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Are sole traders the niche you've been looking for..?

6th Dec 2022
Brought to you by
coconut logo
Coconut’s simple bookkeeping and tax app is specifically designed for sole traders, helping them...
Save content
Have you found this content useful? Use the button above to save it to your profile.

Choosing a niche can help you grow your firm more quickly, effectively and efficiently. So why do so many neglect sole traders? Find out why you can’t afford to ignore this huge opportunity.

Accountant and client discussing business
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One of the key challenges as an accountant is differentiating your service – in a world of firms offering compliance, advisory and technology, how do you stand out? One of the most powerful tactics is specialisation – choosing a particular industry, client-type or service to focus on. Working with a niche gives your firm a range of advantages, including the ability to deploy more targeted marketing, creating bespoke services, sourcing referrals within a particular sector and becoming a domain expert. However, choosing your niche can be tricky.

The best niches are those with sufficient volume to support your business and grow your client-base while also offering scope to tailor your service to the needs of that market. In theory, sole traders are a prime option, but many firms would rather avoid these customers than take them on. But their loss could be your gain.

With the right tools and processes, sole traders can be a rewarding, profitable, engaging niche for your firm – and with MTD ITSA on the horizon, now is the time to embrace them. Here we look at four reasons why sole traders could be the perfect niche for your business.

1. Demand is about to rocket

Sole traders are a huge market – 3.1 million businesses making up 56% of the UK private sector business population. The sector is also about to have a major shakeup as MTD ITSA revamps the rules around compliance and tax – and sole traders are ready to pay for support.

Our research revealed that 60% of sole traders are either underprepared or not prepared at all for the upcoming changes, meaning that many more sole traders will be looking for accounting and tax support. In fact, 40% of sole traders would be willing to pay for accountancy support in light of MTD ITSA, presenting a huge revenue growth opportunity for firms.

2. Sole traders are an undervalued market

Sole traders have long been underappreciated by the accounting industry – including the software industry – due to their relatively simple affairs, low margins and perceived difficulty. However, this also means that there is a huge opportunity for firms that can offer a genuinely useful service that fits the needs, budget and workflows of the country’s smallest businesses.

Since these clients need a different service from limited companies, many firms have just avoided them altogether rather than come up with a new process. This is leaving a huge amount of money on the table. By creating a service that fits with your firm and your customers you can establish yourself in this valuable market well before everyone else clocks how rewarding working with sole traders can be. And this starts with the right tools.

3. The right tech can make working with sole traders simple

One of the key reasons firms have avoided sole traders in the general cloud accounting revolution is that the numbers didn’t quite work out. Major cloud packages were too complex or expensive for sole traders, meaning it was hard to digitise their services in the same way firms have already done for limited companies. But not any more.

Coconut specialises in accounting software designed around the needs of sole traders – it’s cost-effective for your smallest clients, simple enough for them to engage with and smart enough to streamline and optimise your practice’s workflows, delivering real results. 

Instead of being high-effort, low-margin clients, you can use Coconut to manage large numbers of sole traders at scale, automating manual tasks like data entry and invoice admin, while still adding value for them. 

4. You can make a real impact

While many businesses are struggling in the current economic climate, sole traders are often hit hardest, having less capital reserves and fewer options for raising funds. And given that relatively few sole traders have accountants, they’re often operating without the support and backing of an advisor.

Working with sole traders and using the right tools lets you offer real advice and support while still working efficiently and profitably. You can make a genuine impact helping individuals run their own businesses as effectively as possible while still helping your own firm succeed. And making an impact is also the best way to help your firm in the long term too, as grateful clients refer you within their networks to help you grow by word-of-mouth.

Embrace the sole trader opportunity

In a rapidly changing marketplace, opportunity comes from thinking differently to your competition. As MTD ITSA approaches, sole traders are going to become an ever-more important audience for accounting services – and firms who start preparing early have the chance to take the lead.

We’ve made understanding sole traders and their needs our business, literally. That’s why we commissioned a first-of-its-kind report to find out more about how the upcoming HMRC changes will impact them: Making Tax Digital and sole traders: the £360m opportunity for the accounting industry.  To find out more about the findings, as well as in-depth advice on how accountants can capitalise on this major opportunity, download the report for free now.

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