Smallest Viable Market

Businesses ask themselves many questions:

• What’s your target market?
• How will you sell to more people?
• Will you use referrals? Offers? Cross-promotions?
• How are you going to get more people to buy from you?
• How are you going to grow?

You may have heard people talking about “MVP” or the “minimum viable product” when designing something new. It’s a common term used especially in the software industry. It’s expensive to develop applications, so it’s better to launch with the minimum features required to test your assumptions and get feedback from users. Launch and learn.

Usually coming up with your MVP is discussed in the context of launching small and iterating towards a solution that will eventually scale up to a broader customer base. Emphasis there is eventual growth.

However, what if the goal isn’t to scale far and wide but do the work you want to do? Would you create something different?

There is a term developed by Seth Godin called “smallest viable market” – the smallest number of people you can serve and continue to be in business.

It’s an interesting idea. The smallest number of people. In other words, how many customers do you need to find before you’ll be busy enough to have a sustainable business? This promotes the idea of doing the work we seek to do, serving the customers we seek to serve.

As we’ve talked about in earlier Notes From Us, the motivation of many local independent businesses is not to scale but to do the work they love. Create a product they are proud to stand behind. Serve customers they genuinely want to please.

Rather than thinking of every business as a financial entity that must scale to pay shareholders, try considering a business as a vehicle to spend your days doing rewarding work that excites and challenges you.

Another way to look at the smallest viable market for a business is to compare it to the alternative. Smallest market is about the idea of creating something for you rather than something for everyone.  If your focus is to create something for everyone, the offering must be more generic. It needs to appeal to more people on the bell curve distribution. It means you can’t be at the fringes, on the bleeding edge, because that’s not something for everyone. Go to Wal-Mart and you’ll see a collection of products that are for everyone. The product categories are those that appeal to the most people and the products are those whose features themselves appeal to the most people. An offering that is good enough for most people.

No product makes it onto the shelf of Wal-Mart unless it appeals to enough people for it to make the retailer money. Go to most local independent businesses and you’ll see that they’re creating something for someone specific – their smallest viable market.

It is a conscious decision to do something specific, rather than something generic. Going for the generic means you’re going for middle of the road and generally going for scale. Going for something specific means making a choice to tell some customers “this isn’t for you”.

Saying something “isn’t for you” doesn’t mean they are being exclusive. It means the business has decided to put time and care into making something specific for someone else. If it’s not something you want, it doesn’t mean that business is inept or bad. It just means they didn’t make it for you.

Understanding the different motivations of businesses helps my perception of what they do, what they sell, and how they conduct business.

Is a business “bad” because it doesn’t have what I want? Do they have poor selection or poor taste? No, it just means they’re focusing on other customers.  This makes it even more special when I find the businesses that are making something for me.  For the things I enjoy the most, I like buying from places that love what they do. Enjoy coffee? Try a place where the staff are passionate about it. Enjoy fashion? Try a place where the owner curates the collection themselves. Enjoy beer? Try a place where the brewmaster is on site.  Enjoy pastries? Try a place where they make it from scratch in-house.

The path of scale leads to generic offerings for average customers.  The path of smallest viable markets leads to specialized offerings for specific customers.  I like the breadth of choice that comes with independent businesses trying to find their smallest viable markets.  That’s the bleeding edge.  That’s where the new ideas come from. That’s where the innovation exists. Some things aren’t commodities; for those products and services, seek out something small where someone is doing something specific. You may just find your new favourite thing.

Thumbnail photo by Joey Visser – Pictured is the Reuben at Bernstein’s Deli