Having a broad skillset can sometimes be a disadvantage. That is because it makes it all too easy to generalise your business.
When your clients are clamouring for a range of different services – all of which you have the skills to provide – you do not want to turn down their money.
For example, as a graphic design company, you may feel the need to provide assistance in web design and copywriting as well; these are related services your client will inevitably want and since they already trust you, you are likely to close that deal.
This could, and often does, increase the business you get from a single client and it becomes a very attractive way of operating. Few clients – so less sales required – and plenty of work and profit.
However, there are a number of benefits to targeting a niche. If you are planning to sell your company, broad services for few clients can actually be detrimental to your worth in the eyes of your prospective buyers.
It can be better to specialise and target a niche area and serve many clients rather than generalising for just a few. There are two main reasons for this:
1) Specialising increases quality
When you focus your business into a single, core area that you do really well in, it means you can become the absolute best in that area. You can hire specialists who are not distracted by other areas and the quality of your product will soar, making you stand out from your competitors.
If you can carve out your niche, and solidly gain authority over it, your business will start to look much more attractive to a potential buyer.
2) Specialising forces you to increase your client base
When you specialise, you cannot be everything for a single client. While a lot of clients will think they want you to be a jack-of-all trades, they actually want you to be a master of all trades. If you are a small or medium-sized business, that just is not going to happen – and you will produce sub-par work in comparison to bigger agencies.
When you specialise and become really good at your niche area, you need to provide your product or service to more clients – which is a good thing.
Spreading out your revenue over a number of different clients dramatically reduces the risk involved in your company. If the revenue from any one client is no more than 15%, you do not rely on any single client for your business to stay afloat.
This is a much more comfortable position for a potential buyer than if your business was at the mercy of a single client that could pull out at any time.
How to Specialise
Focusing your business into a specialisation should not require a scorched earth policy. You do not need to drop the other work you are doing for current clients.
Instead, what you should do is start changing who you are targeting and your sales funnel so that you are only acquiring new prospects in your chosen niche. You should be refining the niche product and perfecting every part of the process you use to deliver it.
Gradually, the area you are specialising in becomes the "safer" part of your business, and you can let the other parts fall away naturally. Your business then quite quickly becomes a much more valuable acquisition for a potential buyer and you can sell for a much higher price.
This article was contributed by The London Coaching Group, top business coaches in London who help businesses improve their valuation. If you would like to work with them to establish your current and potential valuation, click here.
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