Some brands are meant to dominate the whole world, and some cater to a few thousand people who reliably buy whatever the company puts out. Victor Mitchell, Lead Funding CEO, knows as your small business or startup grows, you have to decide on what you want your business to be. Do you want to make the gamble for huge success and mass appeal, or do you want to find a safe but limited niche with long-term loyal customers?
Every Business Has to Start Somewhere
The greatest innovators and largest companies often started with niche products. Every large company has to start somewhere. For example, Soichiro Honda got his entrepreneurial start with a company that made piston rings for Toyota.
Business leaders and innovators often don’t know where they’ll end up when they start. One little innovation in one offshoot of an emerging industry can lead to huge companies that sprawl across sectors. But to get there, innovators and entrepreneurs have to decide to take the risk on expansion.
Business and Brand Development are incremental.
People and businesses can’t change all at once.
When considering whether to expand your business from its core niche idea or product innovation, ask yourself three questions about the future of the company:
- How does your business offer value?
Can your business solve problems or provide real benefit outside your current niche? If your innovative breakthrough was a way to create slightly more detailed model train engines at a somewhat lower price, it might be hard to break out of your niche.
Still, specific innovation does often have general value. Perhaps making more detailed model train engines at a lower price required the development of an improved injection-molding method. That’s an innovation that would provide value in cost savings to many other businesses trying to make better plastics products at a lower price.
- How would you have to change your brand if you expanded into a mass market?
If your business can offer value outside your niche, consider how your brand might have to change. Imagine again the model train company that makes a significant innovation in injection molding. Directly leveraging the potential value of that innovation would mean entirely evolving the business to focus on industrial production.
Various forms of corporate restructuring are often the end-game of hugely expanded businesses. Besides asking yourself, “What are the risks involved in expanding?” also ask yourself if you would you have the will to keep control as the potential value of your business draws in more powerful players.
- Do you want your business to be a behemoth?
Not everyone wants to run an enormous company. Some people like making a reasonable income in a stable niche. There’s nothing wrong with that, as long as they don’t get complacent, and lose even their niche position. It takes a strategic, workaholic personality to turn big innovations into big companies, and if you don’t have what it takes someone else will take your spot.
However, if your idea or innovation does have the potential to offer value far outside your niche, and you don’t leverage that potential value, other people will. If you’re happy in your niche, consider licensing your great idea to others. It might not result in as much profit, and you won’t have any control, but you also won’t have the risk and responsibility.
What Do You Want Your Business to Be?
If you’ve built your company on an innovative idea and established yourself in a comfortable niche, it’s always tempting to try and expand farther, but first you have to ask yourself if your specific design or innovation has more general value, and then you have to ask yourself whether you really want to change your brand and company.
Facebook is a much different company now than it was in its early niche college version. As you grow your company, it may change beyond what you wanted. If you have a good idea, then it’s good to take the risk, but remember to ask where you’re going before you do it.
About Victor Mitchell:
A serial entrepreneur, Victor Mitchell has successfully founded, acquired, and/or turned around numerous diverse business ventures over the past 30 years. His ventures include interests in finance, transportation, communications, technology, building supplies, real estate development and brokerage services.
Victor Mitchell is the founder and CEO of Lead Funding, a specialty lending organization that provides innovative private financing solutions for homebuilders and developers, reducing their red tape and speeding up loan decisions.