But have you chosen your startup’s niche yet?
Once upon a time, the world was small enough (or, rather, geographic markets were insulated enough) that you didn’t need a niche.
It was okay to be a generalist. People only had so many places to shop.
But, today, we live in a global economy. People have access to products and services that are physically thousands of miles away and businesses that exist only online.
Competition is fierce.
A startup can’t be everything to everyone. A small business doesn’t have the resources to go head-to-head with the Amazons and Alibabas of the world.
While it may seem counter-intuitive to limit your target market’s size, this is exactly what most successful companies do when they first get started.
Amazon started with books before branching out into other products, hosting services, advertising, and much more. Google started with search before adding email, phones, an app store, and many other products. Apple started with computers before adding phones, tablets, headphones, and other products.
When you first start a business, it’s better to build something a few people love than something a lot of people like. It’s much easier to grow a business people love and miss if it wasn’t around than it is to grow a business people merely like.
Startups begin small but are focused on growth once they find product-market fit. So, finding a business concept that is not only viable but lucrative and scalable is essential to a startup’s success.
This is where niches come in.
What is a niche market?
A niche market is a subset of a larger existing market.
Focusing on a particular niche allows your startup to excel at (and become known for) that one particular thing.
When you provide superior products or services, you develop a competitive advantage. So, your business becomes the clear choice whenever a customer needs your specific products or services.
Choosing the right niche for your business lays the groundwork for a successful startup.
It’s not a decision to be taken lightly.
Below, we’ll take a look at how you can identify and assess possible niches for your new startup.
3 powerfully simple steps to identify a profitable niche:
1. Brainstorm your interests, skills, and talents.
Launching a startup is a labor of love.
It takes work, sweat, and tears to shepherd a business from concept to reality.
Make no mistake that you will get tired, you will get discouraged, and you will need to push yourself to keep carrying on. You’ll want to learn to harness your self-control and will-power as you start your new business.
Even writing a business plan can be overwhelming for a new entrepreneur.
One way to optimize your chances of success is to choose a business that aligns with your interests, skills, or talents.
Choosing a business that plays to your natural interests is more likely to keep you engaged when the going gets tough.
And, starting a business that aligns with your skills or talents will give you a leg up on the day-to-day tasks of running your business.
For example, if you’re working as a truck driver and enjoying the travel and schedule, you might consider starting a trucking company and becoming an owner-operator. Your skills and interests already align well with that type of business. On the other hand, if you’re a great amateur photographer, consider starting a photography business and getting paid for what you already enjoy and do well.
So, brainstorm your interests, skills, and talents. You never know where the most profitable idea may be. And, don’t censor your options this early in the process.
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2. Identify niches within your interests, skills, and talents.
The ideas you’ve accumulated so far are only the beginning.
Those ideas are the jumping-off point for some in-depth research. And, it’s this research that’s going to weed out the “okay” ideas and help you identify the profitable, change-your-life idea that will become your startup.
So, start by asking…
What real-world problems can you solve?
A viable business idea for a startup must solve a problem. Otherwise, people won’t spend their hard-earned money on it.
So, what problems can you solve with your skills and talents or within your areas of interest?
Is there an aspect of your hobby that has always driven you nuts and for which there is currently no solution?
Can you apply your talents and skills to solve a problem you hadn’t considered before? If you can’t think of one, ask your friends.
Niches are often identified by looking for audiences who are currently under-served or not served at all. Examine your original list of ideas and think about what audiences may fit those descriptions.
Conduct keyword research
Grounding your business idea in the real world is critical.
But, it’s important to ensure that you see the digital picture, too. A strong online presence is vital to success and is crucial for rapid scaling.
So, research keywords related to your business idea to gauge the level of interest and uncover related concepts.
Tools like Google Keyword Planner, ahrefs’ Keywords Explorer, and SEMRush’s Keyword Research Suite can tell you how frequently people search for certain keywords and how competitive those search terms are.
LSIGraph.com is another great free tool – when you input a single keyword, it shows you related keywords, search frequency, and competition level. Similarly, the free website “Answer the Public” shows related keywords and common search phrases. (Both also offer paid versions that allow you to search for more keywords.)
This research may help uncover other related paths for your business.
It will also reveal if people are showing interest in keywords related to your business. If they are – that’s great! But, if people are not showing interest, then it’s safe to assume that this may not be the most lucrative niche for your startup.
Pro-tip: With the right idea, it’s possible to create a successful business in a niche with weak keyword performance. But, it will require far more time and money invested in raising awareness and building a following. There’s also no guarantee of success, so follow this path at your own risk.
3. Research your market.
So, you have an idea. And, your idea solves a problem and has some reasonably high-volume keywords. Great!
But, that’s not enough to ensure financial success for your startup. It would be best if you were sure of two other things:
- That there’s an audience, who is willing and capable of paying for this solution.
- And that the competition isn’t so stiff that you’ll never achieve any traction.
So, let’s look at a few ways to do market research and assess your potential market.
Analyze the target market size
A startup can only succeed when there’s a market large enough to support it.
If there aren’t enough people willing to pay for your product or service (or if they can’t afford it), you’re doomed to fail. And, that’s not a dramatic embellishment – it’s a cold, hard fact.
You can’t afford to skip market research.
Start by Googling “market size” plus the intended field for your startup. You should find some basic high-level statistics on the number of consumers, their spending power, and the overall market value.
In addition to the overall market size and more targeted information about your niche (if it’s available), be sure to look for indications that the market is growing or declining. So, look back a few years – compare past and present data. If you want to scale, a growing market will help you do that.
Finally, keyword volume can serve as supplemental, anecdotal evidence of market size. The higher the search volume, the larger the market.
You’ll need this information for your business plan (even if you’re creating only a one-page business plan), investors, and lenders. You’ll also need to fully understand your target market to build a strong marketing and sale plan for your startup.
Investigate the competition
The next step is to examine your competition.
Competition is inevitable.
As we pointed out in our tips on writing a business plan:
Unless you’re creating a new industry, you will have competitors. And you’ll need to figure out how to beat them or at least to compete with them.
The easiest way to find your competition is to Google your targeted keywords and see what other businesses come up in search results.
Are there tons of relevant websites on the first few pages of results? If yes, then the market may already be oversaturated.
If you get no results, you may be fortunate. But, you’re better served by taking a step back and asking why there are no competitors before you sprint forward. There may be no market for this niche.
The best-case scenario is likely the Goldilocks result – the presence of a few smaller or low-quality businesses that won’t pose too much of a threat.
Whatever you find, check out their websites. Do their business websites look reputable and inspire confidence? Does the website copy express a distinct brand position? Have these competitors created a strong brand identity, and will you create a strong brand when branding your new business?
And there are other ways to assess your competition. Thomas Smale, a contributor to Entrepreneur’s Leadership Network, shares a few other signs that:
…you can enter a niche and be successful, even if there are already other sites serving it:
- Low-quality content. It’s easy to outrank your competition in a niche where other business owners are not creating high-quality, detailed content that serves the audience.
- Lack of transparency. Many online entrepreneurs have disrupted entire industries by creating an authentic and transparent presence in a niche where other sites are faceless and overly corporate.
- Lack of paid competition. If you’ve found a keyword that has relatively high search volume, but little competition and paid advertising, an opportunity definitely exists for you to upset the market.
So, survey the landscape for signs of competitors. And, take it all in before deciding that a niche is right for you.
Finding your niche
The process for choosing a profitable niche isn’t complex. But, it does require that you do the legwork.
Follow these steps before settling on the niche for your new startup, and you’ll identify a niche where your business can thrive and grow.