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The Shallow End

Don't start by diving into bigger markets-get your product's feet wet by finding a profitable niche.
June 1, 2001
URL: http://www.entrepreneur.com/article/40660

Inventions are the basis for plenty of companies, from multimillion-dollar corporations to small, $100,000 businesses. While many inventors shoot for the former, those in the latter category are nothing to sneeze at. They can generate a modest annual income, often without hiring any employees, facing stiff competition or having to make a significant investment. For inventors without strong management skills, finding a unique product in a small target market is often ideal.

Kelly Greene of La Jolla, California, got her inspiration in 1992 when she moved into a new apartment. Greene, 42, liked swimming laps for recreation and fitness, but her apartment complex's pool was too small to provide a meaningful workout. She thought the best solution was to create a method to swim in place.

Greene's big breakthrough came when she saw teenagers at the beach carrying surfboards with plastic leashes attached. "I immediately went out, bought two surfboard leashes and made my first prototype," Greene says. "The plastic tubes were too stiff, so I substituted a bungee cord for the tube, and I had my product."

Greene's company, SwimCords, has just one product line-SwimCord (retailing at $32.95 to $38.95), a stretchable cord attached to neoprene ankle straps. First-year sales were $15,000 in 1996; last year, SwimCords passed the $100,000 mark.

The 5 Pillars of Wisdom

Like Greene, you can succeed with a product in a small market, but you face a major obstacle right off the bat: You won't be able to afford aggressive product promotion. That means you need certain customer and market conditions in place to succeed. Here are five thing to start with:

Meet a need that customers are passionate about.

When you serve a small market, your product won't be sold in most stores, so customers have to be willing to search for it. You also have to rely on word-of-mouth, something you won't get unless customers have passion for your product.

Early on, Greene sought out people who like to swim 30 to 60 minutes at a time to keep in shape. "Everyone I showed it to wanted to buy one," she says. In support of word-of-mouth advertising, Greene says: "My best advertising occurs when someone buys a set of SwimCords at a pool and spa center. They almost always end up recommending my product to at least two or three friends."

Attract new customers by selling to influential people in your market.

Because Greene's customers are passionate about their interests, they keep track of what the top people in the industry are doing. "[After pitching the SwimCords to them], my first customer was the UCLA swim team. They told me about a trade show hosted by the American Swim Coaches Association where I was able to sell to many other swim teams. After several years of effort, I was able to sell to Clay Evans, a two-time Olympic silver medalist and founder of the Southern California Aquatics Club."

Those weren't enormous sales in themselves, as clubs might buy only five to 10 sets of SwimCords every three to five years, but they set the stage for the rest of the market. Greene didn't get direct endorsements from her high-profile users, but word got out that her product was a training aid for top competitive swimmers.

Design a product with a small upfront cost.

You can't afford to pay a lot for tooling, fixtures or inventory if you sell to a small market. "For the first four years, I made the product myself at night after working all day," Greene says. "Two years ago, I [came] across a manufacturer, who now makes the product, so I have more time to sell." Timing is everything-you may never recover large upfront manufacturing expenses if you're targeting a small market.

INVENTOR-FRIENDLY SITES
Mensa, the organization for people who score in the top 2 percent on intelligence tests, is ready to help inventors turn ideas into finished products. Mensa Intellectual Capital Ventures Ltd. (MICV) provides e-mail project teams and online "think tanks"-coordinating specialists from 40 countries-to focus their skills on a particular problem. Mensa will evaluate and help you develop even the most complex mechanical idea. For more information, visit the MICV Web site at www.mensaiqcapital.com.

Another site inventors might want to investigate is www.nmoa.com/contest, which has details on the National Mail Order Association's contest to find the best products made in the United States. Winners will be featured in the association's newsletter and Web site and will receive a certificate of recognition and a winner's publicity kit. Entries must be submitted no later than December 31, 2001; winners will be announced in early 2002.

Get access to the right distribution network.

Greene saw sporting goods stores as her best long-term market, but they were unwilling to stock a product that didn't serve any proven demand. What she needed was a small distribution network that would attract her target customers. Greene found that spa and pool stores that carry pool toys, such as floats, tubes, chairs and other accessories, were ideal.

In her first few years in business, Greene kept her full-time retail job and depended on National Spa and Pool Institute trade shows across the country to acquire customers. "The shows cost me about $5,000 each to attend, but they helped me line up an initial customer base," she says.

In late 1999, Greene quit her job to work on her product full time. Her first focus was calling on spa and pool stores. "I made displays stocked with about 20 SwimCords and went around the Southwest and California in my van. I'd stop at stores and set up the displays. Then I'd tell the owner the fully stocked display cost $300 and ask if they wanted to buy it. Seven out of 10 times, the answer was yes."

Make sure there's a larger market to penetrate.

Once you get established in a niche market, you want to be able to expand into at least one larger market so you can make a comfortable living. "I was able to get into a few Oshman's [sporting goods] stores in 1996, and now, after five years, I'm in 25 of their stores," Greene says. "I'm also in Sports Chalet this year, and I'm still hoping to get into Sportmart."

Greene isn't depending on the sporting goods stores for survival-she has the spa and pool stores for that-but she keeps working them, understanding that they could provide the sales boost she needs to make a more substantial income.

THE EDI ROADBLOCK
One of the major sporting goods stores Kelly Greene looked at as a market for her SwimCords is The Sports Authority. Yet she hasn't been able to land it, because The Sports Authority requires vendors to have Electronic Data Interchange (EDI) capabilities. Greene doesn't, because she can't afford the $10,000 to $30,000 to implement it.

Most large retailers use EDI to cut costs. It lets them send orders, requests for quotes or computer updates electronically rather than relying on fax, mail or phone orders. Small manufacturers can't get the business unless they use EDI, but buying EDI technology is no guarantee they'll get the business.

The good news: Firms in most areas will do EDI translation for small manufacturers. Look for them in the Yellow Pages under "Computer Software and Services." Web sites of companies providing EDI conversion service include www.edi-service.com, www.sdgi.com, www.eamerica.com and www.edipower.net.

Put It All Together

Greene succeeded because she followed the ideal master plan for a small-market product. Though she did it out of necessity, because she couldn't afford to quit her regular job and make a big marketing launch, Greene still created a profitable business she can run from home.

Don't dismiss a small-market idea even if your ultimate goal is to create a multimillion-dollar company. Small-market products are easier to succeed with, and they can make you a proven entrepreneur who can more easily launch your next big product.

Next time you come up with an idea that doesn't seem to have huge sales potential, evaluate it more thoroughly. It might provide a launching point in a niche market for your own profitable business.


Don Debelak is a new-business marketing consultant and the author of Think Big: Make Millions from Your Ideas. Send him your questions at dondebelak@uswest.net.

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