Niche businesses are great and terrible at the same time. On the plus side, you get to laser focus on a market and product set. Choose right and you get little competition and erect high barriers to entry. The bad part? Your business may seem to have very small potential.

But the possibilities might be a lot bigger than you think. Durval Tavares co-founded Aquabotix in 2011. The company already has a 10,000 square foot facility and 25 employees and sold 100 units this year. Next year he expects to sell 1,000 products and generate between $3.5 million and $4 million in revenue. Not too shabby. And what does Aquabotix make? Underwater vehicles.

Talk about a small niche. Whom do you sell to, the Cousteau family and anyone interested in raising the Titanic? As it turns out, the established manufacturers in the field were often too limited in their views. Here are some tips from Tavares on how to make your niche business bigger than you thought it could be.

Drop existing industry assumptions

The traditional approach in Tavares' niche was to build a few very expensive vehicles for companies and organizations that could do with nothing less and that had the money to pay what was necessary. But a little thought showed that there could be many other uses for vehicles that could go underwater, carry sensors, and be remotely operated.

For example, many cities and towns have water towers that act as reservoirs. Those tanks need to be inspected and hiring divers can be expensive. Not only are there the professional fees, but you also must wash them down with bleach and then treat the water in case of any... "contaminates." (Add any jokes about urinating in pools here.)

Aquabotix has an encased system that runs between $4,000 and $7,000, a fraction of what traditional systems would cost. It's also electro-mechanical and uses no hydraulics or petroleum-based systems that can leak and contaminate the water.

There are many other potential users. The vehicles can be used to do initial reconnaissance work, saving divers precious time underwater. They can check hulls for damage, barnacles, and peeling paint. Environmental monitoring of water conditions suddenly becomes much easier.

Build quality that people will want

Coming in cheap is great, but Aquabotix also needed to supply high quality products that would do what was needed without compromise. So Tavares ignored advice to have everything built in China. Instead, the company manufactures in Fall River, Mass. Electronics boards come from New Hampshire. Vessel bodies are fabricated in Worcester, Mass. Propellers come from Pennsylvania.

Quality can cost. For example, the motors they use come from Switzerland and cost 50 to 60 times more than cheap products from China do. However, the choice was a no-brainer. "We went through literally a hundred Chinese-built motors," Tavares says. "We spent a lot of time trying to get them to work." Cheap is meaningless when you only end up throwing the money away.

Get distribution set

Some companies have great success selling directly to customers. But in many industries, distribution is the name of the game. You want products in stores where your customers shop.

"The technology is the easy part," Tavares says. "The part we've worked the hardest is setting up the distribution network." Aquabotix finally convinced West Marine, the largest chain of marine supply stores in the U.S., to carry its products. "Someone like West Marine gets literally a hundred people a day trying to get products onto their shelves." You need a good and complete story--including working products, pricing, and a discount structure that works for distribution--to make a successful pitch.

Be ready for chance

This could come under the heading of generally smart advice, but it is particularly important for niche businesses. You never know when an opportunity might come by, so always be ready for it. "Chance happens to everybody and you have to be on the lookout all the time," Tavares says. "It's not like it's hovering over people, but when the opportunity comes, you have to seize it. And sometimes you have that in gut feeling that it's the right thing to do and you have to go with it."

Put these ideas into practice and you might find that your niche business isn't so niche after all.