Jan. 5, 2021

#3 – Why Niching Down is a Good Idea

#3 – Why Niching Down is a Good Idea

In this episode we explore the concept of niching down and why it is so important to specialize in order to compete. 

We take a look at three of the most important reasons why you should focus your agency into a specific niche:

  • Easier sales
  • Easier production and delivery
  • Easier scaleability

You can find more resources on growing your agency in my blog edorozco.com/blog.


Would like to share your experience on the show? Send me a message at ed@edorozco.com

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Ed Orozco:

I fear, not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times, Bruce Lee . Hello, welcome to the growing design podcast, where we help you grow your design agency. If you want to learn how to price your services, how to sell your expertise and how to attract the right type of client , you've come to the right place. I'm your host at Orozco let's get started [inaudible] Today. We're going to be talking about why, if you run an agency, niching down is a really good idea. You've probably heard the term niching down, thrown around a lot, but what it really means is to cater to a highly specialized segment of a market. This is specially true for UX agencies, where you have a lot of them offering all kinds of services for all kinds of clients, which makes the selection process from the client's perspective, a lot more difficult. Let me give you an example. If you are looking at the market for office equipment, that is a company that produces furniture for offices. One niche inside that market could be space conscious desk for home offices. That would be perhaps desk that are specifically designed to take very little space for people that live in a small apartments or have a very little space to set up their home office. So maybe you're looking at furniture that's lightweight. That's easy to move around that it's easy to take APAR and put together. Those would be the characteristics that the products from this company would be producing. So space conscious desk for offices is a sub category of home office equipment, which is at the same time, a sub category of office equipment. In general, if you produce office furniture, you're competing with hundreds of thousands of companies for what's considered a commoditized, good such as desk chairs, lamps. So specialize in , in a specific niche, AKA niching down will help you stand out from your competitors. Sure. You'll be attracting a smaller portion of the market, but you would be meeting their needs and ones more directly, which would increase your likelihood of closing deals and , um, and producing a great service for them or a great product for them. And guess what? UX services are no different. If you show yourself online with a portfolio of services that look exactly as the next agency, and there's, that's really making you stand out from your competitor declined, we'll have a very hard time deciding who they are . They want to work with, or who's the right fit to solve their problem. Clients don't have a lot of time in their hands. And usually if they're looking for UX services is because they have a problem that they need to solve. So if there's just a bunch of agencies out there doing about the same thing and the client still needs to make a decision, they can not make a decision on variables that are equal across the board. That is everyone offering the same services. Everyone offering the same products, everything, everyone work in sort of a , in the same way. So they have no other option that, that, that two bays their decision on price. So what are they going to do? They're going to go to Upwork, or they're going to go to one of this job boards or, or one of this blood forms. And they are going to filter by price. And they're going to go for the cheapest option that still looks like everyone else. This is a problem also for you because it's going to be more difficult for you to prove your worth in front of the class . And you're going to have to reduce your prices in order to remain competitive , um, in the sea of agencies. So when you start reducing your prices, that starts reducing your margins, meaning you're going to have to work a lot more hours for the same amount of revenue. So that is more work for less money, the solution, and that I see most UX agencies try to go with ease, to offer more services or to offer just one more service in hopes that their competition is not offering that service. So just adding more stuff to their portfolio, and there's only X exacerbates the problem. Here's why deep expertise comes from repetition. When you solve the same problem over and over again, you start to get really good at solving that specific problem. But when you do everything for everybody, you're always working on different problems, which will not give you the opportunity to become really good at anything , a single specific problem for a specific client in particular. So, especially if you're a small firm, your resources are going to be limited, and you're not going to be able to hire a big staff of specialists in multiple areas and assign them to different products in your report folio . So you need to hire just a few, hopefully great generalists that will work in a variety of different requirements. This still doesn't solve the problem because there's no two generalists that are equally good at the same skills. They're always going to be with generalist a is going to be slightly better. Maybe a front end coding and generally is B is going to be slightly better ad wireframing or visual design. And over time, they're going to tend to gravitate towards the skill that they're better at. So you're not always going to be able to put a generalist for new projects. You're going to have to choose hopefully the best one for, for a particular project that you know is going to require that skill in which they are slightly better than the other generalist . This isn't , this is not scales. Hiring generalists is difficult. There aren't that many generalists. And it's just going to make, put you in a very difficult position for hiring, for scaling your team for training and for staffing people in your team for new projects. So yeah, it might work for a while, but he's not sustainable in the long run. So we already talked about generally generalist gravitating towards specific skills where they see what either they have more passion for, or they just get better at them and they just start preferring , um, those skills or working on those skills. So when you stab them on some, on a project that they're not particularly passionate about, or they're not really good at, they're not going to do such a good job. So your quality starts to suffer under these circumstances. It's going to be a really difficult for you to scale your UX agency. So what would be the alternative becoming a specialist? There are three main reasons why you should specialize. If you want to keep growing your agency. Number one is it's going to be easier to sell your services. Number two, it's going to be easier to produce and deliver. And number three, it's going to be easier to scale. So let's take a look at them in detail. If you decide to niche down, that is to specialize in a particular and specific niche, you can focus all of your marketing and sales materials around a single target instead of chasing different types of clients. Every week, you can sit down, create a bunch of materials to support your sales and marketing. And that's it. You have everything you need to attract a single type of client . So that will save you time. It's just going to make it easier because you don't have to edit these files and PDFs all the time, and you can train your sales team to learn them. And it's just going to be easier. You don't have to train them on different types of materials or different types of client needs, bigger clients and bigger companies usually prefer hiring specialist . So you will start catching the attention of the less general type of clients. And you'll start attracting more to specific problem type of client. The clients that have a very well-defined problem that they cannot solve. In-house when there's a problem that a client can not solve in-house with their in-house resources, the want to make sure that they get the right outside help for that particular problem. So they seek out agencies or consultants that specialize in solving it. Look how different this is from working with a general type of client that just wants everything done for very cheap. Those clients usually have a lot of time in their hands and not a lot of budget or not a lot of money. They will most likely spend most of their time telling you how to do your job and asking for changes. And all of this time is time that they're not as spending on their business and actually wrote a blog post on how to vet bad clients. If you want to check out the article , the scene , it's in my blog, but in general, you want to , you want to track the type of client that has more money than time and that they have, I have a very specific problem for which they are willing to pay to , to make the problem go away. That's the type of client you want to attract. So when you're focusing your marketing materials on a very specific niche, that's the type of client that you will be most likely to . Correct . And eventually you'll start to be known as a specialist in that particular niche. And you're going to face, it's a lot less competition. They say it's very lonely at the top. But what it really means is that not a lot of people are working on the same specific area. So you have, you face a lot less companies. [inaudible] you start to become an expert in that particular product or service that you offer. And you start are attracting clients that need to solve a problem through that specific type of service that you're offering. So you don't have to lower your prices. You can charge a more fair rate for your services, and they'll be happy to pay you your fees because they know that you're a specialist in that type of problem. So all of this will make your sales process way easier. The sales conversation is going to be a lot easier, and you're going to be able to hire and train people that have these specific skills. So also it'll be a lot easier for you to grow your team. That takes us to the second point, which is it's going to be easier for Jews. Once you start specializing . And once you started working in a very specific niche, you can hire specialist for it. You can hire people who specialize in solving the type of problem that you are known for. They will produce really good work. They will deliver great quality because there'll be solving the same problems over and over again. So they're going to become really good at doing it at solving that problem. They will be able to apply solutions from one client to another, which will make them a lot more effective. And in the first couple of times, it might take them off a little longer to figure it out. But the third for 10th, 20th time, they already have it down. They already know exactly what to do because they've seen that problem so many times in the past that will allow you to work more efficiently, deliver faster. And it's a lot better yeah . For you because you can solve the client problem quicker, which most clients will pay more to solve their problem faster. So the more efficient you are at solving the problem, the more you will be able to charge for that particular solution. And by the way, no, this, so that's why they prefer going with specialists . I've had clients in the past telling me one of the reasons I'm working with you is because I know that you've been doing this exact same work for other clients that faced the exact same problem . So I know that you already know how to solve this because you solve that for someone else. And they are happy to go to you precisely for this reason. And last but not least reason. Number three, why you should be niching down is it's going to become a lot easier for you to scale when your recruitment process it's all the time based around the same skills. You'll know where to find that talent, you know, how much they charge, you know, what conditions they're looking for in terms of their engagement. Um, you know, exactly how much to pay them, et cetera. So it just gets easier to hire people and to train them and to onboard them. There's less variation between projects. You don't have to worry about a person in your team not being the right one for a project that's coming up. Instead of having them sit in on the bench , because they're not the right fit for the project that you're going to be working on next week, or next month, you'll have the certainty that everyone in your team or most people in your team can be moved from one project to the other, without any issues, because they're all specialists doing the same thing, which is what your agency is now known for, which gives you a lot of peace of mind. And it reduces the amount of billable time in your you're not going to have talent sitting around doing nothing and not generating value for your agency, because it's so much easier to just move people to new projects or to assist the rest of the team when they need extra help. Now, let's take a look at some of the counter-arguments for nation down or some of the excuses that people come up with to not specialize our agency. Number one, I've, I've heard this one a lot is why do I need to specialize? If Google, Amazon, and Facebook do all sorts of things. And the answer is usually because you're not Google Amazon or Facebook, but in all seriousness, these are big companies with tons of resources. They have a lot of money in the bank and they can invest in ventures with low likelihood of succeeding. Google has failed many products. They actually have a website. I think it's called a Google graveyard or something like that, where you can see all of the projects that they have shut down, because they were not meeting their ROI requirements, or they were not being successful in whatever metric they were using to measure success. So the bottom line is that while you're still scaling, you're stealing that transitional period between being a freelancer. That's grown into a team of a few people and reach in the first million dollars in revenue. You do not have the resources. You don't have the money. You don't have the time to chase all sorts of different pats . You need to focus on just one and you don't have to worry about choosing the wrong one. You can always change direction. Your clients probably do it all the time is called a pivot. Pivot is when you change your business model to adjust it in face of new information from the market, new data from the market. So don't be afraid of choosing one niche and I'm going to be producing another podcast episode very soon on how to choose your niche, but you shouldn't really be afraid of choosing one. Any, any niche that you choose that you're good at is going to be good enough to get started. And as you scale, and you start generating more revenue and you start growing your team, you're going to be able to grow sort of your portfolio of services and will , you will be able to offer more different services for different people. But for the time being before you hit the $1 million in revenue, you should steal specialize. And even after that, but while you are still in this transitional period, don't think of chasing different directions, just focus on one is just going to be the fastest way for you to grow. The other counter argument that I've heard very often is if I specialize, I will attract less clients and let's put it this way. You will attract less of the bad clients and you will attract more of the good clients. Yes. If you do everything for all sorts of clients, you're going to attract all sorts of clients, good ones and bad ones that leads to having to waste your time. Talking to a lot of clients that are not going to be a great fit instead of using that time to engage in conversations with clients that are going to be very profitable for your agency. So yeah, you will attract less of the thrifty clients, but that doesn't mean that you're going to be a less profitable. In fact, soon as you're attracting more of the good clients, you're going to be able to grow your revenue because good clients tend to be a lot more profitable and pay a lot more than back lines . Remember that you do not want to work with clients that micromanage you, that pay late, that are all the time asking for free work. After an engagement is done, they keep asking you for changes. You want to work with clients, Dodd, appreciate your expertise, trust your expertise that are willing to pay your rates. And frankly, that they just let you do your work. That's really the type of clients that you want to work with. And those type of clients want to work with specialists, with people who are very good at doing something very specific. Yeah. Sometimes bigger clients with big budgets will want to work with a huge agency that just does everything. Those are not your target market. You , you can not compete with a huge agency with a lot of resources to be good at doing an all sorts of things while you're still in this transitional period, you want to specialize on something very specific so that you can attract clients for specific problems. So there you have it folks, that's some of the reasons why you should be niching down. There's a lot more benefits Dodd. I didn't cover in this episode, but I will be covering them in future episodes. And I want to leave you all with a quote. I actually couldn't find the , um, the origin of this quote, but it goes something like this, a 100 watt light bulb, like the kind of light bulb we normally have in our homes has the capacity to light up a room. By contrast, a 100 watt. Laser can cut through steel is the same energy, but with dramatically different results. And the difference is how the energy is focused. The light bulb will scatter its energy across a room in all sorts of direction. And the laser is focused on a very specific point, allowing it to well cut through steel that's all for today. I'm Ed Orozco . See you next time. [inaudible] .