You have an exciting new business idea and have been studying how to start a business. But have you chosen a niche yet? Focusing on a niche allows your business to excel and become known for that particular thing. While it may seem counterintuitive to limit your target market’s size, this is exactly what most successful companies do when they first get started. A profitable niche can help your business soar.
Here are three simple steps to identify a profitable niche for your business:
Brainstorm your interests, skills and talents
Launching a new business is a labor of love. It takes work, sweat and tears to shepherd a business from concept to reality. 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.
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.
Related: WJR Business Beat with Jeff Sloan: Want to Start a Business? Find a Niche and Fill it (Episode 213)
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. This research will weed out the OK ideas and help you identify the profitable, change-your-life idea that will become your startup.
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.
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?
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 essential 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 specific keywords and how competitive those search terms are.
This research may help you uncover other related paths for your business. It will also reveal whether or not 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 profitable niche for your startup right now.
Research your market
A great idea alone will not ensure financial success for your startup. You must evaluate two other things:
- That there’s an audience that is willing and capable of paying for this solution.
- 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.
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 people who would be interested in the products or services you plan to sell, their spending power and the overall market value. To dig in deeper, check out business data platforms like Statista or IBISWorld and relevant business or trade associations.
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.
Finally, keyword volume can serve as supplemental, anecdotal evidence of market size. The higher the search volume, the larger the market.
Investigate the competition
The next step is to examine your competition. 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 how 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 spring forward. There may be no market for this niche currently.
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 these company 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 build a strong brand when branding your new business?
There are other ways to assess your competition. Thomas Smale, a contributor to Entrepreneur’s Leadership Network, shares a few other signs you can enter a niche and be successful, even if there are already other companies 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 helps 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 with relatively high search volume but little competition and paid advertising, an opportunity exists for you to upset the market.
Key takeaways on choosing a profitable niche
The process for choosing a profitable niche isn’t complex, but it does require that you do some legwork. Follow these steps before settling on the niche for your new startup, and you’ll identify a profitable niche where your business can thrive and grow.
Originally published June 21, 2021.