The simplest way to find your tax firm’s niche

A couple weeks ago, I wrote an article explaining a specific marketing paradigm through which you should examine your firm’s business development efforts.

Then a couple days ago, I made the case for why you should niche your tax firm.

If you haven’t already done so, I’d encourage you to read both of those articles. Those concepts will put more money in your pocket, period.

Assuming that you accept the arguments I’ve laid out in those posts (which you should, obviously), the next obvious question is: How do you define the target market you’re going to focus your marketing on?

There are a variety of ways to do this, and over the next few articles, I’ll share some ideas on this.

First up: Look and see if you’re already naturally serving a niche market.

Based entirely on where your office is located, or the networking circles in which you swim, you may already be serving a niche. You may never have given it any thought, but you may already be there.

Look at your existing clientele. Are there any specific commonalities? Are many of them in the same industry, same profession, work at the same employer? Connected to the same organization that you’re involved in, such as a non-profit you volunteer for?

If you notice a significant number of clients with some commonality like this, then congratulations, you’re already serving a niche. Now you just need to embrace that fact, and pivot your marketing to dominating that niche.

Still not so sure about this whole “niching” thing? Let me give you two awesome examples.

First, check out the podcast interview I did with Katye Maxson-Landis, CPA in Portland, OR. Katye’s practice is focused heavily on serving Oregon’s growing cannabis industry. Regardless of your feelings about marijuana, listen to the podcast episode to learn about how she recognized the niche opportunity and pivoted into it.

Second, it just so happens that I received a press release yesterday from a reader in Fort Lauderdale, FL, announcing the sale of his CPA firm to his staff. This firm focuses their services entirely on helping aircraft owners. Because of the sale and the niche, the new owners are simply changing the name of the firm to “Aviation CPAs”. Excellent, very excellent!

In The Profitable Accountant newsletter, we provide you with in-depth marketing strategies, niche industry breakdowns, and practice management best practices to help you build … Continue reading

12 Reasons Why You Should Niche Your Tax Firm

In order to run a more profitable tax firm, I’ve always advised tax professionals to specialize.

That means niche down into one or two specific target markets and narrow your service offerings.

We’ve all heard the old cliche: You can’t be all things to all people. And if you try, you’re simply going to spin your wheels and go nowhere fast.

I’ve clearly seen this in myself over the years. A clear lack of focus, changing directions too often, trying to do too many different things. It all results in, well… Zero results. Put another way, he who chases two rabbits catches none.

Unfortunately, I see a lot of accountants effectively doing the same thing. They try offering preparation of every type of tax return, while also doing bookkeeping, while also doing attestation, while also doing tax resolution, while also doing advisory in twenty different industries. They try to offer every possible tax and accounting service under the sun, to every profession, industry, and walk of life, without ever developing deep competency in any particular area. While they might make a living, they never actually build a real firm.

While there are rare exceptions, the majority of highly profitable companies have a narrow focus. They know what they do, and they focus on doing it well. Salesforce doesn’t build cars, and Ford doesn’t build CRM software. Outside of the absolute largest public accounting firms, most of the remainder of the IPA 300 run specialized firms. These firms typically choose to specialize in one or both of the following manners:

1). By offering a very narrow range of services.
2). By servicing a very narrow range of industries or professions.

For example, I know one large accounting firm that specializes in tax, accounting, and auditing for car dealerships. That’s it — nobody else. If you’re a engineering firm, they won’t help you.  If you’re a magazine publisher, they won’t help you. If you’re a manufacturing company, they won’t help you.

Car dealerships. Nothing else.

When I operated my tax firm, I offered one service: IRS and state DOR Collection representation. That was it, nothing else. I didn’t prepare tax returns, I didn’t offer bookkeeping. Nope, just tax resolution. On top of that, I had two very well defined niches that I served: Independent trucking companies in five western states, and large TFRP cases post-assessment. That was my universe.

Early last year, during a … Continue reading

Rise of the 1120S Practice

As we hurtle towards the 9/15 business return deadline, it seems like a good time to remind you of how much gooder this market segment is than the 1040 side of things.

In case you’re new to these missives, verily, I say unto thee:

1). The 1040 prep middle market is rapidly dying due to consumer software and RPA.
2). If >50% of your annual revenues are from the 1040 middle market, your business is totally screwed in the long term unless you pivot.
3). 2020 marks the second year in a row in which 1040 returns prepared by paid preparers has declined — and this decline will accelerate, whether you like it or not.

I could drone on and on about the impact of the two existing AI tax prep companies… How Block’s adoption of the Watson AI is just the beginning of the end… How applications like PwC’s internal K-1/W-2/1099 OCR engine will trickle down to our level in 3-5 years… How nearly 2/3 of IPA 400 public accounting firms already use either RPA or offshoring to complete their 1040 prep… Blah blah blah.

Yes, I’m telling you bluntly and unapologetically that if your tax firm’s revenue are primarily rooted in seasonal 1040 return preparation, your business will be DEAD within a decade. Yes, dead.

OOB, if you want me to use official IRM parlance.

I’ve been singing this song for about 3 years now, and the signs are all around us.

It’s time for you to either:

a). Adapt.
b). Retire.
c). Suffer the consequences.

I hope that you choose (a).

But how do you adapt?

Some quick, dirty, and broad suggestions:

  1. Pivot to the SMB (small-medium business) space.
  2. Target a specific high-income market (the subject of our December 2020 issue of The Profitable Accountant).
  3. Eliminate tax prep from your firm altogether (a solution I embraced for 5 years).
  4. Go do something entirely different.

In all seriousness, the SMB market is where it’s at. I spent eight years in tax resolution in that space, and if all my other business exploded into oblivion tonight at 8:42pm, it’s exactly where I would go back to.

Businesses will always need YOU.

Heck, do you remember the Great Depression???

Eh? Eh? No? Yeah, me neither. I wasn’t born until about 50 years later.

But when history and economics collide, awesomeness ensues. Back in 1929, when even the CPA credential was routinely scoffed … Continue reading