Small businesses have always relied on referrals as a major source of new business. The importance of referrals and word of mouth has only increased as technology has improved our ability to spread messages (both good and bad) quickly and widely.

A great way to increase the number of referrals in your business is to remember one simple question: “what does your ideal client look like?”.

Here are four ways this question can help your business:

1. Ask this question of new people that you meet

By asking this simple question you not only show that you are interested in who they are and what they do, but that you are keen to help them find new clients.  People like other people who listen to them, who care about them and who try to help them, and being likeable is always good for business.

2. After asking this question of others, remember their answer

If you remember the profile of an ideal client for your contact then when you meet someone that matches that profile you’ll be well placed to make an introduction.  While doing this good thing may be enough reward in itself, we know from the Law of Reciprocity that the more you help other people the more likely it is that others will help you.

3. Have a clear answer to this question for your own business

You might think your business is able to help “all small business owners”, but reaching such a wide audience and then convincing them you are their best choice is hard, if not impossible.  A much better strategy is to target a very specific segment of the market and do everything you can to reach them and demonstrate how you are their best option. By focusing on your ideal client rather than just any potential client, you are doing just this. Leave the strategy of targeting the masses to the big boys that have the scale and credibility to make such bold claims, and find your niche then own it.

4. Make sure people in your network know what your ideal client looks like

We are all busy worrying about our own issues and don’t have hours in the day free to help others, so if you want people to help you then you must make it easy for them.  By telling people exactly what your perfect client looks like you make it easy for them to recognise a potential client for you when they meet one. In addition, you make it less risky for them to make the referral because you will be well placed to service the new client (at least, I hope you’re well placed to service your ideal client) and you won’t make the referrer regret their decision.  If done well everyone will be happy and more referrals will follow.

So, in summary:

1. Ask people you meet what their ideal client looks like – showing genuine interest makes you more likeable;
2. Remember their answers and look for ways to help them – making referrals will get you referrals in return;
3. Know what your ideal client looks like – focus on creating a more targeted and credible business; and
4. Find opportunities to let people know what your ideal client looks like – make it easy for people to help you.

During my first couple of years as a solo consultant I worked from home, which was great in many ways but was never going to work as a long term option. This was partly due to my poor productivity, but more due to the lack of opportunity to meet and collaborate with interesting people, so I started thinking about what my ideal workspace would look like and how I could make it happen.

After quite some research I found that I was not alone in my vision, and the sort of place I wanted to work from was what has become known as a coworking space.

To cut a potentially long story short, a couple of clients liked my vision and in late in 2010 I helped them purchase a great little commercial property in Richmond, Victoria. Together we have turned the place into a new coworking space named Six8 Bromham. The name is not overly surprising when you find we are located at Suite 6, 8 Bromham Place, Richmond!

It’s a great space of 235 square metres across two floors with room for about 20 full time members, a couple of large meeting rooms, plenty of open space for events, and an area that we have converted (with the help of a sledge hammer) from a cramped and boring office into an open entertainment area complete with couches, plasma TV and a pinball machine.

The goal for the space is simple – to bring interesting people together in the belief that interesting things will follow. We apply this thinking to both to our members (one- or two-person businesses that can benefit from being part of a collaborative community of small business people) and regular events that we plan to run for our wider group of “friends of Six8″. We often talk about our goal to create a small business hub, and also refer to ourselves as a “business club that just happen to own a really cool clubhouse”. That should give you a feel for what we’re building, and while it may sound a bit out of the ordinary, that’s no accident. As Seth Godin says in his book Purple Cow:

In almost every market, the boring slot is filled. The product designed to appeal to the largest possible audience already exists, and displacing it is awfully difficult. Difficult because the very innocuousness of the market-leading product is its greatest asset. How can you market yourself as “more bland than the leading brand”? The real growth comes with products that annoy, offend, don’t appeal, are too expensive, too cheap, too heavy, too complicated, too simple – too something. (Of course, they’re too too for some people, but just perfect for others.)

So we’ll be too loud, too casual, too collaborative, and too inclusive for many people (luckily serviced offices cater to those people perfectly!) but we are sure that some people won’t be able to imagine working anywhere else once they learn about us. Also, while we don’t want to lose money on the venture, we all believe that we will benefit more from the relationships we form within Six8 than we will from running the space.

We only have a few free desks so we’re not actively advertising to bring people in (we want the right people, not just anyone that needs a desk), but if you’re interested in learning more we’d love to hear from you. You can also become part of what we hope will be a wider community of small business people that benefit from what we have planned by following us on Twitter or Facebook.

In your normal business day, do you spend more time looking for ways to do the minimum or the maximum?

Take these examples:

Of the people in the left and right columns, who do you think is going to:

• get the promotion?
• win repeat business from their clients?
• find new customers through positive word of mouth?
• sell more product?
• have the most engaged staff?
• WIN?

It’s not rocket science. If you aren’t getting the results you want, next time you notice yourself asking “what is the minimum I need to do?”, stop and take a moment to think about the possibilities if you asked “what is the maximum I could do?”

I recently finished reading one of the best books I have ever read, The Big Short by Michael Lewis.

Lewis wrote his first book, Liar’s Poker, in 1989 when he was in his 20′s, and this was one of the few books that almost all of my finance industry colleagues had read. (Although people took very different things out of the book, which was a particular frustration for Lewis who meant it as a tale of caution rather than a how-to guide).

The Big Short is a brilliant account of what we now know as the “GFC”, seen from the perspective of some key hedge fund managers that saw what was coming and took big bets against the conventional wisdom at the time… and made enormous sums doing it. To them it seemed so obvious that what was happening was unsustainable, yet so many thought otherwise that they often felt they must be wrong, stupid, or both.

The book combines an amazingly understandable explanation of some extrememly complex financial transactions, with the character development and suspense of a great thriller – not an easy thing to do!

I cannot recommend this book enough, and have told people ranging from past investment colleagues through to my Dad, that it is worth reading.

You can get it shipped free from my favorite online bookstore, The Book Depository, or if you need it today and don’t care about price, at all local bookstores.

Trust me, you won’t regret reading this book.

We are human, and that means we are not perfect in our decision making.  Far from it, in fact.  One area that we often make irrational decisions is around the value of time.

Take this experiment, for example:

1. You are shopping for a shirt that costs $50, and you hear that it is available at a shop 15 minutes away that is having a 50% off sale, making the shirt $25.  Will you drive to buy it?
2. You are shopping for a suit that costs $1,950, and you hear that it is available at a shop 15 minutes away that is having a 1.3% off sale, making the suit $1,925.  Will you drive to buy it?

Most people answer “yes” to question A, but “no” to question B, even though the outcome is exactly the same: a 15 minute drive to save $25.

This example is an easy one to calculate, so there is no excuse for confusion.  Yet most of us still make an irrational decision and provide a different answer to questions A and B.  Even after we are shown how irrational it is, many will still do the same thing again.  So imagine how bad our decision making is on complex problems where the comparison isn’t so obvious!

So we know that the rational thing to do is to answer “yes” to both questions or “no” to both questions, but not a different answer to each.  Whether you choose “yes” or “no” should depend on how you value your time.  What is worth more to you: the 15 minutes or the $25?

One of my favorite sayings, although I can’t recall the origin, is “Linux is the cheapest operating system in the world… if you value your time at zero”. As most will know Linux is free, but the quote implies that you will spend more time setting up and managing a Linux system than other operating systems, so it is far from the “cheapest” option for everyone.

The rational question to ask next is “how much time are we talking about, and how much is my time worth?”, and only then can we decide whether Linux is still the cheapest option for us.  If it takes two hours to set-up and you value your time at $10 an hour, Linux is still much cheaper than Windows.  If it takes ten hours, and you value your time at $200 an hour, that’s a different story!

These are just two examples of where having some understanding of the value of your time can be of benefit to you and improve your decision making.  Not many people I know, however, actually think about what their time is worth to them.

Here is my suggestion as to how you can start conciously making decisions about the value of your time which, up until now, were probably being made subconciously (and poorly!):

• Imagine if a magic genie came to you and offered to extend your days to 25 hours and the extra hour was yours to do whatever you want without any interuption, feelings of guilt or cost to other aspects of your life. So you could spend time with the kids, play video games without interuption, sit and watch the football and drink beer, or go shopping.  What is the maximum you would pay for this bonus hour each day?
• If your boss asked to work an extra hour each day, doing only the most menial task and which has no redeeming value other than the pay you will receive (ie. it’s not fun, educational, benefitting your career, hleping others, etc), what is the minimum you would need to be paid to work this additional hour?

Hopefully you have picked an answer for both questions, and they are not too different to each other.  (However, if you are like most people, you probably picked a higher number for B than A, even though the outcome is the same – one extra hour a day for a set amount of money.  The reason for this is most people put a higher value on dollars they already own and which they stand to lose, or payout, over dollars that they stand to receive.)

Now average the two numbers you picked.  This is a good estimate of how you value your time.

This number will be different depending on your current circumstances.  If you are working 60 hours a week and getting paid $200,000 a year, you would probably pay a lot for an extra hour each day, and it would take a lot to get you to work an extra hour each day doing a menial task.  A value of $200 an hour, or more, is not out of the question.  On the other hand, if you are not working at all and don’t have any income, an extra hour each day is not that valuable to you and you could probably do with a bit of work, so $35 an hour may suffice.

So why is it so important to think about this?  We make decisions every day that could be improved by thinking conciously about things which, until now, we left to our subconcious, and in doing this we can turn a few irrational decisions into rational ones.  “Should I do this task or give it to one of my team?”;  “Should I outsource this role to someone else?”;  “Should I drive further to buy a product that is on sale or buy it locally and use that time for something more valuable or fun?”;  “How much is it really costing me to spend one more hour in this online video game?”;  “Should I pay a consultant to do this for me or try to do it myself?”;  “Is that free software really a better option for me than the paid alternative?”

Further Reading

The science behind our behaviour and decision making is something that has interested me for years, firstly in understanding how it impacted investment decision making in my previous role, and now how it affects the decisions of small business owners, clients, staff, marketers, etc.  If you want to do more reading on the topic, here are some of my favorite books. There are also some blog posts and videos in the Articles section, including a great video of Dan Ariely at TED asking Are we in control of our own decisions?.

I am surprised at how few small business owners do any kind of financial forecasting given how valuable a tool it is.  I am given many reasons as to why this is, but most often it is: “I’ve tried, but my industry is too uncertain and my forecasts are always wrong, so there is no value in it and I have better things to do with my time”.

My answer to this is simple - almost every forecast in business will be wrong, but that is no reason not to do any forecasting.  In fact, incorrect forecasts are the best kind!

Let’s look at two business owners, and you tell me which one benefits more from the exercise of doing some basic forecasts:

Jessica sits down and prepares a forecast for next quarter.  She forecasts that sale will increase to $120,000, and expenses will increase to $80,000 due to an increse in her rent but a small saving from one staff member cutting back to 4 days per week.  At the end of the quarter she reviews her forecasts and, no surprise to Jessica, her forecasts are almost exactly correct.

At the same time Steve was also doing his forecasts.  He also forecast $120,000 of revenue for his business, and $80,000 in costs.  At the end of the quarter he found his revenue was $20,000 below forecast, and his expenses were $5,000 above.  He looked into why, and found a whole lot of issues:  he forgot that this quarter was notoriously quiet for his industry; he had another debt go bad; he had a staff member take long service leave; and, he had to retrench another staff member which involved a sizeable payout.

Jessica was almost exactly correct, while Steve was very wrong.  If forecasting is only worth doing when you are likely to be right, Jessica would keep at it while Steve would give up.  Yet I hope that it is clear to everyone that Steve benefitted substantially more than Jessica did from this exercise.

Jessica learned almost nothing, but reconfirmed what she already knew – that her industry is relatively predictable and she is good at forecasting.

Steve, on the other hand, learned:

• his industry has peaks and troughs during the year that he should know are coming, if not the exact size of them, and he should take this into account when planning for his business (production levels, spending, staffing etc.);
• while he can’t know which debts will turn bad, he has a history of bad debts and he should factor in some allowance for bad debts each quarter.  Sometimes his guess will be too high, and sometimes too low, but over time it will roughly average out – and its better to plan for some bad debts and be get a postive surprise if there are none than plan for no bad debts and have to find a way to deal with them if they do occur;
• he can’t predict when staff will take leave too far into the future, but he can ask his staff to give ample notice and factor this into short term forecasts, and put some allowance for it in the long term forecasts.
• occassionally he will have to let staff go, and he should allow something for this in the forecasts otherwise staff turnover will always be a negative surprise.

Steve, although he was quite wrong with his forecasts for the quarter, learned a lot more than Jessica.  When he prepares his forecasts for next quarter he will do a much better job, and better again the quarter after that and so on.  Even though Steve is operating in a volatile industry, even forecasts that end up being very wrong are teaching him a lot about his business.

Finally, some tips if you want to improve your forecasting:

• Forget about getting every single forecast right and accept that they will all be wrong. The goal is to get them right on average over time.  The process of continually improving your forecasts will teach you enormous amounts about your business and impove the way you manage it.
• Detailed forecasts are better than high level forecasts, even though you will be getting more individual numbers wrong.  For example, instead of forecasting sales revenue try forecasting sales volume by customer or division, and pricing by customer or division.  Instead of getting one number (sales revenue) wrong you will get dozens of numbers wrong… but the resulting forcast of sales revenue (ie. the end goal) will be less wrong by having gone through the exercise.  Plus, when your actual results come in you can see which component you got most wrong and work on correcting that part of your business first.
• Make sure that you dedicate time to analysing why your actual results were different to your forecasts.  As we saw above, this is how you get most benefit from your forecasts, learn about your business, and improve your forecasting over time.
• if you cannot bear the idea of being wrong in every number you forecast, try doing best/worst case scenarios instead of single point forecasts (with the likely case falling in between).  You will get all the benefits of preparing the forecast, but not be disheartened when your numbers are wrong (unless they come in way outside your best/worst case range – so start with a very wide range so this is less likely to happen!).  In many ways forecasting this way is better than single point forecasts because it also makes you think about the volatility and risk in your forecasts, not just the most likely outcome. Understanding that is a great thing.

I’ve never put together a list of the biggest problems across most small businesses, but if I did the abundance of short-term thinking would be very close to the top of the list.

Short-termism

The release of the results of a recent survey conducted by the Australian Institute of Managers showed that a significant number of corporate executives were worried that “short-termism” was severely impacting the performance of their business:

The global financial crisis is the time when companies should show they’ve learnt from the mistakes of the past, shun short-termism and focus on building long term competitive advantage,

..the CEO of the Australian Institute of Management (Vic/Tas), Ms Susan Heron said….

Companies should ensure they have the business basics right – strategy, cash flow, debt management and investing in their people to build and retain the critical skill sets necessary for long term growth.

You can read more in the AIM press release.

The Death Spiral

In a recent blog post by Seth Godin titled Death Spiral, he talks about the trap that businesses fall into of trying to save money when things are going wrong, which only exacerbates the problem and leads to the death of the company:

The doctor has fewer patients so he doesn’t invest as much in training or staff and so some other patients choose to leave which means that there are even fewer patients…

The newspaper has fewer advertisers, so they can’t invest as much in running stories, so people stop reading it, which means advertisers have less reason to advertise which leaves less money for stories…

What is the answer? I’m sure that when talking about other people’s businesses that most of us can clearly see what it is. However, when it’s our business and we are in the middle of such a situation we do not always look at things objectively and may need to be reminded of what needs to be done.

In Seth’s words:

Right this minute, you still have some cash, some customers, some momentum… Instead of squandering it in a long, slow, death spiral, do something else. Buy a new platform. Move. Find new products for the customers that still trust you.

Change is a bear, but it’s better than death.

A Few Ideas

The focus on the short term usually results in the business being starved of two things: time and money.

Many small business owners will call me crazy for suggesting they need to spend more time on their business. However, to use the language of the popular small business book, The E-Myth, there is a huge difference between working on your business and working in it. Too much focus on the short term usually means spending more time working in the business, however if the problems are related to, say, customers no longer wanting the product that you are offering, then working harder to produce more of that product is unlikely to help greatly.

Instead of just doing more of the same, try allocating time to consider issues such as:

• Why are you the best option available for your clients, and how are you making sure your clients know that;
• If you’re not the best option for your clients, what are you doing to change that in order to give your clients have a compelling reason to buy from you;
• What are you doing to attract and keep the best staff, because the best businesses are rarely built with below average staff;
• How profitable are each of your clients to your business, and are you spending an appropriate amount of time working for each of them.

The other important resource that business owners often withhold from their business is money. Conserving cash seems like a smart thing to do, particularly when economic conditions are tough, and often it is the right thing to do. However, many small business people take this too far and stop spending money on projects that make sense. Worse still, they usually do this at the very time the business needs it most.

Some examples of projects that may make sense, particularly when times are tough, include:

• Hiring an assistant to take the load off your higher paid staff, in turn freeing them up to better serve your clients.
• Investing in some new software that could make life easier and more productive for your staff.
• When hiring new staff, be generous with salary and benefits in order to attract the best person for the job. In the long term this will be a better option than saving a few thousand dollars now, but ending up with with a team member that doesn’t work out.

An Offer From Me

If you, or someone you know, is in the position of running a company that is heading into something similar to a death spiral, you should have someone independent you can talk to. Very few people are able to make objective decisions when put in this situation. If things have reached the point where you can’t even afford to pay for some decent advice, please consider contacting me and we can find a couple of hours to talk through the issues. In just a couple of hours I can’t promise the world, however I know what it’s like to be in a similar situation and it would give me great pleasure to help someone else by providing some fresh ideas and an objective point of view.

I don’t normally post gadget and technology news, but I think this news is worth me changing that policy. In the last couple of days Google announced and demonstrated their latest toy, and this time it’s a big one even by Google’s standards. It’s called Google Wave, and it is likely to be the biggest change to the way we use the internet in years – and that may be an understatement.

The Sydney based team within Google that created Wave started with the question “if email was invented today, how would it look”. What they’ve come up with is something that will significantly change, if not replace, all of the following: email, instant messaging, document collaboration, photo sharing, Twitter, Facebook, discussion forums and blogging… just to name a few.

The way they’re doing this is not by inventing a new application, but a whole new protocol. And better still, while they are building their own (browser based) tools to use this protocol, the protocol will be open source and they’re encouraging others to build their own tools. And to make this process easier they’re even open sourcing their tool, meaning you can start with a fully functioning application and just changing it where you think changes are necessary rather than having to start with a blank sheet of paper. They’re also opening up the API and encouraging developers to build add-ons to increase it’s functionality.

Phew, lot’s of stuff there. But that’s really only the start. The video demonstration embedded below is long at 1 hour and 20 mins, but it is seriously worth watching if you want to see how the internet will undoubtedly start changing when Wave is released later this year.

Just think – Twitter is just starting to change how some people use the internet after a couple of years, and the majority of people still don’t “get” Twitter. Facebook has changed the way many people use the internet, but it has taken many years to reach it’s current level of mainstream acceptance and for developers to build some really interesting add-ons for it. In other words, in the early days of a technology we generally underestimate the impact it will have because it takes time for people to think of new and interesting uses for that technology (even the internet itself followe this rule). Now, with that in mind, take a tool that has the whole internet buzzing like I’ve rarely seen before only days after its announcement, and try to imagine what it could mean for us in two or three years given even all of this hype is probably still massively underestimating what impact it will have. This is pretty cool.

So, for those that can find the time, enjoy…

Too few small businesses have a current business plan, often due to a belief in one or more of the following myths. By dispelling some of these myths, I hope that a few small business owners will decide that now is the time to write a business plan and it will quickly become one of their most valuable management tools.

Myth #1: Business plans have to be long, detailed and well presented.

Reality: If you have plenty of time and you like working this way, go for it. However, for most of us it is preferable to keep them short and without much formatting. This is because a business plan should be checked and updated often, and having an overly complex business plan is likely to discourage you from doing this and lead to it getting forgotten in a draw somewhere rather than as a key document that helps you run your business.

Myth #2:  There is a right and wrong way to write a business plan.

Reality:  The most common reason I hear for not having a business plan is “I don’t know how to write one”. There is no business plan rules committee telling you what you can and can’t put in your business plan. It’s your plan, so write what you want to write! Over time you can improve your plan by learning about what others do, however if the only thing stopping you from writing a business plan today is not knowing what to write then just start writing something… anything… and worry about improving it later. Even a couple of paragraphs detailing why your business exists and one or two goals for the future is a great start and can be built on as new ideas come to mind.

Myth #3:  Business plans are really for other people to read, so if no one is asking to see yours then you don’t need one.

Reality: There are many people that may ask to see your business plan – banks, clients, business partners, etc. So go ahead an prepare something for them and call it a business plan if you like. However, you should always have a business plan that is only for the owners of the business to see, for reasons which will become clearer when we look at myth #4.

Myth #4:  You business plan should show your company in its best light.

Reality: If your bank or a customer asks to see your business plan, go ahead and give them a version of your business plan that shows your company in a good light. (In effect, give them a detailed marketing document which is titled “Business Plan”). However, you should always have a business plan that discusses all the negatives in your business – your weaknesses, the strengths of your competitors, the threats to your business, etc. Admitting to these issues and putting them in writing will get you one step closer to addressing them and that is clearly a better strategy than ignoring them and hoping they will just fix themselves.

Myth #5:  Once you have a business plan you should stick to it.

Reality: I often hear people say “If I have a business plan that I stick to I cannot be flexible, while if I have a business plan I don’t stick to then it serves no purpose… so what’s the use!”. There is a very good reason, and that is because you can use the business plan like this: stick to your business plan until you don’t want to and then don’t, but make sure that when you do deviate from the business plan that it is a conscious decision rather than something that just happens without much thought. By consciously deciding to deviate from your plan you are saying to yourself “my new plan of action is better than the one outlined in my business plan, and I would rather do this”, in which case you absolutely should go ahead and follow your new plan of action. You should then follow this up by finding a few moments to quickly update your business plan (which will be easy if you followed tip #1) to reflect your new and improved thinking. Now, for every major decision you have two choices:  either reject the new idea because it conflicts with your business plan and then congratulate yourself for having a plan that helped you make a good business decision; or, take the new path, update your business plan, and congratulate yourself on having further improved your business plan. Either way you win!

Every business should have this goal: be the best in your market.

Luckily this is not as hard as it sounds.  After all, you get to decide what your market is, from as large as the whole world to as small a niche with only a handful of customers.  Also, not everyone’s definition of “the best” is the same, as everyone places different values on price, quality, prestige, backup-service, risk, etc.

Too often I hear people say something along the lines of “I only need 0.1% of the market to make good money”.  Yes, this is good place to start and is obviously better than needing a 20% market share to make a profit.  However, you won’t even get 0.1% of the market buying from you unless you can convince some portion of the market that you are their best option given their specific set of circumstances.

Let me explain further…

Several years ago I had an ankle injury that required surgery. I asked around and chose a surgeon who I was told was “the best ankle guy in Melbourne”.

I also have many friends that have had work done by orthopaedic surgeons to repair a range of sports injuries. Without exception they enjoy talking about which surgeon they used as if it is some form of status symbol. There is pride in having someone recognise the name of your surgeon and having them proclaim “I know him… he’s good”.

Strangely, I have also heard other ankle specialists described as “the best ankle guy in Melbourne”. The point is not which one is actually the best, but that they are all doing well because at least some portion of the market regards them as the best.

However, I have never heard anyone say that they chose their orthopaedic surgeon because “they will work on anything you need fixed”.
The lesson is simple: People want the best for their specific situation, not the most versatile¹.

So why is it that so many small businesses think the answer to their troubles is to expand their product range?

I think it’s simple…

The number of customers your business has is a function of two things:

1. the size of your target market; and
2. your success rate in turning target customers into actual customers.

A target market of 1,000 people and a success rate of 1% equates to 10 customers for your business.

The reason that struggling businesses consistently look to increase their product range is that it increases their target market, and it is substantially easier to expand your target market than it is to improve your success rate. After all, expanding your target market involves nothing more than proclaiming, even if only to yourself, what your new target market is. That’s it, done! This sure beats all the work involved in coming up with new ideas or making real improvements to your business that will increase the rate of success that you have within your existing market.

However, in doing this you are becoming less of a specialist and less likely to be regarded as the best at anything. Therefore, any gains you planned (hoped?) to make by increasing your target market are offset by a further worsening in your success rate. You are becoming the orthopaedic surgeon that can do work on any limb and theoretically has a huge target market, but sits there doing nothing² while all the ankle and knee and shoulder experts have six week wait lists and can charge whatever they like.
Try this exercise:

• Start with a list of your current target market – that is, all of your potential customers across all of your product lines (goods and services).
• Next, start removing the products where you are least skilled, least interested in, or which you feel have the least potential.
• Finally, take some potential customers from your list, starting with those who are least likely to buy from you, pay the price you want or who you know would really be better served by buying from someone else.

What you now have is a range of high quality products that you like and feel have potential, and a group of potential buyers that are open to buying from you at your chosen price and who you genuinely believe would benefit from being your customer.

Now ask yourself three questions:

1. Can you actually deliver the small range of high quality products that remain on your list?
2. Can you visualise your target clients buying from you and then telling their friends that they should use you because you’re the best [insert your product here] guy/girl in Melbourne?
3. Can you make money from only serving this niche (even if it requires a substantially higher success rate than you currently are achieving)?

If you answered “yes” to each of these questions, you have a market niche worth pursuing. If done right, you’ll have a business worthy of others talking about, and a decent chance of becoming known to at least some people as the go-to person in your market.

So what’s your next step – increasing the size of your target market or shrinking it?
1. In some cases versatility can be of benefit to a customer, but only where it involves areas that the customer has some interest. In the majority of cases the versatility is for the benefit of the business owner, not the customer, and therefore does very little to improve sales.

2. They’re not really doing ‘nothing’… they’re probably busy thinking about how to expand their services even wider because their problem is they can ‘only’ do orthopaedic surgery.

Thanks: I need to give credit Seth Godin who’s constantly great writing inspired some ideas in this post.