Business specialization and niche markets will grow in importance as small businesses first identify and then scurry to serve narrower slices of traditional markets. Outsourcing, the Internet, and customer demand, will help shape niche markets and dramatically change the business landscape.
Outsourcing will fuel the drive to specialization. A new PR firm, for example, will be unlikely to start out as a full-service practice. Instead, specialization in a niche such as investor relations will be seen as the way to gain entry to lucrative markets.

The Internet's global reach will enable wider acquisition of customers. Small businesses will find taking their specialized strengths further a field to be a more viable growth strategy than broadening their offerings in a geographic market.

Customers will continue to ask for more as small businesses proliferate. When there is a Mexican restaurant every five miles, outstanding burritos and tacos won't be enough to assure success. Instead, the menu will offer "secret" recipes from a small mountain village where early Mexican food is prepared, as it was hundreds of years ago. The center of the restaurant will be a plaza where the dishes are prepared over open fires using authentic cooking stones. Diners will stroll the plaza sampling the dishes of their choice.

New niches will grow out of existing specialization’s that are sliced and diced into ever finer segments. Few small businesses are the first entrants in their markets. Studies show that the vast majority of small businesses are not started with a new invention or unique idea. They are far more likely to put a different spin on an existing product or service.

Specialization will increasingly be the name of the game in small business, and specialization begets more specialization. Service providers and vendors will need to be able to show how they'll deliver superior results for each niche market into which they are selling.
The effort to reach narrower and narrower targets will make channel partners more important than ever. Cross-referral relationships will become critical in many markets.

For those selling in the small business marketplace, recognizing the impact of greater specialization and narrower niches will be a make-or-break process. The fast changing small business market of tomorrow will require increasingly rapid responses to customer needs and wants.

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The future is likely to be the age of virtual businesses. The newly opened two-person office will be able to look big, established, and successful. Build a really good website, toss in some color printers, fast computers, and cell phones, and you're halfway there. After that, it's a question of leveraging your creativity and ability to partner with other entrepreneurs.
The virtual business is the epitome of the less is more dictums -- less expense leaving more profit.

Not every business in the future will be able to go virtual -- at least we don't think so today. But as the line between what's virtual and what's real blurs, going virtual will become more attractive.

Let's make one thing clear, virtual doesn't mean the business isn't for real. It just means all that heavy, expensive stuff won't be sitting there eating money when not in use.

Who cares whether the home office of Acme Thingamajig has 300,000 square feet as long as Acme is able to deliver those thingamajigs. Performance is what counts, not the number of employees or the size of the company cafeteria.

For vendors and service providers, reaching virtual businesses will be an even bigger challenge than selling to traditional small businesses. Often virtual businesses pick vendors by word of mouth. Because they rely on other businesses for much of their output, they'll tend to network and look to their partners for purchasing advice.

It will be hard to find the physical location of some virtual businesses, so the old fashioned sales call won't always work. With virtual businesses on the rise, companies will be developing new ways to communicate with decision-makers. Think permission-based email marketing for one. Finding them online is another alternative.

Virtual businesses will run lean. They won't have much time to be sold to, so expect relationship management to take on added importance. Savvy companies will make the investment to recognize the special needs of the virtual business.

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