Introduction – Why even bother with a niche?
Finding new clients is hard, especially during uncertain times when many businesses are looking to cut back on their expenses. That’s why it is important to set your business up with the best chance at success by choosing the right niche.
So many accountants try to target all businesses, but it is hard to stand out from the crowd this way. How many new clients do you need each month to make a difference in your practice? Chances are the answer isn’t hundreds.
It’s far easier to be successful in your marketing if you are targeting a specific niche because you can speak directly to that audience in a way that you simply can’t with a general campaign.
With about 5.5 million businesses in the UK as of 2022, there are enough businesses in pretty much any niche for you to be able to build a successful accountancy practice.
- Business size
- by head count
- By average turnover
- By number of locations
- Industry (You could even filter down further into an area of specialization within an industry)
- Geographic location
- Length of time in business
- Well established businesses
- Financial stability of the business
The more targeted you are, the better you are able to sell to that niche. The flip side of that is that the more targeted you are, the fewer businesses are in that niche. This can be OK if you are able to capture a higher market share in that niche or if the average lifetime value of new clients is high enough that you only need one or two new clients to make a difference. The sweet spot is finding the balance between being targeted enough to differentiate yourself from the competition but not so targeted that you struggle to capture enough market share.
So how do you decide which niche to target in your accountancy firm?
There’s no absolute right answer to that question, but if you consider the following list of criteria, you should end up choosing well.
What are you passionate about?
Do you have a hobby?
Are there enough businesses that serve that hobby to keep you busy?
If so, then why not focus on a niche you are passionate about?
People are more likely to respond to something that you are passionate about than something you have to force yourself to do.
Alternatively, you might find that there is one type of client you already have that you are really good at and just love working for. Why not try to find more of those perfect clients? Try to find what makes them perfect so you can start to figure out if there are more businesses like that out there.
Would you rather have 100 clients paying you £20 or 20 clients paying you £100? I guess it depends on whether the £100 clients take 5x the work. But chances are high that there is a particular type of client that is really profitable for you. It just makes sense to try and get more clients like that.
The downside is that if everyone else also finds them to be profitable then you will end up in a saturated market which may make things hard for you.
The other thing to consider is that when you choose a niche, you get really efficient at dealing with the kinds of clients in that niche and higher efficiency leads to higher profitability. So you should get more profitable over time no matter what niche you choose.
Is there a gap in the market?
This comes down to leg work. Once you have a niche in mind, you’ll need to research it to find out how many and how big your competitors are.
There’s nothing wrong with a bit of competition. It can actually give you confidence that there’s enough work in the niche to keep you busy. But too much competition can mean that you will need to work harder to differentiate yourself.
It’s important to keep in mind that everyone has an accountant. A certain percentage of people will never switch because their accountant is their friend or their neighbour’s cousin. Then there are also people who have no connection to their accountant but have had great service over many years and so have built up great loyalty. Together that probably accounts for about 25% of the market.
At the other end of the spectrum there is about 25% of the market who are unhappy with their current accountant for whatever reason (but not your clients, right?). This group is actively searching. When they find you, they need to be wowed by how much you understand them. This is so much easier if they are currently with a general practice and you are a specialist in their niche.
And then the last 50% of the market might switch but they aren’t looking and would need to be convinced.
If you can craft an offering that is so compelling to your niche that it makes that 50% consider you then you are on to a winner.
Is there a strategic reason to focus on one niche?
Maybe you are passionate about F1 racing. But getting into that space is super difficult because it is so corporate. You could look for niches related to F1 racing that are less competitive – maybe the catering companies that cater for F1 teams or the independent mechanics who get contracted to work on support vehicles. I clearly don’t know the first thing about F1 racing! But this is your passion, remember?
Another hypothetical could be that you identify that business insurance brokers are a good source of referrals so you aim to get as many of them on the books so they make their referrals to you.
The point is that you know your clients and what might be strategic to target.
Can you meet the needs of the clients in your niche?
You must be fully aware of what clients in your niche will expect of you. For instance, are there special regulations in one industry compared to another?
Completely apart from any regulatory compliance issues, there may be some industries that are just more demanding. Some people thrive on that challenge. Others prefer the quiet life. You need to know what will work for you.