Memo 02: Get Big or Get Niche: why small businesses - and asset managers - must choose
I always remember a conversation with a lawyer who was trying to grow his practice. I said to him – the problem I see is that “I don’t know what work to send you – what your specialisation is?” We explored this some more and uncovered that he enjoyed being the overall legal advisor to businesses and family groups – playing the broader role as their trusted advisor across all their legal and commercial issues. And he was good at it. “That’s fine I said – and if that’s the sort of practice you want to grow – how about specialising in a sector, say food manufacturing where you do a lot of work”. I hypothesized that it would make his marketing easier, his referrals would become easier, his expertise deeper. Instead of being all things to all people he would become the go to lawyer for food manufacturers”. That’s not to say that he took my counsel - as a lawyer he’s typically the one giving advice not receiving it!
In a world of increasing competition and ever-shifting market dynamics, small business success rarely comes from trying to be everything to everyone. Instead, it comes from going narrow and deep — owning a space so clearly and credibly that your name becomes synonymous with it.
This is the central thesis of the excellent book “Focus: The Future of Your Company Depends on It” by Al Ries [1], which argues that true growth comes from narrowing focus, not expanding it. Ries writes “The narrower the focus, the stronger the brand. It’s easier to get into the mind of the prospect with a specific idea than a general one.”
In the world of small business—whether you’re doing $2 million or $90 million in turnover—the lesson is the same: niche players win. Why? Because focus creates clarity. Clarity attracts customers. And customer loyalty creates margins.
Niche strategies also scale more efficiently. When a business is tailored to a specific audience, marketing becomes more targeted, service models more refined, and hiring more purposeful. As Seth Godin puts it: “Everyone is not your customer.” [2] The goal isn’t mass appeal—it’s resonance with the right people.
Niching also offers a powerful counterweight to the resource constraints small businesses typically face. Marketing becomes more efficient, hiring more aligned, and product development more targeted. In a niche, a smaller firm can punch well above its weight. Of course, niching isn’t just about choosing a demographic or a product. It’s about identifying a problem you’re uniquely positioned to solve and solving it with unmatched depth. The formula is: pick a market that’s big enough to matter, narrow enough to own, and rich enough to pay.
But this doesn’t mean large businesses should—or even can—niche in the same way. Big enterprises often succeed precisely because of their scale and breadth. Once you have the infrastructure, brand, and operational capacity to manage diversified offerings, breadth becomes a strength, not a weakness. Apple, Amazon, and JPMorgan don’t niche; they scale. Their size gives them leverage in procurement, distribution, pricing, and capital allocation—advantages that smaller businesses can’t replicate.
So, the lesson isn’t that niche is always better—it’s that niche is the best strategy until scale becomes a defensible moat. For small and growing businesses, niche is the fastest route to traction. For already-large enterprises, scale becomes the dominant asset.
The Same Logic Applies in the World of Alternative Assets
Now, zoom out from the world of small business—and consider alternative and private asset management. In many ways, the same rule applies: success today requires going big or going niche.
Over the past two decades, alternative assets have evolved from a fringe allocation to a central pillar of institutional portfolios. Once viewed as opaque and illiquid, strategies like private equity, private credit, infrastructure, and real estate now collectively manage more than $23 trillion globally. Blackstone alone oversees over $1 trillion in assets—a figure unthinkable just a decade ago.
The scale of today’s alternative asset managers has fundamentally reshaped global markets. In July 2007, The Blackstone Group acquired Hilton Hotels Corporation in an all-cash leveraged buyout valued at approximately $26 billion. Such a move underscores the sheer weight of private capital and its growing influence over corporate finance, M&A, and long-duration investment decisions. (Blackstone held the asset for 6 years)
But with this maturity comes new challenges. Where alternative assets once offered clear advantages—access to inefficient markets, higher return potential, and structural illiquidity premiums—those premiums are now under pressure. A record $2.5 trillion in dry powder sits undeployed in global private equity alone [3], leading to increased deal competition, compressed returns, and, in many cases, more aggressive underwriting standards.
So how do managers preserve alpha in a world where capital is abundant and the easy wins have been harvested? Two dominant strategies are emerging: get big or get niche.
1. Get Big
Scale offers serious advantages:
Access to the best deal flow
Influence over terms and governance
Capacity to pursue complex, multi-billion-dollar deals
Integrated operational improvement teams
Firms like Brookfield and Apollo exemplify this model. Their size enables them to engage in long-horizon infrastructure projects, global take-privates, and hybrid credit-equity transactions that smaller managers simply can’t access. With internal legal teams, ops divisions, and financing platforms, they drive alpha through execution precision and volume.
2. Get Niche
At the opposite end of the spectrum are highly focused, sector-specific managers. These firms generate alpha not by size, but by depth of understanding. Whether it’s agricultural credit, regional industrial property, or supply-chain financing, niche firms operate in markets where traditional players lack the depth of insight or appetite. Niche firms can underwrite deals others can’t, spot risks early, and deliver returns through operational alignment—not just financial engineering.
A notable example: specialist private credit funds in Australia that are filling the gap left by retreating banks, pricing risk dynamically and servicing borrowers who value speed, flexibility, and relationship-based capital.
The Squeeze in the Middle
What about managers who are neither large nor differentiated? This is where the pressure is greatest. Mid-sized generalist firms, without scale or focus, are increasingly being overlooked by institutional allocators. They lack the clout of large platforms and the compelling narrative of niche players. Recent fundraising data shows these firms struggling to raise capital and secure meaningful allocations.
The message from the market is clear: capital is flowing to managers with either dominant infrastructure or dominant insight.
Conclusion
Whether you’re running a small business or a multi-billion-dollar fund, the principle is the same: choose your game and play it with conviction. Get big or get niche—but don’t stay in the middle.
The modern market doesn’t reward the unfocused. It rewards clarity, courage, and specialisation. Whether you’re baking gluten-free muffins or underwriting mezzanine debt in regional agribusinesses, the winners are those who know exactly who they serve—and serve them better than anyone else.
[1] Ries, A. (1996). Focus: The future of your company depends on it. HarperBusiness.
[2] Godin, S. (2011). We are all weird: The myth of mass and the end of compliance. The Domino Project
[3] S&P Global Market Intelligence. (2023, December 13). Private equity firms face pressure as dry powder hits record $2.59 trillion.