For a small business, the best chance of success is to find a profitable niche. You can’t be all things to all people given your limited resources. Let’s face it, it may be extremely tough to beat the likes of Wal-mart or Amazon as a small business – at least at the onset. But you can certainly get a little piece of their pie, grab that niche and grow your business from there.
Sheri Schmelzer succeeded not by competing against a market giant head-on, but by riding its coattails. She saw the huge demand for Croc shoes and decided to create a line of accessories she called Jibbitz to decorate Crocs. Crocs eventually bought her accessories company for $20 million.
The question of course is: How do you find a profitable niche?
Choose a Niche Based on Your Passion
Karel Murray in the article 5 Elements to Identifying and Building Your Business Niche suggests that a profitable niche starts out from figuring your own passion and strengths. He suggests 5 elements to identifying and building your business niche:
- Create an inventory of your strengths
- Select the top two areas you have a passion for pursuing
- Research the two niche areas you’ve identified
- Build a resource inventory, including business professionals you can network and build alliances
- Put your stake in the ground and claim your position within your targeted niche
Choose a Niche Based on Identified Audiences
An alternative approach to finding a profitable niche is to look for a specific target market. You can choose an audience that represent yourself or you gravitate toward. The advantage of this approach is that you know what they are going through, what are the problems and challenges they face, and what are the needs that are currently not being met. You will also have an idea on the size of the niche, and whether the size could become profitable.
You can also choose an audience from a niche that you know have their own sets of needs that are not satisfactorily satisfied by the market. This business may not be what you are passionate about or know deeply about (at least initially), but don’t close your mind to niches that may prove to be a winner. As A.J. Wasserstein said in choosing to start a records management company business, “It is a boring business. We’re a boring simple business that makes a lot of money, which is fine!”
Choose a Niche Based on Existing Problems
Whether you choose a niche that you love or a niche that you know nothing about, the key criteria is that a problem should exist in the marketplace. Do these people have specific problems not currently addressed or not satisfactorily tackled by the market?
Chris Ducker suggests these following steps to help you pick out the most profitable problems:
- Number of monthly searches related to a problem
- Number of searches that imply intent to solve that problem
- The stability of search terms related to that problem
- The amount of good quality free information on the Web
Choose a Niche Based on Products
Still another approach is to focus on niche products that will support market demand and profitability. Andrew Youderian’s criteria in choosing the right types of products are worth noting:
- Sell products with a $100 to $200 price point
- Sell products that require a lot of accessories
- Sell products with low turnover
- Sell products from quality manufacturers
- Sell small products
- Sell something that’s hard to find locally
- Sell a disposable or consumable product
Finding a profitable niche market is not easy. And remember, what works for some may not work for you. Find the approach that feels right for you, learn as much as you can about the business, and jump start your business.
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Category: Starting a Business