To put it mildly, Hamlet was challenged to decide what to do and what direction to take. In our profession, we also have had to make decisions; after all, we’ve heard it for years: “You need to go deep into a specific industry or focus on a niche to succeed as an accounting firm.”

A niche is usually defined as a specific industry or vertical, and some may even broaden the definition to include a business stage, such as a startup, turnaround, transition planning, or even IPO. Here, we will limit our definition of “niche” to a particular industry or vertical, so let’s consider the pros and cons of specialization in accounting.

4 pros to industry niches

Concentrating on a market niche has several clear upsides:

1. Acquiring deep and specialized knowledge of an industry can give your firm an advantage. For example, a nonprofit may have complex setup stipulations if it receives grants or specific reporting requirements for donors at the end of the year. Construction companies have different issues, including managing contractors, applying for government bids, and job costing, which can be complex and tedious. Learning these nuances and processes can be time consuming, leaving firms frustrated and less profitable if the research to complete a task is for a one-off client. However, firms that dive deep into a specialized industry can apply that information across more clients, multiplying the value of the time spent learning.

2. With specialized knowledge, your firm can create custom processes specific to a niche. Knowing that all construction clients need cash flow reporting and job costing allows for easier client onboarding and a better customer experience. This also leads to less frustration among team members who excel in standardized workflows.

3. A deeper understanding of an industry’s processes gives your team knowledge about apps commonly used in that industry. Your firm can become a trusted expert to support clients, and provide insight into their strengths and weaknesses. This deeper knowledge will grow your team’s confidence and ultimately deliver a better experience for the client.

4. Because of specialization, your firm can monetize its expertise through higher fees. Clients that recognize you are offering faster, more informed advice, along with the expertise to help them anticipate road bumps in the future, will be willing to pay for these true value-adds.

Disadvantages: Yes, there are a few

What are the disadvantages of having a firm specialty?

1. You and your team may find that focusing exclusively on one type of industry is a little boring. Having some degree of diversification in clientele can bring positive challenges that translate to interesting and more fulfilling work for your team. Due to the labor shortage among bookkeepers and accountants, this concern shouldn’t be discounted.

2. If your selected niche has an economic downturn, your firm could be exposed to an unforeseen loss of clients. This became apparent when pandemic shutdowns disproportionately affected firms specializing in restaurants and retail stores.

3. If the niche is just too small, there may not be enough clients to warrant a specialization. Assuming your firm already has a presence in the industry, you’ll need to determine if growth is a priority. If it is, you’ll need to add more clients or increase the services offered. Other questions come about in this decision process as well: “What about our existing clients in other industries?” and “Will this make us less attractive to clients outside the niche industry?”

The pros outweigh the cons

I wouldn’t be doing you justice if I didn’t tell you about the cons to niching, but here are my observations:

1. Just because you pursue clients in a niche industry does not mean you have to let go of clients outside that industry. You can continue working with existing clients and even take other clients as usual. Having a niche just allows you to focus your marketing efforts.

2. About clients outside your niche industry … newsflash: most will not care! You’ll find they don’t mind that your firm has a focus, especially if you retain a group of clients outside your niche or work with multiple industries.

3. Team members who want to retain a diverse clientele are great candidates to continue serving clients in the “other” category. They can also stay engaged through specialty projects, onboarding new clients and team members, or researching new apps and updated processes.

4. Regarding a niche industry downturn—you can retain a healthy breadth of industries served or broaden your clients’ geographic footprint within your niche to reduce the risk of a regionally focused downturn. And even in a downturn, your clients will need your advice more than ever.

You’ve probably guessed that I like being in a niche. Keeping a percentage of industry diversification and expanding outside your region should reduce the risks of focusing on a niche industry or vertical. All things being equal, it pays to be a specialist!

Learn more about Client Advisory Services

Building your Client Advisory Services offering is about people, processes, and technology. Download our Grow Your Firm CAS eBook to learn more, or read more about these elements in our client advisory services series:

People

• Building an effective team
• Your firm’s client advisory services offering starts with people
• Find your ideal clients and understand their business goals

Processes

• Offering Client Advisory Services across the business lifecycle
• Value-based pricing

Practice management

• 4 ways to build your ideal advisory app stack
• To niche or not to niche: That is the question
• How to avoid scope creep in your advisory engagements