For a lot of ambitious small business owners, the idea of niching or focusing on a specific area can seem limiting. After all, shouldn’t we as entrepreneurs be trying to tap into as many markets as possible? Unfortunately, this strategy rarely yields the results that we expect. In this episode, Gene Marks and special guest Chris Dreyer, CEO of Rankings.io and author of Niching Up: The Narrower the Market, the Bigger the Prize, discuss how small business owners can use niching to not only generate more profits, but to also bolster customer trust in their brand.
Podcast Key Highlights
- What Are The Advantages of Niching?
- Niching enables you to reduce your TAM (Total Addressable Market).
- By restricting your focus to one particular area, you’re more likely to gain complete mastery over it than if you were to divide your attention among multiple specialties.
- Customers are more likely to trust a business that has one area of expertise because they know that your company has taken the time to develop a thorough understanding of it.
- Will Niching Cause Business Owners to Lose Money?
- While you may lose some money in the short term, that amount is rarely enough to generate a significant profit margin.
- Referring your customers to the services they actually need allows you to forge a relationship with other businesses, who will in turn return the favor. This strategy not only generates more profits, but it also fosters a stronger trust in your brand.
- How Do You Find Your Niche?
- In the beginning, you need to experiment with a wide range of areas to find out where you excel.
- Niching too early in your business career could cause you to miss out on your perfect fit.
- Should You Create a Completely Separate Brand when You Expand into Another Niche?
- It will always be easier to leverage the brand you’ve already created than to build another one completely from scratch.
- Once you finally decide to expand into another niche, simply utilize your existing tools, such as podcasts or social media platforms, to promote your additional products or services.
- Creating an entirely different brand for your new niche won’t fool your audience; it’s better to be a “branded house” than a “house of brands.”
- How Do You Find Appropriate Parallel Niches?
- First, evaluate some of your previously lost deals or missed sales. This data will point you in an appropriate direction.
- Another effective strategy for identifying new niches is to use your clients or your podcast as a feedback loop.
- How Many Niches Should You Be Specializing in?
- If your profits range from one to 10 million dollars, you need either one service and multiple channels to get leads from it or multiple services and one really powerful channel.
- For businesses that generate profits above 10 million dollars, you need multiple channels and multiple services because you will cap out a TAM.
Links
Transcript
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Gene: Welcome to The Small Biz Ahead Podcast. We interview great experts that offer advice and tips to help you run your business better.
Gene: Hey everybody, it’s Gene Marks again, and thanks so much for coming back and joining us on the Hartford Small Biz Ahead podcast. We are super happy to have you here. I’m also super happy to have Chris Dreyer here. Chris is the CEO of rankings.io and the author of “Niching Up: The Narrower the Market, the Bigger the Prize.”
Gene: Chris, thank you so much for joining us.
Chris: Gene, thanks so much for having me.
Gene: Yeah, I’m really glad to have you here. By the way, where are we speaking to you from? Where are you about?
Chris: I’m in Marion, Illinois. It’s at the bottom of Illinois.
Gene: Very good. Right in the beginning of the Midwest, I guess. You were born and raised there?
Chris: Yes sir. Yeah. Yeah. De Soto, Illinois. I moved away to North Tampa and they drew me back. Family drew me back.
Gene: Once you try to get out, they always drive you back in, don’t you, right? Well, I’m happy to have you here. Your book is great and very, very relevant to our audience and to me as well. I was telling to you before we started recording how I run my own business and always looking to expand my marketing to certain niches in the markets that we go to. So tell me a little bit about “Niching Up.” Tell me about the book, when you published it, what brought you to write it?
Chris: Geez, I wrote it… When did it publish? About October last year, something like that. I’m not sure exactly. The reason I wrote it is, I just had something to say. I experienced everything I talk about. It wasn’t like… I went through the ups and downs and I don’t have this ascension to where there’s a course and then there’s coaching. I just had something to say. I wanted to write a book and I could speak very strongly about this because I had so much experience. I went through a lot of iterations in my entrepreneurial journey. The one that I focus on primarily in the book is my agency and how I went from a legal agency that kind of did everything to really focusing in on personal injury attorneys.
Gene: So tell me, I mean, what is the book about?
Chris: The book’s about the pros and cons of niching. And so many people, when they think of niching, they think of niching down, and think of a scarcity mindset of what you’re giving up. And I’m trying to have a little divergent thinking here and niching up from an abundance perspective because in many situations it allows for opportunity and opportunity in business is profit.
Chris: We run a business to make profit. Otherwise, it’s a hobby or a nonprofit. And there’s a lot of advantages of niching perception. Allows you to raise your prices, increases your ability to close. Because if you’re copywriting and knowing your avatar maximizes your marketing spend, you know where your consumers congregate. There’s many, many advantages that are talked about and the main one that’s always thrown out there is you reduce your TAM, your Total Addressable Market. And I would say in most cases niching and focus actually is more advantageous than niching being a disadvantage.
Gene: I mean when you talk about niching, Chris, I mean like what? Define it for me.
Chris: In one word I would say focus.
Gene: Okay.
Chris: You are focusing. Malcolm Gladwell talks about in order to become an expert, you need to have 10,000 hours in a discipline. And if you’re doing everything, it’s going to take you many, many years to become an expert in any respective area. But if you focus all your time and energy on one thing, the one thing, then you can become an expert. You can specialize and niche. That’s what niching is about. It allows you to create value at a much deeper level. And you see this in everyday life. It’s a way to stand out in the crowded space. And we can go super deep and happy to answer any questions you have on that.
Gene: Yeah, I mean it’s… the biggest problem or the biggest pushback I bet you would get to the whole concept of niching is that we all as business owners sort of want to have our cake and eat it too, you know?
Chris: Mm-hmm.
Gene: So we want to apply, we want to sell to as many people as possible. We don’t want to turn down any opportunities that come across our door. And by niching, you are doing just that, aren’t you? I mean, you’re probably turning away business so that you can stay focused on what you do best. And I’m wondering what do you say to people that say like, “Oh, that hurts because we don’t want to turn business away”?
Chris: I would say to look at it from a long term perspective. From a short term orientation, yes, you’re probably turning away money, but is it profit? Because there’s a lot that goes into becoming profitable from an organization, consistency, productization, having the right pricing structure, being able to provide value. That’s what people don’t talk about. It’s hard to generate a profit.
Chris: And the way I look at it is if you’re saying no, they may not be the right fit for you, but they’re the right fit for someone. In most cases, you can send out a referral and even get paid for the referral and that’s straight pure net profit margin. But what happens is it lends itself to trust from that consumer, that individual trusts you because you turn down money that they were willing to give you, but also allows you to establish reciprocity through relationships, through referrals.
Chris: Everyone talks about they love referrals, they’re easier to close. Everyone wants referrals. But the best way to get a referral is to give a referral. So that’s what you have to think about.
Gene: When I look at my own business, Chris, I have 10 employees and we sell CRM software, Customer Relationship Management software. And it’s a niche. I mean, there’s a lot of software products, business software products that are out there that we could also be selling. And I often get requests from people saying, “Hey Gene, can you help us with this accounting software? Can you help us with this HR platform?” And I’m always like, “No, we only focus on CRM.” And sometimes I do shake my head saying like, “Oh man, I hate passing up an opportunity,” ’cause it’s hard to say no. What advice do you have for business owners like myself that sometimes just has to say no to stay focused?
Chris: I would say look at it from a long term perspective and how you’re focused in and creating the best expertise on CRM specialization. You are the person when they think of in that crowded space. You’re not the jack of all trades. You’re the master of one.
Chris: The thing that I will say at some point there may be a scenario where you do need to open up your TAM, you do need to consider other services, but at that point you’ll be capitalized very well and you’ll have consistent lead flow for the other thing. And they’ll discover that from all the “no’s” that you’ve turned down in the past.
Gene: Would your advice be for companies like mine that want to open up, I shouldn’t open up a candy store. I mean, I should be leveraging on what we’ve already done in the past, correct?
Chris: Yeah. Tony Robbins says, one of my favorite quotes by him is, “Don’t fall in love with your product or service,” which is a little contradictory to the niching. “Fall in love with helping your client.”
Gene: Yeah, yeah.
Chris: So the candy store, if you’re a CRM expert, I don’t know how you could tie that in. Maybe you could get creative and figure out how to tie that in. But what is it that they also need? That would probably be next because you’re just powering that flywheel. You’re creating more value in your respective market as opposed to just completely shifting to another industry or specialization.
Chris: The thing that a lot of people undervalue is relationship equity. Einstein has this quote where he says, “The eighth wonder of the world is compound interest.” And everyone thinks of finances. You think of stocks. You think of dividends. But there’s relationship equity because you develop trust in this industry. Once you develop so much trust because of the value you provide, they’re going to buy other things. And you can move up the ladder. You can move upstream to the bigger and bigger markets.
Chris: Even myself, being focused on personal injury attorneys I’ve talked to Mike Papantonio, I’ve talked to Kyle Bachus, I’ve talked to the biggest people in the PI space. That took time. Do I know the criminal defense attorneys at the top? I do not. They don’t know who I am. I’d have to start at the bottom of that ladder and then move up, and I could move up maybe a little faster because of my relationships in PI and legal, but it would still be a challenge.
Gene: Got it, got it. So you mentioned about where you’ve come from. So right now, you grew up as an agency in the law industry, but now you’re focusing on personal injury marketing. That’s your niche. Tell us how you arrived at that.
Chris: So about seven, good question, about seven years in was getting more data focused. The larger your business becomes, the more emphasis there’ll be on data to make decisions. At the very beginning of the business, you’ve got your team of seven and you can have one meeting. Everyone’s on the one meeting and you know kind of what’s going on because they’re all right there and you can make decisions. You don’t have a lot of clients because I can think of those.
Chris: At some point it just, it’s impossible to do that. And you have to make database decisions. And we ran an analysis based upon our revenue and client concentration. So we found that 70% of our revenue was from less than 40% of our clientele, which was personal injury law firms. Very clear decision that, hey, we need to focus on PI. They’re paying us the most money. They’re in the most demand or most need of advertising services, marketing services. That’s how we came about that.
Chris: I think there’s a lot of misinformation out in the space about when to niche and how to niche. A lot of coaches and mentors, they’ll say you need to niche. And they know the advantages of it and I agree, but the question is when. And I lean towards you have to have all these experiences before you determine where you can get a profit, where you have a passion and purpose. You have to have these experiences first. So you can’t niche out of the gate in most scenarios.
Chris: There’s a book by David Epstein called Range, and in his book he talks about Nadal, the famous tennis player. His parents put him in all kinds of sports, basketball, baseball, tennis, I don’t know the sports, but a bunch of them. And he excelled at tennis and he’s the superstar he is today. But imagine if his parents was like, “We’re just going to put him in basketball.” Maybe he would’ve been great. It’s very unlikely that he would’ve been a superstar. But because he had all these experiences, he identified the opportunity. So that’s what I’m saying as a business owner, it’s like maybe you do need to go a little broader in the beginning or work for someone else that gets these experiences and-
Gene: Sure, to feel where you figure out where your expertise is and where you really want to focus on.
Chris: Yes.
Gene: All right, so let’s keep talking about you here. So you’re been focusing on personal injury as your niche as it is. So you might decide to continue to grow that or you might decide to explore other niches. And let’s assume that you’re like, you’ve identified a market opportunity maybe with divorce attorneys, and you say, “You know what? That would be another niche to get into.” Some questions on that. Would you say you did that just hypothetically? You’re branded as a personal injury specialist, your agency. Would you keep that divorce if you decided to go into the divorce law niche under your same brand? Or would you create a different brand that is specifically with that? Do you follow what I’m saying?
Chris: I know exactly what you’re talking about. I have a mentor, I have a coach. His name’s Bobby Castro. He had a billion dollar exit, 700 million in real estate. And I went through this exact scenario recently with him. What he says, and which I think is true is every niche needs to think that they’re the only one. But that doesn’t mean that you only serve them. Well, how do you do that? You could have separate sites where you do that. Now, for me, even though I’m an eight figure, I own an eight figure agency, in the agency space it’s very saturated and I would say I’m undercapitalized. I’ve bootstrapped everything.
Chris: So for me, I would make a more speak to legal on the homepage and then have dedicated landing pages for each of these niches. But then how would I get in front of them? My best tactic giving away what I do is through a podcast. So I have a personal injury podcast. My website, which is going to be rebranded soon, is going to be just legal. And if I wanted to go after divorce, I could start a divorce podcast. I could do some divorce Facebook ads that go to just that landing page. And you see the big organizations like Scorpion.
Gene: Yeah.
Chris: Scorpion’s a $250 million agency with 400 sales reps.
Gene: Yeah.
Chris: They’re a generalist agency, but in this space, I think of them like a legal agency.
Gene: Yeah, I think that’s actually a really good point. I mean honestly, when I talk to you and I think of you, I mean your brand is you, and rankings.io, I mean, that’s how people kind of know you. When you think about for most businesses, particularly small businesses that want to go into a different type of niche, starting it up from scratch without leveraging what they’ve already built, seems like you’re kind of shooting yourself in the foot. You know what I mean?
Chris: I completely agree. For that scenario, you said, would you make a separate website? Well, if I do that, I have no authority for SEO. I got to build the website. That might be 20, 30 grand and six months worth of work. And we all went through the design processes, right?
Gene: Right. Right.
Chris: And then there’s just a lot of components where I already got this website. If I’m going to… How about I just write a blog on divorce marketing? I think we actually do rank number one for that, divorce lawyer SEO, probably not number one, but that’s kind of the approach is I would use your existing assets.
Gene: Yeah, yeah. It just seems, and plus, people are idiots nowadays. I mean, they can pretty much figure out that even if you started up a whole new website that focused on divorce law, it wouldn’t take long to put two and two together and see that’s the same guy from Rankings.
Chris: Yeah. This is a really good question because it’s something that I didn’t cover in the book and it all comes down to brand architecture. It’s like, so do you want a branded house or a house of brands? So do you want multiple entities all over the place to decentralize or do you want one superpower? And, yeah.
Gene: I’m only saying that because your brand is you, and this applies to all of us in the audience right now that are talking to you or listening to you. The brand is us and our businesses. So you’ve got a relationship with not only your clients, but if people look at what you’ve done and then you decide to go into another niche, I think the inference is like, “Hey, this guy, he crushed it in personal injury, so he clearly knows what he’s doing there. So yeah, I want to match up with this guy, but my need is for divorce. So I’m happy to be with the guy that’s had that kind of track record.” So that, to me it just makes more sense.
Gene: Okay. I asked you. I took this leap saying like, say you identified divorce law as a niche you wanted to go into, but let’s backtrack back over there and say, if you were looking for another niche to go into, Chris, how do you look for that? I mean, I’m assuming you’re looking all the time. I mean, I know you specialize in personal injury, but anybody who wants growth or more challenges, you’re probably thinking like, “Hey man, what’s another kind of related niche that I can get into?” How do you go about finding that or what’s your thought process for maybe identifying an opportunity?
Chris: For me, I’ll take a couple approaches here. The first thing is I go directly to my CRM. I’m using Pipedrive. Wish I was on HubSpot, that’s a different story. I would go there and see the lost deals that weren’t PI. How many were family law? How many were criminal defense? There’s a lot of opportunity there. I’m already getting those in. Let me just accept those, right? We turned those down in the past and refer them for the reciprocity, but maybe I want to take that now. That’s the first place I would look.
Chris: The second thing that I would do…
Gene: I’m going to interrupt you. I have to ask here.
Chris: Yeah.
Gene: ‘Cause as somebody who sells CRM software, I mean, man, you are preaching to the choir. I mean, my best clients, when they’re going after opportunities, they don’t get the opportunities. They always complete those opportunities as a lost deal or a lost sale. And they always put in some type of an explanation, usually in the field why they lost it. Maybe the price was too high, but more importantly, who they lost it to, what competitor.
Gene: Anyway, I wanted to just reemphasize what you just said, that if you’re listening or watching this and you’ve got a CRM system and you want to create other niches for yourself, you need to make sure that you are tracking where you’re losing work so that you can go back into history and do a postmortem and say like, “Wow, I’m losing a lot to that product or that competitor. Maybe there’s an opportunity there for me to go after.” So I’m glad you brought that up because it’s super important. You said that… Go ahead. I’m sorry.
Chris: Yeah, those predefined loss reasons too that fit, so that way you can sort them and analyze the data based upon your point.
Gene: Yeah, not too hard to do, but anyway. You will probably not want to lose that deal or be happy to talk about losing that deal. So you want to think about it, but you should be tracking that ’cause the good, the bad, even bad news can still turn into potential future opportunities. You were saying there was other ways to identify opportunities, identify niches.
Chris: Another great opportunity is to use your clients or your podcast as a feedback loop. You’re talking to… I love a podcast. I love StreamYard and these types of things because we have these intimate conversations and we get to learn. So many people talk about the marketing and the social media and the distribution, but it’s a feedback loop. So I get to know what’s maybe a parallel niche to PI that I could develop a relationship with. Would it be chiropractors to set up referral relationships? Would it be doctors? Would it be the mass tort space? What are the parallels so that they could easily transition into? And just use your podcast or your client base as a feedback loop.
Gene: It’s great. That is great advice. This conversation is only so timely because again, I say we sell CRM, we sell our business applications in our business, and we get feedback from our clients all the time. They get frustrated, say with Gmail or Google or getting support and whatever, and just having a conversation with one of my project managers this morning about like, “Hey, Gene, we ought to offer services that support Google, Google Ads, Gmail, Google Apps.” It’s not something that we do, but we’re just getting that feedback from our clients right now. Now it’s anecdotal. So I guess what you’re saying is you probably want to quantify that more, maybe doing formal surveys to your client base?
Chris: Yes. Yeah, formal surveys. Look, the Big Mac was made by a franchisee for McDonald’s. Look at what that did for them. It’s like, survey your clients, what do they want? Are you selling just SEO like me and they want OTT? They want social media? Look, they’re wanting it. There’s your buyers. That’s a pretty easy transition. You got immediate revenue coming in versus the capital and the lag and all that time that you could waste for discovery.
Gene: Right. Yeah, it’s absolutely something. I mean, your advice is right on. And that was exactly what I was talking about with Michael, my project manager this morning about doing a similar type of outreach to our client base and asking if those are the kinds of services that they would want.
Gene: Final question for you, Chris. I’m going to let you go. This is great stuff. You’re talking about marketing to niches. I’m assuming though that it’s tough to build a sustainable business, a livelihood on just one niche. I mean, to me, the impression I get is that most people would probably want to be specializing in more than that, two, three, something like that. Does that make sense to you, or is that something you recommend to other business owners?
Chris: There’s a good book called “Ready, Fire, Aim” by Michael Masterson, and it’s a little older now, so the range is maybe different, but I think the principles are very sound. From zero to a million, and again, I know there’s all levels of growth for businesses.
Gene: Sure.
Chris: I’m restating what he’s saying.
Gene: Sure.
Chris: From zero to a million, it’s you need to figure out product market fit. From one to 10 million, it’s either one service and multiple channels to get leads from it or multiple services and one really powerful channel. To get above 10 million, to get into eight figures, it’s typically multiple channels, multiple services. Amazon at the beginning sold books. Now look at everything they sell. You have to have more things to sell because you will cap out a TAM.
Gene: Yeah. Particularly, if you want to grow obviously. That makes complete sense. I’ve been speaking with Chris Dreyer. Chris is the CEO of rankings.io. He is the author of “Niching Up: The Narrower the Market, the Bigger the Prize.” Chris, you also host a podcast, “Personal Injury Mastermind.” I’m assuming we can find that on all the great podcast platforms.
Chris: Absolutely. Yes, sir.
Gene: And tell me about “The Dreyer Sheet newsletter: very quickly.
Chris: Play on words. My marketing team had a lot of fun with that. So “The Dreyer Sheet” because I always say it’s Chris Dreyer, dryer washer.
Gene: It’s cute.
Chris: It’s more like a curation based newsletter. So anything I’m involved in, any guest appearances, this show I feature it in on “The Dreyer Sheet.”
Gene: Great. All right, that’s great. Chris, thank you so much for joining us. It was great conversation. I hope people that are watching and listening to this, they get some ideas for creating new niches for their businesses and how to capitalize on them. So I really appreciate it.
Chris: Thanks so much for having me.
Gene: All right. Everybody, you’ve been watching and listening The Small Biz Ahead podcast from The Hartford. Thank you very much for joining us. My name is Gene Marks. We will be back again soon with another episode, talking to another smart entrepreneur like Chris with some advice to help you run your business. We will see you again. Take care.
Gene: Thanks so much for joining us on this week’s episode of The Hartford Small Biz Ahead podcast. If you like what you hear, please give us a shout-out on your favorite podcast platform. Your ratings, your reviews and your comments really help us formulate our topics and help us grow this podcast. So thank you so much. It’s been great spending time with you. We’ll see you again soon.
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