Finding Your Niche Discover your strengths to distinguish your business from the rest of the crowd.

Find a need and fill it. That's what Ida Krenzin did whenshe couldn't find a retail store in Northern California thatsold quality buttons to finish the tailored suits and blouses sheenjoyed sewing at home. Rather than settle for inexpensive plasticbuttons that easily chip and don't enhance a garment, Krenzinstarted her own small business selling unusual buttons. "I hada feeling other people were as annoyed as I was about spendingplenty of money and time making a garment and having to finish itwith a 25-cent button," says Krenzin.

Her instincts were right. Through her Button Shoppe inCarmichael, California, which she founded in 1993, Krenzin sellsthousands of buttons in hundreds of different shapes, sizes andtextures. Her customers design their own clothes, or want toimprove the appearance of store-bought merchandise. They don'tmind spending from a dollar to $20 apiece for a button, especiallywhen the buttons are made of sterling silver, pewter or pearl, andare shaped as gold leaves, coins, fishes, and Raggedy Ann andAndy.

Krenzin is succeeding at niche marketing--exploiting a narrowsegment of a large, diverse market generally served by only thebiggest companies. By targeting a niche, a small firm like theButton Shoppe can offer a specialized product or service to aspecific group of customers. For Krenzin and thousands of otherentrepreneurs, niche marketing is the key to business growth andprofitability. How can you find the right niche for your business?Consider the lessons learned by Krenzin and three other nichemarketers.

Do Your Homework

A key challenge for Krenzin was finding button wholesalers fromwhom she could purchase buttons. "They aren't listed inthe phone book, so it took some digging to uncover someresources," recalls Krenzin. She finally located a fewwholesalers as she scouted through catalogs and read books on thehistory of buttonmaking. "Once you find one source, you findanother and another. Then the button distributors start coming toyou," adds Krenzin, who now buys from at least 14 differentwholesale distributors.

Krenzin also had to consider the best way to reach hercustomers. She originally sold her buttons through a small retailshop. After being burglarized twice in one month, Krenzin closed upshop and began selling her buttons at knitting, sewing and quiltingshows across the country. "These shows are an important partof our marketing," she says. "They generate from $2,000to $4,500 in sales per show."

Play Your Strong Suit

Healthy Planet Products, which produces greeting cards andstationery for the Sierra Club and other nonprofit organizations,discovered its niche once it stopped trying to compete with largercard companies. The change occurred when president Bruce Wilsonfound that sales of Healthy Planet Products' traditional cardswere edging up three percent a year. Sales of its wildlife andenvironmental cards, printed on recycled but high-quality coatedpaper with stunning photographs of wildlife and nature, weregrowing 30 percent a year.

"We were trying to be everything to everyone, but there wasno way we could compete with Hallmark, American Greetings andGibson," Wilson says. In 1990, he committed Healthy PlanetProducts to becoming "a marketer of cause-related greetingcards, focusing strictly on that need." By 1993, with 90percent of its card line cause-related, Healthy Planet Productsturned a profit for the first time in three years and reportedsales of $3.5 million. By 1995, sales grew to $5.8 million.

The Petaluma, California-based company is flourishing because ithas found the right niche. "We sell blank note cards, whichmost larger companies don't have much success with,"explains Wilson. Healthy Planet Products' use of recycled paperand its commitment to giving a portion of all sales to the SierraClub and other environmental organizations have helped secure itsimage as a cause-related marketer. Its target audience are babyboomers, who, research shows, are concerned about environmentalissues and buy blank cards rather than cards with pre-printedgreetings because they prefer to send personal messages.

Stand Out from the Others

Amy J. Nye, a former investment banking analyst and frequentworld traveler, knows that sometimes it's not what you sell,but where you sell it that gives you a competitive edge. So whenNye selected a site for AltiTunes Partner LP, her small businessthat sells compact discs, audiocassettes and portable electronics,she headed for New York City's La Guardia Airport.

"The airport is a melting pot of different people, fromkids to seniors, all looking for a way to pass the time," saysNye. Not wanting to pay the high rent a 1,000-square-foot airportstore would command, she came up with a better idea: a220-square-foot kiosk.

"The first step was selling CDs and tapes in the airport;it hadn't been done before. Next, I needed a way to bring mycosts down; that meant a small but compact site, like akiosk," explains Nye, who convinced airport leasing managementto let her construct a kiosk in an unoccupied yet heavilytrafficked area of the terminal. Her music/electronics concept isworking so well that Nye now has AltiTunes kiosks in six locations,and plans to open 14 more this year. Each kiosk brings in about$1,000 in sales a day.

Be Patient

Building a niche market can take years of hard work. Just askDave Wiggins, who, in 1978, bought American Wilderness Experiencein Boulder, Colorado, a tiny $20,000-a-year operation offeringWestern-style horseback vacations in the Rocky Mountain West."I had lots of patience. I had time on my side and enthusiasmfor something I really wanted to do," says the activeoutdoorsman, who frequently camped, hiked and river-rafted in theRocky Mountains. By steadily adding new excursions to his travelmenus, expanding his mailing list, and beefing up his promotionswith top-quality travel brochures, Wiggins built AmericanWilderness Experience into a $2.6-million-a-year adventure-travelfirm, booking nearly 5,000 vacations worldwide each year.

Being one of the industry's first adventure-travel firms hadits challenges. While Wiggins faced little competition, consumersdidn't understand what his firm was offering. "Peoplethought we were selling Outward Bound survival trips," laughsWiggins. "We had to educate consumers and travel agents thatthese weren't trips where you're pushed to your limits.They're fun vacations."

Wiggins is convinced his patience and persistence played majorroles in his entrepreneurial success. "I tell people you haveto ride out some pretty lean years," he says, "sodon't look for overnight success. We always said the big payoffwas down the road, and we were willing to wait."

Can You Manage?

New Tax Credit

There's news on the employment horizon: The IRS will rewardyou with a tax credit if you hire someone who is in a pre-specifiedlow-income group. But you'll have to move quickly and do yourhiring before October 1, 1997. Here's the scoop:

In August 1996, Congress passed the Small Business JobProtection act, enabling employers to obtain a tax credit of up to$2,100 if they hire new employees from one of seven targetedlow-income groups. The tax credit, which amounts to 35 percent ofup to the first $6,000 in first-year wages, only applies toemployees who begin work after September 30, 1996 and prior toOctober 1, 1997. Participants must be employed 180 days or complete400 hours of work.

The targeted groups for this tax credit, as identified by theIRS, include: recipients of Aid to Families with DependentChildren; veterans; ex-felons; high-risk youths; vocationalrehabilitation referrals; qualified summer youths; and food-stamprecipients. The definition and specific eligibility criteria foreach of these groups is contained on IRS form 8500, WorkOpportunity Credit Pre-Screening Notice and CertificationRequest. (This form and other IRS forms can be obtained bycalling 800-829-3676. IRS forms are also available on the Internetat the IRS home page at http://www.irs.ustreas.gov)

If you hire someone who appears to be a member of one of thetargeted groups, you need to have the applicant complete IRS form8850 on the day the applicant is offered the job. If the jobapplicant is eligible, complete the employer portion of form 8850.Both you and the employee must then sign the form and submit it tothe state employment security agency, which is responsible forverifying the information contained on the form. If the employeequalifies, the state agency will notify you.

From a practical perspective, there is no guarantee that someoneyou hire who claims to be a member of a targeted group will checkout satisfactorily. You run the risk that the new hire will fail tobe certified by the state agency. If that happens, you will notreceive the tax credit, so make sure the person you hire is someoneyou would hire even if you were not eligible for a taxcredit.--Milton Zall

Just For You

Tips For Negotiation

Negotiating is an important part of every small-businessowner's life. Whether you're dealing with suppliers,managing employees, or contracting with prospective clients,you're negotiating. The quality and success of your businesscan be directly affected by your ability (or inability) tonegotiate. Use these 10 tips to help you sharpen your negotiatingskills:

1. Know what you want. You can't get what you wantfrom others if you don't know what you want for yourself.Establish a specific goal for negotiation. Consider what it willtake to satisfy your interests, needs and objectives.

2. Develop a game plan. Once you know what you want,establish a negotiating strategy to achieve your objectives. Beforepresenting your first offer, consider where you want to start andwhere you want to finish. Give yourself some room in which tomove.

3. Know what the other party needs. It takes two totango-and to negotiate. To reach an agreement, all parties mustfeel that some, if not all, of their interests have been satisfied.Your negotiating partner also has motivations and concerns. Askopen-ended questions to gather information and understand the otherside's position.

4. Be an emphatic listener. There are hundreds of coursesabout public speaking, but very few which teach us how to listen.Attentive listening is a powerful negotiating tool which enables usto understand the motivations of others.

5. Attack the problem, not the people. Focus on findingsolutions to your shared problems. Screaming at the other party maylet off steam, but it isn't conducive to effective jointproblem-solving. Be courteous and tactful.

6. Treat the other side as your ally, not your enemy.Your negotiating partner may have to persuade others in herorganization to agree to your deal. As your friend, this person cansell your deal. As your enemy, she can sink it.

7. Educate, don't intimidate. Be prepared to explain,document and justify to your negotiating partners why they would bewell-advised to accept your proposal. Help them understand yourposition.

8. Be patient. Don't be angry or insulted if thefirst offer you receive is not what you hoped it would be. Treatthis proposal as the first of several in the negotiating proposal.Slow but steady movement creates momentum, which can lead toagreement.

9. Consider the consequences of no agreement. Think aboutwhat could happen-both good and bad-if you are unable to agree. Canyou afford to "walk away" from the table, or are youdesperate to make a deal now?

10. Be flexible and creative. Rolling Stone Mick Jaggermade the line "You can't always get what you want"famous. In negotiations, this is often true. Always have afall-back position-some alternative that satisfies you and theother party enough to make a deal. Be imaginative. "You justmight find you get what you need." -Bruce A. Blitman,Esq

For More Information

Want help developing the right niche for your small business?Check out these resources:

How to Really Create a Successful Marketing Plan, byDavid E. Gumpert (Inc. Business Resources, $19.95, 800-524-1013).Gumpert features actual marketing plans of Smartfoods, R.W.Frookies, The Body Shop and other companies, to show how highlysuccessful companies define and target their niche markets.

How to Drive Your Competition Crazy, by Guy Kawasaki(Hyperion, $12.95, 800-759-0190). Former Macworld columnistKawasaki tells how entrepreneurial companies like Ben &Jerry's secured their market niches amid highly competitivemarket conditions.

Know Your Market: How to Do Low-Cost Market Research, byDavid B. Frigstad (The Oasis Press/PSI Research, $19.95,800-228-2275). This workbook takes a practical look at implementinga market-research program and includes a look at marketsegmentation.

Consider membership in the American Marketing Association, aninternational organization with nearly 50,000 members worldwide,which conducts national conferences and publishes MarketingNews and other specialty publications. Annual dues are $100,the application fee is $30, and local chapter fees range from $15to $65. For more information, call (800) 262-1150, or write to 250S. Wacker Dr., #200, Chicago, IL 60606-5819.

Contact Sources

AltiTunes Partners LP, 740 Broadway, 2nd Floor, New York,NY 10003.

American Wilderness Experience, P.O. Box 1486, Boulder,CO 80306.

Healthy Planet Productions, 1700 Corporate Cir.,Petaluma, CA 94954.