Charles Leikauf breaks down how fractional CFOs should pick a niche using four criteria: clients must feel real pain, have revenue over $1M, operate in a growing market, and be reachable. He also weighs personal fit and business type.
Chapters
Do I really need a niche? The more you say no, the actually, the more you're saying yes, you're trying to be something to everybody, then nobody is going to buy from you. I want the best person. I don't want just like any cfo, you want to be highly specialized. What makes a good fractional CFO niche. So if you heard anything online about online marketing or growing your firm, you've often heard, Charles, you got to get a niche. You got to get a niche. You got to get a niche. Your first thought is, do I really need a niche? That means, like, if I specialize in E commerce, that means I can't sell to construction or doctors or real estate or all these other people. I don't know if I want to be limited to all the individuals who I can sell to. Right. Why would I close off my universe? So one of the things I want to let you know is when you have a niche is instead of closing off to the universe, the more you say no, the actually, the more you're saying yes to. And what I mean by that is, if you look at a market, if you're something trying to be something to everybody, then nobody is going to buy from you. Now, if I was looking for fractional CFO and I own a business, do I want a fractional CFO for anyone? Do I want the average fractional CFO or do I want the person who's going to be handling my finances to be the best person? I want the best person. I want the person who specialized for me, who specializes in E commerce stores or Shopify stores, who are doing a couple million dollars a year, who's got a long track record. I don't want just like any cfo, he might not know the special things for my industry. So the more people you say no to, the more people actually will end up saying yes to you. So you want to be highly specialized. So that's the point, number one, that you want is highly specialized. The next thing you want to be able to do is we want to pick the right niche. When we're thinking about a niche, there's a couple different variants or things that allow us think, do we have the right niche or do we have the wrong niche? And I'm going to go ahead and I'm going to. I'm going to list them here. So if we're looking at our niches that we have, oh, gosh, here, number one is problem. And then after that it's money. And then three, growth. And then number four, target, that's target. If you can't. If you can't read that. So when we're thinking about what makes a good CFO niche, we've got problem, we've got money, we've got growth, we've got target. We want to rank these things. I like to rank them one to five, five good, one bad. And when I think about the different niches that we have, I want to think about how bad of a problem do they have as perceived by them. I'll give you a good example. Lawyers typically are not the best people when it comes to finance. They spent all that time going to law school and they finally make some money and they spend it all like doctors. Here's one of the things, though, is if they do not perceive that they have a problem, they don't have a problem. Therefore, they're not willing to be willing to pay you. So you want to think about how big is their problem as perceived by them. So that's number one. That's one. So what I would recommend you do is you go out and you build a little chart like this, and you put each of your individual niches here. And then you put here problem, money, growth, target. And then you rank them 1, 3, 5, 1, 6, not 6. Right? So what you're going to do is you're going to rank them by promise perceived by them. Next thing is money. Do they have money to pay you? What do I mean by that? Do they make over a million dollars a year? Because you want them to be able to pay you several thousand dollars a month, right? You want them to be able to pay you anywhere from 2,000 to $5,000 a month or $10,000 upfront. If you're going to do that, they need to have enough money to be able to afford to do that. Typically, right? You want greater than 1 million per year. That number can be larger if they have a really large operating income margin. Right. So if they have an operating income margin greater than 20%, you can do smaller than a million dollars a year. But realistically, if a business owner is only taking home 100 grand a year, is it really going to pay you $5,000 a month? It's tight. So 1 million a year is usually my 4 the next thing. So if they're making 20 million a year or if that field has money, e commerce, cool, that would be a five. Next thing is growth. Is the market growing? Is it decreasing? I want to look and I want to go Google. What is the compound annual growth rate of the market when we're looking at that. Is it growing faster than population growth and inflation? If so. Right. I like to think about it like this. That's a three or greater, right. If it's growing less in the market or inflation or whatever else, that's where you get a 1 or a 2, right. So rapid growth, right. 15% plus that's a 4 or a 5 there which might hit or understandable. Next thing I want to talk about is target. Can you get in front of them manufacturing businesses, they had a big problem perceived by them, right? They usually have money because you need capital, assets, goods usually got a building heavy equipment here. Growth depending upon the field that they serve and they manufacture into the growth can be significant target. How the hell do you get in front of them? They usually don't call themselves manufacturers. Usually someone who makes CPG brands is a manufacturer of CPG brands, consumer packaged goods. But they'll call themselves a CPG brand, not a manufacturer. A lot of people will do the thing but they won't call themselves that or consider themselves that. And they're hard to get a hold of. I want to look for a total addressable market. So a T, a M or total addressable market greater than 100k in the United States. So I want a total addressable market greater than 100,000 in the United States. Why do I want that? Because I want to go after them with paid advertising. It's a lot easier to go after them with paid advertising to put multiple calls in your calendar a week or even a day so you can get new clients. So when I'm thinking about what makes a good CFO niche, they have to have a deep problem as perceived by them. They have to have enough money to be able to pay you. They have to be growing. So you're not going to find yourself with no clients here in the future. And then they have to be easy to get in front of and they have to have a decent total addressable market. When you combine these things together, this is what makes a good niche. There are two things that you should also consider that are not on here. One is do you like working with this avatar? Do you like solving the type of problems do they have? So go to gamble. I don't really like arguing with lawyers. Not a fan, don't enjoy. I don't want to serve them. That's a personal preference of me. Nothing against them, just our personality clash. Usually finance guys, medical people, engineering and doctors and lawyers. We all kind of crash because we all think we're smarter than each other. We all know it's finance people that are the smartest, but we get into that, so I don't want to serve them. The next thing we look at is we've got the type of client, what are the type of work? There's multiple types of businesses. There's product based businesses, there's project based businesses and then there's service based businesses. Those are different types of clients and different types of work. I love working with inventory, I love product based businesses. I don't like working with project based businesses. So an E commerce retailer I'm going to significantly enjoy more than I would a construction company who builds big projects. So knowing that when you put it together, when you're looking at what is a good niche, you need one, you'll grow significantly faster with one, your cost to service the client will be significantly less because all of your admin stuff is tools of the backend to do the same thing. And if you go through these four, four targets with the two other things that I mentioned, you'll be able to select a powerful and profitable CFO niche. If you need help doing this, we have a program where we go all exactly how to go into it, how to grow it, how to do fractional CFO services, how to get clients online, how to scale with AI. We do all that. So if you're interested in learning about that, all you got to do is go to profitsearch group.com check out our information there and we'll see you on the inside. See you later.
