Seek an Edge by Finding Your Niche

Clearly distinguishing yourself is the key to entrepreneurial success

Actor Carlos Gomez and The Latino Coalition's Hector Barreto arrive at the premiere of IndustryWorks' 'The Perfect Game' on April 5, 2010 in Los Angeles, California.
••• Alberto E. Rodriguez/Getty Images

Hector Barreto is the former Administrator of the U.S. Small Business Administration (SBA). In his new book, The Engine of America: The Secrets to Small Business Success from Entrepreneurs Who Have Made It!, he reveals winning business strategies from CEOs of 50 successful small businesses (some of which are now large corporations), who share their experiences to help those starting or growing their own business. In this excerpt from Chapter 6, he explores the importance of finding your niche when you start your company, not as an afterthought.

Two of the most successful businessmen I know, Dimensions International, Inc.'s Bob Wright and Fabrica International's Al Frink, have both learned this lesson.

"One thing I learned a long time ago," says Wright, "is that to be successful you have to find a need and fill it. There are a lot of needs that are out there, and you have to find them and then fill them. You must create a niche for yourself and then just work your tail off to make it happen."

Frink puts it this way, "If you're starting a new business, whether it's producing a product or providing a service, you have to have something that you're doing that distinguishes you from what's already available. It's important to look for voids that are not currently being serviced in the marketplace. When you come into the marketplace, what is it that's going to define what you're going to do? Your long-term success is going to be defined by your ability to be different, unique, and better.

"The key is your ability to differentiate yourself in providing a service or making a product that will be your edge. If you can't enter a market with that, then you better wait until you can. How are you going to be able to succeed in the new venture if you can't define what you are going to do in terms of success?

"When I first started in the carpet industry, there were close to 10,000 carpet manufacturers in the United States alone. Today, there are less than 50. The company I founded is still one of them because it was positioned not to be a low-cost producer, but to differentiate itself."

So if finding your niche is the answer, the obvious question is how do you go about finding your niche?

Bill Bryan, a counselor with the Northern Illinois SCORE, gives some advice:

The ultimate key to small business success is finding a niche that is not covered. If you can identify your own niche, you'll probably do well. We are all trying to do business in an overcrowded marketplace and soft economy.

The consumer is inundated with commercial messages and often does not know which way to turn. Too many choices and too many sellers compete for a buyer's attention. It's enough to make some folks say, "To heck with it" and stay home with their consumer dollars.

Finding a market niche -- which you must defend by operating superbly and providing customer service without peer -- is the secret for financial success.

When a successful baseball player was asked for the secret to his constant batting success, he replied, "I hit 'em where they ain't."

SCORE has a wonderful device for teaching small business owners, or potential small business owners, many of the lessons they must absorb if they are to be successful. SCORE calls these lessons "60-Second Guides." They can be found at html.

Jennifer Lawton founded a computer service company, and then became senior vice president for corporate strategy of a major Internet company and now has switched careers by buying Just Books, Inc., which she calls the "Smallest but Oldest Bookstore in Greenwich, Connecticut." She has written a number of incisive articles for the small business web site of the Ewing Marion Kauffman Foundation. Here is her interesting take on finding your niche and on niche marketing:

I've learned that niche marketing can play two ways. The first, which is what we do, is to have a niche-oriented company that you support with marketing and other "branding" efforts. The second is to have a broad-based company that seeks new markets, or a deeper experience, within a specific piece of the broad market.

One starts as a niche, the other carves a niche within a broader space. So when formulating your niche marketing campaign, you must first decide where you fit. Once you do, consider implementing the following five-point plan, which can play to either niche "face":

1. Know yourself.

2. Know your goal.

3. Know your customer.

4. Keep it simple.

5. Have fun!

Here's a tip for how to find a niche: If you need something and can't find it, do others need the same thing and can't find it either. If so, have you discovered a need, a market, a potential business?

I am amazed by some of America's most successful companies that are now household names that were started by entrepreneurs who first found a need because they personally had a need.

There's Tom Stemberg, who we talked about earlier, driving around the suburbs of Boston on a Fourth of July weekend looking for and not finding a printer ribbon. This led him to realize that office products were not being marketed correctly and that led him to the concept of the office superstore and the birth of Staples.

Another mega-successful entrepreneur, Rebecca Matthias of Philadelphia, had a personal need and realized that if she did, then others might as well. This realization led her to establish a small business in her home that has become a worldwide retailer.

In 2003, I had the great pleasure of awarding her the SBA's Woman Entrepreneur of the Year award. Her company, Mothers Work Inc., is an amazing success story that started because, well, she just didn't have anything to wear.

Rebecca Matthias graduated from Columbia with a degree in architecture and then went to MIT to get a degree in engineering. She got married, got pregnant, and saw her life change in a way she never for a moment had considered. She says:

I was trained to be an architect and engineer. My first job out of college was as a construction engineer. I had on my hard hat, and I was walking around the construction site. That's where I met my husband who was the president of a start-up. He was constructing a building, and in 1980 I was hired to work on the project. That's when my eyes were first opened to the idea of starting my own business because he had started three or four businesses. We got married and moved to Boston, and he was starting up another company. I got pregnant and didn't know what I really wanted to do next so I thought I would help him with his business. And that's when I realized how exciting it was to start a business. So I decided that when the baby came, I'd start a business in my home.

As my pregnancy progressed and I got bigger, I couldn't find maternity clothes to wear to work. Then I started thinking about what I was going to do after the baby was born and all these thoughts came together. Then one day, the lightbulb went on. I realized what I wanted to do was to start a business to sell maternity clothes to pregnant women who needed clothes for work. That's how I started my company. I started it as a mail-order catalog company out of my home.

I put together this little mail-order catalog even though I didn't know what I was doing, which I guess was another asset that I had. I didn't have any preconceived ideas of what would work or what wouldn't work, so I just tried a lot of things. r think that's another entrepreneurial thing that people go through, just trial and error. It's no longer a theoretical thing when you start a company, you just have to go out there and pound the pavement, put the product on the market and see if people will buy it.

I found some products in the wholesale marketplace and although they weren't exactly what I was looking for -- because my product wasn't really being made yet -- I was able to find products that were close enough to what I wanted. I was able to put together this little catalog. I used the Yellow Pages to find all my suppliers, like a photographer and a printer, and I picked a couple of national media outlets I thought my customers would be reading, and put in these little one-inch ads. My first adjust said, "Work Pregnant?" and my address to send for a catalog. It caught a lot of people's attention, and they wrote in for the catalog and I had a really strong response.

The new maternity clothing business started to slowly expand, and as it did, Rebecca began to think of ways she could begin growing the fledgling company:

I stayed in the catalog business for a year or two and built it up, and then realized that if I was going to keep growing I had to get into direct retail. The first retail stores I opened were all franchised and that was because I didn't have the expertise and I thought through franchising I could get partners who would help me. I didn't have the money, and franchisees would put up their own money. I got up to 20 to 25 franchised stores in a short period of time. That was another advantage of franchising -- we could grow rapidly.

I named the company Mothers Work because it was for new mothers who had to work. Over time that changed, and I got into many different kinds of maternity clothing, not just career clothing. The business grew and just took off.

Took off is probably more than a bit of an understatement. Started in 1982 as a catalog business, Mothers Work, Inc. has grown to become the world's largest maternity apparel retailer with more than 1,500 locations. Since the time of its initial public offering in Match 1993, Mothers Work has added many new stores, acquired existing maternity stores, established new brands, and increased sales volume.

In its first 10 years, the company grew to $31 million in sales volume. By 1999, it grew tenfold to $300 million and since then has doubled again doing $602 million last year. Rebecca says:

I needed business clothes to wear to work and figured if I had that need, other women did also. I like to say that the best new businesses are started by people who have a need, and then they realize that other people have the same need and they go about crafting the business that addresses those needs. I think maybe that's the best way to start a business -- by looking within your own needs and realizing that other people have that need also.

That's what really got me started -- wanting to start a business and then finding a product to sell. I would advise anyone who wants to start a business to look at her life, what does she need and use, what need does she have that isn't being served well, whether it's a product or a service. If you have a need, there are probably other people who have that need also. You may well be able to somehow turn that into a business, to understand as a consumer what product is needed. And that's very important for any business -- to understand the needs of the customer. So one thing I tell people to do if they're thinking about starting a business is to think about the products and services they need in their own lives and then to think about translating that into a business.

Looking at your own needs is a great way of discovering a product or service that others might need. Filling that need might turn into a business.