It’s 1:30am, and the ringing phone on your nightstand awakens you from blissful slumber.
Bleary-eyed, you see your niece’s name on the screen. You groggily answer the phone.
Through her slightly slurred speech and constant sobbing, you gather that she’s at the police station, having been arrested for driving under the influence after a night of partying with friends. She needs your help.
You tell her to say absolutely nothing to the police, and to just sit there. You’ll be there as quickly as you can to pick her.
When you arrive, police release her into your custody instead of making her spend the night in the drunk tank. However, she needs to return at 10am for arraignment.
After getting her to your house to catch some sleep, you send a text to your attorney, asking him to call you first thing in the morning. Around 8am, you get a call from your lawyer, and explain the situation.
Your attorney specializes in contract law, which is ideal for assisting business clients such as yourself. He explains that your niece needs an attorney that specializes in DUI defense, and quickly connects you with one of his colleagues. This colleague speaks with you, and meets you and your niece at 10am for the arraignment.
Your lawyer just passed on taking a case, because it’s not what they specialize in.
Need a lease for a commercial space reviewed? They’ve got you. Need an employment contract written for a client? No problem. But a DUI? Nope, that’s out of their wheelhouse.
In much the same way, when your family physician sees signs of cancer, they’re going to refer you to an oncologist. If you tell your doctor that one of your teeth really hurts, they’re going to send you to a dentist.
Do what you do best; hire out the rest.
This type of specialization is common across many professional service verticals. Such specialized professionals always refer out work that is beyond their scope of expertise. This is so common in many professions that some readers might be shaking their head right now in confusion as to why I’m even writing about this.
Well, that’s because in some professions, especially in smaller businesses, this isn’t the norm. A perfect example is the industry that I come from: It’s quite rare for small tax and accounting practices to specialize in this manner.
There are numerous benefits to specializing in this nature. One of the most significant practical benefits of doing so: Receiving professional referrals.
We all know that referrals are the best way to get new clients. Hands down — it’s not even a conversation. The cost of client acquisition is $0, in terms of directly attributed dollars, although there can be significant up-front costs in building a referral network.
There is also usually zero sales resistance, as the client is simply going to follow the suggestion to work with you because they were told to by somebody else that they know, like, and trust.
Here’s the rub, though: Only specialists frequently receive referrals.
In other words, professional referrals almost always go from generalist → specialist or specialist → specialist.
If you’ve tried cultivating referrals from other professional service providers, but been frustrated at the lack of referrals you’re getting, this is probably why. It’s because you’re not perceived as a specialist by those you’re trying to get referrals from. If you’re a generalist, you’re just another generalist, just like everybody else. Other professionals have no reason to refer you clients, because you’re just like every other business owner trying to get referrals from them.
Here’s another example from the accounting profession. Many accountants get financial planners knocking down there door asking for referrals. Financial planners love to connect with accountants, because they see the tax returns and other financial data for people. As such, the accountants know who has money to invest, and the financial planners want those names.
But accountants inevitably get frustrated by the steady stream of financial planners asking for referrals. Why? Well, for one, because all they want to do is take, not give. They want accountants to send them business, but they’re working with so many accountants that they can’t possibly send any single accountant much new business in return.
Second, they’re all the same. They’re all generic financial planners, with no differentiation even amongst themselves! If one is just like the others, how will you decide whom to send referrals to?
Just like attorneys that specialize, smart financial planners will also specialize, and serve a narrow range of clients, as described by some set of criteria that define their target market.
Every business owner should do the exact same thing.
When I was still actively running a tax practice, I didn’t do tax return preparation. I made a conscious decision not to prepare tax returns. Didn’t do the seasonal slog. I also chose not to do bookkeeping, payroll, and a few other things, despite the general perception within the profession that one must offer all these services.
Nope. I provided ONE service. On top of that, I only marketed that service to two very narrowly defined target markets.
And because I was a specialist, I got referrals. Referrals from other professionals, like a banker at TD Bank that specialized in accounts receivable factoring and another professional that managed tractor/trailer registrations and trip permits for trucking companies. Later, through some strategic positioning, I received referrals from other tax professionals.
If I had been a Jack of all trades generalist, I would never have managed to develop these referral sources.
I implore you to specialize. Don’t be a generalist.
You can specialize by:
Services offered
Industries or professions served
Shared special interests
A combination of the above
Again, I recognize that this message is leaving some readers scratching their heads. If you’re the founder of a SaaS CRM solution for medical offices, then of course you know you should specialize — you have from the very beginning. This isn’t even a conversation for many professions, let along venture-scale startups. But if you’re a small financial planning or accounting practice, or an independent insurance agent, a real estate broker, or something of that nature, then you may not know this.
By being a specialist, and being laser-focused in regards to whom you serve and what you do for them, your networking suddenly becomes much more effective. You become known for that one specific thing, and you’ll get client referrals for that thing. Your product or service will become known as the go-to solution.
As a direct result of being a specialist, your cost of client acquisition goes down drastically. In addition, you’ll simply make more money as a specialist than you ever could as a generalist.
If you’re a professional service provider of any sort, specialization is also the key to surviving any threats to your industry due to automation. If the services you offer are a commodity, then I guarantee you that some really smart group of people is pounding away on a keyboard right this second to write computer code that makes your service offering redundant — if that software doesn’t exist already.
The bottom line is this: Do you want to run a business that receives customer referrals from other businesses? If yes, then specialize.