Founder/CEO of Rankings.io, an SEO agency that helps elite personal injury law firms dominate first page rankings.
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In his book, Range: Why Generalists Triumph in a Specialized World, David Epstein dives into the advantages of being a generalist before picking a specialty, using tennis champion Roger Federer as an example.
Federer played many sports growing up (including skiing, wrestling, soccer and tennis). Epstein writes that by partaking in a “variety of sports, usually in an unstructured or lightly structured environment,” those who grow up to become elite athletes “gain a range of physical proficiencies from which they can draw,” “learn about their own abilities and proclivities” and then, later on, “focus in and ramp up technical practice in one area.”
As a business owner, chances are that you started as a generalist. Perhaps you run a marketing agency that handles both content marketing and social media strategy for clients. Or, maybe you’re a self-employed graphic designer who designs flyers for a pet store one day and a website for a florist the next.
The depth and breadth of the work you’ve done thus far have given you valuable knowledge and experience, and now you might be considering niching your business. If you’re thinking about turning your focus to clients in a select few industries, or cutting down on the services you offer, here are the pros and cons you should weigh.
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Pros
1. More Optimized Marketing—And Better Conversions
Niching narrows your customer base, but in doing so, presents you with the opportunity to become well-versed in the language of a select industry or line of work and position your business as being able to uniquely address those needs.
In turn, prospective clients view you as more credible than the competition. And to secure that business relationship with someone they trust, they’re often willing to pay more. That translates to boosting your conversions and revenue and gaining a good return on investment on your marketing dollars. Think about it this way: if you owned a home services company and wanted to hire a content marketing agency, would you gravitate more toward a pretty standard one or one that’s tailored for companies similar to yours? Most likely, you’d pick the latter. This reflects one of the lessons in Seth Godin’s book, Purple Cow. For a brand to succeed, it needs to be distinct (like a purple cow).
I’ve experienced these benefits firsthand. In the early days of my agency, I offered SEO and PPC design services to various law firms. Then, I dropped PPC design as a service. Eventually, I started only working with personal injury law firms. Each time I narrowed the scope of my business, my profits increased.
2. A Friendlier Competitive Landscape
Many businesses thrive off of referrals. Leads that come your way via referrals are arguably the most valuable, given that they are already highly qualified.
Your customers can refer your business, and so can companies in a similar line of work. That’s where niching will benefit you. Even though you tackle related projects, other companies won’t view you as a threat and will send you referrals.
3. Increased Operational Efficiency
When you’re a specialist, you’ll form a deep understanding of one industry or type of work (or a few) and become well-acquainted with its nuances. You’ll spend less time figuring out what works and what doesn’t and will be able to build repeatable processes that enable you to work more efficiently—and scale your business.
For instance, a self-employed social media strategist who works with hotels is aware of peak travel season for various destinations. She’ll also know what ideas those executive teams typically like. As a result, she’ll be able to pitch effective ideas that have a higher chance of getting buy-in from management from the get-go. She’ll go through significantly less trial and error than if she were a generalist who worked with clients across a wide span of fields.
Cons
1. Smaller Market Cap
There are cons to niching as well, the most obvious one being that you’ll have a smaller market cap.
A smaller market cap won’t affect you as much if your niche still gives you access to a significant amount of potential clients. However, suppose your niche caters to a hyper-specialized industry with only a few players (such as, say, an obscure type of technology), or you offer a very particular kind of service (such as only photographing weddings in your rural hometown). In those cases, you’ll have a much tougher time. If you do decide to niche, make sure you won’t eventually run out of clients.
2. Greater Financial Risk (Depending On Your Industry Or Service Offering Of Choice)
Hand-in-hand with a smaller market cap is greater financial risk, especially if you pick an industry or service offering that’s susceptible to being severely impacted during recessions.
A recent example of this is the Covid-19 pandemic’s impact on events. As conferences, concerts and other in-person events shut down, the businesses that supported them took a financial hit.
3. Less Variety
Another vital thing to consider is your personality. Some people enjoy having more variety in their daily work life; they’d get bored constantly writing about real estate or designing book covers.
If you’re someone who becomes drained by dealing with the same topic day-in and day-out, or if you’re an extrovert who likes talking to people from all walks of life, niching might prove stifling to your creativity.
Gradually Ease Into Niching
If you decide to niche your business, gradually narrow the scope of your industry focus or offerings; don’t abandon clients or a type of service overnight. Instead, once those projects are over, you can politely opt not to renew them.
Additionally, make sure you dedicate time toward developing your knowledge and skills in your specialty of choice. For instance, if you want to exclusively work with clients in the healthcare space, actively seek those leads. If you want to primarily create social media campaigns instead of working on other types of content, consistently include bigger and better relevant work examples in your portfolio.
Niching isn’t necessarily the right answer for every business. However, if you decide that it’s right for you and gradually ease into it, you’ll likely reap many rewards.
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Author: Chris Dreyer, Forbes Councils Member
