Your business was born out of your urge to create a new or better mousetrap, the belief that, thanks to your expertise, you could do it as well or better than the next person. You brought your business to market, offered a persuasive value proposition, and created demand at a price your target customers were willing to pay. You have satisfied your customers and created enough cash flow and profit to justify continuing to invest your resources. And you have developed an underlying strategy and infrastructure that enable you to maximize your effectiveness and efficiency in that one niche—your unique area of expertise—where you have a competitive edge.
Had you done otherwise, you would likely have struggled or, at worst, failed.
A niche is a subset of the market on which a particular product or service is focused. So your market niche can be defined in various ways: specific product/service features aimed at satisfying specific market needs, unique production and quality factors, and/or the specific target market characteristics your business aims to affect.
There are good reasons why most successful business owners have spent years learning how to do one thing right, exploiting their niche and growing organically and vertically in their singular area of knowledge and strength – their expertise – rather than laterally into unfamiliar and uncharted fields. Many of the processes that must be developed and nurtured – product and service development, supply-chain management (for products), brand building, marketing, sales, and public relations – are challenging enough for just one item, category, or service. In addition, developing, implementing, executing, supervising, and managing each of these processes is, more often than not, what separates success from failure. And, in most cases, the business owners must not only focus on serving their market base but also oversee internal operations and be technologically proficient.
Should you find yourself compelled to outsource any of these processes, time management and need for quality control will make your demanding job even more complex. Generally, most new and growing businesses are owned and managed by one or two people. So it is not difficult to imagine and understand that expanding into a new product or service area, even if it seems viable and economically promising, may become overwhelming and almost impossible to manage. And the opportunity costs, the passed-over projected profits, are impossible to calculate.
It is no accident that almost all businesses start with a narrow area of expertise. Starbucks first sold premium roasted coffee in one Seattle location; Ralph Lauren started with a collection of men’s ties; hotel.com, initially the Hotel Reservations Network (HRN), originally provided hotel bookings via a toll-free phone number; Amazon was an online bookstore; ESPN began operations as a 24-hour network with satellite communications; Southwest Airlines was an intrastate service flying only within Texas, exclusively using Boeing 737–200s; and the list goes on and on.
Every industry has sad tales of failures that did not first solidify their foundations nor made a point of staying true to the core values of their brand before expanding and venturing into tangential categories or unrelated new businesses. At some point, all these businesses were new, but some made regrettable choices.
The lessons for most self-starters are clear. Go with what you know. Keep it simple. Focus on your expertise. The temptation to move into categories you’re not yet comfortable with, even if you think the transition will help you grow faster or enable you to cover up past mistakes and flaws, may lead to disaster. Rather, if you are operating a profitable and thriving small business, commit to building on that promising base to ensure long-lasting success.