It’s difficult to claim you prepare a better tax return than someone down the street. However, you can claim an area of expertise your competition doesn’t have.
A Narrow Focus Will Help You Spur Growth
As a small business owner, the concept of saying “no” to a prospect seems ridiculous. However, you will actually experience more growth and greater profitability while doing more rewarding work if you narrow your focus to a sub-segment of the buying population you can help best.
Implementing a niche strategy is one way professionals can differentiate themselves from their competition. It’s quite difficult to claim that you prepare a better tax return than the person down the street. There is no way you could even prove that. However, you can claim an area of expertise your competition doesn’t have. For example, a significant part of your work may be done with businesses in the oil & gas industry or with churches. Or you could have significant experience with expat tax services. As a result, you are able to bring something extra to those businesses and individuals; you can translate sound experience into better advice.
Identifying a Potential Niche
There are clients out there you can serve better than others – and they will be better clients. Here’s how you figure out your unique position in the marketplace:
- Understand your strengths. This requires that you segment your revenue. Break out every dollar by service line and industry. For example, look at the total revenue generated within a specific industry like manufacturing. How many dollars do you generate from tax services for manufacturers? Accounting? Payroll? Be as specific as you can with the services you offer. Calculate the percentage of revenue each industry or service line represents, too. The rows and columns that make up the highest percentage of your revenue represent the areas in which you have the most expertise.
- Know your competition. Spend time looking at each of your competitors. Determine their areas of strengths so you can focus on an area they don’t. You can gather this information from personal knowledge, their website and conversations with people who know them, like mutual referral sources.
- Be aware of your market potential. Let’s say you have 10 physician clients. That’s a great start. But how many other physicians are in your marketplace? If there are only 25 more, the potential return may not be worth your investment. If there are 5,000, your revenue potential is greater.
The area where you decide to build a specialty should capitalize upon a current strength, where you have the least competition and many potential prospects.
Developing a Marketing Strategy
After you know where to specialize, you have to spell out how you’ll obtain the clients you desire. This is done by developing a channel of distribution strategy. In simple terms, this is a list of services that you’ll sell to a specific buyer through a channel (service à channel à target). Unless you are targeting individuals, you sell through channel of distribution. A channel could be an association, a partnership, a referral source, an event or any figurative place where your potential buyers congregate.
Not all channels are created equal. There are some that you’ll engage with in certain ways and others that will be totally different. Take the time to understand each channel and how you can best use it to obtain new clients. Be strategic about where you are going to sell your services, and you will position yourself for the referrals and prospects you desire.
Measuring Success
If you decide to implement a niche strategy to grow, know that it will take time. You won’t see that growth from day one. As you decide to grow a column, row or cell from your market segmentation report, be sure to measure how you’re doing. If you were to complete the exercise a year later, you should see growth in the area you decided to target.
Over time you will begin to obtain more clients that fall within your niche. Many providers simply add these clients to the existing client base and adjust staffing as needed to serve them. There are other professionals who decide to let these clients replace existing clients that are then transitioned to another provider. No matter which method you choose, don’t sacrifice profitability. A niche strategy should help you increase your profit margin.
The hardest part of implementing a niche strategy is recognizing that you have an ideal client that you can serve better. That not all revenue is good revenue for you. That you may have to say no to prospects that fall outside of your sweet spot. If you take any work that comes through the door, you are more likely to find yourself dissatisfied with realization, lack of client responsiveness, last minute requests or something else.
Be more strategic about the types of clients you work with, and you can build a stronger company.
Katie Tolin will present Positioning Your Practice for Growth at NSA’s 71st Annual Meeting in Tampa on August 20th. Her sessions will include a presentation followed by interactive roundtable discussions around overcoming obstacles to specialization and which growth strategies produce the greatest return.
Register before July 8th and save $100 on the full package price!
Registration and schedule details for the NSA Annual Meeting can be found here.
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