Discover more from JWellsTax
New Firm #1: Their Why
How to pinpoint the customers a new firm will serve
In the previous post, I discussed my why for starting a new firm. But the truth is, no one cares. At least not anyone who might ever pay me to be a customer of my new firm.
The next step is clearly defining who should want to work with my firm. But before I jump into that, let’s start with why having a niche matters.
🤔 Why having a niche matters for a strategy-first business
In The Business of Expertise: How Entrepreneurial Experts Convert Insight to Impact + Wealth, David C. Baker explains that expertise begins with pattern matching, “the basis of all intelligence.”
First, you narrow the range of possible observations by positioning yourself to serve a specific niche. Next, specialization this limits you to similar kinds of situations you deal with regularly. Finally, you more easily observe patterns among the more restricted set of situations.
From these observations, you readily derive insights, which you can share in your speaking, writing, and advising, generating greater credibility in the market. That helps get customers in the door.
But what keeps them is the deeper applications of that insight to specific cases. And application becomes easier when you’ve seen implementation unfold in multiple, similar situations.
But the vantage point of someone guiding strategy is completely different from that of the one implementing the tactics. The general sees the battlefield differently from the foot soldier. And decision makers listen to flag officers, not infantry.
📍 Positioning to sell strategy-first
It should be clear why having a niche matters for selling strategy. But that is only part of the issue.
In Obviously Awesome, April Dunford explains “Positioning is the act of deliberately defining how you are the best at something that a defined market cares a lot about.” That “defined market” is the niche, but you still need to convince them you are the best at addressing something they care a lot about.
Selling strategy presents an additional challenge, because there’s usually urgency surrounding that “something they care a lot about.” In the business adage often attributed to Harvard Business School professor Theodore Levitt, hardware stores sell lots of drills “not because people wanted quarter-inch drills but because they wanted quarter-inch holes. People don’t buy products; they buy the expectation of benefits.” In other words, people aren’t buying strategy sessions, coaching calls, or online courses because they want to. They see them as means to some other end.
Back to Baker’s path to expertise: the more you talk with and get to know a specific niche, the easier it is to discover the common benefits they seek. More than that, you also learn what strategies work and don’t work, which tactics they find acceptable or unacceptable, and the investments (in terms of money and time) they are willing to make to earn those benefits.
Without niche expertise, you sell generic solutions. You sell implementation:
You clean up bad bookkeeping.
You run payroll for others.
You prepare tax returns.
With niche expertise, you sell specific solutions. You sell strategy:
Instead of bookkeeping, you analyze performance against benchmark data.
Instead of payroll, you plan for future capacity needs.
Instead of tax preparation, you sell tax advisory.
Implementation puts the hole in the wall.
Strategy designs the room so it’s optimally comfortable.
🎯 Honing in on my niche
I love working with independent knowledge workers, for a few reasons:
They have relatively simple business structures despite a wide range of business model choices (pricing, staffing, fulfillment).
The business is usually a significant, if not the only, source of income, so business finance and personal finances are intertwined. This presents challenges but also opportunities for coming up with a unified set of financial goals and plans.
I’m an independent knowledge worker myself! So I’m especially motivated to explore their concerns (I share a lot of them) and ideas (I learn a lot from them).
So what do I mean by knowledge worker? In Building a Second Brain, productivity expert Tiago Forte defined knowledge workers as “professionals for whom knowledge is their most valuable asset, and who spend a majority of their time managing large amounts of information.” This differentiates knowledge work from manual labor. With manual labor, the worker’s skill is necessary but not sufficient, for she also has to physically do work to produce a sellable result.
For knowledge-based businesses, the accounting and analysis is different from how accounting generally works. Accounting principles derive from the Industrial Era, where standardized production processes, controlled variable costs, and complicated overhead allocations matter most. In Time’s Up! The Subscription Business Model for Professional Firms, Paul Dunn and Ron Baker state that knowledge work “is not defined by quantity but by quality. It is also not defined by its costs but by its results.” Moreover, knowledge work “can only be designed by the knowledge worker, not for the worker.” Both workers and customers have different expectations when it comes to knowledge work.
And that’s where I fit in. My new firm, KnowledgeCPA, has a tagline based on this realization: “Modern accounting for knowledge workers.” In future posts, I’ll dive more into what I mean by this.