Benefits for Specialty Accountants in Niche Industries
Although accounting has often been described as a profession and industry that is fairly recessionary proof, is that really true?
For the foreseeable future, individuals and businesses still need CPAs and accountants to prepare and file tax. Companies still require audits. The consulting and advisory services many accountants specialize in will continue to be in demand.
If everyone, seemingly, needs their accountant, then the industry hasn’t suffered, has it?
Accounting firms are a good barometer for the U.S. economy. You probably noticed during the last several years that revenues at some of the largest accounting firms declined. Your own revenues may have as well, especially in industries hit hardest by the downturn: construction, real estate, architecture and manufacturing. Similarly, client attrition rates have probably increased as more businesses have either gone out of business or had to downsize dramatically.
What I’m finding, however, is that accounting firms are becoming more optimistic. They are hearing consistent news about economic improvement and seeing clients rebounding financially. Now that the economy is on the upswing, accounting firms are encouraged to target certain industries that were popular 5-10 years ago. Here are several examples of industries where we are seeing more activity.
In most areas of the country, residential and commercial real estate have greatly improved after a difficult time period. Now that the excess inventory has been reduced, local markets are becoming hot again. As a result, accountants who serve the real estate industry are seeing an increase in leads from prospective clients and more activity from existing real estate clients.
Serving this industry means you must help these organizations minimize risk. An accounting firm specializing in the real estate industry must understand its nuances to help clients minimize tax liability, improve internal operations and manage cash flow.
Restaurants and Hospitality
During the recession, no one stopped eating, but they did not eat out as much as they did prior to 2008. Accounting firms that serve the hospitality industry are seeing an upswing in their business. According to the National Restaurant Association, restaurants in particular, which were at an all-time low in January 2009, are now expressing optimism in capital expansion and hiring trends.
Accounting firms serving this industry must understand and make recommendations on operating costs, inventory management and seasonal trends in order to help their clients stay profitable. Firms must also offer specific services to their restaurant clients focused on reducing expenses, streamlining operations, improving financial controls and increasing profitability. Helping restaurants manage payroll, with complex wage and hour regulations, also helps them stay focused on operations.
How to Capitalize
As accounting firms look to grow their businesses, they should analyze the industries they currently service, determine what the hourly realization rates are by industry and develop a niche toward the higher potential areas (industries and/or services). In other words, accountants need to determine which industries may be experiencing higher growth right now and how these sectors can impact their business. Then, firms should target these industries for higher rates of growth at more attractive hourly realization rates.
How can you define your niche and/or develop multiple niches? We encourage you to look at their existing client base to see if there is a pattern. Chances are you already know which niche(s) you want to serve; you may just not have thought about a strategic way to go about developing these niches.
For example, many accountants look at the concentration of businesses to see if there is a pattern in their local area, such as technology companies in the Silicon Valley, defense contractors and nonprofit organizations in Washington, D.C., or hospitality in a certain vacation destinations. Some examples of industry-based niches include doctors/dentists/medical, equines, hedge funds, oil and gas, religious organizations, and agribusiness/farms/wineries. A few examples of service-based niches include back taxes, defense contracting, divorce accounting, estate and trust, forensic/litigation support, international tax, QuickBooks and payroll.
The key is to differentiate your practice from competitors and become the leader for a type of service. As you craft your niche expertise, it becomes easier to acquire new clients, operate at higher profit margins and retain clients longer. Now is the time to capitalize on an uptick in the economy and improve the quality of your firm.