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 target market workshop I was conducting, one of the attendees became flustered, frustrated, and consternated over this. He simply could not wrap his brain around the concept of telling a potential client, “No, I can’t help you. Please call this person I’m referring you out to.” It was just too much of a stretch to his view on business to turn away a prospect. I didn’t really have a good explanation for him at the time, either, and that’s on me. To me, it’s just an inherently obvious way to operate. But in the ensuing 19 months, I’ve spent a lot of time thinking about this, and now I have a better answer.
Thus, I present these 12 reasons why you should niche your tax firm:
1). By narrowing down your service offerings, you’ll develop deep professional competency. Instead of being a jack of all trades, master of none, you’ll actually develop mastery at specific skills.
2). By developing this mastery, you become a specialist. Specialists are worth more than generalists — they are simply able to command higher fees. My classic example is: Who makes more money, the cardiac surgeon or the family physician? They’re both MDs, but one earns 5 to 10 times what the other does.
3). By becoming a specialist, you become known for that specialization. Because of that, you’ll get more referrals from other professionals. You position yourself UP the value chain in this way, generating far more client via word of mouth than a generalist ever can.
4). Your lead generation marketing becomes easier and more effective. If you’re a generalist, marketing is hard, and the conversions suck, because generic advertising sucks. Just plastering up a laundry list of services with a phone number and a website is horrible advertising, it’s very ineffective. But when you specialize, you can create specialized marketing campaigns, specialized offers, that convert much better.
5). When you niche down into an industry or profession, your marketing costs drop like a rock. Broad, generic advertising is expensive, because you’re trying to reach a mass audience. But narrow, niched, targeted marketing costs much, much less. Industry specific publications, for example, are cheap to advertise in when compared against mass market publications. Online, your click costs go down as your targeting narrows. And we’re not talking small savings, either — I’m talking 80% or better reduction in click costs.
6). Your follow up marketing becomes easier and more effective. If you’re a generalist, your follow up marketing to your unconverted leads is all over the place. It has no cohesion. But if you’re niched, you always know exactly what you’re going to talk about, and to whom, in your follow up marketing. Side note: Your follow up marketing to unconverted leads is the most important marketing you do.
7). It becomes easier to put systems in place. When you’re providing 25 different services, you never take the time to build out systems because of overwhelm. When you specialize, it’s just easier and less daunting to put systems in place. Systems = efficiency, and efficiency = profitability.
8). You build greater equity in your firm. E.g., your firm is worth more to a potential buyer of your business. Because you put systems in place. And because your fees are higher. And because your NPP is higher. And because your CAC (Cost to Acquire a Client) is lower. All the KPI’s are just better.
9). Aside from service-level competency, when you niche into a profession or industry, you develop specialized knowledge about that profession or industry. You learn about that industry’s KPI’s, how to benchmark competitors against each other, keep abreast of best practices in that industry, etc. That allows you to become that proverbial “trusted adviser” to that profession or industry. You will simply never build that by trying serve anybody and everybody.
10). Growth plans become clearer and easier. After you’ve built your business, the “next steps” become much more obvious when you’re a specialist in a niche. When you’re a generalist, chasing growth feels more like slinging spaghetti against the wall and seeing what sticks. Not a good way to run a business. Spinning wheels, remember?
11). You’ll have a happier, healthier company. Staff will be less frustrated, because they know what they’re doing and how to do it (back to systems). There will be less stress and anxiety as a whole in your business. Recruiting staff becomes easier, because job roles are much more clearly defined. The business won’t operate in panic mode 24/7, which quite frankly is how the majority of tax practices operate. That’s not healthy for the business, the staff, or the clients.
12). You will be happier. You’ll be less stressed out because you have focus, instead of running hither and thither. You’ll feel more productive, because you are more productive. You’ll have deeper relationships with a smaller number of clients that are paying you more money. Oh, and you’ll have more money. The income of a niched, specialized tax professional is higher than the generalist. They accumulate more personal wealth.
If you’re one of the readers that just finished the 9/15 extension deadline, and you’re rolling straight into the panic and anxiety of the 10/15 extension deadline, after having no break from the extended original deadline on 7/15 instead of 4/15… Well, then you really need to pay attention to this message. Specialized, niched tax firms don’t have all that stress and anxiety, and they’re making more money than you. Blunt and rude, but true.
If you’re ready to get off the hamster wheel and build a specialized tax firm serving a narrower target market, I’d encourage you to subscribe to The Profitable Accountant newletter, which is all about how to run a more profitable tax and accounting firm. For more info, head to:
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