You've got a killer idea for a SaaS platform that'll revolutionize [insert industry here]. Or maybe you’re a mid-career executive with your eye on the CEO’s office and you’re moving from function to function learning the business. Or, you’re a one-person consultancy who can do anything for anyone. All these scenarios suffer from the same problem, they’re too broad to succeed.
Nobody, not investors, promoting execs, or potential clients know what you’re about. They can’t ask you for help because they don’t know how you can help them. You need to niche the heck out of your business to grow your business. I’m going to explore this concept from the perspective of the SaaS entrepreneur. At the end, I’ll bring these lessons home for executives and consultants.
The “everything to everyone” trap
I get it. You see a huge potential market and those dollar signs start twinkling in your eyes. It's tempting to think, "If we build it, they will come...right?" Wrong. In the SaaS world, being a vague solution for everyone is a quick path to becoming a solution for no one. Sure, big players like Salesforce can cover a lot of territory, but guess what? They didn't start that way. They started with a very focused product and market. They became a platform once they had credibility in a niche.
The Five Reasons Niche is your SaaS Secret Weapon
(That’s the click-baitiest headline I’ve ever written. Shame on me)
The are a variety of reasons niche wins in SaaS. Let’s explore a few.
Stand Out in a Sea of "Me Too" Products: The B2B SaaS graveyard is littered with apps that were just...meh. Targeting a niche lets you cut through the noise. Become known as THE solution for [specific problem], not just another tool that kinda-sorta-maybe helps.
Faster Growth (Yes, Really): Counterintuitive, right? But by focusing on a narrow target customer, you understand their pain points down to the nitty-gritty. This lets you build features that solve real, urgent needs. That laser focus breeds happy users and fast referrals. Growth with a generalist product usually means a slow, expensive uphill battle.
Marketing That Doesn't Break the Bank: Imagine trying to write ad copy that actually speaks to everyone. It's impossible. With a niche, your ideal customer profile becomes razor-sharp – their job titles, the blogs they read, the challenges they whine about on LinkedIn. Now you can tailor your messaging and spend your marketing dollars where they count instead of playing a generic guessing game.
Command Premium Pricing: You want to build a profitable business, right? Niche expertise commands authority. When you're the proven solution for a specific industry problem, businesses gladly pay more. Why settle for generic pricing battles when you can be the sought-after specialist?
Avoid Burnout and Build Something You Love: This one's often overlooked. Building a SaaS business is hard work. Will you still be excited two years in if you're solving a problem you only mildly care about? Niching often lets you tap into an issue closely linked to your own experiences or passions. That intrinsic motivation makes those long startup nights a little bit easier
The Niche Trap
It’s not all rainbows and butterflies in niche-land. There are some traps you need to be aware of so that you can dodge them.
Niche? I’ve already got one (or more): Some companies have more than one niche. Sometimes that’s because there are adjacent swim lanes where the solution makes sense. That’s fine. But beware the temptation to have so many that you suddenly lack focus.
You’ve gone too far: You can focus so deeply into a niche that you create a host of problems.
You’ve built a feature, not a product: No longer do you solve a problem, you help solve one piece of a bigger business problem. Grammarly is facing this challenge. Once upon a time, there was a niche with called Writing Assistant (I made that vertical up). However, soon every word processing system (do they still call them that?) will have grammar assist. Grammarly will become a feature helping to solve the bigger “write better” problem. The future is uncertain. It’s time for Grammarly to seek a bigger market. The good news is they’re ready for that pivot. They have an established brand and demonstrated traction in the vertical.
Your market is too small: While that may be okay in the early days, as soon as you get some competition, there is not enough revenue pie to go around.
You can’t scale: Small markets do not provide compelling economics at scale. Software companies need to spread the R&D and operational costs over a fairly large customer base. Are there enough customers to give you a path to profitability.
Seasons change: Is your niche based on a fad? Do you remember Clubhouse? It was the first “social audio app”. A niche. A new niche. A niche that was compelling for about 10 minutes. It spawned a whole bunch of competitors. It now has ~40M monthly active users. Even Pinterest gets ~500M monthly active users.
You’re too dependent on a single market: While niches are a great place to start, you should already cast your eye towards extensions of your product. Is there an adjacent vertical with a business problem that is very similar? Is there a platform play once we’ve demonstrate value within this niche? Stay focused, but scan the environment. Be prepared.
Executives and Consultants
Let’s explore the other two niche use cases: executive ladder climbers and one-person consultancies.
If you’re a large company exec with your eye on the prize, you don’t need to learn the business. That’s the same problem of the entrepreneur who seeks a market that’s too big. You have to figure out the niches that get someone to the big seat. Those niches come in two flavors.
First, there’s a hidden power structure within the formal power structure. Sometimes several. One company I worked for called them the “family” and another was far more transparent and called them the “mafias”. These are networks of people who get the top roles. You need to suss out these groups and figure out the secret handshake for entry. This niche community will help your career advance while your rivals are trying to appeal to everyone. Often, membership is dependent on the second element.
And the second element is: The CEO path. I’m not talking about something mystical here. It’s literally the answer to this question: Which paths lead to the executive suite in your company? Look at the past several CEOs. They’ve come from a certain function. Sometimes it’s engineering. Sometimes it’s sales. Companies have patterns. For decades, IBM’s pattern was sales. If you were in sales, you could rise to the top. Outside that functional niche, you were out of luck.
You need to be in that key function, performing at a high level. The family needs to recognize you. You don’t need broad “know the business” experience. You need to be in that niche to rise to the top. Thank me with a healthy bonus when you arrive at the top.
A big mistake that a new consultant makes is being a generalist. As stated earlier, it’s hard to get hired when people don’t know how you can help them. It’s hard to be known, as Mark Schaefer, author of the book “Known” describes. According to Mark, a fundamental element of being known is to build credibility and a reputation in your specific niche, not about becoming a celebrity.
I have seen this again and again. Tim Peter works with high-end properties in the hospitality industry. Mike Moran focuses on search related technologies and processes. Are they celebrities within their niche? Yup. But they’re also top performers because their customers, those in their niche, know how they can help. They didn’t go for celebrity, they went for high value with a very targeted audience.
ekki-ekki-ekki-pitang-zoom-boing*
Remember, choosing a niche doesn't mean you're stuck forever. It's a starting point. As your business grows, you can strategically expand. But first, you need that strong foundation of focused expertise. Embrace the power of the niche. Start with a shrubbery, then you can get another shrubbery with a path and a two-level effect. That is the road to success.**
* Yes, this is a deep cut. See: The Knights who say “Ni!” and: The knights who no longer say “Ni!”
** See above.
*** I may have had too much caffeine this morning.