Segment for Success
Or, “Keep Your Niche Out of the Ditch!”

By Gale Crosley, CPA

Reprinted with permission from June, 2007 edition of Accounting Today

    “Segmenting” is nothing new in our profession. Segmenting is another term for dividing a marketplace (I call it an “ecosystem”) into well defined groups of likely buyers. It’s the foundational step in developing industry niches and service lines.

    Although segmenting, and then developing niches, is a commonly recommended strategy, many CPAs remain relatively unsophisticated regarding this technique. The result is that potentially remunerative service lines and industries die on the vine. Niches get stuck in ditches and potential opportunities, become road kill!

Yes, But Why?

     What makes segmenting so right for right now? I see three primary reasons.

     Reason one: Our profession is mature. At this stage, the buyers are increasingly sophisticated, with clearer expectations about what they need and want to purchase.They expect specialization and unique value.

     I liken the environment to a visit to Starbucks. A few years ago, naïve in the ways of caffeine, I stumbled in asking for a “large coffee,” assuming a typical coffee shop environment. But I soon learned that yesterday’s cup o’ joe had become a grande latte sans foam. Starbucks has matured and we have become educated buyers!

     Market maturity also yields more intense competition, as well as a need to work harder to differentiate yours as the firm best able to meet buyer expectations. Segmenting markets and then specializing at a level others can’t or aren’t will enable you to set yourself apart.

     Reason two: Sarbanes-Oxley created a multi-provider environment. Pre-SOX there was mostly a one-to-one relationship between firm and client. Today, starting with certain services that are “conflicted out,” multiple firms necessarily become involved with a single client. This leads to a general marketplace reasoning that assumes: “If multiple providers are the norm for conflicted-out services, why not pick and choose the best firm for business valuation, employee benefit plan audits, SAS 70 reviews and other needs?”

     Although this trend started at the top of the market, it is now moving into the midmarket environment. As such, it behooves the savvy firm to become known for a wellhoned specialty.

     Reason three: Large opportunities continue to come down-market. This is a related fallout of Sarbanes-Oxley. And the result is that large amounts of quality work continue to fall out of the top end of the market, as firms grapple with staffing shortages. Savvy firms have become acutely aware that the quality of their future client base depends upon choices they’re making today – choices about which opportunities to pursue, and which clients to prune. These larger opportunities are very much up for grabs among midmarket firms.

     All other factors being equal, the firm that can create a compelling vision of itself as provider of choice for a particular service line or industry will win the business more often.

So Now What?

    I firmly believe that segmenting, and niching, are here to stay and that the days of the general practitioner are numbered. These strategies will set the strategic tone for market penetration. Their potential to help grow your firm is more compelling than ever before. But like any professional skill, defining markets and segments takes practice. I urge firms to acquire the most training, coaching and knowledge possible about the discipline of product management. A great book to consult is Market Leadership Strategies for Service Companies by Craig Terrill and Arthur Middlebrooks.

    Invest in doing it right. Product management will be a highly sought-after specialty, just as marketing was a decade ago. When you manage your “product” (services) through segmenting and niching you are managing, and guaranteeing, your success.

Copyright © 2007 by Crosley + Company

Gale Crosley, CPA, was selected one of the Most Recommended Consultants in the Inside Public Accounting BEST OF THE BEST for 2006, 2005 and 2004 Annual Survey of Firms, and one of the Top 100 Most Influential People in Accounting by AccountingToday in 2006. She is founder and principal of Crosley + Company, providing revenue growth consulting and coaching to CPA firms. She brings more than 30 years of experience, featuring a unique combination as a practicing CPA in two national accounting firms, along with significant experience in business development in the cutting edge technology environment with such firms as IBM and MCI. For more information, visit the website at www.crosleycompany.com or contact her at .