Do investors prefer it if you nail down a very targeted, but small, niche of customers for your product, or demonstrate that it has wide potential?

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Do investors prefer it if you nail down a very targeted, but small, niche of customers for your product, or demonstrate that it has wide potential?

This is the eternal question for almost every business at almost every stage of its evolution.

Whether you are BHP, Seek or Pie Face, your senior management and board need to review your product and service mix on a regular basis.

For example, BHP decided to exit the steel processing business and spun out BlueScope Steel in 2002. At a similar time Seek could have expanded into a number of classifieds verticals but remained successfully focused on employment. More recently, Pie Face could have stayed in Australia but made the move to the larger USA market.

If you are in the early stage of your business evolution you must be extremely focused so that you can articulate your vision, your market and your opportunity to staff, customers, and in this case, potential investors.

For example, if you are developing a game for smartphones, you will need to have a very specific target audience in mind.

It is better to target kids aged 5-11 in English-speaking markets using iOS and Android, rather than targeting all ages and all smartphone users in all markets.

This focus will then enable to target your product, your marketing, your mix of staff skills and your revenue potential.

Investors respond better to business focus than delusions of grandeur.

As your business grows, you can consider expanding into other demographics or geographies once you have proven you business model and your execution abilities.

In simple terms it is better to be very good at a defined activity, than very average at a broad undefined set of opportunities.

This article was first published in StartUpSmart.

© 2014, Philip Alexander. All rights reserved.

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