I see business all the time that would flourish if they would target a more focused niche. I remember when I took economics class we learned all about how to diversify our portfolio when investing in the stock market. This meant making sure we invested our money into as many different industries or niches as we could. This would insure that if one industry took a big hit, our portfolio as a whole, would still be in tacked and making money. For example one might invest in the energy, medical, and automotive industry. This however limits your opportunity to invest big in one area and have potentially huge income. Warren Buffet once said, “diversification is protection against ignorance. It makes little sense if you know what you are doing.” What Buffet means by this is if you know what you are doing, it does not make since to play it safe by investing a little into a bunch of companies instead of a lot in one. If you know the ins and outs of a company and could most likely call what the stock is going to do, then why would you play it safe? Confidence is key in here. So how does diversifying your portfolio have anything to do with finding your niche? Companies that focus too much on having a broad customer base, have a harder time establishing themselves in the first place and getting the potential to have the customer support to diversify. If Nike had not focused on sports wear such as shoes when they first opened, Nike may very well not be around. You need to concentrate on your niche. Not sure how to find your niche? The first question is what are you and your team good at? For example, Nike focused on the sports side of clothing (specifically shoes) as that is what they were good at. They didn’t do any branching out until they had established themselves more within the sport community. They now have branched into things such as eye glasses, hats, backpacks, and sports equipment to name a few. Think of it as a pyramid that was built from the top down. At first you focus a ton on one small specific niche. After getting established within that niche, you can then start to branch out and take on other risks. With more experience backing you, you can now have the backing to venture into new markets.
Experience is definitely important and that is what finding your niche will help with. How many times have you gotten a recommendation for a repair mechanic because you were told they are good at what they do. The mechanics experience has made him the best in the industry. Your niche will help you establish this just like having great sports shoes helped Nike become who they are. When you are focused too much on different niches, it becomes increasingly difficult to become great at one niche. All of your resources are pulled in to many directions.
Your niche will also allow you to win big. Becoming the best in your industry will bring in more customers. It gets the word out about you and your business. When you have your hand in too many pots, it’s difficult to become the best. So get out there and find what niche best fits you and your company.