The world of business is getting more complex and sophisticated by the day. Data, analytics, specialization, best practices, and experience continue to become more and more domain-specific. While every accounting professional undoubtedly needs to understand general principles of economics, business, and accounting, being an excellent generalist is no longer what will best empower the small business entrepreneurs of 2020 and beyond.
As you know from our company story at Ceterus, one of the most significant (and successful) decisions we ever made was to shift from doing “everything else” for practically every type of customer, to focusing on a very small handful of niches. I remain firmly convinced that the smaller the industry/vertical/niche, the more focused your expertise will be and ultimately, the more value you will provide to your clients. Accounting professionals who want to empower SBEs (and increase their rates, retention, and referrals in the process) need to be industry experts. Here’s why:
Industry Specialization Provides More Consistent Processes
There’s no denying it: the process to generate financial reports is a critical function of accounting. But this same process that has been the backbone of accounting for so long is also what’s holding the industry back. When professional accountants get stuck in the process-oriented work, they’re hindered from spending time delivering high-value financial consultation (business therapy!) to their clients.
This doesn’t mean we need to ditch the processes, though. They just need to become more efficient. And one of the keys to efficiency is by eliminating variables in a process. Later on, I’ll discuss how to leverage technology and partnerships to reduce the process work, but regardless of the tools or resources you bring in, a narrower industry focus with fewer variables will always improve your firm’s performance.
The variables I’m referencing include:
systems of record (point of sale, practice management)
the accounting basis (accrual, cash, modified accrual, etc.),
the systems for accounting processes (payroll, accounts payable, general ledger, etc.)
the standard procedures you and your team follow to generate the financials
the account structure of the chart of accounts and financial statements
the presentation of the financial statements (year over year, monthly trends, etc.)
custom/special reporting to provide the additional information and analysis your clients love.
Every single one of these variables in your accounting process are improved and streamlined when you focus on an industry. You can reduce to a few or ideally a single way of handling each of these simply by focusing on an industry. I know this because I have plenty of experience doing it the wrong way, trying to serve hundreds of clients in an array of industries at once. The moment we shifted our focus to just a few industries, we were able to create consistent and repeatable processes that ultimately enabled us to serve thousands of small business entrepreneurs. Not to mention, those streamlined processes made our lives better and our client’s lives better!
Industry Specialization Provides Better Data
Financial consultation is powered by analytics. Analytics are powered by information. And information is powered by data. At the end of the day, everything you do — from reporting to financial consultation — depends on the quality of your data.
In nearly twenty years working with small business entrepreneurs, I grew incredibly frustrated with the quality of each individual business’ data quality, let alone that of their industry peers. How was an entrepreneur supposed to understand their business when the data provided to do so was so inconsistent? How could we achieve our mission of empowering SBEs when data quality (or lack thereof) was getting in the way?
You guessed it: industry specialization.
When you standardize processes within an industry, you can control the data of the client’s business itself, making it easier for you to report and advise. As your client base within that industry grows, you suddenly have a collective of businesses adhering to those same processes, creating benchmarked data that most small business entrepreneurs have never had access to. Industry focus allows you to dramatically improve the data from which to glean information, from which you then provide analytics, and most importantly from which to base your financial consultation. By focusing on an industry, you not only solve the problem of data quality, you create an entirely new way to provide value to your clients.
Industry Specialization Provides Deeper Understanding of the Business Drivers
I will make a bold statement, which I believe is 100% accurate: if your client knows more about the key financial metrics of their industry than you, they will not be your client for long.
For instance, if you work with restaurant clients, you must understand what is poor, average, and great food cost. If you operate in many industries, it is impossible to truly remember and know these things off the top of your head. Most good entrepreneurs understand the key drivers of their businesses, and they’ll see through it when you don’t, too.
By focusing on an industry, you become more attuned to all of the critical business drivers within that industry. You’ll gain this knowledge without even thinking because you’ll monitor those drivers with your niche clients every day. When you understand the drivers, the nomenclature, the key systems and vendors they rely on, the macro-economic impact to their business, you can truly become the financial consultant your clients need and in time, the type of partner that all small business entrepreneurs will demand.
To sum it up: industry focus provides you and your clients with more consistent processes, better data, deeper understanding of the business drivers, and the ability to quickly and effortlessly help one client with information gleaned from another client, truly demonstrating invaluable expertise. Determine your industry specialization and you will be successful long into the future.
If you have an industry specialization, and you are looking for ways to scale your delivery, contact us!