Does your accounting firm focus on a specific niche? Why or why not?
Whether or not to choose a niche to focus on in your firm is a hotly debated issue within the accounting world. The truth is, there are advantages both to choosing a niche and being more of a generalist. Further, some niches are more popular than others, and there are advantages and disadvantages of focusing on a more popular market segment. By understanding the pros and cons of different niches, you can help your firm grow, scale, and become a top accounting firm.
At Gusto, we want to empower you to help your clients through challenging economic crises. That’s why we brought you our online show On the Margins: LIVE with hosts Caleb Newquist and Will Lopez. In this episode, Caleb and Will discuss the niches of the current Top 100 accounting firms. They also discuss the advantages and disadvantages of being a smaller firm in the wide field of accounting and offer solid advice and encouragement to accounting firms looking to grow.
Secrets to success from the Top 100 accounting firms
To kick off their discussion of niching in accounting firms, Will referenced the Accounting Today article, “Secrets of the Top 100 Firms.” In the article, Accounting Today listed the most popular niches of the Top 100 accounting firms. Those niches are, in order:
- Real estate
- Professional services
- Mid-sized businesses
- Health care facilities
If you’re looking to choose a niche to focus on in your accounting firm, this list can be an incredible place not to start. Because these verticals or niches are so popular, the market for serving them as an accountant is incredibly saturated. In other words, you’ll find much more competition—particularly from large firms—if you’re trying to seek clients in those fields.
“To think about it in a slightly different way, if these are areas of specialization, and if there’s a wide variety of specialization, then is it really a specialization? … I think the idea to have a true niche or a true specialization is to do something rare that there’s still a demand for and that you can then take that rare skill or rare area of expertise and charge a premium for it. It seems to me that real estate experts in the accounting world are a dime a dozen, so why just become another real estate expert?”– Caleb Newquist
No matter what line of work you’re in, it’s important to stand out, right? You want to distinguish yourself from the crowd and make sure others know you are unique. The same holds true for accountants. It’s important to design your firm to stand out from the rest and make a unique impact on the accounting industry. If you choose a niche that is already popular, it becomes much more difficult to do that. There are already many real estate experts, so why be just another one on the list? You can increase your chances of standing out in the industry by choosing a less common vertical to focus on.
How to stand out in an already-saturated niche
Caleb certainly holds that opinion, but Will chose to play devil’s advocate. If you’re truly passionate about serving in one of those already-saturated niches, you can still find a way to stand out from the crowd. But how?
“I came from conventional accounting, and we served high-end clients, and I particularly was not convinced that we were doing a great job. … While that was probably our primary bread and butter, to make money within these niches, … [that] doesn’t necessarily mean that client satisfaction in that service is really met, which is why, personally, I started a cloud firm. I felt like I could do it better in those niches and draw clients away from those top firms over to my super small practice, and I was successful in some instances where some of my clients were working with the top four [accounting firms].”– Will Lopez
When Will started his accounting firm, he decided to choose a niche, but instead of becoming an expert in a rare field, he decided to choose a popular niche and simply do it better than everyone else. By serving that niche from within a smaller accounting firm, he was able to offer his clients a quality and specificity of service that larger accounting firms simply cannot provide. Eventually, clients began leaving their larger accounting firms in favor of Will’s better service. They received accounting advisory in the same areas, but they sought Will for his high-quality service.
When it comes to choosing a niche, it’s important to ask yourself this question: Do I want to work within a rare niche, or do I want to serve a popular niche and commit to doing it better than everyone else? At the end of the day, the most important thing is to choose a niche that you love. When you bring your unique passion and energy to your accounting work, you can stand above the rest and offer your clients the highest-quality service.
The ups and downs of bigger bureaucracy
Will and Caleb went on to discuss the advantages and disadvantages of differing levels of bureaucracy found in accounting firms. The fact is, larger firms have more bureaucracy and smaller firms have less, but there are definite advantages and disadvantages to each. The important thing is to understand what they are and how to leverage your advantages for your own growth.
When it comes to bureaucracy, larger firms have a definite advantage when it comes to speed:
“The firms at that scale, they’ve built systems—i.e. bureaucracies—they’ve built systems and frameworks that they can apply essentially to any vertical … they want.”– Caleb Newquist
It’s true that larger firms often have a stronger infrastructure to provide some services to clients. Big firms have the benefit of years of experience as well as systems and technology already in place, enabling them to serve their clients with greater efficiency than some smaller firms.
Further, it is often easier for larger accounting firms to pick up more and more small clients, thereby allowing their business to grow even more:
“I would predict that, over the next several years, you’re going to see all firms do this if they haven’t already started doing it. … They’re going to start snatching up even smaller and smaller businesses … to become more like big-box accounting firms, like Walmarts of accounting firms. And if they offer those things at competitive prices, I think businesses are going to have to take a hard look at them.”– Caleb Newquist
As accounting firms grow, their potential for growth grows as well. When larger firms offer their services at competitive prices, they’re able to attract clients of all sizes, thereby increasing their businesses even further.
Smaller firms do have a distinct advantage over larger firms, however. Small accounting firms have the ability to refine and nuance their niches even further. While large firms must focus on providing a broad range of general services, small firms have the unique ability to develop highly specialized expertise and offer rare services large firms simply can’t provide:
“I think, obviously, larger firms are always positioned well to serve any kind of industry en masse, and I think that’s where the struggle is for a lot of top firms. … I think there are some experiences where you create a framework to serve that real estate vertical, but you may not nuance that framework.”– Will Lopez
Take real estate accounting for an example. While there are many big firms that offer accounting services to real estate agents, they are unable to offer highly specialized services. Smaller firms, meanwhile, have the opportunity to focus on realtors, investors, flippers, or another sub-group within the real estate industry. Small firms can use their unique position to offer specific services and draw clients who seek more nuanced accounting away from the bigger firms.
Learn more about the most popular niches for accounting firms
The most popular niches for accounting firms today are real estate, manufacturing, professional services, construction, technology, mid-sized businesses, and health care facilities. You can choose to focus on one of these niches, or you can choose a more rare niche, and there are advantages and disadvantages to each. Additionally, there are advantages and disadvantages to being a larger accounting firm versus a smaller one. The important thing is to find out how you can stand out from your competition.
At the end of the day, it’s important to remember that accounting is a team sport:
“Accounting is a team sport, and so serving clients is a team sport. It keeps you sharp, it keeps you on the edge of your seat—you’re always, constantly having to advance. … The profession accepting the status quo is not what the profession was meant to do. It’s meant to advance itself. It’s meant to move forward. It’s meant to revisit its own service offerings and take a good look in the mirror and say, ‘Okay, is this service offering something still relevant today? Do I need to do anything to it in order to advance it?”– Will Lopez
Whether you choose a popular niche or a more rare one, whether you’re a large firm or a small one, you can advance the accounting profession. You have the opportunity to find new and better ways to serve clients. When you advance, the profession advances.
Watch this episode of On the Margins: LIVE with Caleb and Will to hear their incredible insights and advice.
Becoming a Gusto Partner can make your life easier. Get payroll and HR support for your team and our new advisory revenue stream for your practice through our people advisory platform. As a Gusto partner, you’ll also get tools to help you expand your accounting practice and offer your clients new insights, plus a free payroll subscription for your own accounting firm. Sign up today!