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Small niche companies are great. They typically have high gross margin, little competition and long product cycles. What they do not have is scale; a niche market will never sell millions of units.
The characteristics of small niche businesses create some unique challenges when it comes to developing products. Compared to larger companies, small businesses have limited product development budgets. Small companies simply do not have the scale or cash flow to support large product development budgets. They do not have to develop products as often as large companies (longer product cycles), but that also means they cannot afford the fixed cost of a full-time product development team. This lack of team means they will likely be less efficient than larger companies — making the problem even worse.