05/ 25/ 2006
by Gwen Moran
Expanding into new areas that complement your existing business is a good way to boost profits. But experienced business owners say look before you leap.
Modesto, Calif.-based Aquatic Dreams might look like just another place to buy scuba gear. But Bonnie Vance and her five partners have turned their retail shop into a diverse collection of products and services—and it's thriving.
The store's on-site pool stays busy with scuba and swimming lessons, but it's also rented out to physical therapists, swim clubs and even parents hosting birthday parties for their children. Vance expanded the retail mix to include diving-themed T-shirts and gold-panning gear for those interested in prospecting in the nearby mountains. The business even sells scuba vacation packages.
"Targeting different niches stabilizes our income, especially in the winter, when people aren't thinking about scuba as much," Vance says.
"Niching can be a very profitable marketing strategy as long as companies don't spread themselves too thin," says Jay Lipe, CEO of Emerge Marketing in Minneapolis and author of The Marketing Toolkit for Businesses. Overextending resources to chase niche markets ultimately makes businesses weaker, Lipe warns.
Peter Rush began adding capabilities to serve his association management clients. Rush reviewed the services that his clients needed and analyzed which ones might complement those already offered by his small business, the New York City-based Kellen Company. Rush's expanded staff now includes Web site designers and marketing professionals. He even purchased a public relations firm to add those services to his company's capabilities. "By having a base of existing clients, a business can enter a market with much less downside risk," Rush says.
3 Key Steps
What to consider before diving into a new niche
1. Do your homework. Jay Lipe of Emerge Marketing advises researching the market before committing resources to it. Is it large enough to generate acceptable sales and profits?
2. Start small. Try launching the new product or service on a small scale, perhaps within a regional market, with limited inventory or offerings to key customers only. It may be a good idea to use outsourcing at first. Aquatic Dreams rented pool time and built demand for on-site classes before investing in a facility with a pool.
3. Stick with what you know. Work toward expanding your niche markets along customer lines. By selling to existing customers, Peter Rush of Kellen Company was able to expand his offerings with less risk.
NFIB.com
Find more ideas on growing your business in the "Strategic Planning" section of "Managing Growth" at www.NFIB.com/toolsandtips.
