How a niche in Employee Retention Credits drives profitability and growth

It is far too common in tax and accounting for firm owners to get so caught up in being a practitioner that they fail to develop and benefit from an entrepreneurial mindset.

This was certainly true for us. Our firm began its life as a conventional tax practice, doing compliance work for a diverse clientele at an hourly billing rate. The frustrations inherent in this model set us on a journey to find a better way—one that led to a deep dive into business books, seminars, and consulting that revealed significantly missed opportunities in our approach to the marketplace.

Since then, we have corrected course and greatly benefited by niching down to hyper focus our services to only processing Employee Retention Credits (ERCs) for other CPAs, and we are confident that many other firm owners could similarly benefit from choosing a niche specialty.

We found this focus allowed us to build better service and better margins into our model. After carefully thinking through our systems, efficiencies, and processes for the ERC, we started providing credit processing to other CPAs as our sole service. Our aptitude for technology, and the special expertise we acquired in credit work, made us realize how much leverage we could command in our space. Firms with more conventional models were too overwhelmed with routine compliance work and high volume to aggressively pursue credit claims on behalf of their clients.

Narrowing in this way seemed risky at first, as we were turning away potentially high-paying clients interested in our previous comprehensive tax planning and consulting services, but it quickly paid off. Approaching other CPA firms with a streamlined solution that targets their pain points became a win for all involved: An easy solution for the CPA partner, quick and expert handling of credit claims for the client, and a consistent, scalable fulfillment process for us.

There are six factors firm owners should consider when thinking about how a niche focus can transition a practice from a conventional to an entrepreneurial mindset:

1. It is difficult to be a master of everything related to tax and accounting, so having a specialty focus makes it much easier to cultivate deep expertise, whether it’s staying on top of market conditions, legislative changes, or tax court cases.
2. Many tax professionals want to start with helping anyone who approaches them, but over time they find that they cannot really serve everyone well and start to rely on volume to drive profitability. Focusing on better service in return for higher margins allows for easier growth, less stress, a more satisfied clientele, and consistent profitability.
3. In thinking through how to niche down, consider how you might maximize the most valuable aspects of your current practice. Since our team has a facility with technology, we decided early on to automate a lot of the data cleaning and calculation work for ERC claims. As a result, we found natural synergies in our firm when technology combined with the special credit expertise of our CPA partners.
4. Think about which demographics could benefit most from your chosen specialty, and be willing to pay a premium for that added value. Early on, we identified real estate investors as one such demographic when we did general tax planning and consulting because of their higher net worth, our ability to plan proactively around their goals, and their appreciation of the value we brought to our client relationships. But these advantages were magnified even further when we switched to doing credit work for other CPAs, a demographic we understand very well—and one that is even better able to see the value our specialization brings.
5. Any kind of specialty focus can be a part of niching down. For example, having excellent production workflows can be as much of a specialty as knowledge or a market niche. We considered technical expertise, practice expertise, and market niching when we identified ERC processing for other CPAs as our chosen focus.
6. Apply this same logic to your own internal processes. Consider working with more third-party providers with key efficiencies that allow you to offload lower value work, giving you the freedom to pursue more profitable activities. We have outsourced a variety of internal functions to outside providers so our team can stay focused on its highest value work.

Dominion has come a long way since our beginnings as a general tax practice. A shift in mindset to a more entrepreneurial mentality caused us to take a careful look at our market, comparative advantages, and internal processes. Niching down to only doing ERCs for other CPA firms has radically changed our practice, and allowed a small team to produce amazing results through leveraging specialized knowledge and technology.

The best part is that we are confident that the benefits this entrepreneurial journey has brought us are accessible to anyone who similarly looks critically at their place in the market. This doesn’t mean that you necessarily have to become as specialized as we have. Simply adding a niche service line on top of your current offerings can do a lot to take your firm to the next level.