The Ambitious Bookkeeper Podcast

203 ⎸ Q: Is the NonProfit Sector a Viable Niche?

• Serena Shoup, CPA • Episode 203

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In this episode, I'm answering an audience question about whether the nonprofit sector is a viable niche for a new bookkeeping firm. I dive deep into the pros and cons of specializing in nonprofits and share actionable strategies for making this niche work.

What You Can Expect to Hear

  • How to overcome the common challenge of nonprofits expecting discounted pricing through value-based pricing strategies
  • Specific scalability tactics including productizing services, choosing specialized software, and building efficient processes
  • Networking strategies and the sweet spot for targeting mid-size nonprofits that have budget but haven't internalized their accounting function

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I am taking a listener question and answering it here in a short and sweet format so you can get a little extra strategy in your earbuds this week. So if you were not aware, I actually have. If you aren't aware, you can submit your question through audio format if you go to speakpipe.com/ambitious bookkeeper, just like our listener here. Now, let's get into today's episode. Hi Serena! My name is Steve. I'm an experienced financial manager with 20 plus years doing or supervising accounting, financial analysis, budgeting and operations like AP and payroll. I am a CMA. I'm starting an outsourced bookkeeping and accounting firm. First moonlighting with a couple of clients, and when I'm ready, quitting my day job and ramping to full time. One of the things you talk about is picking a niche, and I'm considering nonprofits. I've been active off and on with a medium sized nonprofit for many years with responsibilities from setting up QuickBooks reporting and helping with the bookkeeping to leading the finance committee for the board. I'm now a senior manager at a$5 billion nonprofit, though this isn't particularly relevant to my target market. Do you have any thoughts on nonprofits as a niche? It seems there are some differences from small businesses that may be to my advantage, like on the technical side I understand fund-based accounting and I think form 9-90 prep will be easier to master than tax prep. I also have a lot of experience in internal controls, which is often a need at smaller nonprofits, and I've worked with a lot of boards. On the negative side, I wonder about the scalability of these services as opposed to straight up bookkeeping and accounting. And another disadvantage is that nonprofits often expect discounted fees despite the fact that their requirements are more complex. So I'd love to get your thoughts and any advice you might have about this area. Thanks. Hey Steve, and thank you so much for submitting your question today. This question about nonprofits being a viable niche has actually recently come up in our community live q and as. So if you haven't listened to our most recent live q and A here on the podcast, go ahead and scroll back and take a listen. But today I'm actually gonna dive a little bit deeper, so. If you did listen to that episode, you're in the right place either way. Okay, so first of all, you have a very impressive background, Steve, with a CMA, 20 years of experience working in a large nonprofit currently. All of this is really, really great experience and that will only help. You as you pursue this niche, if you pursue it. And I love your strategy of moonlighting, with a few clients here and there as you're working full-time just to get your business off the ground. I think that's a strategy a lot of us accountants prefer to use. We're a little risk averse. And then your depth in internal controls. Your board experience and experience with fund accounting is highly, highly valuable in the nonprofit space as you probably are well aware. And so those things alone are going to set you apart. And if you enjoy the nonprofit niche, I personally say go for it. Now let's address some of your concerns, in a minute. But first I'm going to. Again, reiterate the pros of you actually moving forward with the nonprofit niche. You already have really deep expertise in this niche, and it's going to quickly build trust with the nonprofits that you come in contact with. Like I said, before fund accounting is kind of complex and a lot of people haven't learned it, don't care to learn it. I learned it in college and did a little bit of it early on in my career, but it's not something I've kept up with. So I would be nervous to tackle a nonprofit at this stage in my career. So the fact that your people understand fund accounting really well, you have a major technical advantage here, especially with those larger nonprofits. And I'm gonna keep reiterating working with larger nonprofits because as we get to some of the, challenges with nonprofits, like you mentioned. a lot of people tend to think that nonprofits are going to want to pay less, so we're gonna dive into that in a moment. Your board experience is absolutely a differentiator here. Many nonprofit bookkeepers don't know how to speak to boards or speak the board language. And the fact that you have, set up finance committees for boards is great experience that you can bring to the table and maybe even include in your packages. And your internal control implementation is super critical in nonprofits, in all businesses, to be honest. And this, positions you more like a CFO or a, you know, controller type position when you're interacting with the boards, and again, is only going to set you apart and show the real value that you bring. Like we were talking about before, a lot of nonprofits are bootstrapped, but a lot of them have grant funding and they actually have the budget for this position, for the accounting role for a CFO role. So I believe this actually creates an advantage and opportunities for you as you are going out there and networking and, making this your niche. I also think that it's a little less competitive when it comes to marketing because there are fewer bookkeepers and accountants who specialize in nonprofits. And so again, you're gonna be setting yourself apart. Now let's get into some of the challenges that you brought up, like maybe. Nonprofits are expecting discounted pricing. I would address this with value-based pricing where you're not pricing based on the time you're spending or maybe the volume of your work, but instead you're basing your pricing on the value that you're bringing. With all the things that we talked about at the top of this episode, all of your experience, that's what they're getting when they work with you. And so make sure that you price based on that as your package, right, that you are very well versed in nonprofits and you bring a lot of experience to the table. Now you also address your concern about, about, maybe this isn't a scalable niche, but just like with any niche, you will have efficiencies. no matter what niche you choose, so this advice goes to anyone listening, even if you're not interested in the nonprofit niche. This, this is across the board. This will help you. So, number one, make sure you're creating processes and a common tech stack for your future team. If you don't have one right now, Plan for it, right? if you really want to scale your firm, the only way to do so this day and age is either by automating or growing your team, or probably both. So making sure that you're setting up as many automations as you can from the get go and creating your standard operating procedures, which you probably have experience with as well in your 20 plus years of experience. And then I want you to start also thinking about where you amassed your experience and making lists of ways that as you bring on team, you can share resources and things that have helped you learn what you know along the way, and then be willing to mentor and train your team. So maybe you get someone. On your team that doesn't have experience in nonprofit bookkeeping, but you have the experience so you can teach them along with your ability to mentor and lead as well as the standard operating procedures that you're gonna be creating. And then think about your values, your core values, as. A human and what types of people you think you want to work with so that you attract the right team and talent from the beginning that are also gonna be passionate about helping the nonprofits that you are helping work with. Next I want you to consider productizing your services. And this basically just means creating packages so that you're not recreating the wheel every time you go to the table at a nonprofit to propose your services, give them options, examples being around the nonprofit industry, monthly board reports or audit prep kits, and other internal control processes that you've implemented across other companies that you've worked with. my last point here is you can scale if you specialize in a software. So choosing early on, maybe not right off the bat, but early on, which software you want to be working in, with your nonprofits. So that one simple thing of choosing one software as you are growing is going to greatly improve your scalability. Now the last challenge, I don't know if you mentioned it, but board involvement in companies like this or larger companies with a board or nonprofits with a board can slow down decision making. So your experience with board actually gives you a competitive edge because you understand how they work, so you can help streamline that approval process. By educating, the nonprofits and providing clear board friendly reporting and a whole proposal process because you already have inside knowledge to this. So all in all, I do think that you should pursue this niche if you're passionate about it. If you're not passionate about it, and this is just you're asking these questions because you have the experience, maybe it's not the right move. But it sounds like you're passionate about it. It sounds like you want to stay in the nonprofit sector. So I say go for it. And like I said before, consider focusing on maybe those mid-size nonprofits, the ones that have the funding and have budgets where your impact is going to be more tangible. And maybe they also won't have in-house finance teams. So you gotta find that sweet spot. You probably know better than I do and anyone listening, because you've been in the industry for so long, where that shift tends to happen. where do boards actually start internalizing the accounting function And find that little slice of the nonprofit sector that has the budget, but has not gotten to the point where they're internalizing that function. And then identify specific types of nonprofits that you enjoy and that you're passionate about to make the networking and marketing easier and continue to network via your board member groups, your local nonprofit associations, and maybe even grant consultants. Because I'm sure you already have a network of people from the nonprofit industry. So start networking with them, even if you're not telling them yet that you are doing this. Just start building those relationships now and so that you're top of mind and when things come up, you might hear about them. I have pretty much a couple little points to cover. When you do start entering this as a niche, you can offer workshops and webinars on topics like internal controls for nonprofits or some other thing that you have, found to be really helpful as you've been working with nonprofits in their success. Maybe how to read financials, reading financials for boards because, Board of directors of nonprofits. We, as we all know, most of us know, they're volunteer board positions. And a lot of people come to these boards without actual, expertise and understanding about reading financial statements. So the more that you can educate people and can connect with them in that space, the better. and then keep your services productized like we talked about, and a little bit flexible. So basic bookkeeping plus optional, upgrades like audit prep or restricted fund tracking, or budget to actual reporting wherever you think the need is. There for that little slice of the nonprofit sector that you are going to target. So thank you so much, Steve for submitting this question, and thank you all who have submitted questions in the past. Don't forget, if you would like to submit your own question like this and have me answer it on the podcast and here on YouTube, go to speakpipe.com/ambitious bookkeeper and we'll see you next time on our next episode.

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