The Own and Invest method Part 2

Start a business in a niche or up trending market

In the last article we looked at the Own and Invest method of becoming a millionaire, which is centred around the mindset of a business to produce income and re-invest to create a cycle of wealth generation. We considered the first of three criteria, identifying a financially valuable skill and one that can be used to create additional income. Then develop it and maximise it to get that wealth generation cycle moving.

The second step is to start a business in an up trending market or niche market to utilize the new found financially valuable skill. Having a valuable skill can assist in generating additional income as an employee through higher productivity and greater results, however much of the returns generated flow to the business owner(s). Starting your own business allows you to take those profits from your work or even better from having employees completing the work, which is how large amounts of wealth can be created.

Now you could start a business in any industry or market, it could be an old or new industry but the best way to increase the probability of success is to go into a market that is in an uptrend. The uptrend of a market will carry you further, the growth in demand from consumers means the money flow will make for a larger ‘pie’ in which to claim a share.

Benefiting from an uptrend

How much more valuable is it to be be in an uptrend? Let’s take a look at an example of a business that benefited from entering an uptrend.

Monster Energy, makers of energy drinks, got into the market at the start of an uptrend. By 2012, the energy drinks market in the US was estimated to be worth $12.5 billion in sales.

Monster Energy sales have increased from $227m in 2004 to $2.46b in 2014. Such growth meant the share price went from $0.56 in January 2004 to over $71 in June 2012 and this growth continued with the share price hitting a high of $154.61 in November 2015. By entering this market as it started to take-off meant Monster has been able to continuing growing sales and profits. All thanks to the demand for energy drink products.

Source: Yahoo Finance

From this example there is a clear case supporting why being part of an up trending market is so lucrative. However it’s not easy to pick a trend, in fact, it can be very difficult.

A good alternative is to focus on a niche within a broad market, this provides a clear group to market to and the business can evolve and pivot from this starting point to continue growing. When looking for a niche it should be clearly identifiable, ie. road cyclists, marathon runners, etc. This market also needs to be communicative ie. there are existing channels or places people in the niche go.

Finally the niche should have a market size capable of supporting a business and growing in popularity. There are examples of ‘niches’ everywhere, some are on a grand scale. Some examples of niches that are now mainstream: Dominos is a niche food market of pizza, Angry Birds is a niche for gaming/entertainment, Apple products was a niche for computers and mobile phones.

Starting a business in a niche market will help increase your chances of the business being successful and if you can also get into an up trending market then the results can often exceed expectations. In the next article we’ll look at the next step which is spending less to save and invest.

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