How To Create A Category As A Small “e” Entrepreneur: 7 Legendary Ways To Niche Down
Life is good when you have no competition.
Pirates, are you playing Christmas music aboard your pirate ship yet? Rockin’ out to your favorite Hanukkah hymns? Are you and your fellow swashbucklers getting in the holid-ARRRRR! spirit? As we enter the holiday season, we want to remind you that the single greatest gift you can give someone is the gift of knowledge. One reframe, one “new way” of seeing the world, and that person’s life may change forever. So if Category Pirates has had a positive impact on the way you see the world of business, entrepreneurship, marketing, investing, and even life as a whole, then we encourage you to pay it forward and give that same gift to someone else in your life.
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Dear Friend, Subscriber, and Category Pirate,
One of the most common questions we get asked is, “How do I create a category if I’m not a heavily funded startup or some massively successful company? How can someone like me create a category of my own?”
We love this question because it reveals maybe the single greatest benefit of category design:
Anyone can do it, at any stage of their life.
Category creation and category design is not a strategy reserved for multibillion-dollar companies or high-flying startups. And while money is often helpful, it is not a requirement (and in some cases can be the difference maker, as constraints are a forcing function for creativity). In fact, some of our favorite category designers are solopreneurs, small business owners, and consultants who have niched down, leveled up, and found a way to get themselves out of “the comparison game” and into a category of one. As a result, they have no (or little) competition.
Which means they’re in demand and they set the price.
However, the secret to “not having competition” is not to pick a niche that simply has no competition.
This is an oversimplification of the problem.
For one, if you are choosing to *look* for blue ocean, simply for the sake of blue ocean, then you are a mercenary—not a missionary. You just want your little slice of the existing pie. (And if this is you, then we encourage you to read our mini-book, No Ocean Strategy, and start from a place of, “There is no ocean—now what?”) And second, if you are trying to fix your competition problem by searching for a niche with no competition, what you probably won’t find is opportunity. Instead, you’ll likely find a dead, deserted category. There’s a reason no competition is there anymore: everyone left (including the customers)!
But how you create a category for yourself as a small “e” entrepreneur is not just about niching down and getting more specific about your offering.
It’s about having a Point Of View.
Why are you niching down?
What problem are you determined to solve in the world?
Who do you want to help?
Who do you not want to help?
Why is it so important to you? And why is it so important to the people you want to help?
What will life be like on the other side (tell us!)?
Because without a POV, your niche is nothing but a small straw trying to suck the juice out of someone else’s coconut.
But with a POV, you can grow your own coconut tree.
We affectionately describe small “e” entrepreneurs as business owners who do not take the path of raising huge amounts of capital from venture firms, and instead choose to build small but mighty (and sometimes, insanely profitable) businesses. Small “e” entrepreneurs are the lifeblood of the US. They drive 44% of the economy and create two-thirds of the net new jobs. In many cases, they are family businesses. We love these entrepreneurs, and so do 72% of Americans who prioritize them over getting “the best deal.” They bring character to communities, sponsor little league teams, and are highly creative and innovative in ways big companies often are not. 48% of Americans work in a small business, and 18% work in companies with fewer than 20 people. Further 20% of small businesses are owned by women.
Small “e” entrepreneurs matter.
The Story of Daversa Partners
Let us give you an example.
Headhunters are all the same right? Headhunters are undifferentiated right? The primary way they succeed is by being good at what they do and building relationships, right? (Aka: “They all sell the same product.”)
In the very early 2000s, a pirate by the name of Paul Daversa, founder of Daversa Partners (at the time named Resource Systems Group), asked Pirate Christopher if he’d be open to an afternoon sail to talk. He had a problem, and his problem was that RSG was an undifferentiated headhunting firm. Paul, the founder, explained how he and his team were great at sales, great at recruiting, but it was a lot of hand-to-hand combat. They had to work hard to convince each person individually, and even though it worked, the company was stuck in a comparison game (The “Better” Trap)—constantly competing against all the other headhunting firms out there.
So Pirate Christopher asked him, “OK, so what makes you different?” “What problem do you solve?”
To which Pirate Paul replied, “Most headhunters deal with people who are looking for a new job. The problem is, if you’re looking for a serious executive who can create a different future for your company, the likelihood that person is looking for a new job is almost zero. Because they are already employed at a great company and highly compensated. In addition, most recruiters shy away from challenging their very best recruits by creating a value proposition that takes the candidate journey from “not realistic” to “what’s possible.” So what we do is recruit highly valuable executives who aren’t looking for new jobs, and more importantly, show these highly valuable executives what else is possible for them.”
Pirate Christopher pointed out to Pirate Paul that he’d just said the answer.
RSG already had a unique and differentiated service, solving a different problem—all Pirate Paul needed to do was Frame, Name, and Claim it. “You don’t recruit executives,” said Pirate Christopher. “You recruit unrecruitable, material impact executives.” (Specificity + Languaging.) And that’s not just a niche down, that’s a powerful new and different Point Of View of the industry.
He then encouraged Pirate Paul and his team to niche down even further and focus primarily on recruiting executives in tech—narrowing their “different” even more.
20 years later, Paul Daversa called Pirate Christopher out of the blue.
He wanted to say Thank You.
Because the category design and POV of “unrecruitable, material impact executives” had changed his life and his firm. When the company was called Resource Systems Group and had no category design, they had 10 people and were struggling financially. Pirate Christopher told Pirate Paul that “RSG” sounded like the name of a dusty computer repair company going out of business. So they changed their name and adopted a new POV grounded in new Languaging that more accurately described Pirate Paul’s personal super power: recruiting unrecruitable, material impact executives.
Fast forward 20 years. Today Daversa Partners has over 200 people. They are international and operate in eight major cities. Daversa has become the go-to independent firm that tech VCs and executives turn to for “material impact executives.” And as Pirate Paul is proud to point out, he has “a lot of millionaire partners.” And a huge reason for their success is the fact that, even long before COVID and “The Great Resignation,” there has essentially been zero unemployment for “material impact executives” in the tech industry. Virtually anyone who is anyone has been “unrecruitable” for a long time. And so, as the category began to change, and “the thing” they were known for became the thing every headhunting firm needed to figure out how to do, this gave them a tremendous competitive advantage.
Because if you can’t recruit the unrecruitable today, you can’t do any recruiting.
Daversa prosecuted the Magic Triangle: Product Design, Company Design, and Category Design. And they invested massively in building their own data flywheel. “Our team of data analysts strategically focuses on cultivating the top 10% of future material impact executives that we believe will drive unparalleled results for innovative technology companies,” says Paul Daversa. And to this day, this is the way Daversa Partners explains who they are and what they do. “We recruit unrecruitable material impact executives.” They've sung this song so loud and for so long, material impact executive even became a term in the industry.
Daversa Partners is seen as “the original.”
How To Niche Down
“Niche down” opportunities combined with a Framed, Named, and Claimed unique & differentiated POV is the key to getting out of The “Better” Trap and enjoying a life where you have no competition.
You’re in a category of one.
In this “mini-book,” we are going to walk you through the 7 ways small “e” entrepreneurs (solopreneurs, small business owners, consultants, advisors, freelancers, etc.) can become known for a niche they own:
• WHAT do you do… that you are uniquely known for?
• WHO do you do it for… who are surprisingly willing to pay large premiums?
• WHEN do you do it… that sits at the peak intersection of Important and Urgent?
• WHERE do you do it… that if money were no object, everyone would want it?
• WHY do you do it… that is so in sync with the Superconsumer, word of mouth spreads like wildfire?
• What OUTCOME do you unlock… that is 100x more valuable than the price you charge?
• How much and “how” does it COST… that is both a value & a premium, and the ‘way you pay’ is a benefit in itself all at the same time?
Each of these are areas of opportunity for you to execute a No Ocean Strategy, meaning you CREATE something in the world that previously did not exist. And the more of these “niche down” opportunities you combine together, the more different you are and the more difficult it becomes for someone else to “do what you do.”
1. WHAT do you do… that you are uniquely known for?
The single greatest way to create a category of your own is to do something no one else does.
Because if you’re the only person who sells that type of product, provides that type of service, or has that type of insight, who is your competition? What’s the alternative?
However, when you are looking for “something no one else does,” the proper starting point is not “what everyone else does.” Because you are rooting yourself to the past, to what has come before you—and this is a guaranteed path to The “Better” Trap. Instead, you want to root your thinking in what you are currently doing and experiencing that you see is being underserved. Are you looking for a product, service, or solution in your own life you can’t find? That’s usually a good place to start.
Even better is answering the question, “What are you uniquely known for?” Be super specific. It’s not what your category or company or product is known for, but rather what is the super-specific-I-never-thought-of-that-but-it-makes-complete-sense moment that you are known for.
Take Velveeta, for example: one of the most secretly successful brands at Kraft.
What is Velveeta known for?
Most people would say it’s a great queso dip for Superbowl parties.
But if you ask a Superconsumer of Velveeta (they absolutely exist), they will say it’s “the melt.” There are fancier cheeses. There are healthier cheeses. There are more indulgent cheeses. But a “cheese Superconsumer” will tell you there is no cheese that has a better melt than Velveeta. So when you need a dish that calls for that ooey, gooey, drooly, melted goodness on a grilled cheese or homemade mac & cheese (or to trick your kids into eating broccoli), there’s only one brand that does the job.
More times than not, a person or a company already has something they’re known for (they don’t need to reinvent themselves), but the “thing they’re known for” has historically been ignored or dismissed. Most of the executives at Kraft were aware of “the melt,” but were dismissive in thinking that it didn’t matter. After all, the hot trends in food were organic and natural (Velveeta was neither), or beautifully crafted wheels or wedges of cheese in the refrigerated section of the high end deli. Velveeta, on the other hand, was a rectangular, shelf-stable block of cheese that was sold in the center of the store. And it took eagle eye executives like George Zoghbi (former president of Cheese & Dairy division at Kraft), Greg Gallagher (former marketing director for Velveeta), and Carl Gerlach (former Senior Director of Enterprise Integrated Business Planning for Kraft Cheese & Dairy) to see “the melt,” shine a spotlight on it, celebrate it, and turn it into a $100 million dollar plus growth strategy.
So, what is your “melt”—that you might have missed or others have dismissed?
Another one of our favorite examples is Eric Jorgensen, founder of Special Needs Navigator.
In 2012, Eric experienced two life-changing events: he retired from the Navy, and he lost his wife—to whom his 12-year-old autistic son had been completely dependent.
Overnight, his entire life became centered around learning how to take care of his son and navigate his special needs. And through those experiences, Eric became frustrated at how difficult it was to find support for his unique situation. How should he think about financial planning for his son? What would employment look like? What professional development should he be prioritizing? These unanswered questions, and having to figure things out on his own, were the inspiration for him to create Special Needs Navigator: future planning for families with special needs children.
Eric created the category of Special Needs Planning.
And he turned a source of frustration in his own life into a wealth of information for others.
This is called “problem/founder fit.” The stronger the problem/founder fit, the more likely the entrepreneur is a missionary determined to change the world—not a mercenary just trying to get his or her slice of the pie.
2. WHO do you do it for… who are surprisingly willing to pay large premiums?
Another way you can niche down is creating a product or providing a service for a radically different group of people.
Or, a better way of thinking about this would be: a group of people who are radically underserved.
Within every megacategory (health, wealth, relationships, personal development, sales, etc.) are the audiences everyone knows. These are the “established buyer personas,” and as a result, these types of people are typically over-served. For example, think about how many companies try to target “busy moms” or “mid-market sales managers.” These established buyer personas are clearly defined, proven, and as a result, highly saturated. (Aka: it’s time to niche down.)
Instead, we encourage you to think about who isn’t being served. Who, within or separate from those established buyer personas, needs help? Who is being ignored? Who does the rest of the world see as an inconvenience, an afterthought, or even a “bad” customer? Chances are, these are niches worth their weight in gold—and that’s because the more specific the audience, the more likely they are to be a Superconsumer.
In Pirate Eddie’s book, Superconsumers, he explains:
“Unlike heavy users (a product’s highest-volume buyers who are defined simply by the quantity of their purchases), Superconsumers are characterized by their attitude as well: they are passionate about and highly engaged with—and maybe even a little obsessive about—a category (say, gold equipment, in the case of my dad). They are the sneaker-heads who own dozens of pairs of sneakers. They are the sports fans who own replica jerseys and hang signed memorabilia in their finished basements. They are bacon, chops, and carnitas-loving consumers who call themselves ‘pork dorks.’ Superconsumers aren’t random oddballs who buy in bulk. They’re emotional buyers who base their purchase decisions on their life aspirations.”
A legendary example of one such niche audience is scissor-collecting scrapbookers.
To a multibillion-dollar company like Staples, the “proven buyer persona” for people who buy scissors might be the HR manager at a large company whose responsibilities include placing orders for office supplies. As a result, small “e” entrepreneurs who enter the “office supplies” category will likely adopt a similar mentality. Conventional wisdom says to follow in the footsteps of those who came before you and proved to be successful, right?
But what these companies (because they are optimizing for scale) tend to overlook is the potency and profitability of certain niches. To them, these types of customers are outliers, rare cases that don’t have a material impact on their bottom line. As Pirate Eddie’s excerpt above says, they’re focused on “heavy users”: people who buy in volume, and that’s it.
One such audience is scrapbookers—who love, love, love buying scissors. And not just buying one pair of scissors, but multiple. And not just multiple, but multiple for each different use case, and are willing to pay a premium for having such abundance and freedom of choice (we’re talking $50-$75 per pair of scissors). To a company like Staples, spending time thinking about how to serve a “small” niche like this is seen as a waste of time. But to an entrepreneur who takes the time to understand these quirky, scissor-obsessed scrapbookers, what they’re likely to find is a category full of underserved, misunderstood customers who want nothing more than to spend more, more, more on hundreds of different types of scissors.
3. WHEN do you do it… that sits at the peak intersection of Important and Urgent?
Think Uber “surge pricing.” What’s your version of it?
Here’s a scenario:
Let’s say you fly into a city. You land late at night. Your flight was delayed, it took forever to get off the plane, and by the time you get out of the airport, it’s midnight. You haven’t eaten in hours, and everywhere you look, no restaurants are open. Bored on the flight, you even put together a list of the best restaurants in the city—the best reviews, the best wine menus with the most awards—and now, they’re no longer an option.
Everything is closed.
What do you do?
If a restauranteur took some time to think through this problem, and really put themselves in the shoes of this disgruntled traveler, it wouldn’t take them very long to spot a terrific opportunity. Half Past Twelve: The Only Nice Restaurant Open Late. Right? Because if every other restaurant is closed, and you’re the only one willing to serve food past 11pm or midnight, who is your competition?
You basically have none.
Here’s another one of our favorite examples:
If you’ve ever wanted a night of pirating fun in San Francisco, you can start and finish your evening at two radically different establishments.
First, you can have dinner at AsiaSF. As you know, most restaurants try to differentiate on the typical dimensions: food quality, price, location, service, etc. And, as you know, most restaurants fail. But AsiaSF has been in business since 1998 and has become a cultural icon. Is the food good? Sure. Do they serve luscious libations? Yes. But that’s not what makes them different. Their secret is their servers. And the experience they create. When we take people there, we like to let them discover how different the servers are—without telling them in advance.
Imagine walking into a hipish restaurant/nightclub. The place is packed. You think, “Wow, this place is happening!” As you’re seated, your server comes over to welcome you. She’s dressed super sexy, and she’s funny, playful, and flirty. As you are getting settled at your table, you notice that all of the servers are that way. She gives you and your friends menus and takes your drink order. A few minutes later the music stops. The place gets a little quiet. You hear an instantly familiar piano riff. Your server appears—standing tall behind the long bar in the middle of the place, towering over everyone, all eyes on her. Then a legendary voice sings the legendary opening lyrics, “First I was afraid, I was petrified!… kept thinking I could never live without you by my side... ” Your sexy server is dancing and lip syncing as Gloria Gaynor’s anthem pumps through AsiaSF. You think, “Wow, never seen that before!” The whole place is now a party. Soon you realize that all the servers are also performers. And these performers are transgender women. You go on to have one of the most remarkable restaurant experiences you’ve had.
Their website says it all:
“Our star performers make you laugh, make you blush, make you ‘Wow!’ and make you feel like a million bucks. Choreographed dance routines, lip sync numbers, live singing, comedy, and special effects are just some of the talents the Ladies of AsiaSF bring to the runway stage. This sisterhood of diverse Bay Area performers have mastered the art of celebrating themselves, and they provide a warm, welcoming atmosphere to celebrate fabulous you! Be sure to sample our signature cocktails that are named after each of the Ladies!”
After a meal you will never forget, you and your friends bee-bop around the San Francisco bar scene.
Around 1am, you are confronted with the reality of California’s draconian drinking laws. The government mandates “last call” at 2am. What’s a group of pirates to do? Grab a Lyft and head to the one and only The EndUp.
While The EndUp abides by the demands of the California Cocktail Cops and stops serving at 2am, they don’t close—often staying open ‘til 8 or 9am. And in California, they can start serving again at 6am. So pirates who load up at 2am and want to party until they can order another drink at 6am can do just that (or so we’ve been told). And just like AsiaSF, The Endup is prosecuting The Magic Triangle. They are known as a legendary spot for DJs and dance music, and being a Gay and LGBTQIA icon, where bankers, artists, entreprenures, music lovers, and people of every kind of “different” are welcomed.
WHEN you choose to sell your products or provide your services can be a key differentiator and opportunity to create a new niche:
Do other restaurants in your area focus on serving breakfast? Maybe you can be the only one that serves breakfast from 3am to 8am, focusing specifically on people who have to be up at the crack of dawn for work but still want a nice big, hearty breakfast.
Do other restaurants in your area consider “lunchtime” to be 11:30am to 1:30pm? Maybe you can focus on serving “late lunch” to people who are stuck in meetings all morning and early afternoon. Or maybe you can focus on serving “second breakfast” to people who had jam-packed mornings and missed regular breakfast time.
But to be clear: the WHEN doesn’t have to just be a time of day.
It can also be a point in time along the customer’s journey.
Do most book agents focus on working with authors after their book proposal is done? Maybe you can work exclusively with authors who need help writing their book proposal in the first place.
Do most piano teachers focus on working with students who are in elementary or middle school? Maybe you can work exclusively with preschoolers and kindergarteners, and help get them exposed to music and the piano in their most formative years.
There are countless physiotherapists, but how many focus on people 80 and above? How many are open on the weekends? Or provide in-home service in the evenings?
Every single person in the world is on their own journey to somewhere.
Your job is to figure out the point in time along their journey where they’re stuck, and then help them get unstuck.
4. WHERE do you do it… that if money were no object, everyone would want it?
In one city, you might be considered a commodity. And in another, you might be considered rare and highly valued.
In one location, you might be “same old, same old.” And in another, you might be radically new and different. (There are lots of taco trucks in California. But not too many in Saskatchewan.)
Where you plant your flag matters.
Do you go to people? Or do they come to you?
This is a helpful first question when trying to figure out WHERE you should set up shop.
If everyone else is brick and mortar, your niche can be delivery.
If everyone else is in person, your niche can be over Zoom.
If everyone else is in the city, your niche can be in the suburbs.
One example we love is Santa Cruz Bread Boy. It’s a moving artisan bread and cannoli shop—and for just $50, the breads and cannolis can come to you and your event, prepared on-site.
Or, consider the single-serve coffee wars over the last two decades.
Some of the largest and most famous consumer packaged goods companies like Kraft, P&G, Mars, and Sara Lee tried and failed at building single-serve coffee businesses in the US. Starbucks even tried and failed. So how is it that Green Mountain Coffee, a coffee company from Vermont that had a fraction of the money, brand recognition, and resources to succeed, dominated and became the Category Queen of single-serve coffee at home?
The answer is: they started somewhere different.
They didn’t start in coffee shops or grocery stores.
They started in offices.
Green Mountain Coffee (which later became Keurig) realized that office coffee sucked and it would be relatively easy to stand out. They also realized that office products distributors were a highly efficient channel strategy to get into offices. They knew office managers were mostly thought of as a ‘cost-center’ who told the real ‘revenue generators’ in the office what they could and couldn’t do, dying to be “the hero” in the office by supplying single-serve coffee. Most of all, they saw that dominating office coffee was profit-positive marketing—giving employees the opportunity to sample the product while they were making money. Finally, they focused on the Northeast, where office products distributors were strong and the coffee shop coffee palate was lighter than the darker palate in the pacific northwest, making it easier for K-cups to gain traction.
Where made all the difference.
5. WHY do you do it… that is so in sync with the Superconsumer, word of mouth spreads like wildfire?
Your POV of your niche is arguably more important than the niche itself.
There’s a reason why so many services try to differentiate themselves with “custom support” and “personalized service.” The problem is, without a clearly articulated POV, these become clichés—features, at best. What you want is to Frame a new problem, Name the solution, and Claim the transformation you stand for unlocking in other people’s lives.
Are you a missionary or a mercenary?
The world can tell if you’re in it for yourself or you’re in it to help others.
(Don’t get us wrong: we’re big fans of making money. We just think the way people win matters. And we have a massive bias toward people who build a fortune creating net-new value for others.)
The neon signal that usually gives the person’s intentions away is the degree of specificity they bring to the problem. Mercenaries love staying up in the clouds. “Why do we do what we do? Because the world deserves better.” Those words don’t actually mean anything, and they reek of false compassion and, “Me, me, me.”
Missionaries, on the other hand, are usually Superconsumers of the thing they wish existed in the world. They love talking about it. They’re the person at the party who corners you at the wine bar and talks your ear off. Specificity is not their problem. If anything, they are so specific, so nuanced in their thinking, the average person looks at them and thinks, “That person is a weirdo.”
WHY you do what you do, and the specificity with which you can articulate your WHY, can be a powerful way of explaining to the world the reason you’re the right person for the job. For example, who do you trust more to deliver your baby? The doctor who says, “I deliver babies because it’s a solid living” or the doctor who says, “I safely deliver babies because my mother died when she had me, and my purpose in life is to make sure no family has to experience that sort of loss.”
As Elvis Costello sings, “My aim is true.”
Another example we love is Mike Flynn, the founder and CEO of Engenius Learning Center, a high school tutoring and college planning business. He helps high school students (and their parents) navigate the college journey.
Like many of his would-be competitors, Mike has done this for 30+ years and knows every nook and cranny about the process. But his WHY is totally different. Mike’s goal is not to help students get into “the best college.” His goal is to have open and honest conversations with students to help them get into the right college for them, their unique interests, and their individual aspirations in life.
This is not true for all college advisors, tutors, and test-prep experts. In fact, many charge an arm and a leg by dangling the promise, “I can help your child get into XYZ elite school” (regardless of whether or not that particular school is truly the right fit for the student). And they promise this without honestly admitting the good, the bad, and the ugly about the college admissions process:
Unless you are a star athlete or your family name is on a building at that school, it’s basically a lottery process for students who all have similarly stellar credentials.
Getting into college is not the same as graduating on time from that college.
Getting into a great college and performing mediocrely is not as good as going to a less prestigious college where you can graduate near the top.
And finally, what you major in is far more important to achieving a great outcome in life (a job/career) than where you go to school.
But consider this data conducted by FreeOpp that calculates the actual ROI not just from colleges, but the specific combinations of colleges and their majors across 30,000 combinations. It shows a massive variance in ROI based on what major you pick. And it’s not just the difference in making some money versus a lot of money. Some major combinations at elite schools NEVER have a positive ROI. If you get into University of Pennsylvania, Stanford or Yale? Great! But if you major in East Asian studies, English or Ecology at those schools, your lifetime ROI on your education is -$600K to -$700K.
We bet those parents would like their money back.
What makes Mike and Engenius Learning different is he rejects this premise—not just of the college advising category but also the lies many elite colleges promote. And he does so in very specific ways, all of which center on why he does what he does:
College advisors emphasize the prestige of the school. Engenius Learning emphasizes the practical and profitability of the major at that school.
College advisors emphasize helping the student get into the best school. Engenius Learning emphasizes finding the best fit for the student, based on what gives them energy and purpose.
College advisors emphasize getting into college. Engenius Learning emphasizes graduating from college on-time and with a game plan for the future.
College advisors do “college planning.” Engenius Learning does “future planning.” College is not the goal. A long-term emotionally and financially rewarding career is.
Mike and Engenius Learning are on a mission to demystify and debunk college admissions lies so the student (and the parent) can design the best future for the student—not just blindly aim for “the best college.”
Your POV, and the specificity and authenticity with which you articulate that POV, matters.
One final example, purely to show how this thinking can be applied to, quite literally, anything.
The UFC has approximately 576 fighters on their roster.
But only one MAGA/Trump fighter.
He’s a super tough, super exciting fighter. And while he has been an Interim Champion, he’s not (as of this writing) been a full-fledged Champ. But, he’s a massive pay-per-view draw because he’s the only UFC fighter to have been to the White House and met with a U.S. President.
Colby’s category design ensures three things:
1) A large group of people love him
2) A large group of people hate him
3) A large group of people will pay to watch him fight
6. What OUTCOME do you unlock… that is 100x more valuable than what you charge?
You can also niche down by solving a similar or commonly accepted problem in a new and different way, unlocking a unique and different outcome.
For example, imagine you are looking to hire a content writer to help you launch a newsletter for your business. Well, there are lots of talented content writers in the world, and there are lots of content writers who specialize in writing newsletters. But notice how the niche changes when you change the outcome:
#1: “I’m a content writer who specializes in writing newsletters.”
#2: “I’m a content writer who specializes in writing newsletters readers share like crazy and end up going viral.”
#3: “I’m a content writer who specializes in writing newsletters with the sole purpose of turning readers into customers.”
If the outcome you want is you just want a newsletter, you will probably choose writer #1.
If the outcome you want is exposure and virality, you will probably choose writer #2.
And if the outcome you want is to convert customers and drive revenue, you will probably choose writer #3.
It’s not enough to Name & Claim your niche.
You also need to tell readers, listeners, users, and customers and to what end.
What’s the outcome you unlock?
For example, do you want a financial advisor who helps you protect your money or a financial advisor who grows your money? Two different outcomes. Or, do you want a personal trainer who helps you lose weight or a personal trainer who helps you put on muscle? Two different outcomes.
The more specific you can be about not just what you do, but why it matters and what outcome and transformation it can unlock as a result, the easier it will be for customers to say to themselves, “Ah, you’re exactly who I’ve been looking for.”
Successful consulting firms understand this perfectly.
Consulting firms deliver their work via teams. A team typically consists of one to two analysts or consultants (each making $100K to $200K per year), one manager (making $200K to $500K per year) and a ‘junior partner’ making ($500K to $1MM per year). Let’s say this is $1.9 million per year of costs. This might sound like a lot, until you realize the top consulting firms charge over $1 million dollars per month per team, which is essentially an 80%+ gross margin.
How do they justify doing this?
These firms promise business outcomes that have at least a 10x profit multiple on their fees.
But that’s not all. Outcomes don’t have to be purely financial, but also emotional and aspirational. Jim Kilts was the former CEO of Gillette and Kraft and a long time client of The Cambridge Group, Pirate Eddie’s prior consulting firm. When Jim was a mere brand manager for the Country Time Lemonade brand, he worked with Rick Kash, the founder of The Cambridge Group. That project went so well, Jim got promoted. And in his next role, he brought Rick on board to help. Later in Jim’s career, he said, “I kept working with The Cambridge Group because everytime I did, I got promoted.” The most senior partners at consulting firms spend quite a bit of time doing career counseling to their clients, helping them identify and prioritize different career moves, benefiting both parties.
This is a valuable outcome in and of itself.
(It’s worth asking: aside from the standard outcome you typically promise customers/users/clients in your line of work, what else do you help people with as a natural byproduct of your working together? How valuable is that outcome to the other person? If you emphasized that outcome more, what might that do for your earning potential and ability to attract and retain an even more specific type of client/customer?)
7. How much and “how” does it COST… that is both a value and a premium, and the ‘way you pay’ is a benefit in itself all at the same time?
Finally, you can create a niche by pricing yourself far and away from any and all competition.
One of the things Pirate Cole hears constantly about his cohort-based writing program, Ship 30 for 30, is customers saying, “I’ve never seen a course like this before. It delivers obscene value at a laughable price.” Most live, cohort-based online writing courses cost thousands of dollars, and many don’t have a community component to offer motivation and support. Ship 30 for 30 is a few hundred dollars (a fraction of the cost) with a community of 500+ writers, an entire educational curriculum, and even a software tool with templates for beginner writers to use. One Shipper in the last cohort even said, “The price point for the value received puts it in a completely different category.”
Or, another example: the Fleur restaurant at the Mandalay Bay in Las Vegas sells a “$5,000 burger.”
Why so much money? Because it is a super-ding-dong burger—made with sliced black truffles and prime foie gras. Oh, and the burger “comes with” a $5,000 bottle of Châteauneuf-ding-dong (also known as a 1995 Petrus).
Since they market it as a $5,000 burger, they get people to STOP and reconsider what they know about burgers. This is a playful reframe in the same way, we call our weekly Category Pirates newsletters: “mini books.” People view a “mini-book” differently than they do a newsletter. It’s differentiated Languaging.
The rule of thumb for pricing is you either want to be insanely cheap (or free), or insanely expensive.
You want to avoid the middle.
Conventional wisdom, of course, says the opposite.
Most small “e” entrepreneurs price themselves in the context of who they think their competition is. “Those guys over there sell widgets for $20, so that means we should price our widgets at around $20 too.” This is a mistake. When you do this, you are signaling to customers, “We’re the same, so pick whichever one you want because there’s no difference.” But imagine if a customer went widget shopping and saw one widget was $20 and another widget was $200. The price difference would force them to stop and ask themselves a very important question, which is, “Why would anyone buy a $200 widget?”
The price forces a choice, not a comparison. The second the customer considers the question, “What could possibly cause someone to pay that much?” they become a person interested in paying that much.
One of our favorite examples here is the story of YETI—two small “e” entrepreneurs who set out to build an industrial-grade cooler for their fishing expeditions, only to end up unlocking a massive new category and building “the Range Rover of cold.” They launched their premium coolers in 2006 for $250 a piece, at a time when coolers were thought to be big plastic boxes you bought at Sears or Dick’s Sporting Goods for $20 or $30. The concept of a “premium cooler” seemed unfathomable to the average customer. But to fishing, hunting, and outdoor enthusiast Superconsumers, a premium cooler made all the sense in the world. Not long after, YETI began launching even more premium coolers, like their 85-gallon Tundra 350 for $1,300, tested and approved to be impenetrable by the Interagency Grizzly Bear Committee (we’re not joking).
YETI went public in late 2018 and today has a market cap of $9 billion dollars (some seemingly small niches turn out to be not so small). And today, you can’t go shopping in any outdoor-themed department store without seeing a dozen YETI knockoffs, all trying to chase the category king.
But “how you pay” can also be a point of differentiation.
One of the most striking benefits of Uber was simply moving the payment to the beginning of the trip versus the end (and automated in a way where you no longer had to worry about carrying around cash or leaving a tip when you were exiting the cab). Or, when was the last time you bought an Apple product? At this point, Apple is a bank that allows you to buy thousands of dollars worth of luxury technology products without needing to pay upfront. Instead, you can pay per month.
New niches can also be created by combining multiple niches.
There are bars, and there are arcades.
And then there’s Barcade: the original arcade bar.
You can eat sushi. You can eat a burrito.
Or you can eat a Sushirrito: the world’s first sushi burrito.
There’s Korean entertainment, and there are vegan food blogs.
And there's only one “Korean Vegan.”
Opportunities are abundant at unlikely intersections. If you are ever stuck on how to create something new and different in the world, we encourage you to read through the 7 niche category creation opportunities in this “mini-book” and think about how you can smash two of them together. Can you combine the WHAT with a new WHERE? A new WHERE with a new WHEN? A new WHEN with a new HOW? A new HOW to unlock a new OUTCOME?
In certain businesses, your niche can also be a doubling-down on your legacy.
“Since 1945” is a niche.
For example, Fisher’s Popcorn: “First opened in 1937 by Everett Fisher on the corner of Talbot Street and the Boardwalk in Downtown Ocean City, Maryland.”
Their differentiator is: we’ve been here forever.
There are businesses like this all over the world, started by a grandfather or a great grandmother and passed down through generations to the point where the business becomes iconic. It becomes a tourist attraction in a town or city. Eventually, the business transcends the idea of “being a business” and is seen as a local or even national treasure. Pirate Christopher’s father-in-law has a farm in San Jose like this. Customers don’t think of it as a replacement to Whole Foods. They think of it like a state park.
Or, in tech, “We buy great businesses that VCs won’t fund and then we leave them alone.” We are paraphrasing here, but this is the brilliant POV of Andrew Wilkinson and Chris Sparling, co-founders of Tiny Capital. They’ve built a tech holding company modeled on Berkshire Hathaway, focusing on businesses that are smaller and more niche-y than a Sand Hill Road VC would typically fund, earning Andrew the nickname of “The Warren Buffet of the Internet.”
The Riches Are In The Niches
When in doubt, get more niche.
Especially when you’re first starting out, you always want to be more specific—not less specific, less general, or “for a wider audience.” Because when you start small, you can always grow bigger. But if you start big, you can’t really get “smaller.” (It’s better to matter to a hundred people versus being irrelevant to eight billion people.)
However, in order to create the most value for yourself (in any niche), you must ask yourself two very important questions:
1. “What would need to be true for me to charge 10x more?”
2. “What would need to happen for me to achieve the same result for 1/10th the amount of effort?”
People think of niches as small opportunities. But that’s not really what they are. Niches are specific opportunities. But their value creation potential usually has less to do with the niche and more to do with how it’s being approached. If you take the time to talk to, learn, and understand your niche’s Superconsumers, these people will gladly tell you how and why they would be willing to spend more money with you. Conversely, in order to scale your earnings and reclaim your autonomy and agency (there is no nobility in working 15 hours per day, 7 days per week. “Hustle 7/24/365” is for people who are suffering from Gary Vee-D.), you have to also consider how you can make changes to your products or services to achieve the same (or improved) outcomes for your customers and clients while putting forth a fraction of the effort.
The answer here requires leverage, and the only forms of leverage are: labor (hiring people), capital (using money to accelerate or compound your decisions), some kind of automation (replacing yourself with tools) and/or creating increasing returns digital products.
So for example, if you charge $150 per hour, what would need to be true for someone to pay $1,500 per hour?
You can change the value: “Per hour, I give you X. But per project, I give you X hours + deliverables Y & Z.”
You can change the outcome: “Per hour, the outcome I can help you achieve is this. But if we work together on a retainer basis over the course of 6 months, I can help you achieve this much harder, more valuable outcome.”
You can call it something different: “An hour of my time is $150. But if you want to go through a Strategic Power-Hour Workshop with me, that’s $1,500.”
One final story for you:
From Homeless Vet to Successful Entrepreneur
America as we know it was unrecognizable in June 2020.
The global coronavirus pandemic was killing people at a shocking rate, the economy was in free fall, and unemployment was rising at a record rate, all while social and political tension hit a generational high—causing global protests and riots. For American entrepreneurs, it was the most challenging time in modern history. The word of the moment was “unprecedented.”
By February 2021, nine million small businesses were facing closure. That’s three out of every ten. Even worse, eight out of every ten minority small businesses were in bad financial shape.
Here’s one such story. Jaime Jay is a big-hearted, big-bearded, hardworking, smart, courageous man, and a proud U.S. veteran living in Springfield, Missouri. Jaime is an entrepreneur’s entrepreneur. And Jaime has faced and overcome being homeless three times.
Prior to the pandemic, Jaime and his partner Sara Knox had founded “Bottleneck Virtual Assistants.” They spotted the emerging “VA category” as a growth opportunity, and with years of experience working with off-shore teams in their web development and podcast production businesses, Sara and Jaime thought their operational experience coupled with their deep personal knowledge of how to help entrepreneurs free up their time made them qualified to succeed in this new category.
They were right.
From a standing start, and with no venture capital, they got to over 7-figures in barely three years. They were turning their dream into a reality.
Until, just before the pandemic hit, the Virtual Assistant category started changing. Bigger players had entered the market. These bigger companies changed the category design of what a virtual assistant was. Jaime and Sara’s vision from the beginning had been that a “VA” would be a person who is deeply technology enabled. Someone who is nowhere near you, but who gets to know you very well. As a result, they become a super-powered personal assistant.
The problem with that definition was that the big competitors changed it. All of a sudden, “VA” meant more technology, less human. These technology-heavy competitors had started to de-position Bottleneck before the coronavirus crisis hit. And, as you know, a crisis can turn a small problem into a big one. Fast. By June 2020, some of Bottleneck’s customers had cut back. Some couldn’t pay their bills. Some went out of business. All while the big sharks were circling. Bottleneck, like almost every other American small business, was facing an existential crisis. Survival was on the line.
Well, when human beings are threatened, they react in only one of three ways.
Freeze, flee, or fight.
Jaime Jay is a fighter.
First, they confronted the reality of the situation. They did not BS themselves about the life-threatening trouble they were in. They did a complete evaluation of the business, the competition, and the VA category. With sober minds and clear eyes, Jaime and Sara organized a brainstorming session with all of their people to explore the possible strategic moves Bottleneck could make. They were determined to find a way to save the business.
As a result, a new idea emerged: “Maybe we’d been looking at this the wrong way?” Maybe, just maybe, Bottleneck was in the perfect position, and we just haven’t been looking at things from the right perspective?”
So, they started asking a series of “crazy” questions.
How could we create radical differentiation?
How could we stop competing feature by feature?
What if we could force a choice versus a head-on competition?
What if the competition with their massive technology focus was a gift?
What if their technology was the perfect juxtaposition to what we do?
What if we could show entrepreneurs (Bottleneck’s target customers) that Bottleneck was not a service to cut in bad times, but a “must have” that helps power you through bad times?
Said differently, what if Bottleneck could use the bigger competition’s strengths against them to create a whole new category? What if Bottleneck’s more human-centered approach to being an assistant was a positive, not a negative? And what if Bottleneck could “Dam The Demand” for technology virtual assistants by saying to the market, “You thought you wanted that, but what you really need is this!”
As they dug deep into fresh thinking about their category and business, they had an “aha moment.” The terms “physical distancing” and “social distancing” had blasted into the lexicon—discouraging the spread of the virus. Making these words powerful, meaningful, and all of a sudden, positive. To be “distant” was now a good thing, not a bad thing.
The new category idea all of a sudden became clear: Bottleneck was the world’s first “dedicated distant assistant” company. A real person dedicated to helping scale YOU, who is highly technology enabled and nowhere near you. It was a massive insight that had the potential to work. After careful consideration and analysis, they committed, took a giant leap of faith, and went all-in on a whole new category design for their business. Bottleneck was the new leader in the new category of Dedicated Distant Assistants (DDAs). And to make their position clear, they even changed the name of the company from Bottleneck Virtual Assistants to Bottleneck Distant Assistants.
In addition, they created a new point of view. A POV that made it clear why they were different (not better) than virtual assistant companies. They rewrote their website, their sales pitches, and all of their marketing materials. Jaime became the chief evangelist officer preaching the DDA sermon to anyone and everyone. And the whole company lined up behind this new, clear, different vision.
Bottleneck took control of their future by summoning the courage to be different. To stand out. And by executing a “Dam the Demand” strategy by telling prospects, “You thought you wanted a virtual assistant, but what you really need is a dedicated distant assistant.” When people emailed or called about their “virtual assistant” service, Bottleneck had the courage to say, “We don’t do that, we’re the first dedicated distant assistant company. But if you’d like to hear about the difference between a VA and DDA, we’d love to tell you.”
By September 2020 Jaime and Sara had stabilized the company. And by November Bottleneck was growing again. Prospects started reaching out to the company asking about their “dedicated distant assistant” service. (When the category starts parroting your language back to you, you know it’s working.)
By March 2021, Bottleneck made back all of the lost revenue. And by May, the company hit their highest growth rate ever.
In one year, Jaime and Sara had achieved what less than 10% of entrepreneurs ever do.
They survived a brutal recession and came out of it stronger.
The overarching category or industry you’re in usually isn’t the problem.
It’s the fact you haven’t niched down, haven’t Framed a new problem or Named and Claimed a new solution, haven’t asked your Superconsumers, “What would need to be true for you to pay 10x more than you’re currently paying? What else can I be helpful with?”
Most small “e” entrepreneurs are surrounded by ATMs of ideas, answers, and potential niche category opportunities.
The question is: are you paying attention?
Fantastic write up. Worth the $20 I spent today. My first read of the substack content and I just want to stop reading and go to work! As a small startup with a co-founding team only at present, a slight move to momentum, and little cash, this one was not only tactical but inspirational.
Legendary article. As a small "e" entrepreneur, who bootstrapped their podcast agency with a laptop and microphone, I really appreciate this piece. Thank you!!!