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Crossroads: Niches & Moats!

Updated: May 28

Through a lifetime of hard work, frugality, and outstanding customer service, Sam and Henry build a thriving business. Their success affords them a very comfortable living.

Sam and Henry have done everything right, but when it comes time for their retirement, their business is worth a fraction of what it could have been.

Sam and Henry never did the hard work of building a team to succeed them. Without them showing up every day driving the values of quality and customer service, the company is not worth as much. Had they taken the time to raise up a team to succeed them, the sales value of their business would be exponentially higher.

Without a successor, the inheritance they could have left for their families will be limited. Sam and Henry didn’t know the future potential of their business.

Had Sam and Henry worked to build a team, they likely would have faced the crossroads of niches and moats. Their business had the potential to be more profitable as a niche business.

Without a successor, the inheritance entrepreneurs could leave their families will be limited. click to tweet

Entrepreneurs who maximize their legacy successfully navigate the crossroads of niches and moats.

It could have ended badly, but providentially, one of their customers became very interested in the business. We worked with Sam, Henry, and the new owner to maximize the handoff for everyone involved.

In the end, Sam and Harry got a good nest egg and supplement to their social security. They also made enough to leave an inheritance to their children’s children. And, with a plan, the new owner hit the ground running at maximum speed.

Turning Sam, Henry, and the new owner’s experience into a win-win involved recognizing the business’s unique niche and building a moat around it.

Here’s how that happened.

The First Thirty Days

  • Recognize and listen to the business’s best customers

Recognizing who your most valuable customers are is a first step in succession planning. Your best customers may not be those who spend the most dollars with you. Those customers who allow you the most profit are the best. It is good to consider if they pay on time or haggle with your pricing.

Recognizing who your most valuable customers are is a first step in succession planning. click to tweet

  • Review the margin contribution by product/service line

Some of your products or services bring you more profit than others. Through research, determine which products and services give you the most profit after expenses. This knowledge is gold. Knowing which products and services bring you the most bang-for-the-buck leads to discovering your niche. Thom Rainer gives a four-part framework for determining your niche: clarity, movement, alignment, and focus (read more here).

  • Review profitability by customer

Answer the question: Which customers generate the most margin dollars? A customer may buy a lot, but they may buy low-margin products or services.

  • Refocus resources on the best customers and the products they value most

Customer and product niche are often right in front of the business owner. Approaching what you do as if you are a new owner (no small feat) can clarify. Entrepreneurs that spend 90% of their resources on these core customers and product/service segments are building future profitability. You will invest the remaining 10% in developing your next niche.

  • Build a moat around your niche

Continually listening to what your best (most profitable) customers need helps you to build an impenetrable moat around your niche. What can you learn from them? Why do they continually buy from you? How can you find more like them? Pay particular attention to your lost customers; why did they go to a competitor? Markets never stop changing, always be aware.

You are leaving a legacy, proud of you!

Harry T. Jones

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