Has anyone ever suggested to you that you could grow more efficiently by limiting yourself? It sounds counterintuitive, but I’m going to suggest it to you now.
The instinct of many entrepreneurs is that limits are the enemy of growth – that you want to go everywhere and do everything for everyone. Accepting limits on any of this, the thinking goes, is the enemy of growth.
I want to challenge that thinking, and I’ll do it by asking you to think in terms of verticals. A vertical is simply an area of focus, and just about all entrepreneurs would agree that some degree of focus is crucial. After all, you wouldn’t create a company that makes soda pop, office chairs, vitamins, picture frames and saxophones. No one could possibly be good at all of those things. You need to do what you know, and that requires some level of focus for everyone.
So, we already agree that you can’t do everything. And we already agree that some limit is helpful because it keeps you focused on what you do well.
That’s what the concept of verticals is all about. And I’m going to suggest to you now that you’ll grow more – and more sustainably – if you embrace more focused verticals in three areas:
1. Target market. Of course you want to work with everyone, because if the whole world is your market, you are unlimited in who you can serve. But it’s a much stronger selling point when you can tell the companies in a given industry that you really know their industry well.
I worked not long ago with a marketing firm that focused exclusively on serving personal injury lawyers. Not only did they limit themselves to the legal profession, they limited themselves to a certain segment of the legal profession. And they were hugely successful. They developed a system that was highly successful, and they offered exclusive representation for one firm in each city.
Who is the expert on serving the needs of banks? Of schools? Of manufacturers? Of construction companies? Of automotive companies? If you can develop a specialty based on your superior knowledge of a certain market – or just a few markets – you can own those markets. You can become almost impossible for a competitor to tangle with. You may be pursuing a market that’s smaller than the whole world, but it should still be plenty big to fill your capacity and give you room to grow.
2. Specialty. Many entrepreneurs want to be “full-service” shops, which means they bring lots and lots of functions under one roof. But how many things can you really be good at? Perhaps more importantly, how many things can you be the best at?
You can offer products or services that go together, but you should be careful not to become so unfocused that you’re trying to sell things at which you don’t really excel. If you only make pillows, but you make the best pillows, there should be plenty of people who want what you’re offering. If you only do digital data backup, but you have the most robust system anywhere, you will find high demand for your service.
Specialize, and be the best. You’ll become very difficult to compete with.
3. Geography. There’s a whole world out there, and technology allows us to work with anyone these days. So why accept geographic limits to our market?
One reason is that economies of scale don’t always work when we go too far to find customers. I once had an opportunity to work with a client in Dubai. At first it seemed exciting, and the money they were offering wasn’t bad at all.
Then I started looking at the details of what would be required – the travel time, the fatigue, the attention drawn away from other clients, the missed family time . . . and I realized I wouldn’t come out as far ahead as I thought. There are hidden costs to handling out-of-town business.
The impact of those hidden costs varies from industry to industry. Some services can be handled with phone, video conferencing and e-mail. But even then, you have to consider the cost of pursuing out-of-town business compared to focusing on a more immediate local area.
There is a particular geographic area where you will do your best work. Once you identify it, that’s where you need to focus.
I am not saying you should never, under any circumstance, work with someone who fits outside these verticals. Sometimes you’re approached by a customer who’s waving so much money – and whose demands are so attainable – you’d be a fool to say no. But when that happens, charge a premium.
You shouldn’t knock yourself out pursuing business that’s outside your verticals. Deal with it if it comes to you, and make smart decisions about it. Maybe it makes sense and maybe it doesn’t.
But you will grow better if you stay within the limits of your verticals. That’s because you are always going to do better work when you do the kind of work you do best, for the customers who are the best fits, and in the geographic area where you perform best.
Not all limits are limits on your success. Sometimes limits save you the trouble of drifting outside your areas of strength, and put you in a position to be even more successful.
I know. It’s counterintuitive. A lot of the best ideas are.