Hi there, Danilo here.

This week, a question came up that I think resonates with many consultants: “I’m struggling to find a niche that’s both profitable and aligned with my expertise. What do I prioritize?”

It’s a great question, but here’s the short answer: this isn’t really a trade-off. You don’t have to choose between profitability and expertise; the two can coexist. Finding the right segment means identifying a place where your skills and experience are valued and where clients are willing to pay for your expertise. Let’s break down what that process looks like.

Estimated read time: 7 minutes.

When it comes to building a sustainable consultancy, the top priority has to be profitability. Of course, working in a field that you’re passionate about or that helps others is rewarding. But if the business doesn’t turn a profit, it won’t last. Survival comes before growth, and that’s why I encourage consultants to think about their chosen market segments from a financial perspective first.

What does this mean in practice? Start by looking for organizations that face urgent, costly problems that they’re willing to pay to solve. Ideally, these clients operate in growing industries and have healthy budgets to pay for your premium consulting fees.

The fact that some market segments or practice areas are more attractive than others is backed by data. Take, for example, this 2023 Rattleback research. They found that although IT service firms made up only 29% of the sample, they represented 50% of the fastest-growing firms. There are many other publications showing how sectors like digital transformation, cybersecurity, and environmental consulting are growing faster than the market.

For new consultants, focusing on a specific initial market segment - what I call a “beachhead segment” - is a powerful starting point. This segment serves as your launchpad, where you’ll focus your energy and go-to-market efforts. You start from there and gradually expand to adjacent segments as you gain traction and refine your services.

You can and should define it clearly, using industry, demographics, or geography, for example. “UK-based hospitality organizations with 500-1,000 staff” will give you more clarity than 90% of the market. But I highly suggest you don’t stop there. Also consider the “jobs to be done” and market entry points: What are the problems these organizations face, and what’s the trigger that makes them look for help?

The goal with a beachhead segment is find a niche with a big, critical problem, strong budget capacity, and steady growth. Important: Don’t underestimate the power of your existing network here. Strong relationships and referrals make it much easier to gain traction in that critical first six to twelve months.

With that said, let me come back to today’s topic. The question of “profitability versus expertise” is often a false dilemma. The two can, and should, go hand-in-hand. I like to think of expertise as a set of “building blocks” that can be adapted to serve different markets or solve related problems.

For example, I'm working with a client who had experience in helping large international NGOs retain talent. She initially wanted to target other big organizations, but we soon realized that mid-sized firms were a better fit for her early-stage consultancy.

There were a few strong arguments for this. Large corporations are often bogged down by bureaucracy, and you can get stuck forever in procurement hell. The total addressable market was also too small - by focusing on mid-sized organizations, it was easier to start and initiate conversations to test her new service offering.

What’s important here is that we could find ways for her to leverage her existing skills and deliver high impact to these smaller organizations. She knew how to assess which capabilities were missing for clients to identify internal talent. And she knew how to create a roadmap to help them reduce recruitment costs and improve retention.

It’s also worth noting that there are specific, objective ways to measure whether your choice of a beachhead segment is working or not. I like to focus on both client acquisition (pipeline conversion rates) and client satisfaction KPIs (NPS or retention rates if your services are set up as retainers or ongoing engagements). These metrics reveal whether you’re building real traction and delivering value.

Source: David C. Baker, The Secret Tradecraft of Elite Advisors

Here’s an example of why the target segment you decide to focus on matters.

According to research from a client advising in the food industry: the U.S. packaged food market is expected to expand at a CAGR of 4.8% from 2022 to 2030. The organic food and beverages market, however? A CAGR of 13.9% - almost 3x faster.

Is your beachhead segment designed to generate fast traction and early wins?

This is just one of the key questions we tackle in our go-to-market advisory service, where we help consultancy founders design service offers that align expertise with profitability.