risks, in terms of both their own compensation and working outside their comfort zones.

If internal specialists merely dabble in a niche while keeping their "day jobs," the endeavor is likely doomed to fail. For this reason, it may be more effective to recruit specialists from outside the firm or merge with a firm that already has niche expertise. Also, it's important to remember that just because a professional has technical expertise in a niche, he or she doesn't necessarily know how to sell it.

Perhaps the ultimate form of differentiation, Koltin suggests, is to combine industry and service-line expertise. For example, a firm might specialize in technology consulting for nonprofit organizations or business valuations for auto dealerships. Firms that can pull off this type of combination often dominate their markets.

Firms that aren't ready to make the financial commitment necessary to build a niche might consider an alliance or strategic partnership with another organization in order to provide these services to their clients.

For the complete article, read "The Benefits of Being Famous."

From CPA Practice Management Forum, Vol. 8, No. 10, November 2012, p. 18.