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?
Text and images are © 2020 David A. Fields, all rights reserved.