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Buyers Targeting Big Fish in Small Pond!

Big Fish Small Pond

We meet business owners who worry that a niche will limit their opportunities and sales. However, a niche can often be the key to growth…and can increase your overall business value!

Why are niches attractive to Buyers?

#1 or #2: It is much easier to be #1 or #2 in a smaller, niche market than in a larger, broader market. 

  • #1 has many advantages, typically including, but not limited to: the best margins among your competitors, more brand recognition, first call/last look with customers, and many other benefits.

Profit Margin: Higher profit margin businesses are generally more valuable than those with lower margins – even if the profit is the same.

  • Higher margins mean better cash flow. Buyers use cash flow to pay debt service and fuel future growth.
  • Lower margins may indicate less operational room for growth and thus, increased risk.

Stand Out: Easier for your business to stand out in a large, crowded marketplace.

  • Marketing messages can be more targeted, which makes them clearer, more personalized, and more memorable.

Expertise: Customers will see you as an expert.

  • Your business credibility increases and it becomes easier for your customers to decide to do business with you.
  • For certain customers, expertise is more important than size, location, or brand name. When providing hard-to-find services, you can charge more for them.

Shrink Competition: If targeting a distinct segment of the market, you help ensure that segment thinks of you first and continually chooses you, again and again.

  • Alternatively, buy smaller competitors to add market share.

Age of Specialization: Remote work is accelerating specialization.

  • During these past 2 “COVID-19” years, more employees/customers became accustomed to remote services (e.g., remote banking, remote meetings, online exercise classes) and businesses found innovative ways to provide remote services, even if they had never considered it before.
  • As customers become less constrained by geographic area and travel time, they may seek out niche providers elsewhere (e.g., a client may decide to leave their local financial advisor to work remotely with a firm specializing in values-based investing).

When you decide it’s time to sell your business, you may be surprised by the value in being a big fish in a small pond. If you own a niche, you have more than a good story to market to customers/clients; your business will stand out to buyers and investors.