Niche Businesses Sell For More

Niche Businesses Sell For More

It’s a fact, niche businesses sell for more than commodity businesses.  Today’s topic is one that may or may not be completely possible to achieve in your business, but all business owners can work towards it to help differentiate your company, which will make your business more attractive to acquirers.

What I am talking about is creating market power, by making your business unique, having a strong competitive advantage, and thus less competition. That is not being a commodity – it’s about focusing on a narrow, niche market. After all, niche businesses sell for more. 

Do you have a clearly defined niche and market well to this special population in your business? If you have high market power you will earn more for your business than those that do not. 

 In his book “Good to Great”, Jim Collins mentions the Hedgehog Concept. It is the path to greatness by focusing solely on what you can do better than your competitors.

It is having a true understanding of what you realistically can and cannot be best at.

Your hedgehog helps you create a specific, targeted market where you can effectively market your company with its Unique Value Proposition.

In addition to being an expert in your industry, there are also many ways business owners can be the best in their markets such as servicing a specific geographic area, doing what you are passionate about, and serving a specific demographic.

Again, the more barriers to entry and less commoditization a business has the more its value. These barriers can be in the form of intellectual property rights, anything proprietary, complicated/highly technical processes and systems in place, valuable equipment, and regulatory approvals.

When you make it difficult for competitors to compete with you, you can also name your price for the unique product or service that you provide. I’m not suggesting you create monopoly control and price gouge others just because you can, I’m just saying you no longer compete based on price since you are no longer a simple commodity. When others cannot compete in your area, the sky is the limit. It’s a beautiful position to be in. When you, instead of your customers are in control of your pricing, you can also create more favorable terms for your business to not only increase profitability but also control cash flow and your operating working capital.

The bottom line is that niche businesses sell for more. Whenever possible, differentiate your business from the rest, and become a specialist with your product or service, and do best what few people can do, to be THE, go-to organization and earn top dollar when you are ready to sell your business and begin the next chapter in your life.

As always, thanks for your attention and take care.

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