Back in 1994, an excited Tony Ellison sat down with a few friends to tell them of his plans for a new company. Just minutes into the meeting, one of his friends interrupted Ellison, and with a blank stare shrieked, “Tony, are you insane?!”
His friend was rightfully worried. Ellison, a veteran of Wall Street, was planning to leave his job to start an e-commerce company selling office supply products. Huh?
“The industry was already crowded with the big guys like Office Depot and Staples, and back then, no one really knew what e-commerce was; but I had read papers suggesting how big the Internet was going be an how it would be a great way to conduct business, so I went for it,” says Ellison.
He soon launched Shoplet.com and turned a profit within the first three years. Today, the company supports 70 employees and is wildly successful.
Entrepreneurs Thomas Hoebbel and Michael Carney also know what it takes to succeed in a crowded marketplace. In 2001, Ithaca, New York-based Hoebbel launched a photography company titled Thomas Hoebbel Photo~Video; and in 2009, Carney, a CPA based Chicago, founded MWC Accounting. Both companies are going strong.
I sat down with all three small business owners to learn the five best ways to thrive in market saturated with like-businesses.
1. Focus on a niche
Hoebbel is a theater and music buff, so when he started his photography company, he focused on his passions. He called up studios, theaters and concert venues and offered his services. “I soon established a reputation for being the best at that niche in the area,” he says.
According to Hoebbel, it’s important for small business owners to think hard before choosing a niche.
“Don’t just go out there and pick a niche because you think it will work—instead, go with what you love and are really good at. Eventually, you will be seen as the expert in a specialized area,” he adds.
2. Study the market and fill gaps
Upon launching Shoplet.com, Ellison wanted to differentiate himself in the market and solve customer problems at the same time. He knew of a company that helped streamline procurement processes for large businesses, but was too expensive a solution for small business owners. To solve this problem, he developed a free online procurement platform for the little guys.
“In the old days, admins had inefficient processes for collecting purchasing requests and didn’t have a way to keep track and manage inventory—the system we set up allowed them to do it and do it for free,” he says.
Ellison launched the product and small businesses flocked—a lesson for other small business owners in saturated markets.
“Come up with a unique value proposition that helps you gain a competitive advantage in the marketplace,” he suggests.
3. Network, network, network
Carney was a 28-year-old with public accounting experience when he launched his company. Without any clients, he focused on one thing: Pounding the pavement.
“I knew I wanted to focus on small businesses, so I started with my own network and took people out for coffee—I would ask them how they got started and just build a relationship, not focus on the hard sell,” he says.
His plan worked. After numerous coffee dates, he had a nice roster of clients—and recommends the same strategy to others.
“You really need to get out there and let people know who you are. Don’t just think people will find you—that will take way too long and you won’t have any money by the time it happens,” he says.
4. Diversify your offerings
When the economy tanked in 2008, Hoebbel was ready. “I diversified and created a Web-based marketing video department in my company,” he says.
His plan worked and carried his company smoothly through the recession.
“I recommend small business owners be ready to innovate and change your business for the better; if you diversify you could open up a whole new business stream in a similar industry,” says Hoebbel.
5. Focus on customer service
Yes, customer service is a key ingredient to the success of any company—but it is especially important to those in saturated markets.
“I want my clients to enjoy working with me; I’m never happy unless they are happy—and sometimes that means I have to go back and reshoot something on my own time, but I’m OK with that,” says Hoebbel.
Great customer service doesn’t mean offering low-ball prices, he adds. In fact, undercutting the competition can come back to bite you later on.
He says, “Not everyone is going to go for the cheapest price. Remember: You want people who value your service and are willing to pay you for it—if you are the cheapest person in town you will get the cheapest clients in town.”