Specialization emerges as an intriguing avenue for accounting/audit firms, both in emerging and developing markets, offering profitable opportunities, yet significant challenges. Following is a brief overview of the advantages and opportunities on one hand, and the obstacles and limitations on the other, that come with specialization for accounting professionals.
ADVANTAGES AND OPPORTUNITIES OF SPECIALIZATION:
- Market Differentiation: Specialization allows accounting/audit practices, as with any service provider, to stand out by highlighting specific skills, offering significant differentiation in an increasingly competitive market. This is particularly relevant in emerging markets, where the accounting profession can be is subject to unfair practices (price dumping, illegal pratices..), when it comes to “classic” missions (bookkeeping, monthly assistance, etc.).
- Enhanced Credibility: market recognition of any specialized service will enhance the credibility of the firms, demonstrating a commitment to excellence and expertise in a particular area. This can take the form of certificates issued by authorities to professionals who have completed specific training, or simply reference letters obtained by clients in a particular sector.
- Increased Profitability: In niche markets, with less fierce competition, accountants can offer higher value-added specialized services. Optimized team performance, and specific know-how naturally allows for better margins, even by employing more "senior" profiles.
- Response to sector-specific needs: Specialization allows for a more precise response to the specific needs of a sector, an industry or a client-type, by offering services tailored to their specific issues. Sector-oriented service can be developed withing a practice for tourism and hospitality specialists, for example, renewable energy, construction, or for healthcare professionals, leading to a
OBSTACLES AND LIMITATIONS TO SPECIALIZATION:
- Market Size and Economic Diversity: In small markets, economic diversity can limit specialization opportunities, making some areas less viable or insufficiently structured to benefit from specialized service. This is even more relevant when services are delivered while heavily relying on technology tools, leaving only little room for specialization added-value.
- Underdeveloped Recognition Process: The lack of recognition can be a significant obstacle, as firms wishing to focus on a particular niche may risk not being able to highlight the added value offered, resulting in longer delays in implementing specialization, while s
- Resource Constraints: Firms wishing to specialize will have the burden to invest in training, specialized technologies, and partnerships that might be necessary for successful specialization. This can however be compensated by a progressive specialization that comes along gradually with “organic” market recognition.
- Seasonality Risks and Economic Sensitivity: Some specialization areas may be exposed to seasonality risks or heavily depend on specific economic conditions, increasing vulnerability to economic fluctuations. This can particularly happen for specialized audit firms that, in the event of a new legal provision concerning entreprise-specific audit treshholds, would see its turnover drop, due to less demand.
RECOMMENDATIONS FOR ACCOUNTING PROFESSIONALS:
- Pre-Evaluation: Before embarking on specialization, it is crucial for any firm to conduct a thorough evaluation of the risks & opportunities attached to going niche. This should take into account market size, diversity, relying on technology, as well as potential extra cost of staff.
- Strategic Investment and ROI: To ensure successful specialization, firms must budget sufficient strategic investments, including recruitment, training, and acquisition/transformation of necessary technological tools, while estimating the Return on Investment and associated feasibility.
- Partnerships: Collaboration across firms, with recognized experts, or with other stakeholders can expand the reach and capabilities of the firm to specialize prudently, offering a holistic approach to meet the specific needs of the target clientele.
- Clear Communication: Transparent communication about the fields of specialization, their advantages, and the benefit for clients is essential to inform the market. It serves to establish trust and legitimacy, and consolidate the firm’s specialization strategy.
Redouane Stoti (Audigroup/Morokko)
February 2024
