Competition can spring up for a small or mid sized business from anywhere at any time. Dealing with competitors can send many businesses who lack confidence in their work reeling. A concerted effort by a well funded and well managed business could be the death knell for even the most sure footed player in a given industry.
To help compete with this reality businesses are increasingly focusing on super specialized markets, presenting themselves as experts in handling a certain type of client. By limiting the reach of your business you can actually assure your place within a niche market. You can also dispel less of your small business funding chasing a broader client base.
You might think that the limited focus can limit the kind of business you bring in. This fear is justified and so it is important that your specialized market is widespread and profitable enough to sustain your business. That said, if you have isolated the right market your expertise will grow quickly. Soon you will regularly be finding new ways to better serve your niche and grow your business around those discoveries.
Finding the best way to maximize the potential of a niche will take business funding and sharp focus from you and your staff. Once you do though it will be a lot harder for competition to impede on your territory.