The age old debate in public accounting is whether to be a specialist or a generalist. Both sides have their arguments but which one is really the best? Generalists will tell you how it’s better to work with a variety of clients and learn more about different industries. Specialists, on the other hand, will counter that generalists can’t possibly service their clients as thoroughly as a specialist, and working with only one type of client offers specialist a competitive advantage over generalists.
Both arguments have their truths but it ultimately depends on the goals and interest of the individual accountant. This article will detail the difference between generalized accounting services and specialized accounting services, and how to be successful in whichever path you choose.
Accountants can either specialize in the services they offer or they can provide the entire gambit. Essentially there are four options when it comes to specializing or being a general practitioner:
- Offer a broad range of services to a broad range of clients
- Offer a broad range of services to clients in a specific industry
- Offer specialized services to a broad range of clients
- Offer specialized services to clients in a specific industry
Types of Services
There are three broad levels of services that can be provided to a client:
Accounting/Bookkeeping – This is the lowest level of service and does not require extensive knowledge or expertise. However, there are distinct bookkeeping needs for specific industries, like job costing for the construction industry.
- Low fees due to high competition and lack of specialization.
- Requires an increase in volume of clients to make significant revenue
- Focus on automatization
Compliance – These are the services that have to be done: tax returns, sales tax compliance, financial statement reporting, etc.
- Fees range based on complexity of compliance work – 1099 reporting yields low billing rates while large audits can cost thousands of dollars.
- Requires a range of expertise and industry specific knowledge based on compliance work.
- Focus on gaining knowledge and expertise.
Advisory/Consulting – These are services that are not required but can transform the way a business functions. These range from cash flow management to business, tax or attest consulting services.
- Fees can be considerably high especially for specialized consulting services.
- Requires a range of knowledge from information technology to industry specific business processes.
- Focus on low number of clients, high fees and specialized services.
Choosing the Right Mix
Choosing the right mix is important whenever deciding to be a specialist or a generalist. Knowing your market, your price point, and your services is important for optimal success. The following is a list of focus areas and how to effectively price and target your potential clients.
Offer a broad range of services to a broad range of clients:
- Use a mix of services tailored to smaller clients: monthly bank reconciliations, quarterly payroll and sales tax returns, tax planning, and a year end business tax return. Smaller sized businesses with less than $1 million in revenue are fairly similar so offering a mix of services across several industries makes sense.
- Automate processes to save time and keep billing low. These type of services are a commodity so having a competitive price with timely service is a must.
- Focus on volume – to be profitable you will need a large number of clients that are billed monthly.
- Don’t bother with taking on complex jobs, leave that to the experts and surround yourself with a referral network of specialist for one off projects.
Offer a broad range of services to clients in a specific industry:
- Chose a specified industry and use a mix of services tailored to those specific clients. This is similar to the previous example except the services will be more specialized. For example, monthly job costing, workers comp compliance, tax planning, and a business tax return specifically for construction clients.
- Know the ins and outs of the industry and tailor your services to your specialized niche. Since this is a form of specialization you will be able to charge higher billing rates.
- Focus on sticking to clients in your specialized industry. Don’t be afraid to pass up on other clients in other industries. Having one type of client will make you stand out to similar clients.
- Since you will spend the vast majority of your time working with similar clients don’t be afraid to learn about more complex issues within that industry. This will help boost revenue and bring in larger clients.
Offer specialized services to a broad range of clients:
- Pick one particular service and do as much research as possible. Offer it to a broad range of clients across several industries but make sure to only offer that one service. For example, offer state and local tax compliance to clients across several industries.
- Know everything there is to know about your targeted service. Since you will only be offering one service you want to make sure you use your knowledge and expertise to set yourself apart from other generalists.
- Since your services are highly specialized you can bill at a higher rate.
- Make sure you have a large referral network of generalists so they can refer you business.
Offer specialized services to clients in a specific industry:
- Pick one service in a particular industry and know everything there is to know about that one particular niche. For example, 1031 exchange consultant for real estate clients.
- Since this is the most specialized form of accounting you will need to focus your attention on high level work for a few number of clients to maximize profits.
- The work will be difficult and complex for a niche industry so the billing will be the highest compared to the pervious examples mentioned.
- Since you are highly specialized you will have a high reliance on referrals. This will have to come from both clients and other professionals in your industry.
There is no one size fits all approach for accountants – this is especially true for both specialists and generalists. The greatest aspect of working in public accounting is the vast differences in the level of services provided across different industries. By using the techniques described in this article accountants and CPAs can better target, price, and service potential clients.