It is accepted wisdom that finding and focusing on a niche market is a good idea. Executing such a strategy is harder than it sounds, however.
And if it isn't difficult, there's a reasonable chance you don't have a real niche strategy but a preference for certain types of clients (not that there's anything wrong with that).
DEFINING A NICHE
The starting point of a niche strategy is determining your niche. For simplicity, I would suggest that a niche must meet five criteria:
It must be specifically defined, represent something you are passionate about, have unique and identifiable needs, be accessible and have strong economic potential. And while getting to that definition may entail some deep thinking and personal reflection, that's in fact the easy part.
The difficult part is building a business entirely around the needs of that niche market. Advisers don't need to have a niche to succeed. But if you pursue a specialized practice, dabbling is not an option; your business needs to be centered on that niche.
I recently interviewed two advisers who have built their businesses around clear niche markets.
Randy Gerber is the founder of Gerber and focuses on first-generation entrepreneurs. Chris Moynes is a managing director at ONE Sports + Entertainment Group and focuses on professional athletes and entertainers, with a specialty in hockey players.
I'll draw on the experiences of these two advisers in discussing the five questions that can determine if you have an effective niche strategy.
1. Does your website make a bold statement about your niche?
If I went to your site right now, would I know exactly whom you serve? Are you willing to define your business in terms of your niche?
On Mr. Gerber's site, for example, the first headline says: Giving first-generation entrepreneurs the clarity and guidance to help integrate and achieve their life, business and financial goals.
2. Does your offer reflect your niche?
Do the products and services you provide your clients differ based on the needs of your niche market, or do they look similar to what any other adviser offers?
Mr. Moynes said he emphasizes disability insurance, because “professional athletes have the ability to earn a lot of money over their career, [though] it could be a very short career.”
Mr. Gerber focuses on aligning clients' business, financial and personal lives because they are commingled for entrepreneurs.
3. Does your hiring process incorporate an affinity for, or specific experience in dealing with, your niche market?
A niche market can be a powerful point of attraction for prospective staff hires. At the same time, staff members must appreciate the special aspects of your niche market.
When hiring, consider asking questions that let you know if prospective team members understand what is unique about your target audience.
Mr. Moynes pointed out that candidates may be attracted to the niche itself (sports, for instance) but fail to recognize that being a fan isn't enough to fully grasp the requirements of the client base.
4. Do you take a thought leadership position to advance the thinking in your chosen niche?
If your niche market is not a central focus of your marketing strategy, you probably don't have a niche market.
Mr. Moynes has established himself as an expert in his niche market by publishing a book, “The Pros Process: An Expert's Approach to Wealth Management for Professional Athletes” (Crowe Soberman, 2013).
Mr. Gerber said educating centers of influence about his firm's focus and niche has been critical. He also is creating a video series covering the specific needs of his target audience.
5. Have you said no to a prospective client?
Perhaps the greatest test of a niche strategy is your existing client base and your firm's process of bringing on new clients.
While the transition process may take up to five years, if 80% or more of your clients are not in your niche, you need to ask why.
The answer may lie in an unwillingness to say no, the ultimate hallmark of an effective niche strategy. The day you turn away a prospective client because he or she doesn't fit the niche is the day you know you are doing it right.
Julie Littlechild is the founder of If Not Now Research, which provides advisers with research and programs to drive innovation and growth.