Last year, I became the host of Made in America, an online documentary series on how low-income and minority entrepreneurs overcome barriers to build their businesses.
In making the first season's four episodes, I met entrepreneur Sequoia Ferguson, who bought a box truck to convert her storefront clothing business into a store on wheels. I also met Consuelo Rosales, who cleaned houses to earn the money she needed to escape an unhealthy relationship. She was in the process of hiring a team and expanding her business to serve commercial customers. In spending time with them, I learned an important lesson about diversity.
When we talk about diversity in the world of business, we usually mean building a staff with varied genders, races, viewpoints, and other identities. This makes sense, as research tells us that a well-managed, diverse staff is often more innovative and successful than a homogeneous one. But little attention is paid to diversifying the customer base, which is what Sequoia and Consuelo hoped to do.
They both understood that diversifying your customer base is good for the bottom line. Generating revenue from more sources also can serve as a hedge against losses, lowering your risk by making you less dependent on just a few types of customers. And it can lead you to surprising places as you move to fill a gap that competitors have missed.
Sequoia first became a mother in her teens, just as she got her first business off the ground. Last year, she decided to switch to a mobile store to give herself more time with her two kids. Based in Hot Springs, Arkansas, she premiered her new venue at Memphis Pride Fest. She'd never been to a Pride event before, so, as a queer entrepreneur myself, I encouraged her to be open to the experience. I gave her a rainbow flag to hang on her truck and provided a few tips. "This is how you broaden your customer base," I told her.
If Sequoia wants to broaden the appeal of her That's So You Boutique to a new audience--in this case, the LGBTQ+ community--it starts with challenging any assumptions and implicit biases she might have. Instead of guessing what our community might like, someone trying to sell to us should directly ask us what we would like to buy. For Sequoia, I might suggest using a card-sort technique by putting together a Pinterest-like board of potential inventory and asking people to rank the clothes and accessories. Or she could use word association, asking prospective customers what they're interested in buying. If she asked me, I'd tell her colors, sequins, and anything related to Cher, Dolly Parton, or David Bowie.
But we're not all cut from the same cloth. While people in a group might have similar interests, it's important to counter stereotypes and not assume that everyone with the same identity likes the same things. The goal of this inquiry is to learn as much as you can about the new market you're hoping to serve before buying a single new item of inventory.
Consuelo, who also lives in Arkansas, is one of the millions of immigrants joining the country's entrepreneurial ecosystem. She used her housekeeping income to move herself and her three sons to a new home, and soon set her eyes on a bigger home and a better life for her family. That meant she needed to bring in more money, so she devised a plan to stop cleaning houses herself and instead hire employees to extend her range of customers. Residential customers pay only so much, so Consuelo's Cleaning Services started lining up office buildings, construction sites, and other commercial clients.
To continue attracting lucrative but demanding commercial clients, Consuelo needed to understand how cleaning offices differed from cleaning homes, such as the extra time it might take, what she should charge, and the time of day the work is done. Like Sequoia, she got out there and engaged with this new market by asking a lot of questions and learning through experience. But instead of testing inventory, Consuelo had to test her message to see what language would give her credibility and inspire confidence with a commercial client. Many of her residential customers worked in office buildings, so she looked to them for referrals to find her first commercial contracts.
Both Consuelo and Sequoia enjoyed the support of Communities Unlimited, a 44-year-old economic-development nonprofit based in Fayetteville, Arkansas. They also got help from Empower by GoDaddy, the web-services company that is one of the sponsors of the Made in America series. The program works with Communities Unlimited to equip business-minded minorities with training, tools, and networks. To get going, entrepreneurs like Sequoia and Consuelo must overcome disadvantages such as not being able to tap the family wealth that gets many entrepreneurs started.
This highlights how investors and financial institutions might be smart to stretch beyond their traditional customer base too. Giving a chance to budding entrepreneurs who don't fit the usual profile may not only be good for profits, but might also benefit society. Owning a successful business builds generational wealth, and for minorities, this reduces the wealth gap between groups.
Examples of diversifying a customer base can be found in virtually every market. Yoko Sen is an electronic musician whose genre is ambient music. She widened her revenue stream by rethinking the soundscapes of hospitals and health care facilities to improve patient care and the experience of visitors. In the toy industry, which typically caters to children, there's one group that often gets ignored: older adults. By connecting with them to learn how toys could improve their lives, companies such as Ageless Innovation have created talking and robotic cats and dogs that help older adults who lack creative stimulation and feel isolated and lonely. They're tapping a market that's wide open, and that eventually will be larger than the standard market for toys. That's because in less than 15 years, the U.S. is expected to have more people 65 and over than under 18 for the first time.
The more you think about diversifying your customer base, the more opportunities emerge. I've seen car-service companies that serve people with disabilities and entrepreneurship accelerators supporting people who are reentering society from prison. There are sex toys for people living with arthritis, part of a story line on the Netflix show Grace and Frankie.
So when you think about diversity, don't think just about your employees--think about your customers. Ask yourself, "Whom are you not serving?" Then go out and talk to them, even if you have some initial trepidation. With thoughtfulness and good intentions, these interactions don't have to be awkward or exploitative. Like Sequoia and Consuelo, you'll soon be building a business that meets the needs and desires of a new market.