Monday, August 15, 2022
HomeOnline BusinessThe importance of having a niche as a small company

The importance of having a niche as a small company


What niche means for a small business

When the word niche is used in reference to business, it’s often associated with “small”. In actual fact, a synonym for it might in fact be “targeted”. A niche in business is about having chosen an area of the marketplace to service and the way in which you do that, whether that be by location, audience type, need, service range, or some other narrowing criteria.

At this point it’s worth mentioning that I am a keen amateur fisherman. The relevance of that point is something I have learned through years of trial and error: that to catch the right fish, you need to be in the right place, at the right time, with the right equipment and the right bait.

This is precisely how developing a niche works in a business setting too.

‘What is your niche and what changes do you need to make your business better service your target audience’s needs?’

By choosing your target audience, you get to clearly understand their specific needs and support those through a well-targeted service or product. Once you know the why (they will buy) and the what (they will receive from you), you are better able to define the way in which to plan, market, sell to, service, price, and achieve recognition for your work.

Why it’s better to have a business niche

There are benefits across the board when businesses’ effectively define and manage their business around their chosen niche, and these can be split into benefits for customers, business owners and your team:

  • Customers – receive targeted and relevant solutions that give them the best outcomes possible. This creates a strong relationship between the supplier and customer, which generates loyalty and, hopefully, recommendations to others, that in turn generates more new business.
  • Business owners – one of the key benefits of being a “specialist” in your niche is that you tend to be in more demand, in shorter supply, and achieve higher rates of valuation and recognition than the generalists.
    It is therefore harder for competitors to displace you as your service or product is less commoditised, and your value is harder to erode.
    Finally, it makes planning, marketing and the operation more efficient and, frankly, easier to complete; which in turn means your business is more likely to deliver successfully and thrive.
  • Teams – regardless of what your “narrowing” criteria are for establishing your niche, by having a niche which is understood, and with operations and systems in place to keep this focus, it’s easier for your teams to manage and deliver.
    Your team delivers the outcomes for your customers, so anything that removes ambiguity and inconsistency for them is a good thing, and a niche can do just that.
    In addition, it can be a great motivating and development tool too, as there is a sense of pride in having expertise and specialist skills, with the recognition and development within the role and business.

Therefore, having a niche is a win-win for you, your business and customers.

How to define your niche

Knowing you need a niche is one thing, it’s another to confidently define it and build your systems around it. Many businesses will have niches already, either deliberately established or emerged over time, but they aren’t always defined, written, communicated and understood as well as they could be.

This is why market research is an essential starting point for start-up businesses, or something to go back to, in order to create, validate and tweak your niche from, in order to enable you to have a growth business.

Your niche has to be in demand, and it has to have a value that people are willing to pay preferentially for. The business graveyard is filled with irrelevant and unwanted innovation.

>See also: Nine mindset changes that will turn you from employee to entrepreneur

One top tip is to look at the general context of your industry and ask where a generic approach or mainline solution fails to achieve customer delight. Where that potential exists, then innovation and niching exists.

An example is the growth of vegan cookbooks, restaurants, and so on. This market is now becoming saturated with the broad vegan offering, but from personal experience of having a wife with coeliac disease (she cannot tolerate gluten), there is still a massive space for providing high-quality gluten-free food or restaurants.

Innovation and establishing a niche are natural bedfellows. Of course you will need the skills, structure, systems and operations to deliver it but there are resources and people who can support those, including a business coach. What you need to come up with first is what the market opportunity is.

Don’t have price involved

It is an error I’ve seen time and time again – “our niche is that we are the cheapest solution available”. That may well be the case, but it only lasts until someone else comes along and finds a way of doing it cheaper.

Discounting and price as part of your niche definition is problematic. It’s often used to overcome a lack of perceived differentiation.

As a specialist/niche business there is less direct competition, and less chance of the value erosion or “I can get that cheaper elsewhere” being raised.

To give an example, if a business is selling its product at £100, and has variable costs of £70, then its gross profit is £30 i.e. 30 per cent margin. With a 30 per cent gross margin, and then discounting sales price by just 10 per cent, you would need to sell 50% more volume to recoup the same profit as you would have achieved before the discount was applied (£20 profit achieved on a £90 sale price needs 50 per cent uplift to reach the £30 original on a £100 sale price).

Now if you are able to offer your product at a lower price because you do things differently – you operate differently to the rest of the market and are able to give greater customer delight as a result – that operational difference is where your niche lies. The reduced cost is a positive outcome but not your niche. An example of this would be when the likes of Purplebricks came along and changed the way in which the estate agent market worked. That did result in reduced costs for home movers, but their niche was about how they serviced their customers.

So, what is your niche and what changes do you need to make your business better service your target audience’s needs?

Business coach Tim Rylatt is co-founder of UK Growth Coach, which provides business owners with coaching to help them simplify the business of business.

Tim’s coaching background comes from working with the world’s largest business coaching firm for over a decade, and since then, from running his own profitable coaching enterprises. He has worked with around 250 companies throughout his career and is a published author on the subject. Alongside being a co-founder of UK Growth Coach, he is also a Director of two award-winning marketing agencies and has real-world experience of being a business owner too

Further reading

Top tips for creating a clear vision for your business



Source link

RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Most Popular