Finding a profitable niche; greater job satisfaction and higher revenues are two possible benefits.

Do all CPAs relish every aspect of their work? It seems more likely they prefer some tasks and derive less fulfillment from others. Those who get particular satisfaction from one type of project and who know they are good at it may want to consider limiting their practices to that one area.

Specialization-finding one or two niches in which to concentrate-can allow CPAs to focus their talents and build more profitable practices. Limiting a practice and turning away clients needing conventional services is a frightening and risky step, but consultants to the profession frequently advise that CPAs can earn more money by shedding difficult clients. Specialization offers the same opportunity to obtain higher profits and experience less frustration. This article discusses the pros and cons of picking a niche and how to start a targeted practice. WHY CHOOSE A NICHE? General practice can make it difficult to focus on work one does well, gain self-satisfaction and take pride in what's been produced. CPAs who try to offer all services to all people must be familiar with an increasing load of Financial Accounting Standards Board pronouncements, government standards and regulations as well as this year's batch of tax code revisions. It's possible to become competent in many areas but difficult to excel in all of them.

On the other hand, finding a specialty can provide a sense of mastery of one subject and it can mean less competition. There are many excellent general practitioners, but very few specialists who do only water company operational audits, or provide expert witness testimony for manufacturers or limit their clientele to visiting nurse associations or liquor stores. Yet, if someone has a reputation as an expert and is recognized as the top estate planner in the state, clients as well as other CPAs will come looking for him or her. Clients are more likely to choose an accountant who really understands systems analysis and procedures and controls in their industries over a CPA who does only occasional work in a certain field. Referrals will be easier to obtain because a CPA with a limited practice isn't perceived as a threat by general practitioners.

In addition, broad, thorough knowledge is respected, but special expertise can lend prestige to a practice. When people go to medical specialists, they expect to pay them more per hour or per visit than they pay their internists. CPAs who choose to specialize also will find that clients are more open to higher rates. That offers practitioners several options: the choice of increasing their revenue streams or earning the same amount in fewer hours, leaving themselves time for practice management or development or simply for their own personal lives.

Specialization may help cut down on legal liability. Legal experts advise that knowing clients and their businesses very well is one important factor in avoiding lawsuits. Those who work in only one area come to know more about the industry, the kinds of companies in it and the engagements performed for them. In addition, the consulting services usually performed by specialists are low on the list of engagements most frequently involved in lawsuits.

Niches are less seasonal than more traditional accounting work. That doesn't mean a practice focused on one area won't be volatile or experience peaks and valleys, but the peak can come in August instead of February, which means firms can use staff during the summer who might otherwise be idle, waiting for tax season to roll around again. Choosing a pair of countercyclical specialties ensures a steady flow of engagements throughout the year. Examples of specialty areas that are unlikely to peak at the same time of the year are school districts and convalescent care facilities; heavy manufacturing and professional services; and microcomputer consulting and litigation support.

THE DOWNSIDE

Some CPAs simply won't like specialization-they enjoy instead the variety and novelty that are constants in broader practices. Niche marketing is a fashionable practice management strategy, but it would be a mistake to sacrifice a thriving general practice simply for the sake of change.

Practitioners take a considerable risk by limiting their client pools when they specialize. If a firm's expertise is in utilities, for example, there simply won't be as many utilities as there are other kinds of businesses. CPAs may even find themselves in the unenviable position of having to turn down work because, for example, they aren't familiar enough with tax laws to do the tax return of the person sitting next to them at the last Chamber of Commerce meeting.

If CPAs forgo all traditional accounting engagements they automatically must expect their income to vary as they branch out into new territory. Also, they must be prepared to be top-notch marketers. Many of their assignments as specialists will be one time only-their clients will not necessarily return year after year as tax return and audit clients do. There may be follow-up work after completion of financial ratios and analyses, but the main engagement won't recur every year; the same is true for computer consulting and a variety of other engagements. As a result, specialists must be comfortable with marketing if they are to succeed. They must be salespeople, not order takers.

They must spend a lot of time on the road, because frequent travel usually is necessary to reach prospective clients in narrower markets. That's not always true, but the narrower the niche, the more likely travel will be required. In addition, if clients are paying more for expert advice, they want to see the expert-not his or her 25-year-old staff member. Specialists who do build competent staffs must invest more in their training to justify the premium rates the operation charges.

Finally, sole practitioners likely will have trouble selling their firms if their expertise is the business's main asset. Specialists who work alone may want to merge with other CPAs or hire staff dedicated to building a separate traditional services practice to ensure retirement funds and firm continuity.

HOW TO DO IT

Those who choose to narrow their practices to one or two niches have myriad options from which to choose. CPAs can specialize by function. For example, data processing is too large a specialty, but microcomputers is a possibility, although one might choose only to install them, do feasibility studies or work on networks between 6 and 100 terminals. Litigation support, a broad field comprising a variety of engagements, is another option. Partnerships of all kinds split up and re-form and there are financial questions involved all along the way; the financial aspects of divorce alone offer numerous specialty opportunities.

CPAs frequently learn a great deal in one engagement that they can use in other functions. Someone who has done operational audits for companies likely has obtained enough knowledge about human resource procedures and regulations to write personnel manuals, for example, or consult on the subject to other firms or companies.

There is also the option of becoming what was once called an efficiency expert, someone who does business analysis and monitors financial controls and ratios. In addition, there are CPA firms that do nothing but insurance settlements, working either for insurers or claimants.

There is the option of specializing by industry, even narrow sectors of industries. One firm works only with visiting nurse associations, offering thorough and unique knowledge of this niche. The firm has offices in Connecticut, Illinois, Massachusetts and Florida, built serving nothing but these associations.

Each area of expertise has its own marketing opportunities. Those who work heavily with liquor stores, for example, offer a rare familiarity with Bureau of Alcohol, Tobacco and Firearms controls and state licensing requirements. Some CPAs market their unique experience with the bonding aspects of construction contracting. One CPA, frustrated by the competition among practitioners to serve medical professionals, targeted chiropractors exclusively through the state chiropractic association and now has over 100 chiropractic office clients throughout the Midwest.

The possibilities for combining specialized functions and industries are endless. Some people are experts in the tax aspects of not-for-profits. Others serve as rate-case expert witnesses for utilities or prepare Federal Communications Commission filings for television and radio stations. Numerous newsletters and other trade publications offer insights into all of these industries and their particular financial concerns.

TAKING THE FIRST STEP

Marketing is vital to narrowly focused practices, so CPAs should start out knowing precisely what's being marketed and stick to it in order to support their credibility. Many CPAs already are on the road to specialization; they are better at some things than others and have built a reputation as experts on the dry cleaning industry or on family tax planning.

CPAs can approach specialization in two ways: They can build deep expertise and then market it, or they can identify a need in their communities and then develop the skills necessary to fill it. In either case, CPAs must prepare themselves professionally for their new niches. A possible starting place is the American Institute of CPAs consulting practice aids, which cover small business and technical engagements as well as consulting practice management. The AICPA library will research members' questions and provide copies of relevant materials. CPAs also can turn to other specialist practitioners for information and assistance in new areas as well as to their state societies.

A good way to begin a new practice area is by offering to do subcontracting work for another professional who has the contacts or skills a CPA would like to develop. CPAs can build from there by taking all the training and continuing professional education available on the area of interest. Starting out slowly offers the opportunity to confirm one's interest and abilities in the new field.

Those seeking to specialize should attempt to give the client more than he or she asks for on the first few assignments. This is done not only to build a good reputation but also to test whether one has a flair for the work and whether clients will appreciate extra effort. The response one gets for providing this extra effort also helps determine whether there's a market for professionals who are skilled in this field.

Early on, specialists should assess the seasonality of the field to see if it complements the r existing practice. They also should determine whether it will be possible to delegate work to staff and, if so, what sort of training will be necessary.

Practitioners will already own all the technology necessary to run a CPA firm, but they may need new software to handle different kinds of clients. They can learn about what clients use by reading industry journals or attending national trade association conventions and researching what vendors have to offer. CPAs should find out what their clients or their competitors are using and get demonstration packages from manufacturers.

FINDING CLIENTS

Other CPAs are a great source of referrals, especially if they don't perceive the specialist as a competitor. A finn in a nearby town may be happy to turn over estate planning clients if the expert planner in exchange refers audit clients to that firm.

Trade associations are another important source of clients. The Chamber of Commerce and local business clubs are excellent organizations, but they are not the places to market specialized services. Instead, CPAs should attend and perhaps give presentations at state trade conventions and local chapter meetings as well as write articles on their specialties for trade publications. National trade conventions, however, can be a waste of time because it's too difficult to target the clients local firms are looking for and because small practitioners will get lost amid all the large, well-financed companies looking for prospects.

No matter how sophisticated marketing techniques become, client referrals remain one of the most important sources of new business. It's usually easy to demonstrate the value of a specialty engagement to a client because the CPA is offering something out of the ordinary and frequently has the chance to deliver more than the client expected. A CPA who helps a client achieve significant savings by auditing the company's laboratory testing procedures and suggesting improvements not only gets personal satisfaction but also likely leaves behind a client who'll recommend the firm's services to others. Someone who examines a client's human resources management and finds that flaws in the company's affirmative action program leave it open to lawsuits has probably done a good job of convincing the client of the engagement's value.

A WELL-RUN PRACTICE

CPAs who specialize must ensure they have a financial cushion that will afford them the time to build a successful practice. Specialization takes more effort and usually must be done in large part by more experienced practitioners.

Specialists should do interim billing and insist on prompt payment from clients. Many of the engagements will be similar, so CPAs should be able to standardize workpapers, transmittal letters and other documents.

Up-to-date reference books on the firm's chosen industry or function are vital. Sole practitioners who want a second opinion on the validity of their advice in tax or financial reporting or anything outside their expertise can turn to other CPAs and pay them for their time. The AICPA and state CPA societies have referral services; in addition, CPA association membership provides a wealth of expertise to members.

CPAs advise clients to write business plans but often fail to do so themselves. Quantifying how the business is doing and setting targets for future practice should be top priorities, especially at the start of a new, unique practice. Practitioners should not only budget revenue and expenses but also set goals for new clients and output. In creating a budget, they should remember that an attractive office certainly will help bring clients to a fledgling practice.

It's important to set a realistic timetable for business growth. Those who find only one client for the slow summer season have a base to grow on in the future. For help in selecting a specialty and setting goals, CPAs may want to contact the AICPA management of an accounting practice committee at [phone] for the names of people who've tried similar ventures. A REFLECTION OF

THE PRACTIONER

The options for specialization are as varied as the CPAs who adopt this career choice. Practitioners may devote their entire practices to one niche or may adopt a couple of specialties to focus on during the off season. The percentage of the business devoted to the specialty depends on the practitioner. A niche that is only a small part of the business can still be worthwhile if it's profitable and enjoyable. n