What do Nike and Under Armour have in common?
The obvious answer is they’re both multi-billion-dollar companies that sell a range of sporting goods. But there’s another answer that’s practically opposite that one, and which ties in neatly with today’s topic.
Both companies were built on the success of a single product.
That’s right. In the beginning these companies weren’t selling a range of sporting goods because they only had one thing to sell. In Nike’s case, it was a running shoe. (Yes, one running shoe.) And for Under Armor, it was a Lycra top.
Okay, so it’s a nice bit of trivia. But what can a tradesperson (or any other small business owner) possibly learn from it?
Three strategies for growing a business
To get your small business to stand out in a crowded marketplace, you have three options:
- Cost leadership (selling your product or service for less than everyone else)
- Differentiation (doing things differently to everyone else)
- Focus (selling a specific product, or to a specific market).
(If you really want to know more about this stuff, look up ‘Porter’s Generic Strategies’ on the internet. Personally, I’d rather pull up my sleeves and do something.)
Unfortunately, two of these options aren’t long-term solutions.
Yes, you’ll get more business by lowering your prices. But you’ll also be lowering your profits, which is the last thing you should do when trying to grow your business. And while doing things differently will make your business stand out initially, it won’t be long before other businesses are either copying you or doing things even more differently.
Which leaves one option: focusing on a specific product, service or market. Otherwise known as…
Creating a niche in your small business
At first, focusing on a specific product or market may sound like a death knell for your business. “You want me to sell fewer products to a smaller market?” But focusing (or niching) gives you a couple of distinct advantages.
The first advantage you’ll have is efficiency. By focusing on one product or service, you’ll be able to produce it quickly and efficiently. You’ll have fewer issues with stock, and need less equipment. And if you need to train additional staff, you’ll only need to show them how to do one thing.
And by focusing on a smaller market, you’ll get to know it a lot better. You’ll spend less on advertising your business, and the advertising you do will be a lot more focused.
The second advantage you’ll have is being known as a specialist. If a customer gets the same quote from two people, and one of them is a specialist, who do you think will get the job? You may be able to quote a little more and still get the job, because the customer would prefer a specialist doing the work.
So, creating a niche in your business can actually lead to more work. And because you can do it quickly and efficiently, you’ll make more money.
As an example, one of our clients is an electrician who can do any type of commercial and domestic electrical contracting. But after making ‘prefab new builds’ his niche he now has all the work he needs, and can charge considerably more than “the going rate”.
Another example is the company that produces a single beauty product (“Micro Blades”), which is growing at nearly 50% a quarter.
Without a niche, you may find your business stuck in no man’s land—too cheap, too expensive for others, and not enough experience. You may have lots of customers now, but it’s probably from good luck rather than good business practices.
Finding your niche
Not sure what niche your small business should specialise in? Start by looking at your existing customers, and seeing if there are any similarities or patterns. Do they all live in the same area? Are they all a similar age?
You might also want to look at the products or services you sell. Are some more popular than others? Which ones are making you the most profit? If you could only sell one thing, what would it be?
Write these down and you will soon see a pattern emerging. When we did this exercise we found that at the time over 70% of our customers worked in the trades. So what did we do? We doubled down on our efforts to attract more tradesmen of course. We refocused our brand and website to talk directly to tradesman. We advertised in media where we knew tradesman hung out. It became a lot easier for us to know what would and wouldn’t work.
If you can’t think of an appropriate niche, or would like to talk about your options, don’t hesitate to get in touch with us. We can help alleviate any fears or concerns you might have, particularly when it comes to turning away business that now falls outside your specialist area.
But once you have your niche you’ll quickly recoup your losses and start reaping the rewards. And while you may not achieve the status of brands like Nike or Under Armour, you’ll certainly be better off.