Smaller businesses often have a very focused strategy, operating in a small part of a market with great success. This enables them to compete with larger organisations and achieve a level of protection against competition.

The advantage of operating in a niche is that it gives you the opportunity to become a strong supplier in a small market. But it’s important to identify your niche correctly with sound judgments based on thorough research.

• Analyse other businesses operating in your market and the products or services they offer. Do their products or services attract a wide range of customers or just a few targeted ones?
• Use this analysis to decide what degree of specialisation your product or service calls for. Will operating in a niche mean alterations to your product or service? Can you offer flexible service solutions?
• Identify areas where customers’ needs aren’t already being met and look for a competitive edge by adding features or offering a value-added service that isn’t currently available.
• Conduct research to see if there is a group of customers that your competitors are failing to reach and consider how your product or service could be updated or adapted to attract them.
• Explore how your customers buy from your competitors. Can your product or service be sold in a different way – over the Internet or through a mail order catalogue?

Once you’ve completed this analysis use the information to identify customers that have things in common and things that make them different from others buying in that market. Then create a profile of these customers and use this as the basis of market research to ensure the niche is viable.

Action checklist

• Do your research. Go to trade shows, collect competitors’ catalogues and look at trade magazines to find out what’s already on the market.
• Talk to potential customers and find out what they want.