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How to Pick a Niche for Your Small Business

August 11, 2023 / 384 Comments

You will have heard people saying that to be successful; you need to pick a niche for your business. It is pretty standard business advice. However, some of the world’s biggest businesses don’t have a clear niche. Do you actually need a niche? In this article, we will cover why small businesses need to niche down and how to pick a niche for your small business. And we will show you that even big businesses are more niched down than you think. 

What Is a Niche

The best way to think of a niche is it allows you to concentrate your efforts so you can maximise your ROI. (Return on investment.) You focus all of your efforts on one thing that you do to the best of your ability. This narrow scope of focus makes it a lot easier to find customers, market your business, optimise operations, and improve your product or service.

A niche can be the customers you serve, the products or services you offer, or even your way of doing business. It can be as narrow or as wide as you like. However, we do recommend starting as narrow as possible and then expanding your niche as your business grows – this allows you to streamline the use of resources in your business. We’ll take a little bit more about how to pick a niche for your small business further on in the article.

Here are some examples of niches:

  • Travel blog for people in wheelchairs
  • Beauty tools for left-handed people
  • Eco-conscious supermarket
  • Creche for nightshift workers

This niche attracts the people you want to attract because it is a product or service created with people like them in mind.

A niche allows you to optimise the use of your resources by focusing them on a narrow group of people.

The Benefits of Niches for Small Businesses

So why do so many people encourage small businesses to pick a niche? Here are some of the main benefits of niches for small businesses so you can determine if it is right for you.

Niches Allow You to Compete Against Big Businesses

The major benefit of niches is they allow small businesses to carve themselves a foothold in a competitive market. There are so many businesses out there that it can be difficult to stand out as a small business or a new business. Rather than competing against the giants in your market (who have more resources at their disposal) or trying to reinvent the wheel, you can stand out by narrowing your focus.

The major players in your industry can make a great product or service, but it is impossible to make a product or service that meets all the needs and preferences of everyone in the world. Different types of people have different preferences. By choosing a niche, you can attract customers who feel that the major players don’t serve their needs and are looking for something that serves them better.

Niches Allow You to Improve Your Expertise

The second benefit of niches for small businesses is that by focusing all of your efforts on one thing, you can become an expert in that one thing. This is particularly true if your niche is based on the type of product or service you offer. For example, if you are a copywriter who focuses on writing landing pages, then in time, you will become an expert in writing landing pages because you are writing landing pages more often than a general copywriter might. If you only manage TikTok ads for e-commerce businesses, then you will become the expert in running TikTok ads for e-commerce businesses because that is what you do every day.  

Niches Improve the Effectiveness of Your Marketing

The third benefit of niches for small businesses is that your marketing is more effective because you are talking to fewer people. You can target your marketing to the problems, pain points, needs, and wants of your ideal customers.

For example, if you are trying to create a landing page for your product, you need to address the problems the customer is experiencing and their pain points with current products or solutions available to them. From there, your landing page shows how your product solves that problem and the benefits that reduce or eliminate their pain points.

Without a niche, that becomes a difficult task. There may be 50 different types of people who could benefit from your product, all of whom have different pain points and desires. How can you possibly create a landing page that is highly attractive for all of those people? You’re basically taking a scattergun approach and seeing what you hit, which impacts the conversion rate of your landing page.

When you have a niche, you are taking a more targeted approach because you can tailor your landing page to your ideal customer. You can focus your landing page around the benefits that make a real difference to those customers and the transformation they can expect to see. Your landing page conversion will be far higher because the customer reading feels like the product was made specifically for them.

Niches Are Not Permanent

Niches are not permanent. You can change your niche at any time for any reason. For example, you might pick a niche and then, after a few months, decide that you don’t like working with that type of customer because their expectations or needs do not match their budget, and you can’t handle the capacity required to be profitable in that niche.

Even after you have established yourself in one niche, you can pivot and change your niche. You can take everything you learned about establishing yourself in a niche to shorten the learning curve. Many of your resources can simply be revised so that they are tailored to your new niche.

You can also expand your niche at any time. This is common for tech products and SaaS businesses whose products can benefit multiple types of people. When they are ready to grow, they will create new sales funnels and marketing assets tailored to a second niche. That allows them to work in multiple niches without diluting the effectiveness of their marketing or operations.

Niches are not permanent. You can expannd your niche or target additional niches as your small business grows.

When You Need to Pick a Niche

Many people pick a niche for their small business when they first start their business. However, that may not always be the best time to pick a niche.

If you are a new entrepreneur starting your first business, then we would recommend staying general at first to build experience and see what different types of clients are like. This allows you to get a feel for various niches without committing 100%.

Let’s say you’re a freelancer starting your business on Fiverr. You can see what kind of skills and types of work are common in a particular industry. It also gives you an opportunity to test what clients are like in a particular niche. For example, one of our team was considering the real estate niche for her freelance copywriting. She used Fiverr to test out the niche with jobs for real estate property descriptions and brochure copy and decided the niche was not for her because it didn’t match her preferred way of working.

As a new entrepreneur, this gives you time to test the water rather than having to pick a niche. When you are ready to start your business independent from marketplaces (you’re ready to make a website and start branding etc.), you would benefit from having a niche.

Is It Okay to Not Have a Niche?

There are people who make a good living being generalists – just look at handypeople. However, as the saying goes, the riches are in the niches. Having a niche makes it easier to charge more because people are willing to pay more for specialised products or services.

Imagine you need to get your car fixed. There are hundreds of mechanics to choose from, and you’re not really sure where to start. Then you see a listing for a specialised mechanic. It could be a mechanic that specialises in your kind of car. (So they know about that weird design quirk or how you need to get specialised parts because the manufacturer decided to be difficult.) It could be a female-run mechanic, so as a woman, you feel confident visiting the mechanic because there is a lower risk of being ripped off, talked down to, or leered at.

As long as the budget isn’t the primary factor in your decision, would you be willing to pay more for a tailored service? Would you pay more for a mechanic who specialises in your type of car and, therefore, likely has spare parts on hand, reducing your service time? Would you pay more to not dread visiting the mechanic as a woman or any other person who may experience discrimination and harassment at the mechanic?

How to Pick a Niche for Your Small Business

There is no set list of good niches or bad niches for your small business because it is very dependent on your needs, wants, interests, skills, and experiences. So we can’t give you a set answer of what makes a good niche. We can give you a decision-making process for how to pick a niche for your small business. This will take you through the various steps of identifying potential niches and evaluating the niches to find the best one for you.

List All of the Types of Clients That Need Your Products and Services

This is the brainstorming step of picking a niche for your small business. You’re going to think about all the types of clients who may need your service or product. It can help to think of the umbrella categories of types of clients that need your product or service. For B2B businesses, it can help to think of main business categories like retail, e-commerce, service businesses, etc. Those categories can help your brainstorming process.

The goal here is not to list every kind of customer for your business; it’s just to give you a long list of potential customers or niches. Don’t try to think about your interests at this point. We’ll do that in the next step when we create a shortlist.

Shortlist the List

We need to turn this overwhelmingly long list into a shortlist of niches that you are interested in so you can research the feasibility. Take a few passes through the list. The first pass will eliminate any that you are not at all interested in. The second will eliminate any that would require you to learn a lot to serve that niche. (Highly technical niches that you don’t already have basic knowledge in.) The third pass will remove any niches that you are unsure about.

Before you move to the next step of picking a niche, you want a shortlist (less than 5) that you are willing to research and look into.

How to Pick a Niche for Your Small Business: Is Your Niche Good?

How to Know if a Niche is Good

We believe the best niche lies in the sweet spot between interest, access, authority, and profitability.

  • Interest – Are you passionate enough about this niche to do it day in and day out? If you need novelty to stay motivated, is there enough novelty in this niche to keep your interest in the long term?
  • Access – Do you have access, or can you get access to people in your niche? Do some research to see how easy it will be to find your first 10 customers in this niche. Where can you advertise? Where can you network with potential clients (either online or IRL)?
  • Authority – Do you have authority you can leverage to build trust with your niche? This could be past work history, being a member of your niche, or having achieved results in your niche.
  • Profitability – Is there enough of a profit margin in your niche based on the resources you have, the expectations of your target client, and the capacity you can handle? It can help to identify your ideal profit and then reverse-engineer how many customers per month, week, and day that would equate to.

A niche that ticks all of those boxes is a good niche for your business.

Research Your Chosen Niche

The final step of choosing a niche for your business is to do some initial market research to understand how your product or service fits into your customer’s life. You also want to create a basic client profile to identify the customer needs, wants, and the pain points they experience with the current solutions.

This will require some digging, so see if you can speak to people in your niche that you already have a relationship with. You could speak to past clients or friends and family who are in this niche. That relationship comes in handy because you need to do some digging and probing to find the root cause of the issues (rather than the first thing that comes to mind.) Often, people are so used to the standard offering that they don’t stop to think about what their ideal is or what elements don’t really work for them. You may need to make suggestions or ask targeted questions about elements of the product or service.

Once you have chosen a niche for your small business, tailor your business around the wants and needs of your niche.

What To Do When You Have Chosen a Niche

Small businesses see the maximum benefit of picking a niche when they tailor their business around that niche. Think about the experience and needs of people in that niche and what they would appreciate from your business. The Pumpkin Planby Michael Michalowicz is a great book about how to tailor your business operations to your niche. Your goal is to make customers in your niche feel like you have thought about every possible need or want they could have.

The best way to know what needs and wants your niche has is to ask people and clients in your niche. Start by talking to friends and family in your niche to find out what pain points they currently have with the solutions they are using.

In The Pumpkin Plan, Michalowicz gives an example of an airline that wants to serve executives travelling for business. Upon speaking to some of their clients, they identify that their target client’s major pain point is that they lose so much working time when they have to travel. Between the commute to the airport, the check-in and security process, and the distracting airplane environment, the executives lose hours or full days of work.

Over multiple rounds of feedback-promoted refinement, the fictional airline decided to pick up customers from designated pick-up points and transport them to the airport using a minibus. The minibus could use carpool lanes to get customers to the airport quicker. The minibus was fitted out with free WiFi and tray tables so the executives could work on the way to the airport. They also had a gate agent on the bus to check in customers and their bags when they get on the bus to reduce airport wait times. The pick-up points would have free parking, and the airline paid a premium to secure a dedicated security line to expedite the process for clients.

On the plane, they have stripped in-flight entertainment and kids’ snacks in favour of free WiFi and concierge services. They have also made deals with other companies who share their niche to offer product testing on your flights. In this example, the airline has leveraged their niche to create a product that is very attractive to its target market. Their customers will be raving about the airline to other busy executives. This is why we niche down.

The trick is to find the needs and pain points your niche has and then decide what elements you can take away that your niche doesn’t care about and what elements you can add that provide extra value to your niche. These elements would be both things your niche values and things you can feasibly provide.

 

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