There are roughly as many strategies for how to run a business as there are people under the sun. In this article, I discuss why we focus only on offering PSD to WordPress services, when other companies that likewise perform PSD to WordPress frequently also offer back-end development, plugins, premium themes, and more. It’s a decision that has paid off for us — we hired a dozen WordPress developers in our first year and doubled in size each of the two following years.
Whether you are working in web development or another branch, this dilemma represents a choice all businesses have to make: do you focus on a niche or do you diversify? And it’s not only a one-time decision when you start the business. Conditions can change, so that even if you started with a broad array of services, it might make sense to narrow them — or vice versa. For example, many of our web agency partners must decide whether to provide only WordPress websites or to support other platforms as well. Alternatively, if you’re web designer, you might be hesitating over whether to offer marketing services as well or stick to just design.
If you’re considering whether to take a niche approach yourself, we have compiled four key questions to walk you through the decision.
01 Is the market big enough?
Most businesses want to grow. Likewise, we built TWLA to be scalable. That means we need lots of potential customers. Can this goal be combined with finding a “niche”? In fact, a “niche” market need not and should not be small, especially if you want to grow your company.
WordPress is the most commonly used CMS platform in the world. Equally important, when we started WordPress was also growing faster than any other platform at the time. For these simple reasons, we decided to specialize in WordPress for our business in outsourcing web development. To put it more concretely, in every city where there is a marketing agency with 3 or 4 employees, we have a potential customer base of several thousand dollars per month. We only need to capture a small slice of that market to be successful.
For agencies considering whether to specialize in WordPress, the equation is similar. The demand for WordPress is large enough that it offers a virtually unlimited pool of customers.
That doesn’t mean WordPress will always be an obvious choice. It’s been the dominant CMS platform for a number of years now, but the internet has changed before, and it likely will again. WordPress itself is an example of this: one of our partners saw the writing on the wall a couple of years ago and switched from using their own custom CMS to WordPress for all their websites.
02 Can you develop a useful competitive edge in your niche?
If focusing on a niche service or product will make you substantially better at delivering it than competitors who also engage in other activities, you have a strong reason to keep your focus narrow. It seems intuitive that you continually get better at whatever you do if it’s the only thing you do, so why shouldn’t companies always choose just one service or product?
Getting really good at one thing is only valuable in so far as customers want to purchase that one thing separately from related products or services. Complementarity is the key word here: some types of products or services are highly complementary to others, while certain products or services can easily be detached from related activities. For example, it’s likely easier to sell a full “marketing optimization” package than to individually sell blog writing services, keyword research, and email drip campaign design. If you focused a business solely on blog writing, you will probably become awesome at it. However, it might not be the best business strategy if most customers want to hire someone to do blog writing and to design an email drip campaign in one go.
Producing premium themes and plugins are not complementary to WordPress front-end development in this way. It’s worth noting that web design and marketing services are arguably complementary to development — but only for an end customer. A business buying one website for itself is not likely to want to search around for separate services for design, development, and marketing. However, from the perspective of a web agency that produces dozens of WordPress websites per year, the PSD to WordPress conversion is actually quite straightforward to detach and outsource from the rest of the process.
For us at TWLA, that means if we get really good at doing this one step, we will, in fact, develop a meaningful competitive edge in our niche market. Can you do this for the niche you want to work in?
03 Will you attract the clients you want?
Not all clients are created equal. Are there segments of clients in your area of interest that would be easier to work with or allow for higher margins?
Our case illustrates a way of answering this question. For example, say we decided to offer full-stack WordPress development rather than merely front-end. Doing so might allow us to compete for producing websites for large corporations, who likely have considerably more complex demands than a couple of custom post types and a blog page. However, we have decided (partially from experience) to generally avoid these types of large-scale websites. While they may provide a larger amount of revenue in absolute terms, the margins will typically be lower than for smaller projects. Moreover, the larger and more complex a project is, the higher is the risk that we ultimately lose money due to unforeseen issues or delays. One likely factor is a greater amount of back-and-forth needed due to the more unique and complicated features such projects typically have.
Offering only front-end development with PSD to WordPress conversions, we eliminate most larger projects of this nature. Instead, we are more likely to attract web agencies with small or medium-sized businesses as customers, seeking relatively standard but high-quality WordPress websites. Such projects are much easier to estimate, which helps with maintaining stable margins. It’s also easier to build optimized production processes around a flow of projects that are fairly standard.
In this way, your choice of service is actually crucial for giving you the clients you want to work with. Think carefully about how what you offer — as well as what you don’t offer — affects who will consider you.
04 Can you finance growth in your niche?
Within the world of WordPress, we chose to focus on PSD to WordPress conversion. We could have instead chosen to develop custom plugins or our own premium themes for sale. How do you choose between the services or products you could offer?
Like any product, developing WordPress plugins or premium themes for mass sale requires substantial outlays, typically months in advance, plus ongoing investment in maintenance and support. Then, to make a profit, hundreds if not thousands of units need to be sold. Engaging in product development demands plenty of capital to bridge this gap in investment and earnings.
Instead, we chose a niche that would eliminate this kind of liquidity pressure. By focusing on PSD to WordPress, income is directly tied one-for-one to development costs. Later on, we could have chosen to diversify by investing in other types of product development. Naturally, a service like PSD to WordPress has lower potential margins than software products, which in theory can have unlimited returns. We have decided this is a worthwhile tradeoff to achieve lower-risk, sustainable growth.
When choosing what product or service to offer within a particular market, you should consider both what type of cash-flow situation you can afford, as well as what level of risk/reward ratio you want to live with. Risk and reward generally increase in tandem, as illustrated in the classic textbook diagram pictured.
If your niche hits the mark on these questions, narrowing your focus to just one service or product might be a solid decision for your business. For it to make sense, you need a substantial market where you can be profitable if you capture only a small slice of the overall demand. What you choose to sell should offer you a level of risk and reward that is sustainable — and that allows you to sleep at night. (After all, your livelihood will depend on its results.) If you are going to focus on one specialty to the exclusion of others, that focus needs to give you an edge that makes up for not offering other services or products.
Finally, it’s key to choose your service or product in a way that attracts not just many customers, but the customers you want. It’s worked for us — and it can work for you too.