In the early days of starting a business, you feel like any dollar is a good dollar. You have really good intentions and in order to gain some momentum and get the cash flowing, you look for anyone willing to do business with you. But very quickly, you discover that not every client is a good fit and not every project is in your wheelhouse. But you need to generate those dollars, so what choice do you have?
At first glance, it seems reasonable that serving the widest possible audience will bring the greatest revenue potential. But for most businesses, it’s really the opposite. Finding the narrow groups that need your product or service the most and serving them – that is the better path to revenue growth. Finding those products and services that you know well and can deliver exceptionally time after time – that’s the way to expend your energies wisely. When you try to be everything to everyone you spread yourself too thin and dilute your real value to clients.
So it’s time to stop being all things to all people and start niching down. I think the Pareto Principle (80/20 rule) applies here. For many companies, 80% of revenue is derived from 20% of the products and services they provide. When you niche down, you are focusing energy on that high-potential 20%.
So how do you niche down when niching down potentially means saying no? When you are starting out, saying no can be really scary, so take small steps at first. Start by taking an inventory of 2 things: First, what do you love doing? This tends to be that high-potential 20 % of products or services that are the backbone of your revenue stream. Be honest with yourself, what do you love the most? What is generating 80% of your revenue? That is where the bulk of your energy should be going.
Second, do an assessment of the ideal clients who are best suited for that product or service. When it comes to defining your ideal client, there are a number of tools to use. The idea is to develop one or more customer personas. Hubspot has a great tutorial and intuitive tool for creating basic customer personas. It is free and simple to use, and you can create a number of personas to fit the niche clients you think are ideal for your business.
In order to niche down and create traction, you need systems and processes in place. Lots of people are good at collecting data and while that is helpful, you’ve got to use that data and implement it in order to create traction and be successful. The more we progress in our business the more we are trying to systematize our core processes. Doing so helps us focus more clearly on that core Pareto 80% revenue generator and on our ideal customers.
In future posts, I will dig deeper into the systems we are finding helpful. Stay tuned for that!
In our experience and in our conversations with clients, podcast guests, and others who have built successful businesses, it is clear: niching down and focusing on your sweet spot activities and sweet spot clients actually drives more revenue and gives you more confidence in building your business.
I believe you will find what we have found, that building a stronger foundation of expertise and cash-flow will allow you to expand and add experts in your weaker areas. Your business will then be able to provide other products and services as you gain traction and confidence. There is no harm in adding niches as your capacity grows.
Remember, the temptation is to try and please all of the people all of the time but my message to you is to take courage and niche down.