How to build a niche firm
The 2016 Practice Excellence Awards featured a rush of new firm entrants demonstrating the advantage of adopting a niche. Richard Hattersley explores why firms choose this path.
When a corporate merger resulted in Simon Bulteel, owner of Practice Excellence Award entrant Cooden Tax Consulting, being made redundant, he reached out to a former colleague who happened to be looking for a new finance director for a motorsport company.
The company had just won a world championship and were in the midst of building a Nissan GT-R GT race car. Of course, the research involved in this made the company eligible for a huge amount of R&D tax relief.
Bulteel had never put a report together of this stature, since in his previous role at a clinical research company nearly all of it qualified, and he brought in a French company who were involved in F1 back in the days when R&D tax relief started. When the company constructed a technical report Bulteel called this his light bulb moment.
Light bulb moment
“It opened my eyes to what my knowledge could be worth in the commercial arena,” said Bulteel. The Practice Excellence Awards entries suggest that many other accountants have experienced this light bulb moment, too.
As a Practice Excellence Awards judge, the Profitable Firm’s founder Karen Reyburn has seen the trend of new firms like Bulteel leaning towards a niche.
“The generalist kind of tries to cover everything,” she said. “Whereas the niche market says 'I specifically help overseas property owners with these issues.' And the overseas property owner says, 'if I am deciding between two accountants, these guys talk my language. They know what they are doing. I may as well go with them'."
It opened my eyes to what my knowledge could be worth in the commercial arena
Practice Excellence new firm nominee Jen Gerrard noticed a similar gap in the market, which encouraged her to pursue her niche. “The not for profit angle has always been my passion, but I think for me, it was a few years of experience in that sector and just really being able to identify the gaps in terms of service offerings,” said Gerrard.
Gerrard’s light bulb moment happened shortly after she set up her business and realised that the not for profit sector usually can’t afford to have a qualified accountant in-house and smaller charities tended to have bookkeepers rather than accountants. “There was a real gap for that intermediate position,” she said.
Having the background as a charity audit manager, Gerrard semi-positioned herself between the two in terms of ethos and pricing. The firm focused on small charities who use large audit firms to do their year-end compliance but can't afford to go to them with, say, a three month strategic project that they’re looking at but need support.
We paid attention to the market, knew our clients, and we knew what their pain points were
Eventually, the consultancy side of Gerrard’s business naturally grew into training. “We paid attention to the market, knew our clients, and we knew what their pain points were, and over time our clients said: "can we just come to you for everything."
Reyburn said a niche will lead to more business and more focused marketing: “Every single business without fail says, 'when I choose my accountant it impressed me and made my decision when I saw that they specialised or had niche expertise in what I do'," she said.
Reflecting this, niching has ramped up the word of mouth interest in Bulteel’s firm. “One of the things I was very keen on when I set the business up was that I didn't want to do any accountancy because I didn't want firms of accountants thinking 'if we refer clients for R&D tax relief he might poach them and take them for compliance’” said Bulteel.
You own a space, so don't be afraid to send a lead to someone else in your network's way
As seen from Bulteel, niching opens opportunities to strengthen your network and buddy up with other professionals. Rhys Bateman, Sage’s senior product marketing manager, agreed: “You own a space, so don't be afraid to send a lead to someone else in your network's way.”
Know your niche
Seeing the success others enjoy through choosing a niche, it is only natural to at least explore the option. That said, Gerrard advised budding niche practitioners to “know your niche before you set out”.
Reyburn concurred: “It would be absolutely useless saying, I really like creative agencies or I like the gaming industry,” she said. “You can't just sail in and say I like coffee shops because I drink coffee. You've got to have some knowledge of it.”
To those taking their first step, the 'Go-To Expert' Jon Baker encouraged accountants to think about an area where they have got some expertise or a reasonable number of clients – because if it was about benchmarking and you haven't got any clients in the area how are you going to provide that benchmarking niche, it's going to be hard work", he warned.
Indeed, niching requires the accountant to be an expert. It should go without saying but accountants considering this path should take the time to at least explore it. “If you don't know which niche to go for it might be worth contracting for a short time in an organisation, working in their finance department to get some experience, or working with a firm in their specialist department,” advised Gerrard.
Similarly, Reyburn knows a client who attended wine conferences and exhibitions to see if he could get more clients and to figure it out. “He put himself in the place where these people were and put it to himself to learn and get excited and interested in it.”
It was only one part of my work but it was something that I enjoyed more than anything else
Just as important, you should pick an area that you enjoy. For Bulteel R&D relief piqued his interest when he was working for a small company that ran drug trials for pharmaceuticals. No one had told this company that they were eligible for R&D tax relief.
“So I got in there and started looking at it and thought why is this company who is called 'something, something, research' not claiming R&D tax relief,” he recalled. "I went back to the tax manager and said 'why aren't we claiming R&D tax relief for them?' He said: 'I don't know. We haven't really thought about it'."
He looked more and more about the subcontracted side of R&D and helped the company put together some backdated claims. “It was only one part of my work but it was something that I enjoyed more than anything else,” said Bulteel.
Refine your niche
But Baker warned accountants to choose their niche wisely. “We all know there are some sectors where there is little money,” he said. “Developing a niche in that area is not likely to generate profit.”
That's why Bateman urged accountants to be granular in picking a niche: “I think it's about being clear about what you are," he said. “If you know some specific areas of tax better than anyone else, or you think there's a niche in looking at a little vertical, I think it's worthwhile exploring and really bubbling up your expertise in that area.”
Once you’re clear in your own mind, your story is going to be easy to communicate to the market
He addded: "Once you’re clear in your own mind, your story is going to be easy to communicate to the market."
As a further concern, some accountants are afraid picking one niche will kerb flexibility. But Reyburn disagreed. “Just try stuff,” she said. “If you've got seven new clients in a particular category or industry or geographical area or type, just give it a go to develop some things which are useful for them,” she advised.
While others fear choosing a niche will alienate existing clients. However, Baker recalled a construction industry niche client who gradually changed some of their pictures on their website. “Rather than having standard stock images, they started building up stuff around some of the construction sites that they've worked on or know.”
It's about keeping your finger on the pulse as well
The firm nudged its marketing and the language used on the website to aim more specifically to construction. “If you're doing it gradually and continuing to give good service, why would clients go?” he questioned.
Keep your finger on the pulse
But more than anything, owning your niche is about continually re-assessing. “I had this vision of what I thought our clients needed, but I've had to adapt over time,” said Gerrard.
Knowing the pain points of her clients, Gerrard developed an online training module which is more accessible both in terms of cost and time for people and it is a bit more flexible.
She concluded: “You might think you know what your clients need, but 18 months down the line that might have changed without you realising it. It's about keeping your finger on the pulse as well.”
Both Karen Reyburn and Jon Baker will be involved in the Practice Excellence marketing session on Tuesday 25 October. Reyburn will deep dive into the marketing mindset, while Baker will show you how to get the clients you want. You can continue your research by referring to ABN-AMRO's niche practice guides and registering for its How to make your specialism a real asset for your firm webinar on 9 November.
What do you think? Have you adopted a niche? How did you start to build your niche firm? What was the first step you took to master a niche?