How Much Risk Should You Take Choosing a Vertical?

"Do our company's current numbers truly show the best vertical market for us to focus on? Or could we be missing a better opportunity?"

This was the question my client Daniel, an agency founder, asked me last week when discussing which vertical market to focus his agency on. 

The answer begs the question: how much risk do you want to take as an agency owner when narrowing your focus on a vertical market?

When you base this decision on data from current or past clients that you have a track record working with, it is less risky. If you went out to a vertical market that you have no experience with, it's more risky.

You can certainly build your positioning around a new vertical you've never worked in. But you risk discovering six or twelve months down the road that the vertical doesn't align with your agency's natural strengths. 

So, my response to Daniel's question was: "How much risk do you want to take?" and "How quickly do you want to see results?"

CQ 

Frequently Asked Questions

Why might current client data not reveal the "best" vertical to focus on?

Because existing numbers only reflect what's already been tried, not necessarily the full range of opportunities available. A better-fit vertical could exist outside of what current or past client data shows.

Why is choosing a vertical based on existing client history considered lower risk?

Because there's already a proven track record to draw on. Real experience with that vertical reduces the uncertainty of whether the agency's strengths actually align with what that market needs.

What's the risk of choosing a completely new vertical with no prior experience?

Discovering months later, six or twelve months down the road, that the vertical doesn't actually align with the agency's natural strengths. Positioning can be built around something unfamiliar, but the fit isn't guaranteed.

What questions should actually guide this decision?

How much risk is acceptable, and how quickly results are needed. Those two questions, more than the data alone, are what should shape whether to specialize in a proven vertical or take a chance on a new one.

Is there a universally right answer to which vertical to choose?

Not really, it depends on individual risk tolerance and timeline. The right choice differs depending on how much uncertainty someone's willing to accept in exchange for the possibility of a better long-term fit.