Finding Your Business Niche, The Entrepreneur's Guide Entrepreneur MBA 10.8

Speaker A: The Entrepreneur MBA podcast purpose is to help existing business owners grow their companies past the 10 million in revenue per year benchmark. Here is your host, Stephen Holasnick. Hello everyone, my name is Stephen Holasnick and um, today on the Entrepreneur MBA podcast, we're going to be trying something a little bit different. Um, I think it's the first time I've ever tried this and that is I'm going to be talking about something that I've Learned over the 30 years of me building seven companies. Um, maybe it'll be a common practice for me to talk about that. You know, the thing that I've learned over those 30 years is that experience really matters. And just, uh, some of you guys, uh, may or may not know, but I am one of the managing partners at Financing Solutions and what Financing Solutions does, it provides lines of credit to small businesses and uh, other industries. And um, so, you know, just to start off being self promoted here, the reason why I do these podcasts is two reasons. One of them is trying to get the word out that we provide lines of credit businesses. And number two is I just really enjoy, um, the expression of, you know, of what I've learned. I love business and, you know, that hopefully some of the things I've learned can help you as well. So if you're interested in line of credit for your business, please feel free to visit our website@, um, financingsolutionsnow.com so today what I'd like to talk about is kind of one of the most important things that I've learned about the key to a successful business and that is, you know, finding your niche. Now I mean, it just might sound so, um, common to say that. But you know, the seven businesses I've built over the years, the ones that did the best at finding its niche were not only the most profitable, but they were also the easiest ones to run. So just in order so that everybody understands what businesses I've built and what I've built and timeframe and stuff like that. At first I started working for Xerox for eight years out of college. Loved it. I was one of the top sales reps in the country. But I always knew I wanted to start my own business. So I started, uh, my first business was a digital printing company. Was like the newest technology at the time. Um, it wasn't really something that got very big. Um, you know, it, it produced enough revenue for me or, uh, profit for me to be able to leave Xerox, but I didn't do it for very long. It was Successful in that it allowed me to put my foot into the, an industry, learn it to see if it was a good business for me. And I did that about three years of running that company. I sold it for a very small amount of money because I knew that the, wasn't the industry that I wanted to be in. And I started a company called expertseeker.com, which got to be about 6, got to be $6 million in revenue. It was a, uh, company that I Knew had a 10 year life cycle because the industry that we were in and the market that we were going after was only going to be hot for a certain period of time. What expertsecret.com did was placed, uh, um, high end technical consultants into companies on long term temporary assignments. Um, and that was a really hot field at the time for a variety of reasons. At the same time I started Expert Seeker, I shouldn't say at the same time. Several years into Expert Seeker, I knew that there was two things I wanted. I wanted to run a bigger company, but I also uh, wanted to leverage what I had learned already. And with Expert Seeker and I knew how hard it was for me, I had a really hard time pivoting Expert Seeker into a niche. We kind of tried to do it with Expert Seeker. What we did was, I say we, I owned the company, I didn't have a partner at the time. Um, what we did was we said let's only place the very high end of these consultants, the most expensive ones. And um, that was good, that was a good decision. But the problem was that we were still competing against very large companies who had major contracts. And you know, a lot of our uh, customers would not work with us because we did not have those contracts. So again, although we tried to find a niche, and I kept trying to find more and more niches with that company, Again that was only my second company. So running a business was a little bit, you know, something. I, um, still was learning, you're always learning. But I was much more naive back then. So uh, I started another company about five, five years into expert seeker called healthcareseeker.com and the idea was, number um, one was let's leverage our experience in temporary staffing with skilled positions. Another thing, instead of me building one big company, maybe I can build a lot of smaller companies. It's a pretty good idea. Even now. I think I was on the right track. So I got involved in um, and started a company that placed registered nurses at hospitals throughout the United States on long term temporary assignments similar to Expert Seeker. But these were nurses. Um, it's a $13 billion industry at the time. Um, and uh, the whole idea that I had was let's build this company in the Northeast, specialized in that, and that will make us attractive for someone to buy us, which was the idea. And also while Expert Seeker was maybe potentially going down in revenue, healthcare, uh, Seeker might go up. And I was looking for a company that I thought at the time was recession proof. Um, so anyway, I get involved in this business, Healthcare Seeker, and what I, you know, I kind of knew, um, but this problem. But registered nurses are not licensed to work anywhere in the United States. They're only licensed to work in the state that they are. And every state has a different protocol and timeframe for when a nurse can be, um, put into a, uh, work in a different state. So an example would be California might take a day or two to get their license in place, whereas New Jersey takes three to six months. And if you want to place nurses that want to work in different states, you have to know the licensing requirements of every state in certain states. Certain states like the Northeast takes six months for a nurse to get licensed there. And they're just not going to wait. So the whole idea of me building up a business in the Northeast, although we did do some business there, wasn't really going to work out. And so I had to compete on a national level. And that caused a lot of problems with finding a niche. Honestly, I end up going into, um, having to compete with all the big guys all the time. Now, believe it or not. See what happened was the industry was growing a lot and we got that company to $11 million run rate per year and on the Inc. 500 fastest growing companies. And honestly I think that that company would have continued to do great because we were exceptional at execution. But uh, the 2008 recession hit in the United States and contrary to what I believed, the idea of a recession, uh, not affecting health care had a huge effect on the travel nurse business. Um, it's not worth me getting into why, but the industry went from, it went down between 50 and 75% and our business went from 11 million down to 1 million in about three or four years. It just, you know, tanked. And so, um, I then started another company at the same time with Healthcare Seeker, which was a company called Credential Agent, which was, I think it was my most unique idea that every kid I ever came up with. It was a company that made software that allowed, uh, organizations with lots of licensed professionals have lots of credentials that have to be stay updated. The software allowed that to be done better and more effectively. Um, great idea. For a variety of reasons, it wasn't really needed in the marketplace. People were doing that work in other ways. And the price level that I needed to come in at, um, because of the software didn't make it very attractive. There's more details to that, but it's not worth getting into now and then. Um, I also um, you know, some of the, uh, two of the other companies that I'll be talking about today is Financing Solutions, which is the business I own now with my business partner Keith, and also Elite Funeral Funding, um, which is a company that buys life insurance policies when um, someone passes away so that the family can get the money up front instead of having to wait the 45 to 60 days. So today's topic really has to do about niche and how important it is um, to find that niche for you as a small business. Now when we talk about small businesses, most people don't think that a $20 million company, which you know, Financing Solutions right now and elite are uh, $25 million companies. You don't think of that as a small business, but it really is. And really because you got to imagine we're competing against billion dollar companies. So $25 million is still a niche player. And if you're going to be successful, you need to find your niche that the other guys are either not focused on, not very good at, or not paying attention. And over the years what I've learned is when you find that niche, um, it makes your life so much easier. And what's a huge indicator if you found that niche is, is if your margins are higher than the average uh, uh, competitor in your space. Because when you're really, really good at that niche and you're there and you're executing great and you found the great lead generation system, uh, to find more clients, then you can charge more. And as a business owner, I think you only stop looking when those three things are there. Um, you know, so with Financing Solutions I can't get into the reasons why, uh, what we're involved with. But we have certain niches in that industry that really are overlooked and allows us really to have a greater uh, um, higher margin than our competitors. And with Elite Funeral Funding, I can't get into the niche on that one too. But we would not have gone into that, that industry, uh, Keith and I own that too if um, if it wasn't because that we had a niche, um, by the way, we got into uh, financing solutions in 2012. And that company actually had to pivot three times. And, and what I mean by pivoting is an industry term which means that you have to kind of change your direction. You know, what happens with pivoting is you learn something and then you go into a different direction because of that. And um, we had to pivot three times with financing, uh, solutions before we kind of found our niche, which we're still in today. Um, Elite. It wasn't that way. We knew that from the very beginning what our niche was, which is always nice. Um, but the two companies, we started it because of our experience of being in recessions in the United States, which typically happens every ten years. Um, we knew that we needed a company to maybe offset the other company if there was a recession in one. And so, uh, it's a minor point. It's not having to do with today's conversation about niches, but the kind of key ingredient that, that I've learned over the years is that you have to be in that constant lookout for are you a niche player? And if you're not a niche player, you know, you need to keep looking for it. Um, so like an example with Healthcare Seeker and Expert Seeker, Expert Seeker again placed really high end consultants into Fortune 500 companies on long term temporary assignments. Healthcareseeker.com placed registered nurses at hospitals on long term temporary assignments. Um, Healthcare Seeker, um, uh, and Expert Seeker were specifically designed to really, for me to go after the idea that if I can't just build one big company, maybe I can build a small, a few smaller companies to that equal one big company. You would think that Expert Seeker and Healthcare Seeker were niche companies, but they were not. I mean, we tried to make it a little bit more unique but uh, or more niche oriented. But healthcareseeker.com competed against very big companies that have had major contracts with companies and Expert Seeker did the same thing. So you know, they, as much as we tried to redefine our niche, Healthcare Seeker, the niche, what we were trying to do is go after nurses in the Northeast or placing them in the Northeast to eventually sell that company to a competitor, um, an Expert Seeker, we went at the high end of that market. I think that the difference is, was when we looked at the margins that we were getting, the margins were not significantly different than the industry. And therefore I think that's an indicator that you don't have a niche. Whereas you look at Financing Solutions, the company that uh, provides lines of credit to other small businesses. We have certain niches. I can't get into what those niches are. But we are in several niches that are very hard for our competitors either to go after. For some reason. Um, we are very good at understanding the lead generation for that, for the, for those customers. We understand what those customers like, um, and we are really great at those niches. Um, so I am really, um, you know, fully convinced that a successful small business is based on finding your niche, achieving high margins or higher margins, your competitor. Uh, and of course you need to generate sufficient revenue because if you don't have like, if you're only generating, if you have high margins. And I learned this with the digital printing business. I was only, the revenue was only like $400,000, but my margins were like 80%. Well, it's not, it wasn't enough money because the revenue was never really high enough. So you need to have that revenue too. And the other thing is a small business needs to be incredibly great at execution. And execution is something that is not sexy. Most entrepreneurs love the phase of building, uh, coming up with the ideas. They don't love the execution part of it. And Honestly, execution is 90% of a successful business. And if you don't like that part of the business, um, I'm going to tell you right now from a small business perspective, you can't really outsource it. You can't really bring in a second command and say, well, I'm going to keep thinking about ideas while you execute. The owner really has to be involved in execution too because that's what really makes things great. The thing that you want to be careful with and not to get too much off the topic is not to be a control freak. Because if you become a control freak, you are going to stop. The ability for you to come up with ideas for your company niches to look at and spending your time in the area where your business might really, really need you. And that is the, you know, the, the person at the top looking down at the numbers, looking on the numbers, looking at where your strategic direction should go and those type of things. Um, and um, you know, really the thing that you really want to look at is, you know, are you competing against your competitors that are billion dollar companies and you're basically offering the same services that they are. Um, the other thing to me is that finding a niche really is based on lead generation, um, the total cost of acquiring a client. If you don't know that, what it costs for you to acquire a client, then um, you are missing the biggest opportunity. Because to me, lead generation and the ability to generate prospects that turn into customers in an inexpensive manner is one of the biggest parts of a successful business. I spend 90% of my time, um, figuring out our lead generation systems. And one of the key reasons why Financing Solutions is so successful, um, because it really is. And you know, both, um, if I didn't mention this yet, both Financing Solutions and elite, um, are $25 million companies. Um, if, if we could not acquire our clients at an inexpensive way, we would not have a successful business, regardless on how good we might be at execution. So to me is, you know, what is lead generation? Well, you got to figure that out. You know, um, advertising, marketing, search engine optimization, search engine marketing, social media, direct, uh, mail, all the different types of verticals for advertising and marketing. You need to be able to figure out where your customers are going to be because if you can't figure that out, you're just not going to win. And to me, you know, again, I want to come back to the idea is that margins are the biggest indicator if you found a niche where others are not. Now how do you go about finding that niche? I think the biggest thing is you need to keep looking and you need to just work on it all the time. You know, I think you need to work on your lead generation system a lot, but I also think you need to keep looking at what your niche is. It makes your lead generation system easier. So how do you do that? Maybe look at your existing customers who really like you and work with you a lot. What industry are they? Why did they use you? How did they find you? What other customers are like them that might have similar needs? What other. Why did they come to you and not your competitors? Especially if it's a larger company? Um, is it just really hard for you to find those type of customers? If it is, then you don't have a niche yet. Know who your competitors, customers are, know why they use them. Um, that's really important. Know who's coming to your website and what they're typing in to come into. You know, what trends are going on in the United States. I mean, I use Google Trends a lot to kind of see what people are typing in, you know, in my field, so to speak. You know, I read, I read, I read. And you know, you really have to be on that mission to find that niche because it just makes your business so much better. And I'm not saying this is easy. I remember trying to pivot, um, expert seeker because I knew that that industry was going to die out at some point. And you know, I just couldn't find it. Um, you know, it was really hard. Um, and you know, keep in mind this too. Even once you find a niche, and this will become easier, you have to be the best in that niche. So execution becomes even more important. Now the other thing that I've learned over the years is that the higher margin businesses will sell for a lot more. And the reason being is that a higher margin indicates that you found a niche, that you found something that's hard for somebody else to duplicate. So it's, the term is a higher multiple. A multiple is what somebody's going to pay your company based on, uh, the value that they see in it. So if you sell your company at 5 times earnings versus 15 times earnings, they don't value it as much. The problem is, is that not to complicate this, but, uh, when you do find your niche, keep in mind that you might have 100% of your business in that concentration in that niche. And if for some reason that industry experiences a recession, then you're going to be in a little bit of trouble. And so it's sometimes it's important to continue to look for other niches, um, so that you are not tied to just one area. I had that experience with the healthcareseeker.com business I was involved with. So, you know, again, I think the key here is for you to understand is that, you know, I'll do another, uh, podcast on, uh, lead generation systems. But again there, I think there are really two key things here that I'm saying is, you know, you need to spend a huge amount of your time trying to find your niche and you need to really put a lot of effort into that. The other thing is you really need to find an inexpensive lead generation system that really works. You know, most business owners, they aren't really, they aren't always marketing, um, they aren't always spending time in marketing. And to me, my ability for these businesses that I've run have been successful because of the amount of time I spend in those areas. Um, and it's fun. I happen to love it. It's very creative and I can expressly, creatively in many, many different ways. I feel like at times that I am the puppeteer with my, with my fingers out, able to control my company based on the ability for me to be able to get people coming to my company. Um, and for lead generation, I hope this helps. Again, if you have any comments, please feel free to email me or if you have a question, my email address is. Steve. HinancingSolutionsNow uh, dot com. And if you're looking for a line of credit for your business, please feel free to visit our website@financingsolutionsnow.com I hope this helps. I hope you liked a little bit of this new format that I have. I'll see if I'll do it again. I don't know. And, um, I hope everybody has a fantastic day. Enjoy. Sam.