Expert Business Advisors Nick Phelps and Jeremy Round break down how to identify a gap in the market to grow your small business.
If you’re a small business owner, you understand the importance of finding your niche and appealing to a select group of people. If you can identify a gap in the market by offering something that’s not currently available in the marketplace your small business can achieve new levels of success.
A gap in the market is an area that businesses don’t currently serve but that there is customer demand for. A gap usually has the following characteristics:
- It’s unique and new, and there’s nothing else like it in today’s marketplace.
- It’s an update or modification to an existing product or service.
- The product already exists, but nobody has attempted to sell it in your new market.
If you’re looking to increase profits by finding a market gap, continue reading for 9 ideas on how to identify a gap.
Analyze the Current Situation in Your Market
Before your small business can move forward with filing a market gap, you’ll need to spend time researching and analyzing the current situation in your market. What is trending? You’ll want to look at the data to help build a competition table as a starting point. Who are the top competitors, and what are they doing well? You’ll start to see some overlap among your competitors that helps you identify a potential business gap.
There could also be unique inefficiencies in pricing as value is determined differently by customers. If you can provide more value to your customers at a better price, this will also factor into how to find a market gap.
Spot Acute Unsolved Problems
One way to spot problems is directly through your customers. Are there any requests they’re making that you don’t currently offer? Surveys or qualitative discovery conversations can be an effective way to identify product gaps in the market.
It comes down to a combination of competitive analysis and soliciting feedback from your customers. Once you identify the gap, you’ll want to determine if you can serve this particular need and whether it is one of your core competencies. Finally, don’t forget to factor in a hiring and marketing plan to go after this untapped market.
Consider Niche Markets for Your Small Business
It’s easy for small businesses to think broadly about serving the market, but don’t forget to look into niche markets to tap into new opportunities for growth. Ideally, you’ll establish your niche as early as possible.
If your market is incredibly specific, you’ll be able to target your audience more effectively. Be aware that there is such a thing as being too niche; you want to tap into a market that is large enough to sustain growth. The market should already be easily identifiable with an established customer base. If you don’t see these things, your niche market might not be big enough to drive small business growth.
Oftentimes, market gaps have already been turned into profitable businesses in another country. For example, Rocket Internet is a German startup accelerator that consistently earns billions annually. They do this by recognizing successful overseas businesses and lawfully replicating their business models. Rather than focusing on your existing audience, consider how you can expand your horizons by partnering with an international corporation that can assist you in tapping into a market gap.
Assess Your Competition
When identifying and assessing your competitors, strategically consider substitutes for your budget. For example, Netflix never saw themselves competing on home screen consumption; rather, they saw themselves competing with other companies offering a fabulous evening experience.
This means that Netflix’s competitors include restaurants, movie theaters, cooking classes, etc. Taking a broader view of your purpose is an important first step before you delve into what your direct competitors are doing.
It’s not just about identifying services others aren’t offering; you must do it better. What you’re doing within your service can make a huge difference; let’s say you’re a roofing company. You can stand out from the crowd if your team is respectful, shows up on time, is polite, and wears a company polo.
Identify Your Strengths
When it comes to identifying your business gap, you aren’t only looking for a unique idea, but you also need to find a gap where your business can thrive. Before you delve into the idea of identifying an untapped market, you need to take a step back and identify your company’s strengths (and weaknesses). Reflect on your past company experiences and make a list of your strengths. You can also comb through old performance reviews to better understand areas where you excel and areas upon which you can improve.
Listen to Your Customers
Customer feedback plays a huge role in where your company should focus its attention. If you aren’t routinely asking your existing customers for feedback, it will be significantly harder for you to determine where you can provide future value. Keeping in regular contact with your customers can also help keep your company top of mind when thinking of the product or service you offer. Remember that your clients or customers might not be completely transparent in their feedback, so it’s also helpful to seek assistance from a third party.
Try to Improve an Existing Product or Service
You don’t need to reinvent the wheel when it comes to identifying a gap in the market for your small business. Instead, look at your existing products or services and determine if you could make some minor adjustments to create an even more profitable asset.
Consider that Amazon started as a book retailer that found success that eventually catapulted them into a global success. In the same vein, you can also look to your competitors to see if they are offering a product or service that aligns with the brand ethos that you could do even better.
Follow Pending Legislation
Industries sometimes go through major changes simply due to legal reasons. Local, state or federal legislation can help create market gaps by forcing industries to make changes they wouldn’t have encountered otherwise.
If you anticipate these changes and identify market gaps as early as possible, you gain the first-mover advantage. You can appeal to your customers in a new and enticing way. If applicable, you can sign up for updates from trade organizations that track pending legislation, so you’re always looped in on changes.
Get Professional Advice from Expert Advisers
We know that navigating the market and identifying business gaps can be overwhelming. Our team at Cultivate Advisors is happy to work with you to analyze your business and identify growth opportunities that you didn’t know existed. If you’re interested in learning more about how we can help, take advantage of our free advising sessions today.