Developing a niche practice in tech takes more than time

by Seth Fineberg

The need to diversify a technology or CPA practice, coupled with the rise in vertical-focused accounting software, has driven many firms to consider developing niche practices. Those who have gone down this road advise that it is not something that a firm should just jump into.

But given the right direction, experienced staff, a solid vendor relationship, and a bit of patience, a firm could find that having a niche practice — be it in the not-for-profit sector, human resources, or even something as diverse as equipment rental — can pay off.

Columbus, Ohio-based Delphia Consulting started out like many other small consultants in their field — carrying a line of accounting and business application software. In their case, it was Best Software’s MAS 500 and SalesLogix. But, as chief technology officer Joe Rotella recalled, the firm realized thatit had a solid team of “technology experts” and could evolve.

Delphia, with help from primary vendor Best, developed a human resources and payroll niche practice by getting trained on the company’s Abra Enterprise product. It was a process that Rotella admits took time and patience.

“The learning curve for us took over a year and a half before our human resources [product and services sales] exceeded our general ledger activities, and within that the sociological shift that happened within the firm was dramatic,” Rotella said. “We had to work extra hard to make the transition, and even after initial training only one consultant was able to make the transition from general ledger [sales] to HR.”

Then, something hap­­pened that Rotella and his firm did not expect.

In April 2003, the Abra Enterprise customer base was purchased by Chelmsford, Mass., software-maker Kronos Inc.

Kronos had licensed the source code from Abra Enterprise since March 2002. That code made up the foundation for the human resources and payroll components of Kronos’ Workforce Central suite. Delphia’s business was now threatened as it saw the majority of its client base migrate to Kronos.

“We had to turn on a dime when that happened. You really have to know how to adjust, and for that we looked at our strengths, which have always been our flexibility and our technology expertise,” Rotella said. “Cash flow is also critical, especially if something goes wrong with your niche.”

He also admitted that having an understanding and helpful vendor is equally important. Delphia now carries Best Software’s other Abra products, including Abra Suite, Abra Learn­ingAction and Abra Recruiting Solution.

And as Rotella and others explained, even with initial struggles, the return on the investment of money and time was significant.

Gary Garnet, CPA, CITP, and his Farmington, Conn.-based firm DigiTech have worked on their nonprofit niche since 1995. The firm slowly hired experienced staff, ran seminars and became active in the non-profit community while working with vendor Blackbaud Inc. and developing their own proprietary software.

Once a wholly owned division of the CPA firm Kostin, Ruffkess & Co., DigiTech has become well known in its space. Garnet said that it’s a daily struggle that always requires everyone in the firm to remain focused on specific goals.

“Our goal has always been to be an expert in this area and get known for what we do,” Garnet said. “There is definitely more time and effort spent than dollars, but it’s at the point now where much of our new business is from referrals. We just got a call from an organization 120 miles away that said they heard of us and really wanted to work with us.”

Among the most difficult decisions niche practice developers said that they make on a regular basis is deciding how broadly or deeply their firms should go into a particular vertical. To that issue, many advise firms to hire or acquire talent rather than stretch existing staff too thin, or simply “take what you have and do it well.” Business technologist Steve Lipton’s firm, Wipfli Young, an affiliate of Madison, Wis.-based CPA firm Wipfli, did just that.

Lipton’s firm, then Williams Young, which Wipfli acquired in October, took many years to grow its niche practice of servicing grant-funded organizations — a sector Lipton describes as “a niche within a niche.” It started with one knowledgeable partner who had one not-for-profit client.

The partner became familiar with the client’s technologies and processes and eventually trained others. The firm itself now services multiple grant-funded organizations and offers nearly 60 nonprofit technology training sessions per year — and resells Best’s MIP and Abra software.

“The sell is relatively easy now, but if we had it to do again, I’d want more time for the staff to learn and figure out a way to get even better training,” Lipton said. “On the upside, our multiples are much higher [than when we started]. We are also not seen as just a reseller, but a solution provider that understands their space.”