This long blog post is an excerpt from my full book on how to choose your business niche, and write a business plan. Here is the link to the full book on Amazon.
A business niche is a subset of a market that a product or service might be focused on targeting.
And example of targeting a niche is a product that targets just dogs within the pet industry. And a deeper niche example might be a product that targets only a certain dog breed.
There are a few reasons why it helpful and important to find your business niche:
i. When first starting a business it helps you to find an area within large industries where you can be competitive
ii. It helps you find a specialization within your industry so people can refer others to you according to your specialization
iii. It gives you a manageable target to achieve when first starting out
iv. It helps you focus your business strategy and marketing efforts
v. It helps you differentiate from more established competitors in your industry
If you are looking for ideas, you can certainly look at popular magazines, book topics, TV shows and other things in your daily life. You will get plenty of ideas for large and lucrative industries to get into everywhere you look.
But in my opinion, it is far more powerful to first take a deep look inside yourself, and work from an understanding of who you are and what drives you. Once you identify a business area that you want to get into because it will be fulfilling enough to you as a human being, then it is important to evaluate your business ideas or niche ideas with real world criteria. But before that, always look inside yourself first. That is how much of this book will progress: first looking inside yourself and who you are, and then evaluating ideas based on practical and real world criteria.
The first thing you must do when choosing your niche is to follow your passion. Yes, I know that this sounds cheesy. So let me expand on that a little bit to make it a little bit less cheesy.
Most people's passions are fun things like travel or music or just sleeping or relaxing. That hardly helps because that leaves many boring industries out there that almost no one would ever get into if everyone just followed their passion. So instead of "follow your passion" let me change that for you to at least "have a strong interest in the industry in which you decide to start your business." And by the way, if your passion is just to create a business or to put food on the table for your family, that might be good enough.
The reason people say "follow your passion" is that working in an area you are passionate about gives you an intrinsic motivation to work harder, longer, and to forge on during challenging times. Try to identify what your strongest long-term motivations are, and start thinking about what businesses to get into from those areas of interest.
After identifying your "passion," the next thing to do would be to start evaluating your personal strengths. From all the things you are passionate about, what are you also strong in?
Some strengths can be industry knowledge and experience, ability to work alone, ability to build and manage teams, ability to network and leverage business connections, ability to take rejection, creativity, ability to raise money, and many more things that you can bring to the business as an advantage.
Similarly, consider your previous work experience and education. Is there something within your work history or education that you can bring to the business, and use it as an advantage?
If you have industry experience, it is a huge advantage that you can bring to your business. In fact, if you don't have experience or industry knowledge, your first three to nine months of starting your business will be a huge learning experience which will be a very big disadvantage. I'll talk about that a little later in the book.
Just like you should carve out your business niche out of your strengths, you should also make sure to avoid starting businesses which will expose your weaknesses. For example, if you aren't a people person, maybe don't start a customer facing business. And if you don't know how to program, trying to get into a technical business or a mobile app business would immediately put you at a disadvantage when compared to engineers who might start a similar business.
The next thing to consider when choosing a niche is whether you will have to initially build out a team of co-founders and empoyees to start a business in the niche, or whether you already have many of the necessary skills, and can do it on your own. As your business grows, you will probably have to hire and outsource many parts of your business. But in the beginning, you (or somone on your founding team) should be able to do many of the things required for your business. You simply won't have the resources to hire and outsource everything, nor should you do that at first. My advice is to have your hand on the pulse of as many parts of your business as possible so that you can understand the ins and outs of every part of it.
For example, if you want to make a mobile app, it makes a huge difference whether you can program the app on your own or not. Since I know how to program, I would have an advantage over many people because I can make the app for free whereas someone who doesn't know how to program apps would have to pay somone else $10,000 or $20,000 to get the app developed. That is a huge difference right from the start for a person who knows how to make apps.
Of course, there are levels of advantages. For example, even if I can make an app, a well-funded start-up that has a whole team of engineers and designers can make a better app than I can in a shorter amount of time.
Another thing you want to consider when choosing a business niche is how competitive the business and marketing environment in it will be. If you are in the travel industry for example, it is a very competitive industry. You would have to niche down to maybe only travel in United States. But that is still very competitive. So you might have to niche down to specific kind of travel like backpacking or luxury travel, and maybe within even a smaller area. That would be a far less competitive environment for you than trying to compete in the more competitive greater niches within your industry.
Of course, you also want to consider whether the small niche you choose is still big enough to help you achieve your financial goals for your business. If you niche down far enough that the niche becomes tiny, there may not be enough potential clients or enough money in it to be sufficient ofr you to achieve your financial goals.
There is a famous blog post on this issue by Mark Suster who is a very well known and respected venture capitalist. The article is here.
To summarize the article for you, Mark talks about three kinds of markets you can tackle. He refers to these markets as an elephant, a deer and a rabbit. A gigantic and competitive market is like an elephant. It is huge, but difficult to overcome. A market that is too tiny is like a rabbit. Even if you hunt it and kill it, there isn't that much meat on it. So a deer sized niche is a perfect size. It is not too big and not too small.
By the way, I am just using hunting as an analogy. I love animals and I am actually against hunting. As an analogy, hunting makes sense though.
So when you are looking for your niche, try to aim for a deer-sized niche. It doesn't have to mean that you will always stay in this niche. Once you find success in any niche, you can always grow out of it, and target elephant-sized niches, but you must start somewhere manageable.
Another thing you want to consider when choosing a business niche or a business idea is your realistic goals for your life. Your business should enable you to reach your goals. And if your goals aren't astronomical, you may not have to go after the most competitive or challenging business ideas in order to have your business get you to your financial goals.
Additionally, your business niche or idea has to be something that makes something better. For example, it might solve some problem, entertain someone, educate someone, make something or some process better, or do any other kind of good. Once you identify that, you can then consier whether what you provide is something that addresses something beneficial enough that people will pay for.
Once you identify a niche and a business idea to pursue in it, try to consider how easy or difficult it will be to promote. Some types of businesses lend themselves well to certain types of marketing, but other types of businesses have fewer effective ways in which they can be promoted.
It does take an experienced marketer to be able to determine what business ideas are easy to promote and which are not. If you are not an experinced marketer, as one of my free gifts to you that I mention at the end of the book, I can give you feedback on your business idea and try to help you understand if it is a good business to get into. Read more about the free offers I made available for you, at the end of this book.
Few things to consider when you are evaluating a business idea is whether that business is the kind of business for which people search for on Google, can generate publicity, or will go viral on social media.
The same sort of a principle applies to monetization strategies that can apply to your business. Some business types have many natural ways in which they can generate revenue, and others don't have as many natural ways in which they can be monetized. Again, if you aren't sure, this is a good thing to get coaching or advice from someone experienced in these issues.
Another thing to consider when choosing a niche is whether you already have a habit of dabbling in that space or area of interest.
Habits are scientifically proven to help people stick with something. It may be exercise or it may be working on your business. The power of habit is that it makes work much more effortless, and allows us to keep doing it longer. So if you will spend years working on your business, having a habit of dabbling in something or regularly being in an environment that makes doing something easier increases your chances of success.
In the previous section I explained how to look inside yourself for ways to hone in on the right business idea or business niche for you. In this section I'll give you a few tips for how to look at the external world for extra niche ideas.
One thing you can immediately do is browse product categories on gigantic websites like Amazon.com or similar sites.
For example, here is a list of the full store directory of Amazon.
That is a great list of over 100 of some of the most lucrative and popular business niches to potentially get into.
Similarly, you can also search on Google for things like "top 100 Amazon book categories" or "top 100 Amazon product categories."
When Googling for niche ideas, you don't have to just rely on Amazon. Try to also search Google for "top 100 business industries" or go to a book store, and browse the different kinds of book categories there. Once you get into a category/niche inside a book store, you will be able to browse the different sub-topics that the books in that category are about. That will give you ideas for how you can niche further down in a category.
You will find many good ideas there, but again, don't just blindly take a niche and run with it. Try to evaluate it to see whether it will be a good niche for you personally based on many of the points made in the previous section.
Continuing our discussion of places to find business niches, I want to introduce you to the Google Keyword Tool. You may already be familiar with it because it is a very popular tool, but bare with me for just a second. If you are not familiar with it, here is the link to it. It is free to use.
You can enter keywords into this tool, and get many related keywords which will give you ideas for niches that may be related.
Even though starting a business seems fun and maybe even glamorous, the reality of it is that the day to day of starting a business can be stressful, frustrating, dejecting, and somtimes simply boring.
For this reason, I want to get back to the idea of making sure that you are passionate and excited enough about what you are working on, and that you continue to build habits that make it natural for you to keep working on your business.
When I started my first business, I had no idea what business to get into. There was no one to teach me or advise me. There wasn't a book like this one, and there wasn't an online course I could learn from. When I was just starting out there wasn't even a YouTube!
So I had to learn by making my own mistakes. And when you are new in business, everyone who knows at least a little bit seems like some sort of a great expert. At least that was how it seemed to me. So I met someone who professed to be a "business guy" or an "idea guy" and since I didn't really know how to tell whether they know their stuff or not, I took some of their advice.
This person told me to apply some of the technology I was working on to the fashion industry. You don't know me so let me tell you: I know nothing about fashion. Now let's take a second and think back to earlier in this book when I suggested that you pursue a niche that you know something about. I didn't have that advice or insight when I was first starting out so I took this "business person's" advice and got into fashion as my business niche.
That led me to fumble around in the fashion industry for a few months until the project failed. I learned a lot, but the outcome wasn't what I was hoping for. I was starting from zero in that industry with below average knowledge of that industry. Everything was a first for me, and without good mentors I had no chance.
I wish I understood then that I needed to get into a niche in which I had knowledge, passion and exprience. That is why I am sharing this with you now so that you wouldn’t make the same mistake that I did.
If you think that I was done making niche-choosing mistakes, I wasn't. For my next business I started a group hiking website. I liked hiking. I can’t say it was my "passion" but I certainly liked it and knew more about it than I knew about fashion.
The problem I ran into was marketing. I originally tried to start it on a national level in United States. But it was just too difficult to get various hike organizers to start using the website in different parts of the country. I then changed direction and shifted my niche to target a hyper-local area of Northern California and mainly San Francisco.
The problem with that niche was that it was too small to make a significant amount of money from it, and was a little bit stuck.
To succeed with that business I had to change direction again to having themed outdoor hikes and because the events were interesting and themed, I was able to charge people money to attend, and I was able to get many attendees. That business was OK, but it wasn't going to become a big enough business to fulfill my hopes for it because it was difficult to scale and had a number of other minor problems. It did have some success, but you see how many niches I had to target, with none of them being perfect.
Let's say that you get a business idea. Of course, you want to get expert feeback and advice about it. But you can also do well brainstoming it with peers as long as you have a good way to brainstorm your business ideas.
Let me share with you how I like to brainstorm business ideas. You can use this method with a friend or on your own.
Let's say you get some business idea. You must ask questions about this idea like whether the founding team (probably just you on day one) has the skills to do the work. If you can do or learn to do the work, you can save some money. If not, you will need to hire help, which is an extra cost. You should also ask how you will promote this business. Do you have marketing expertise on the team or will that have to be outsourced? Also ask yourself whether the marketing environment is competitive for the ways you will promote this business?
What happens during the asking of all these common questions is that at times some business strategy has to be adjusted to make the overall idea work. What happens when a part of the business strategy is adjusted it mis-aligns other parts of the business strategy and you have to go back and ask the questions you've asked to make sure that the answers to them still make sense.Here is a list of questions to ask:
These are initial business planning questions. We'll cover business planning more fully in the next chapter.
Once you picked a niche and an idea, and brainstormed it on your own to find areas where the idea might be weak, the next thing to do is to begin getting feedback from different people.
You can get feedback from friends and family, business peers, people who you think might be potential clients, and industry professionals and experts.
Friends and family are great because they are almost always available to you. The problem is that they don't necessarily understand business or the industry in which your business is in.
Business peers are good to talk to as well. But the problem is that they might also be at some early stages of becoming entrepreneurs, so their insight might not be that strong.
Note of caution: when you talk to frinds and family, many people say something like "that sounds great" or "that sounds awesome" in their support for you. don't fall for that as a positive sign about your business idea. That is too easy for people to say. Get into deeper conversations than that. Really explore their thoughts and have a back and fourth discussion.
The best people to talk to are industry and business experts, and potential customers. The problem is that business experts are also the most difficult to get a hold of. They are usually very busy.
But I'll give you a tip for how to easily get to talk to many industry experts. This won't work for some industries, but it will work for quite a few industries.
The tip is to join Facebook groups that are on the subject matter of your business niche or business idea or overall industry. Usually there are large Facebook groups for just about any industry, and you can post questions there that many industry professionals will answer. You can try a similar approach with LinkedIn groups, but in the last few years Facebook groups have been taking over and becoming more popular than LinkedIn groups so I would recommend exploring professional Facebook groups first.
Personally, I have gotten help with such groups in helping me grow my online courses, Kindle books, YouTube channel, mobile apps, podcast, and much more.
Lastly, you must talk to people who you think are potential customers. Identifying and reaching out to your potential customers really depends on what your industry and niche are, and who those potential customers might be. Sitting here and writing, it is impossible for me to guess who your potential customers might be. But try to identify them and begin conversations with them ASAP. You don't have to start selling to them, but definitely try to get their thoughts on your ideas and whether they would be interested in the kind of product or service that you are considring.
Article by Alex Genadinik