For earliest stage entrepreneurs, it may seem attractive to cast as wide a net as possible. After all, you want to serve a great number of customers, why not design a strategy that allows you to reach as many market segments as possible?

While this may seem logical, the truth is that you’ll find best results not from being everything to everyone, but through an approach that lets you and your company master your market segment. When it comes to creating a business, a vertical-oriented approach can be the best way to reach incredible heights.

In essence, vertical markets are ones that address only one particular industry. Their opposite, horizontal markets, are spread across a range of industries. For example, a horizontally inclined software company makes a word processing program suitable for any business, while a vertically oriented one may make specialized software for use only by industrial farmers. 

While household names like Google and Apple have raked in billions by succeeding in a horizontal market, creating products with widespread appeal, countless early-stage entrepreneurs have found that a vertical approach is the best way to craft superior products. The strength of deeper knowledge of your industry is undeniable, and for a growing business a narrow focus can result in the development of highly profitable practices.

While there certainly are advantages to versatility, today’s markets more frequently demand the kind of quality that comes from specialization. If you had the resources to shop for the best, would you buy a diamond ring from Walmart? Or would you go to Tiffany’s? One retailer promises something for everyone. The other promises unmatched expertise. When it comes to the quality of the end product, there’s no argument.

Even if you’re not hawking precious stones, your business serves its own goals best by operating in a vertical market. Since staying lean is crucially important in the early stages, gaining a nuanced and deep understanding of your particular industry segment goes a long way when looking to cut costs. You should always be searching for ways to lower overhead, and a vertical alignment allows for the kind of comprehensive understanding of your niche that can help your team refine processes. The techniques and protocols you develop thanks to this expertise can be a huge boon to your efficiency, smoothing the road to profitability.

If you’re only taking a horizontal slice, you also miss out on developing smarter marketing strategies that can take advantage of the pinpointed approach. Grabbing the attention of someone off the street is incredibly difficult. When you operate in a vertical market serving a narrow customer base, convincing the uninitiated to buy what you’re selling can can be a matter of speaking their language, and offering easily understood proof that you’re the one to meet their needs. Be sure to keep a precise marketing strategy in mind while crafting your vertical business plan.

Of course, there are always potential dangers to the vertical approach that you must take into account. Industries and trends are always changing, and taking too narrow a focus can leave you behind. Your cutting-edge VCR business may have done very well in the 1980s, but before long you’d have been gathering dust. Allowing yourself room to adapt is a necessity in a vertical market.

Many young companies aim to take over the world and fail to occupy a single shelf. By taking your business vertical and mastering one profitable niche, you may not become a household name, but those in the know won’t be able to operate without you and your product. When building a company that’s aiming for the heights of your industry, there’s no better direction to look than up.

About the Author(s)

 Robert  Koven

Robert Koven is the Managing Director of Leonis Partners, one of New York City’s top financial firms with a focus on Mergers & Acquisitions and equity capital transactions. After working for investment banks like JPMorgan and Lazard Freres, Robert Koven and his team at Leonis took techniques they learned at those large financial institutions and applied them to growing...

Managing Director, Leonis Partners
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