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Are you thinking about starting a business?
Before you do, here’s a pop quiz: Experts say this is a good way to ensure your business survives and thrives. Entrepreneurs (including the founder and publisher of BLACK ENTERPRISE magazine) have grown businesses for decades this way. And yet only 10% of small businesses out there are doing it. What is it?
The answer: carving out a niche within a niche — a smaller segment of a larger market with common needs or purchasing habits. According to experts, choosing a niche is a smart strategy for businesses with fewer resources than their corporate competition. They say that entrepreneurs who can manage this are much more likely to succeed and thrive than their general-market counterparts.
A niche magazine, for example, might target businesspeople as readers. A niche within a niche might be black businesspeople. It involves separating the target market into smaller chunks. While you’re swimming in a smaller pond, the idea is that by filling the niche, you’ll capture a greater percentage of that subsegmented market. This results in less competition and greater profits, because niche customers are less price sensitive, says Portland-based Lynda Falkenstein, author of Nichecraft: Using Your Specialness to Focus Your Business, Corner Your Market and Make Customers Seek You Out (Niche Press, $24.95).
So why aren’t more entrepreneurs adopting a niche strategy? “Many are afraid that it will limit their opportunities, when the opposite is really true,” says Terri Franklin, an entrepreneur from Atlanta who started her own hosiery business. At the outset, many small business owners are concerned with attracting as much business as they can and have trouble accepting that narrowing their customer focus may be more profitable.
Franklin looked to her own experiences and recognized the potential for success in niche-marketing. Having once worn pantyhose with names like Red Fox, Cinnamon, Gentle Brown, and Mahogany, most of which didn’t match her skin tone, Franklin, 48, understood first-hand the plight of women of color looking for flesh-matching hoisery. When she found a color that accentuated her legs, Franklin would buy several pairs. Sometimes, she would buy everything in stock so that she wouldn’t have to hunt for them again.
Franklin, a sales specialist at AT&T, recognized a hole in the hosiery marketplace and came up with an idea for hosiery for women of color. “We’ve all worn some hideous colors,” Franklin admits, summarizing the experience of many women who have been frustrated by the sparse selection of hosiery in pleasing deeper brown tones. Franklin’s solution was to buy pantyhose in black, navy, or a color that complemented a particular outfit, sidestepping the challenge of locating a pair that wasn’t a match.
Her brainchild, Atlanta-based Accents of Color Hosiery, was launched in October 2002 and boasts seven shades of brown and five other hues — jet black, off black, white, navy, and cream. The company has been growing at a rate of about 20% annually. Franklin expects 2006 sales to total $200,000, but they could go much higher if pending deals with Nordstrom and Macy’s