For those entrepreneurs interested in running their own businesses, one important decision is whether they want to have large corporations with a wide variety of products or smaller niche businesses, such as a business focused entirely on pumps as opposed to an entire hardware store. Although corporations have their benefits, small niche businesses have several key advantages that make them an excellent choice. Here are three of the biggest reasons why it’s good to go the small niche route instead of building a large corporation.
More Focus on Your Products
It stands to reason that you can only devote so much time to whatever products and services you offer, and the more you offer, the less time each individual item will have. When you have dozens of products, it’s tough to improve on them and expand with exciting new options equally. Generally, this means that your products are unlikely to improve as quickly as they would if they had more attention.
With a small niche business, you’re able to focus on a select few products that you strive to make the best of the best. For example, a company like Compressor-Pump & Service, Inc. can succeed because they provide a wide variety of a single item category. This allows for simpler marketing, merchandising, and even innovating. Fewer products also makes it feel more special if you release something new.
Less Competition
The biggest problem with trying to do it all is that it leaves you with plenty of competition that has already established itself in the marketplace. People already go to Amazon and Walmart when they want to shop for all kinds of items at low prices, so trying to compete with them is an uphill battle. While not every sector has a Walmart or an Amazon to compete with, many have fierce competition that can leave you in the dust if you’re not focused.
By niching down, you’ll have much less competition to worry about. You can also hone in more effectively on a target audience and build specific marketing campaigns that focus on your desired customers, instead of trying to appeal to everyone. Even if you sell a wide range of products, you can still benefit from narrowing your focus. Customers will come if they feel like you are a better choice, and often that just means appealing to their particular sensibilities purposefully.
Better Profit Margins
One major benefit of being able to focus more on your products is that you can develop higher quality products, allowing you to charge more for them and earn higher profit margins. As you develop your products, you may find ways to cut production costs, streamline labor, or any number of things that make your focused efforts more efficient and profitable. This is the gateway to scaling up your business.
Another reason you’ll have better profit margins is that when you’re a smaller business, you don’t need to compete on price alone. You can stand out by offering better quality or superior service, whereas large corporations typically need to have low prices if they want to bring in customers.
A small niche business is often the best way to go, especially among new entrepreneurs. Keep in mind, also, that just because you start in a small niche doesn’t mean you’ll stay that way. Amazon was only a bookseller when it started, and look at how far it has come.
