In a joint collaboration laying the foundation for Practice Excellence Week in October, ACCA and AccountingWEB have produced a series of three videos highlighting the factors that are driving the evolution of forward-looking accounting firms.
Setting the scene for the project, ACCA head of advisory Glenn Collins drew parallels between the association’s professional accountants of the future research and the examples that have emerged from the Practice Excellence Awards.
In the first “secrets” video, Collins and AccountingWEB global editor John Stokdyk dig into one of the dominant trends to have emerged during the past few years: the rise of specialist, niche practices:
Why go niche?
One of the key maxims in the technology industry is to “get big, get niche or get out” and signs are emerging that accountancy practitioners are taking this idea to heart:
Numerically, firms that focused on specific market niches were the most prevalent among Practice Excellence Award entrants last year. All nine New firm entrants launched themselves into niche sectors, but the specialist pathway was also popular among mid-size and innovative firms looking to carve out new growth.
Average figures disclosed by entrants showed that niche firms were also growing fastest in terms of annual fees. The 50% average enjoyed by these firms was fuelled partly by the rapid success of many of the smaller, New firm of the Year entrants, but niche success also equated to good growth rates for larger firms.
Niche firm behaviour was strongly allied to the significant rise in referral activity in recent years. Practices making an impact with clients in a particular market and effectively promoting their expertise will rapidly attract the attention of other businesses in that sector.
The best way to appreciate how the niche dynamic works is to look at a couple of representative examples:
Gerrard Financial Consulting was shortlisted for the 2016 New Firm of the Year Award. The firm was founded by Jen Garrard ACCA in 2013 with a mission to “provide pain relief for charities – all done in the cloud, with the efficiencies of a virtual practice”. Gerrard supports this strategy with a methodical and effective approach to content marketing and social media. The firm also illustrates how niche players often adapt cloud accounting and add-ons by putting together a collection of tools that cater for their specialist sector.
At the other end of the scale, inniAccounts is firmly rooted in the contractor/freelance market and has brought a disruptive, technology-led model to bear on the sector. CEO James Poyser comes from a technology background and sat down with his colleagues to “build our dream accountant”. Their first step was to recognise that only around 6% of small businesses are the high-growth “gazelles” that every other accountancy firm wants as clients. Instead, inniAccounts focuses on “the other 94% who have much more straightforward needs”. The inniAccounts model includes a mobile app tools to streamline the accounts process and a self-service web library designed to help clients answer their own tax queries.
Where can you make a difference?
Developing a successful niche is all about finding gaps in the market where you’ve got something extra to offer. Being a niche firm isn’t the easy option as it will often demand knowledge of specialist compliance and reporting requirements, effective technology solutions for the sector or some other intangible advantage.
With competition intensifying in well served sectors such as contractors, construction and start-ups, several members of the Practice Excellence class of 2016 targeted less well trodden paths including: the fitness industry, life sciences/R&D tax credits, social workers, travel agents and residential care.
A niche service doesn’t have to be industry-specific. Some Practice Excellence firms differentiate themselves by the types of services they offer, including cloud technology consulting and implementation, training and “virtual finance director” outsourcing.
Where to start?
For newer niche firms, the specialist approach is the whole focus of the firm and is likely to be in the foreseeable future. They have clear view of their ideal clients, know their sector backwards and are on a mission to take it over.
Glenn Collins noted that most general practitioners already have clusters of clients they can develop as a niche. “You already speak their language, so develop that and actively promote it to similar businesses.”
Having focused on the target clients, and designed a service model around their needs it can take a few years to get the formula working on an effective, scalable level. But as the rapid growth rates from this sector demonstrate, if you can get the service model right, you should start attracting enquiries from similar businesses. And if you don’t, go out and find them in the places (online and in real life) where they gather.
The next video in this series will focus on digital marketing, a key element in how many niche practices promote themselves. For more information about all of the initiatives that are linked to this video series, visit the Practice Excellence Week website.