Don't Be Afraid to Be the Biggest Fish Splashing Around in the Smallest Pond Lots of markets are crowded. You're more likely to thrive in the one that's not.

By Mike Kalis

Opinions expressed by Entrepreneur contributors are their own.

Everyone loves a good entrepreneurial Cinderella story. We cheer for companies that start from nowhere and wind up revolutionizing entire industries.

Unfortunately, this happens pretty infrequently. Nine out of 10 startups end up folding, and while there is a long list of factors that contribute to this jarring statistic, I believe one of the biggest reasons for failure is that founders seek to be the best at everything instead of the best at something.

Related: How This Private Aviation Startup Found Its Niche in the Luxury Market

My company, Marketplace Homes, launched in real estate -- a $117 billion-dollar industry. We knew we'd be a tiny minnow swimming in a gigantic body of water, so instead of attempting to be the best all-around real estate company in the entire world, we chose to be the biggest and best fish in the smallest pond we could find.

We narrowed our target market to new construction in metropolitan Detroit (our home base), and we decided our ideal clients would have homes to sell and would be moving up in housing sizes. In the blink of an eye, we went from targeting billions of people to targeting thousands -- and as a result, we were able to confidently say we were the best seller of new construction homes to move-up buyers in the metro Detroit area.

We differentiated ourselves from our crowded industry by shrinking our scope. And once we did that, it became easy to identify our greatest strengths and build upon them as we grew.

With a little deep thinking, any industry can be boiled down to very specific micro-markets and demographics. Here are three tips to help you differentiate your startup and have it stand out from the pack.

Related: The Fastest Way to Find New Customers

1. Identify an age range.

A great way to narrow your scope is to identify the age range of your ideal clients and adjust your offering accordingly. For example, instead of competing with the likes of Fitbit and Apple Watch, Live!y cornered the senior citizen wearable tech market by creating a smartwatch that counts steps, provides medication reminders and can call for help with the push of a button.

By zeroing in on move-up buyers, my company realized our demographic tended to be 25- to 35-year-old new parents searching for larger accommodations for their growing families. We knew our young clients would embrace tech with open arms, so we invested in a brand app for them to use.

2. Use price as a niche.

It was important for my company to determine how much money our ideal clients were looking to spend. Were they searching for million-dollar homes, or were they in the market for something less expensive? Identifying our lower price point early on was key to establishing our identity and differentiating ourselves.

A fashion startup called Everlane is making waves, because it sells stylish luxury handbags at an absurdly low price point. If these same bags were being sold elsewhere, they'd cost hundreds of dollars more. Offering affordable (but still high-quality) goods is how Everlane successfully stands out in a crowded online retail space.

3. Target familiar territory.

Premature scaling is the No. 1 cause of death for startups, so don't just jump headfirst into an infinitely large market. Even if you have grand plans to change the world, you are much more likely to make waves by dominating a smaller demographic you know like the back of your hand.

As a lifelong Detroit resident, that's exactly what I did with my company. Finding so much early success in our hometown boosted our brand's recognition and paved the way for a smooth national expansion down the road.

Every startup needs to be able to say it's the best at something. Otherwise, it faces an uphill battle proving its worth and justifying its existence. Today, every marketplace is crowded; that's what makes differentiation such a key part of launching a modern business.

Dig deeply into the sub-genres of your industry, and don't be afraid to splash around in the smallest puddle you can find. It worked for my company, and it will likely work for yours, too.

Related: Why Your Target Market Is Not, That's Right, Not Important

Wavy Line
Mike Kalis

CEO of Marketplace Homes

Mike Kalis is the CEO of Marketplace Homes and one of Crain’s Detroit Business’s “Top 20 in Their 20s.” 

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