When an accounting firm establishes any formal niche, thoughtfully measuring your foothold in various industries and considering the reception you'll have within them can mean the difference between success or failure.
Take an Inventory
The importance of completing a full inventory cannot be overemphasized.
Inventory the clients you have in or related to the industry as well as your referral sources and potential referral sources, associations or other networking and skill building opportunities, and--most importantly--assess the industry's current needs (look BEYOND accounting needs, identify as many as possible), economic situation & outlook, price sensitivity issues, and other players in the market meeting those needs.
Then inventory your internal resources, services to offer, experiences to cite, etc., and see how complete a picture your firm can paint. Where there are blanks, consider alliances for filling them and determine anyone you can collaborate with to do so (lawyers, bonding agents, software companies, etc).
Choose the Right Industry
Picking an niche area that is likely to be responsive to you as you establish a foothold is important unless you have unlimited resources and patience. I'll pick on the construction industry to illustrate my point. I've found in many markets that the construction industry can be particularly tough to break into, and contractors can be less than desirable clients to keep, for several reasons.
- learning curve: prospects often need to be educated that they have a need
- fee sensitivity: when they buy things like audits that aren't "required" they do so somewhat grudgingly because they cost a lot and the companies often don't feel strongly in favor of the benefits over the cost - it can be like pulling teeth to get payments and cost justification can get old
- sophistication of accounting systems and processes: let's face it, contractors usually aren't the most organized business people (and I'm married to one so I can say that with some authority) so, while this potentially creates a lot of work for the accountant, it is not work the client is usually pleased to pay good money for and many don't have a great respect for smooth bookkeeping so frustration can mount that the problems you will fix as the accountant will recur over and over again
- competition is fierce with many CPA firms, large and small, vying for the same pool of prospective clients!
With all of the above issues, I am still baffled as to why so many accounting firms desire to penetrate this market! Maybe the need in the construction industry is so huge and there are enough "great" companies out there to make up for the flakier ones. Maybe CPAs just like a challenge!
Before deciding which niche to pursue, consider the perils of each vertical market before jumping in. Don't start with the toughest markets to penetrate. There's probably some lower-hanging fruit that is more ripe for the picking...and tastier, too.