One of the most common things young entrepreneurs are told is “don’t do it, it’s already been done.” Due to their lack of experience, they believe the advice and keep looking for the amazing idea that’s never been done before.
This is one of the biggest mistakes that can be made for many reasons. The most glaring one is that novel ideas are hard and often take large sums of money to get off the ground. Contrary to popular belief, most businesses aren’t ideal candidates for investor funding.
Most businesses are boring and quietly make the owners a healthy income and increase their net worth. The best example of this is real estate. It has been around for thousands of years and still produces more millionaires than almost any other industry.
This guide will make the case for why building your business in a well-trodden industry can be a recipe for success.
They’re ripe for innovation
Most industries that are well-established have begun to stagnate because there are large players that have an understood monopoly. A good example of this is the vehicle market.
Before Tesla came along, car manufacturers produced all-electric vehicles with a range of fewer than 100 miles. Sales were lukewarm at best. When Tesla came on the scene, major car manufacturing executives laughed at the upstart company but it was able to deliver cars with a range of hundreds of miles per charge. The sales and valuation followed.
Other legacy industries such as logistics, health services, insurance, etc. are often mired in regulation or resistant to change. It often takes a fresh pair of eyes to understand where opportunities lie for innovation.
It takes less effort to educate the market
Entrepreneurs often underestimate the effort needed to educate a market about a new type of product. For example, if a startup tried to introduce a smartphone, it would’ve likely failed. It would’ve been too expensive and difficult to educate the larger market.
With established industries, people already understand the benefits, use cases, and features. All you have to do is build a better mousetrap. This mousetrap can be your design choices, branding, and symbolism, the causes you stand for, your marketing messages, etc.
The bulk of your energy can be spent on enhancing your product instead of teaching your customers how to use it or why it matters.
You can more easily use indirect marketing strategies
You may be familiar with something called side project marketing. It’s the process where you use a smaller tool that’s directly or relevant for your audience but may be indirectly related to your core product.
For example, this online signature creator is a free tool for all types of businesses. It’s also related to the electronic signature software the brand sells. It’s a logical progression for people to download the signature and sign up for the core product.
Other indirect marketing strategies include sharing useful information on your blog, building out social media channels, guest blogging, etc. Of course, you can still use direct response strategies like direct mail and FB ads.
The bottom line is that you have more options.
There’s already an ecosystem to support you
In established industries, there are multiple players all across the value chain. For example, in the real estate industry, you have notaries, agents, contractors, specialized lenders, and more. If you were a new player in the industry, you wouldn’t need to train these people to do their jobs. They’re already experts.
This is how it works in established industries. Vendors don’t need to take a risk on you and change their processes for your business. You can just plug yourself in and start operating faster.
This state of affairs repeats itself in every established industry. In the blogging space, there are tools and content management systems that you can start using in a few minutes. If you’re a logistics company, there are software applications and other businesses that are ready to work with you.
This can help you drastically reduce costs and accelerate your ability to turn a profit. This isn’t possible when you’re in a new industry. The tradeoff is that a newer industry will allow you to grow larger once you’re able to move beyond the initial barriers.
More opportunities for niching down
The CRM software space has more vendors than any other software category. Do you think that all of them sell to the same type of customer? Of course not.
Each vendor has found its niche – at least at the start. From there, they usually expand to compete directly with larger players.
Felix Yim, co-founder of GrowthBoost has this to say on the importance of carving out your category – “unless you’re coming into a space with an abundance of capital to brute force your growth, it’s almost always recommended that you find your niche to serve and gradually expand once you have found traction. That way, you can focus on what your group of customers wants out of your brand and adapt as you go.”
Since you’re not focused on educating your market as much in established industries, you can spend your time building features or products that meet the needs of specific market segments. This gives you the ability to charge more and keep more of the profit while differentiating yourself.
It’s not a bad thing to come up with a novel idea. There are a lot of unique challenges associated with that process and it’s much easier to fail. With an established niche, you gain multiple advantages without putting in any additional effort.
If you’re on the fence about starting a business in an established market and trying out a completely new idea, do both. Start with an established business for cash flow and a safety net. From there, chase your real dream until it gets you to where you want to be.