The rise of specialisms in professional services

“We're seeing a lot more alignment around firms having specialisation in one or two different industries,” says Guy Pearson, co-founder and CEO at client engagement and commerce software platform, Ignition. “There's a good exchange of value; a higher value per client means the average revenue per client goes up.” Ignition’s software offering focuses on accountants and bookkeepers, and has seen an increasing number of the firms which use it developing a niche. The more successful firms have developed a specialisation within specific different industries to provide value added services to these individual sectors. With over a decade of experience in professional practice and chartered accountancy under his belt, Pearson’s background comprises accounting in public practice and a self taught knowledge of technology. Prior to launching Ignition, he built an accounting firm from scratch which he still runs on the side. Covid was a “great forcing function”, says Pearson, for businesses to reflect on business models and forecasting, and subsequently many accountants realised they could only provide ongoing advisory for certain segments of the market. Moreover, there is increased revenue for both businesses once an accounting firm develops a niche, starting with the accountant and cascading into the clients’ business. According to the Office for National Statistics (ONS), the professional, scientific, and technical industry accounts for the largest number of UK companies, representing 16.4% of all registered businesses in the country. Meanwhile, the recruitment company Hays reveals that the areas within accountancy and finance roles which are poised for the high demand are audit, risk and compliance, shared service centres, and payroll. Why go niche? “It helps accountants understand the specific industry a client is in as opposed to being a high street firm that deals with everybody that walks in. If you're dealing with all those, you don't necessarily understand that industry,” Pearson explains. However, by entering a niche market, accountancy firms will develop a deeper understanding of relevant suppliers and their prices, foot traffic, and all the systems they need to implement to obtain “better data” to “better advise” clients. “As people niche, they usually end up being in demand,” Pearson adds. By developing a deeper service offering to one client or one client group versus a “very light” service offering, accountants can build a circle of influence, build sector-specific business models and earn higher revenue, but also better help the entrepreneurs they are serving by having a “specialised set of knowledge”. “When you build a niche, you get value out of your IP. You have the client service you provide, i.e. delivering the outcomes for existing clients, but you're also able to attract other clients in that sector, so you have a secondary income stream.” Once an accountancy firm has implemented a niche service offering, these firms must delve into the semantics and gain an understanding of the competitive landscape of this respective sector in order to enable clients to execute their growth strategy and conduct pricing, sensitivity analysis, marketing, payback, and follow the velocity at which clients wish to grow the business. Despite the opportunity for increased profitability for accountancy firms, there are inevitable challenges that come with narrowing a client base. Pearson notes that the greatest risk of niching is that firms can risk losing out on clients as they haven't put systems, policies and procedures in place to assist their new client base, and they either haven't trained their team accordingly or they struggle to find “good people” in the first place. “The people that struggle the most are solo operators because they're trying to change their systems, and trying to win new business while trying to service their existing clients, and this is a lot to deal with all at once.” Another challenge that comes from focusing on a specialism is learning about the particular niche and being comfortable not charging for that. “You cannot charge for a lot of this work and there is a lot of work to be done – for example, learning software, key metrics, how they operate, and who the ‘major players’ are in the market. You will not get paid for the above, but it will be the key to your success.” Pearson highlights that nicheing is successful because accountants are able to rinse, repeat, template, automate and be in front of issues for a particular niche of business. Moreover, accountants will be faced with the difficulty of turning down potential new clients; It’s very hard to refuse a new client that simply lands in your lap because they don’t fit the niche you’re wanting to build.” Overall, there is “greater ability to better help an entrepreneur succeed” and therefore, due to the exchange of providing value, accountants can also charge more. “If you build a great client base focused on a particular area, you can build up the value per client. If you have to do the same thing for 10 different people, you learn a smarter way to do it and you then focus on efficiency and make more money out of being more efficient,” Pearson says.. Establishing a niche The “only way” that accountants can achieve this is to change their systems, implement automation, share knowledge base and narrow their client base. “Nobody likes paying for something they don't perceive they get value out of, and accounting is under attack on a transactional level,” Pearson says. He reveals that there is a transactional limit and pressure for businesses to push prices down, particularly with the rising inflation levels within the UK, however by choosing a specialism and using technology to automate financial services, accountants firms can increase revenues. However, if accountants fail to make these changes and don’t adapt from their previous working structure, they won't get paid as well per hour to solve those problems. “You will then be left with a business that doesn't make as much profit as it used to.” Ultimately, by increasing efficiency and freeing up time through technological implementation, firms can add another client to their business rather than having to spend more time conducting menial tasks. “There's very few accountants that think about how their clients run their day to day,” he states. By developing fluency in how a clients’ software integrates with their business, accountants can generate “accurate” reporting and start building benchmarking. “Understanding the software that drives the business is much more valuable to an entrepreneur, so you can correlate that with your financial acumen,” he adds. How to choose a specialism By selecting a specialism in an industry you are passionate about and have experience in will make the move less likely to “feel like work,” Pearson emphasises. “Find a sector or a couple of business streams that you love and that you're good at, and focus on trying to find more customers within that market so you can build a niche. You have to feel like that about the area you want to serve and niche in otherwise you will be miserable.” Overall, to go about implementing a specialism, it is recommended that accountants must understand the common business models within the sector they are choosing to specialise in, the relevant software and systems typically used for clients work within this industry, and to understand whether the work is project by project or cyclical. He says: “Make sure you understand the software both at the top, which is the system clients use to run their actual business, whether or not a ledger or payroll a particular size is applicable and then what metrics they need to better run the business. A business model is fairly simple, so you just need to understand the flow through. “Furthermore, accountants must uncover where their client demographic hangs out, albeit at industry events or online forums. Your challenge is to then put yourself in a position to become the expert for that group, and you'll end up with the client base on the back of that and be able to help add value,” he concludes. By the same token, specialised firms must build and execute a go to market strategy as most accounting firms grow based on referrals. To target a niche, firms must win their first clients in that niche if they don’t have any/many, which means they need a marketing strategy and to think about how to get in front of these businesses to build up a referral network again, according to Pearson. “Staffing is the biggest thing to align – making sure you have the right people on board, whether this is tech staff, speciality advisors, or your marketing team. And then you need to train people in the market you serve and the key metrics, tools, and issues facing this industry in an ongoing fashion. Likely this will mean an increase in spend before you see an increase in revenue.”

The rise of specialisms in professional services

As the accountancy sector moves on from the pandemic, there is a huge opportunity for businesses across professional services to change strategy and exploit a niche more fully. Accountancy Today explores the pros and cons of delving into a niche market, and how to implement a specialism

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