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Niche: Required or Overblown for Your Consulting Firm?

You’ve undoubtedly received plenty of advice to position your consulting firm in a narrow niche. Of course, you’ve also been advised to coat your daily diet with chocolate. (Maybe the latter advice was only from me, but it still counts.)

Niche, chocolate. Is either one really necessary?

Absolutely! Let’s look at some examples, a few benefits, and a very rough rule of thumb for consulting firm niches.

Examples of Niche vs. No Niche

Two small consulting firms I work with in Europe offer similar solutions to an operational problem. One firm proudly announces their experience across a wide range of industries. They consistently knock their heads against a $1.5m/year annual revenue ceiling.

The other firm serves a single industry. Their revenue is $15m/year.

10x revenue because of a niche? Yes.

Countless consulting firms run strategy projects. The vast majority of tiny and solo strategy consultants offer guidance to any prospect that meets their sole criteria: signing authority.

Most of those strategy consulting practices earn (well) under $500k per partner.

In contrast, one of my clients solves only one piece of the strategy puzzle for a single industry. Their revenues are skyrocketing and the two-partner firm will crest $3.0m this year.

In further contrast, another consulting firm I work with offers services only to a sub-segment of the healthcare industry, and their revenue is topping $100m this year.

The consulting firm I cut my teeth in served the narrow intersection of retailers and manufacturers, and regularly generated over $1m per consultant. (Much more per partner.)

One final example is my own firm. There are many advisors to “professional services” firms, and that may strike you as a narrow target.

However, my team works exclusively with consulting firms, and my personal experience is that our precise focus allows us to deliver superior value, win clients more easily, and enjoy greater financial performance compared to firms targeting professional services in general.

Benefits of a Narrow Niche

Memorability. Your consulting firm is easier to recall if you’re the one that serves Ecuadorian chocolate factories than if you’re one of a zillion consultants who “help companies with operations.”

Relevance. Your consulting firm’s work, IP, and marketing efforts all feel directly applicable to your target when they address your target’s problems precisely, illustrated with close-in examples.

Credibility. Prospective consulting clients trust you can help them, when they see you’ve helped others who look exactly like them in exactly the same situation. In most clients’ eyes, the closer your consulting firm’s experience is to their own situation, the higher your credibility.

Referrability. Because you’re memorable, relevant and credible, others will sell on your behalf. The consulting firms I work with who specialize in a narrow niche obtain far more referrals and inbound leads than those with diffuse targets.

Broad Opportunities: Ironically, a client who knows you focus in a certain area is more likely to ask, “Could you also…?” Once you’ve established trust with a client, expanding your work is natural and seamless.

Think of your market as a hollow wall. You need a sharp point to penetrate the resistance.

A Client’s View of Niches

As I sat in the sun-drenched Sonoma Valley this past weekend, a Silicon Valley tycoon (on his 7th company!) and I struck up a conversation. When I mentioned that I advise consulting firms, he said,

“I hope the very first piece of advice you give them is to focus in on a narrow market. Consulting firms approach me every day saying they can do everything, and I can’t remember one of them.”

A Rule of Thumb for Consulting Firm Niches

Divide your consulting firm’s total revenue by the total number of industries you market to and problems you represent yourself as solving.

Is your revenue per target under $3m? If so, you’ll benefit from narrowing your niche.

You could easily win much more business than that in the right combination of industry and problem. However, $3m per niche is a good yardstick for measuring your consulting firm’s performance.

What has your experience (or challenge) been in finding a niche for your consulting firm?

  1. Steve
    August 14, 2019 at 6:15 am Reply

    “I help leaders in healthcare organizations who are tired of dealing with the high cost of turnover.” Do I need to narrow my niche within healthcare organizations? I’m just getting started as a Culture Consultant. I’ve been in sales of some type for over 18 years but haven’t sold consulting. Your book is excellent. I love the structure.

    • David A. Fields
      August 14, 2019 at 10:45 am Reply

      Congratulations on your new venture, Steve. That’s very exciting, and I’m sure you’ll find the difference between other types of sales and winning consulting business to be fascinating.

      As you narrow the type of healthcare organizations you work with (hospitals, teaching hospitals, West Coast teaching hospitals), the decision-makers in those organizations will feel more and more like your business is designed specifically to help them. That, in turn, will help you!

      Keep me up to date with your progress, Steve!

  2. Michael
    August 14, 2019 at 9:18 am Reply

    Hi David,
    Once again great post. I’m starting a solo consultant firm and the service I will be providing is people management. I have over 9 years experience working with different organizations and I have a background in psychology/social work. Is a people management consultant narrow enough? Or do I have to select an industry as well (I’m thinking of focusing on the tech industry)? Any suggestions would be helpful!

    • David A. Fields
      August 14, 2019 at 10:53 am Reply

      You’re joining the ranks of solo consultants? That’s great news, Michael! There are always opportunities in the world of employees and employee management, and it’s a fertile field for your new consulting practice.

      That said, you will benefit from spending a bit more time fine-tuning your Fishing Line. It’s not clear to me that “people management” means anything to a decision maker. If I heard that, would I know what problem you solve, and for whom? It’s a very generic, broad term without clear applications. One of my clients who focuses in a similar area narrowed his target to, “I help first-time managers in large sales forces learn how to lead.” That’s a much narrower focus and has served him well.

      Yes, an industry focus will help you considerably. Or, as in the case of my client, a situational focus. (Large sales forces, first-time managers). No matter how narrow you think you are, you’ll probably benefit from tightening your target. (Tech industry, for instance, is way too broad.)

      Let me know how you’re faring, Michael.

  3. Patrick J. McKenna
    August 14, 2019 at 11:44 am Reply

    David, your article is right on point. The game today is not to be a niche specialist but to be the expert in some defined “micro-niche”. Or as I (and you have said above) there is no such thing as a health care industry specialist, because the health care industry is comprised of at least 40 different sub-specialities and the client wants to “see evidence” of what special competence you bring to their particular business matters. And don’t you dare confuse health care with life sciences, as those are two very different industries! The best advice I ever heard was from the late founder of the rock group, the Grateful Dead. Jerry Garcia is known to have said, “it ain’t good enough to be the best of the best. I want to be the only cat who does what I do.”

    • David A. Fields
      August 14, 2019 at 12:03 pm Reply

      Bonus points for injecting a Grateful Dead reference into a consulting blog, Patrick.

      Fortunately, you don’t actually need the best or the “only cat” to succeed in consulting. You just need to trusted, credible and competent. A micro focus helps you on all counts.

      Great addition to the discussion, Patrick.

  4. Sai Hari
    August 14, 2019 at 12:58 pm Reply

    Niche is good for consulting. However I feel it’s a mixed bag. Especially, When we target niche segments, the enquires are not very frequent (in spite of our marketing efforts) because of various reasons like only early adaptors need the service or market doesn’t mature as envisaged, reasons largely are beyond consultants control. This force us to diversify and eventually lose the niche focus for sustainability.
    Happy to hear other views

    • David A. Fields
      August 14, 2019 at 1:20 pm Reply

      You’ve brought up a crucial point, Hari: if the niche you’re targeting isn’t producing the revenue you expect AND you’re doing a good job of your visibility building, then…

      …choose a different niche! The answer isn’t to expand, it’s to refocus. That’s one of the hardest shifts to make in consulting. Letting go of what you’ve done before in order to focus elsewhere is a great way to build your business; however, emotionally it’s a tough road to travel.

      Thank you for raising that point, Hari.

  5. Catherine Mattice Zundel
    August 14, 2019 at 4:54 pm Reply

    Thanks for your blog post (and all of your posts!). My consulting firm focuses on turning around toxic work environments, so we’re niche in that way, but we have clients across all industries. We’ve doubled revenue every year for the last three years, and if stay to trend we will hit $1M next year. I’m interested in getting to $1M per consultant! Curious if you think we should start moving more into a specific industry to be even more niche? I am also super-niche in my executive coaching, which is focused only on coaching “bullies”, but again it’s across many industries. Curious what you think.

    • David A. Fields
      August 14, 2019 at 5:44 pm Reply

      First of all, congratulations on your continued growth and success. Your story is inspiring.

      Second, a very narrow area of expertise or situation can be an effective niche. For instance, coaching bullies is a nice, tight situation description and can transcend industries. Would an industry focus make you even stronger? Perhaps, if there are enough bullies in one industry!

      Turning around toxic work environments strikes me as a bit generic, and I’d guess that decision makers in a particular industry would react very favorably if you could speak to the prevalence of toxicity in their industry. That said, I’m not one to argue with success, and you’re finding success so far.

      Finally, keep in mind there’s a difference between the niche you target and the work you do. You can target one industry and one, narrow problem, and still win substantial work from outside your niche.

      I appreciate you sharing your success and your questions, Catherine.

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