Booking-World.com Doing Business on “Niche” Markets

What Is a “Niche”?

Let’s get down to business and define just what the term niche means. It sounds like kind of a fancy French term (which it is). It sounds like it rhymes with riche, as in nouveau riche (which it does). And while the nouveau riche (the newly rich) are often made fun of, it is better to be nouveau riche than never riche at all! The word niche brings to mind something small. Something manageable. A realm in which you can build your business and avoid many of the pitfalls waiting for any entrepreneur. And so a niche business is…what, exactly? Simply stated, it is a business created to profitably serve the needs of a niche market. And doesn’t that sound like where you want to be?

Why Niche?

What’s so great about starting and running a niche business? Business is business, right? After talking with hundreds of businessowners we’ve come up with some compelling reasons why you, too, should niche and get rich. v You’ll stand a great chance of succeeding. Now that is a big claim to make. Why should a niche business be any likelier to succeed? Because you are positioning yourself as a bigger fish in a smaller pond. With that comes greater market power and with greater market power comes greater stability, pricing power, and profitability, and a more loyal customer base. You aren’t as exposed to the whims of the economy, nor to those of the competition.

• It will be easier to find customers. Easier? Why? Because the tighter your niche, the better you will be able to capture customers, focus on their needs, and meet those needs. The customers you capture will be the right customers—ones you can do business with over and over again.
• You’ll have less competition. A famous American general maintained that the secret to winning is to “get there firstest with the mostest.” You’ll be the first to serve your niche and should therefore capture the largest market share. Market leaders control markets so long as they preserve their advantage. They are the first to respond to trends, set the pace on product and service deployment, and set the terms on price. Isn’t that where you want to be? You understand the market and lead the way in meeting its needs—creating what Warren Buffett would call a “moat” around your business and protecting it against competition as long as you stay in touch with your niche. Competition may happen, but you’ll have a leg up, especially in the beginning.
• You’ll make more money. Not only will you have more control over pricing and profit margins in your business, some operating expenses will be lower too. With a captive niche less will be spent for promotion and advertising to acquire new customers and preserve market share. Word-of-mouth is a powerful advertising tool in a well-defined niche.
• You’ll be able to do it over and over again. Once you’ve built one successful niche business and understand the thought process behind it, what is to stop you from using that same knowledge to build a similar business that serves a slightly different niche? Or to add products and services to more profitably serve the existing niche? Such crossover niching works well—to identify new products and services to serve your existing niche or find new niches receptive to your current products and services. Online entrepreneur John Drummond and his wife, Amy, founded Unicycle.com, and quickly built a successful business shipping unicycles to customers around the world. “Now that I know how to build a Web site that caters to a specialized niche, I’m on the lookout for more ideas. Ideally I’d like to have five different niche Web sites, each pulling in a million dollars a year,” says John. Maybe accident and health insurance is a good “crossover” product to introduce to the unicycle niche? More seriously, t-shirts, bumper stickers, and other “ephemera” would work, and who’s to say unicycles couldn’t “cross over” to the extreme sports, scooter, and skateboard crowd?
• You won’t be caught off guard by market changes. In many niche businesses you are the perfect target customer; when your interest or needs shift or change, you’ll know your customers will soon be shifting as well. Large corporations run from remote headquarters offices are the last to hear their customers have changed, defected, or otherwise moved on. But if you run a store for middle-aged surfers because you are a middle-aged surfer who didn’t feel comfortable buying in an atmosphere designed to appeal to young boys, you will be smack dab in the thick of things. And when your customers start looking for bright green shirts instead of pale yellow ones, you’ll know it immediately. As a niche business owner, you will be nimble and swift. Just as in the example above, you will be able to quickly adapt to changes in your niche. A niche seller of ethnic cooking ingredients will be able to adapt much faster and more favorably than a supermarket to the latest cooking trends.
• It is often easier to get financing for a niche business. A lender who thinks you understand your market and are well positioned to serve it profitably is more likely to invest in you than another “me too” business and business plan.