From the March 1998 issue of Startups

As you launch your new business, you would do well to follow the practices of expert target-shooters. A business start-up can be a hit-or-miss affair. As any good marksman will attest, you stand a better chance of scoring a bull's-eye when you take aim before you fire. Blindly launching a business without first carefully defining your target market is like shooting with your eyes closed: You may score a hit if you're lucky, but the odds are against you.

Differentiating your product or service in a highly competitive environment is crucial. But before you can differentiate, you need to identify exactly what niche you'll serve. Will you operate an all-purpose bakery or one that caters to the health crowd with whole-grain products? Should you target the entire small-appliance repair market or focus solely on fixing vacuum cleaners?

Knowing who your market is--and who it isn't--helps you maintain a constant focus. Think like Goldilocks: The market you choose should be just right for your business--not too big, not too small.

"Define your niche too narrowly, and you may not have enough market to make a profit," cautions Janet Attard, a small-business consultant and author of The Home Office Small Business Answer Book (Henry Holt & Co., $19.95, 800-288-2131). Defining your market too broadly is just as risky. "Many small businesses have gone under trying to be all things to all customers," says Attard.

Start by assessing existing markets. If you plan to provide a unique service or product, you may be able to consider a broad market base. But if you're planning to enter a market with established competitors, look for an underserved niche. For example, if you intend to open a bakery, perhaps there are specialty markets begging to be served: the health-conscious or your local Hispanic community. Always follow your observations up with sound research to ensure a profitable market niche really exists.


Kathy Steligo is a freelance writer in San Carlos, California.

The Start-Up Niche

No one can point the way to an unserved market more clearly than the potential customers in that market. Such inside experience led Mike Holzschu to establish his Farmington Hills, Michigan, human resources consulting business. As district manager for a large corporation in the mid-'80s, Holzschu had attempted to outsource some facets of his human resources operation. "I needed someone who could interpret complex issues and legislation. But at that time, there were few, if any, choices," Holzschu recalls. "I realized my peers in other small businesses shared my frustration."

He had discovered a market with virtually no competition. After further research, Holzschu decided to pursue the market. "I had a business background, plus the skills I needed to serve the market: human resources expertise, knowledge and the ability to translate technical matters into plain English," he says. He launched Holzschu, Jordan, Schiff & Associates in 1987; the company's sales grew 20 percent between 1996 and 1997.

The Evolutionary Niche

Holzschu began his business by taking aim at a specific market niche. Plenty of other entrepreneurs, however, reach their ultimate target markets as a result of business evolution.

When Tim Prero established JetWest International in Van Nuys, California, in 1992, he envisioned a robust clientele made up of several markets. But high overhead costs forced him to focus on a very narrow market. "After aircraft, fuel and pilot costs, there was nothing left for advertising," Prero says. "So I began by offering to fly for wholesale brokers--primarily cargo and UPS--when they were oversold. Our profits were reinvested to add more planes, more pilots and, eventually, more markets.

"Once I began targeting retail customers, I quickly established a growing clientele in the entertainment business," Prero recalls. "It would have been easy to focus solely on that market, but it would have eliminated the other 40 percent of my business that is now made up of other markets."

Unexpected changes often shoot holes through the best of market plans. Changing market conditions (a big discounter moves into your territory) or disappearing markets (remember eight-track tapes?) may require drastic redirection of your business. Or, as in the case of Lesley B. Fay, a simple change of heart may lead to an entirely unplanned market direction.

Fay worked as a caterer, pastry chef and restaurateur before realizing her true passion--developing a unique line of gourmet foods. But she credits the lessons of her past pursuits for the success of Lesley B. Fay Fine Foods of Sonoma in Sonoma, California. Although her successful restaurant provided the perfect testing ground for her products, Fay found it impossible to devote sufficient time to both markets. Narrowing her focus to concentrate on her gourmet condiment line, she now devotes all her time to developing new products, sales and distribution of her wholesale food line. Sales have more than doubled since Fay sold her restaurant and retail store.

Taking time to identify your market before your business is launched is time well-spent--time that will improve the likelihood of scoring a business bull's-eye.

Niche Hunt

Need help finding your niche? Check out the following resources for more information:

  • The National Business Incubation Association provides information on small-business incubators across the country; call (740) 593-4331 or visit http://www.nbia.org
  • The Small Business Administration (SBA) co-sponsors more than 900 Small Business Development Centers with universities throughout the United States. Call (800) 8-ASK-SBA to find the center closest to you.
  • Get marketing advice and one-on-one business counseling from an experienced counselor at the SBA's Service Corps of Retired Executives (SCORE). Volunteers from this organization help mentor fledgling business owners free of charge. Visit them online at http://www.score.org (You can also call the SBA district office nearest you, listed in the government pages of your phone book).
  • Visit the Smart Business Supersite at http://www.smartbiz.com for valuable marketing information, tips for small-business start-ups and helpful business planning information.
  • Niche Selling: How to Find Your Customer in a Crowded Market, by William T. Brooks (Irwin Professional Publishing, $30, 800-447-2774), offers valuable information on targeting your market.
  • Finding Your Niche, by Laurence J. Pino (Berkley Publishing Group, $9, 800-447-2774), can teach you how to successfully pinpoint your customers.

Contact Sources

Holzschu, Jordan, Schiff & Associates, 38986 Polo Club Dr., #102, Farmington Hills, MI 48331, HRdoc1@aol.com

JetWest International, http://www.flyjetwest.com

Lesley B. Fay Fine Foods of Sonoma, P.O. Box 2054, Sonoma, CA 95476, (888) 537-5392