Do you know how to become invaluable to your clients while increasing your firm’s revenue?
An industry vertical is a group of companies that targets a particular market. Focusing on an industry vertical can bring in more clients, simplify your workflow, and increase profitability. Rather than focusing on numerous industries, you can target a specific niche to bring more value to your firm and your clients.
Gusto, along with our partners at CPA Academy, presented a fascinating webinar all about how specializing can increase your firm’s income. The webinar titled, “How to Add Revenue to Your Firm Through Specialization,” featured the vertical business expertise of Dan Moshe, Founder and CEO of Tech Guru.
In this article, we’ll share invaluable highlights from Dan’s presentation. He went into great detail about the importance of specializing as well as his own experience choosing a target niche, and his advice could have a great deal of application for your firm.
Specialized accounting through industry verticals
Focusing on serving a specific business vertical can simplify your workflow while increasing profitability and revenue opportunities. Dan and his company, Tech Guru, specialize in providing IT services for accounting firms, but they didn’t always have this business model. Since beginning to focus on accounting firms, Dan has improved his business and ability to assist his clients:
“When it comes to specialization, you can do more. I call it doing more by doing less by getting better at the few critical things and not trying to do the same thing for so many different types of people. You add real enterprise value to your organization when you go really deep in a particular niche and add incredible value to the companies that you’re serving.”– Dan Moshe
Understanding an industry vertical is critical for the success of your business and your clients. Rather than spread yourself across different sectors, you can focus on being an expert in one specific vertical.
“[What] you’re able to do [by focusing on an industry vertical] is gain a deeper understanding of your clients.”– Dan Moshe
In addition to gaining an expert understanding of your specialization, you also show your clients that you’re irreplaceable because of your industry knowledge and targeted services. When you focus on serving many different industries, your clients recognize that you’re easily replaceable because countless firms offer general services rather than specializing in their industry:
“When we serve clients across dozens of different verticals and industries, we are just at a very high level, which makes us susceptible … to looking like a vendor, looking replaceable, looking like a commodity.”– Dan Moshe
Finally, you can add more value to your firm when focusing on a business vertical because it simplifies your workflow. Tech Guru can bring in and retain exceptional talent because the employees have a workflow that involves a single industry. When businesses try to serve different kinds of industries, they create more complexity because they need to address the specific industry needs of each vertical. With specialization, you take the complexity out of it and can better assist the clients within your target niche.
How Tech Guru began specializing in CPA firms
Tech Guru’s journey to serving accounting firms offers valuable lessons for the importance of specialization and picking a particular business vertical. Dan noted that the tech industry bears many similarities to accounting:
“There’s a tight labor market. … There’s … a lot of change and disruption where big companies are providing services directly to our clients, like Microsoft and so forth, [which] are things that we used to do with our clients. We are having to find ways to become advisors and partners to our clients and add value in new ways. … I hope that sounds familiar because it seems that’s a lot of the same pressures and changes that the CPA vertical is experiencing at this time as well.”– Dan Moshe
Dan didn’t always focus primarily on accounting firms. Tech Guru initially offered tech services to clients across different industries. Dan and his associates realized that their business model wasn’t working. They were having difficulty with growth, and they weren’t seeing definitive results from their marketing efforts.
“We found that we were kind of stagnating in growth. … We were growing, but it was in fits and starts. We couldn’t predict it, and we couldn’t ever say, ‘Let’s invest a dollar in marketing, and we know that we’ll get X numbers in new revenue.’ There never was a connection. … We were getting very little and unpredictable returns on marketing dollars and marketing efforts.”– Dan Moshe
On top of Tech Guru’s growth and marketing struggles, they lost clients to tech companies specializing in particular business verticals. Dan recalled a conversation with a client that revealed the importance of offering specialized services:
“We were losing clients here and there to specialization. … I had this great [orthodontist] client. … [They call and say,] ‘We were at a conference, and we learned about this company that specializes in orthodontic firms and technology. We found that they can help us pick the right software and set up the integrations in ways that you’re just not familiar with because you don’t specialize in our industry.’”– Dan Moshe
Tech Guru lost the orthodontist client because it didn’t specialize in their niche. Dan realized that the only way they could compete with businesses that specialized was by either lowering their prices or targeting a business vertical. They knew that lowering their prices wouldn’t be an effective strategy, so they decided to investigate specialization.
How accounting companies can determine their target business niche
Before deciding your target business vertical, your firm needs to commit to specializing. Finding the right niche takes research and money, and if you don’t commit fully to the idea, you’ll fall back on your existing strategy. After committing to specialization, consider your existing clients. Dan noted that Tech Guru’s first steps were analyzing their clients and consulting with a specialist:
“We engaged a specialist. It was actually an industry-specific … consulting company that helps technology companies to specialize. … We looked at trends within our client base. We made a list of all of our clients and listed the industry they’re in. … What we did is we narrowed it down to the top three that we were most excited about.”– Dan Moshe
In addition to evaluating your existing client base, you should also consider the industry that interests you. Dan and his business partner picked their vertical based on what they wanted to learn more about, but that was far from their only criteria.
“The other criteria is: We needed to be able to have the potential to become the number one or number two technology services provider in that specific vertical. … We also looked for firms in our organizations who had highly compensated employees—… supporting a team of highly compensated people has a huge lift. If their productivity improves, the whole organization is lifted as a result. We also wanted to be working with organizations where technology is valued and is a strategic tool that these organizations use to leverage, to grow their business, and become leaders within their industries.”– Dan Moshe
Based on the different criteria Dan and Tech Guru established, they picked dentistry as their initial target vertical. They spent a great deal of money on branding for dental firms, but they quickly found that dentistry wasn’t a good fit. Although dentistry fits most of the criteria, they don’t value IT services as much as other industries.
“We decided to fail fast and fail forward. … We lost a little bit of time [and around $20,000 in branding and our domain name], but that was okay because we learned a lot the second time around, which was deciding to work with the accounting vertical. We were smarter. We asked more of the right questions. It went more quickly. I chalk it up to a learning experience and an investment in education.”– Dan Moshe
Dan restarted the process and found that Tech Guru was well connected with many accountants. They assembled a board of advisors comprised of five CPAs and began asking them questions and researching the accounting industry. Ultimately, they had great success from focusing on the accounting business vertical.
What business vertical would benefit your firm? You can evaluate your existing clients and determine what industry would most value your services. For example, many restaurant owners struggle with bookkeeping and day-to-day people management such as HR and benefits. Your firm could specialize in that particular niche to simplify your workflow while also gaining a deep understanding of the industry.
Learn more about accounting specialization
Specializing offers many benefits to CPA firms. Your firm can focus on serving the needs of a particular industry rather than many, and you can become a trusted advisor with industry knowledge that sets you apart from your competition. The more you understand your target niche, the easier it will be to assist clients and grow their businesses. You’ll also position yourself as an expert in the industry and become irreplaceable to your clients.
If you want to learn more about how specializing your offers can help you open more opportunities for your firm, you can watch the entire presentation here. Also, be sure to read part two, “Establish Yourself as a Trusted Accounting Partner Through Specialization”, and part three, “Specialization in Accounting: FAQ with Tech Guru“, of this webinar series for more information about accounting specialization.
Looking for more ways to serve your clients while growing your firm? Consider signing up for Gusto’s People Advisory Certification. With People Advisory Certification, you’ll learn all about managing day-to-day people management tools, such as HR, payroll, and benefits. You’ll also join a community of accountants and bookkeepers building for the future with Gusto Pro’s modern tools. As a People Advisor, you can better serve your clients and their incredible teams. Get certified.