A well-worn trope of boring business advice is that “There’s Riches in Niches” – a sentiment that sounds cool, especially in America where those two words rhyme (in Australia ‘niche’ rhymes with ‘quiche’, which is less impressive).
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In my experience, ‘Riches in Niches’ suffers from survivor bias – looking at successful business with a strong niche and then deciding that was the important factor, which is like concluding that lottery tickets are a great investment by only researching lottery winners.
Sometimes, particularly for start-ups, niching is a bad idea. Choosing and pursuing a niche too early in your business journey (or with a spin-off product or service) can drive you off the road, into a ditch, and possibly see you investing your last energy and cash into a focused market that will never work.
Remarkably, many of the most successful niche businesses never set out to niche at all. It was only by going wide to market and being responsive to demand that they were able to stumble across an opportunity that wasn’t even visible from the outside.
In this week’s episode I will share some real world examples of just those companies. And then share with you an awesome list (thanks in part to this great book by Mark Lenthall [LINK https://www.predictablesuccess.com.au/books/the-million-dollar-coach]) of all your possible niche choices with a guide on how to identify and choose a profitable niche not a misleading ditch.
Watch this week’s episode here.
Who is Jacob Aldridge, Business Coach?
“The smart and quirky advisor who gets sh!t done in business.” Back independent since 2019.
Since April 2006, I’ve been an international business advisor providing bespoke solutions for privately-owned businesses with 12-96 employees.
At this stage you have proven your business model, but you’re struggling to turn aspirations into day-to-day reality. You are still responsible for all 28 areas of your business, but you don’t have the time or budget to hire 28 different experts.
You need 1 person you can trust who can show you how everything in your business is connected, and which areas to prioritise first.
– There’s a wonderful saying in business that there’s riches in niches. And that works a heck of a lot better with an American accent, where I call it riches in niches. But my warning for you today is that there’s also ditches in those niches. Sometimes you can go into a niche too early, too fast, and cause you and your business untold hurt. So, I wanna talk in this episode of Blackboard Fridays about how to niche, but also when is the best time for you to actually go down that path. So, why is there such an opportunity? Why are there riches in these focused market segments? Well, it’s because of that focus, the focus that gives you a much greater return on your investment. The focus allows you to do much more targeted marketing. It allows you to build a team that is a much closer fit to your client base. It makes it a lot easier for me and others to refer to you because your niche target market is very, very clear. And then of course, lastly, you can build a very niched solution, which is both refined and more profitable at your end and also, much harder for any competitors to compete with, to copy. So, there is definite value in being that niche. If you’re going into battle, better to do it with a spear tip than with a wobble board. How then do you work out what a niche is? Well, I’ve stolen from a wonderful book by Mark Lenthall, called Predictable Success, some of these different categories. And if you have a look at your existing client base, you may start to see where they are grouped across these different areas. So, your niche might be demographic, it might be psychographic, it might be geographic, or it could be, if you’re a business-to-business kind of company, it may break down into some of these industry-size structure, ownership structure, kind of categories. Great niches will combine several of these. That’s how you get really, really small and focused. McDonald’s sells a billion hamburgers, not by going too small. Whereas, for most private enterprise businesses, we do wanna make sure we have a very, very clear niche. And to give you an example, for me and my coaching business, my niche, my focus, is Gen X clients who are energetic, who are generally between 12 and 96 people. In terms with the business lifecycle, they are transitioning from startup to scale-up. I combine those four to have a very, very clear focus, but you’ll see, my clients can be anywhere in the world. I have no geographic niche. Another theoretically competitor in a business coaching space may have a very, very different focus. They may work exclusively with specific industries in a certain city. And this is one of the reasons why I say there’s no such thing as competition because if I have my niche and she has her niche, then we can actually send each other clients. We can work together, and both us and the clients, win. They create that outcome. Why are there ditches in niches? Why do some people get it wrong? And for me, in my experience, it’s because they try a niche too early. They try a niche from the outside of a market segment instead of from the inside. Now, the struggles with that are two-fold. Firstly, if you just look from the outside and go, I’m going to go and target that profession or that type of business, you don’t yet know what they need and what you’re trying to sell them may not be what they need. You might have a great focus but you’re a problem in search of a, solution in search of problem rather than a problem in search of a solution. You’re trying to sell them something that they don’t actually want. The other thing is the best niches and the ones you’ll often see in case studies are the ones that get stumbled across. They’re not obvious from the outside. It’s only when you as a business owner find yourself solving the same problem for the same type of client over and over again that you realize you’ve created a niche. If you go too narrow too soon, you’ll lose the opportunity to actually stumble across a much better opportunity. Let me leave you with two actual case studies and examples. The first was the very, very first full-time job I had, which was a real estate agency that specialized in riverfront sales, very, very high-end, and they had a wonderful niche that meant that they were selling some of the most expensive and therefore, most valuable, in terms of their revenue, properties in the city. Now, that was not a niche that they targeted. The business owner had been given a referral early in his career to sell a riverfront home, and he did it successfully, he was good at his job. And that then meant, the neighbor said, well, if you sold Bob’s place, then maybe you should sell mine. Before he knew it, he had sold two houses on the river, two in that niche, that geographic niche. And what he started to realize was that selling two in that category meant he was one of the leaders in that city. Because of the way the industry was set up around franchise areas, most of his competitors only had a tiny segment of the river in their suburb, so at best, they were going to sell one or two a year. By being an independent, he actually had an opportunity to target the whole river, to go where his competitors were not, under their franchise agreement, allowed to go. And so, he did, he embraced it. And having found that niche, he doubled down, he invested very heavily in becoming an expert and was successful as a result. If he just tried to pick a random niche, he would not have had that success. He was open to the opportunity. And sometimes being open to the opportunity means creating a larger business that have multiple niches and works together to create a robust business. So, this is the last case study I’ll share, which is a professional services firm, three partners who were very, very alike in terms of culture and in terms of the specific product that they were selling but their target markets, the demographic, was quite different. And so, they decided to go down a strategy where each of them was going to niche. The geography was the same, many of the psychographic elements of their clients were the same, but they had three very different demographics. Now, this has meant that they’ve lost the benefit of focused marketing. They have three times the marketing investment to go into three different niches. However, the advantage is that they have a much more robust business. They’ve got a great culture, which means if one of those niches were to have a downturn or a decline, the others would be able to pick that person up and by delivering a similar product, engage them with those clients. So, they’ve gone down a multiple niche strategy. And again, that was only something they were able to do once they were in the industry, once they were delivering great outcomes to their clients, and they were able to look back and go, what do our best clients have in common and what would happen if we niched our focus to only work with them. If you don’t yet know the answer to who your best clients are, go and find more clients. If you do, if you’re clear on that niche, then focus, double down, and go forth, and I wish you all the best with those riches. (gentle tune)
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