Niche services: starting out to succeed.

• Author: Fensin, Daniel

Historically, companies have relied on their CPA firms for advice on a variety of issues. Because of CPAs' involvement, whether as bookkeepers, auditors, or tax preparers, they were in a unique position: They had the trust of their clients as well as significant knowledge of the clients' business, making them the natural choice to be advisers to client companies. Some CPAs recognized that offering additional services could provide opportunities for growth and added profitability to their own practices, as well as considerable value to their clients.

CPAs have educated themselves and other firm members as to the reasons their business models need to change. Clients are becoming more sophisticated and are themselves performing much of the compliance work previously done by their CPA firms. They are demanding other services and are willing to engage non-CPA professionals to provide those services if CPAs are unable (or unwilling) to do so.

As CPAs have struggled to take their firms in this new direction, some have done well, while others have failed. Sometimes, the new approach collapsed under the weight of disinterest, distrust, lack of knowledge, and unwillingness to change. For instance, a firm's visionary may have been unable to convince partners and associates of the benefit of expanded services.

Eliminating traps

Even today, as many CPA firms attempt to develop additional services, they need to be aware of the following possible pitfalls that can hamper an initiative to expand services:

* Lack of overall strategic direction for the firm

* Uncertainties as to clients' needs

* A poorly defined business plan

* Lack of real desire to broaden services

* Lack of the expectation of profit (expanding services are seen as a defensive measure.)

* Distrust by CPAs of consultants and other non-CPA professionals

* Uncertainties as to compensation and career paths for employees outside of traditional practice

Those firms that are doing well in providing additional services today have managed to overcome these obstacles.

Most importantly, these successful firms have embraced three elements critical for success in this area:

* Create sound business plans that fit the context of the firm's overall strategic mission.

* Understand that clients are willing to pay a commensurate fee for services that add value to their business.

* Be willing to employ and refer consultants and other professionals to clients.

Focusing on service success

Firms that continue to...