The companies that succeed are the ones that are able to see a way they can differentiate themselves.
Maybe it’s by finding a small piece of the overall market, such as tailoring your offering specifically to business customers. It could be increasing the features and benefits you offer clients. Perhaps it’s physically moving your business to an underserved market, or maybe it’s as simple as doing things better than your competitors.
If companies all do it the same, customers will simply buy on price.
Case Study: Find Your Niche
I think an entrepreneur is naturally very good at seeing where a market opportunity is ahead of their competition. That’s one of the main things that separates entrepreneurs from business owners.
Much like vision, being able to identify a market opportunity is a learnable skill, and it’s one of those skills that you’d better learn early on.
I spend a fair amount on this point with my clients because this is one of those places a business coach can be your most valuable tool.
You have to know what your niche is and how your market opportunity falls into that niche. If you can’t tell me that right now, you need to get some help.
This is where you start to see the tenets of this series overlap.
In my next article, we’ll take a look at your base of knowledge. You really can’t figure out the market opportunity without a certain level of understanding of what’s going on.
At the same time, you’re not going to see a market opportunity if you lack vision. This is why you can’t score highly in some areas of the tenets in this series and low in others. It all ties together.
I was working with a company a while back that is a specialist in their field. They’d been around for a while, but I don’t think anybody in their company could tell you why they were better than, or different to, their three nearest competitors.
They had a small profit margin on most jobs, and that’s the way it had been for years. They were able to tread water and even give out small bonuses some years. Employees were mostly satisfied and customers agreed they did good work.
Ownership, however, knew that they hadn’t built a company that would survive a major shake-up in the economy or in the industry itself. Down the road, it would be almost impossible to sell the company for any appreciable amount.
It wasn’t dire straits, but it wasn’t good enough.
When I asked about their niche and market opportunity, they told me the commercial building industry was where they made most of their money.
What happens when construction drops, I asked. You’ve suddenly got the same group of companies, my client’s included, fighting for the same-size pieces of a smaller pie.
Something has to give.
This company didn’t do a lot of maintenance because it was smaller-dollar work. However, we noticed that they did well in this area with industrial clients. While it obviously costs less to maintain assets than to install them, the profit margin was much larger.
I won’t get into the details, but we were able to figure out that they could bill the same number of hours at a much higher rate for servicing industrial clients than they could for installing commercial systems.
Within a year, this company was making a significantly higher profit. It was just a matter of seeing the market opportunity and devoting their time and resources to going after that segment of the market.