How do you find a profitable niche for your business? What will ensure your startup success?
Not even Google can be everything to everyone. They certainly didn’t even start out in maps, autonomous vehicles, drone delivery, video, or online pay per click ads. They started with a niche, gained a profitable foothold in the world and built a massive enterprise on top of that.
No matter how grand your big vision is, and even if you hit the ground running with billions of dollars in venture capital, you can’t be too broad at the beginning. You can’t spread yourself too thin. You’ll burn your resources, fail to get traction, won’t be strong in any area, and you’ll be vulnerable to many, many competitors.
If you want your startup business to survive and thrive, you have to pick a focused niche to start with. Then build on it and expand. To get to this next level you also need a niche that is truly profitable. So, how do you find and pick one especially for those that are wondering how to start a business in a few hours?
What Niche Can You Embed Yourself In?
When figuring out how do you find a profitable niche for your business, it’s far better to be able to really embed yourself in the space you want to start in. It will give you proximity to customers. It enables you to watch and understand their problems, to speak with them, get feedback and see how they are really using the first versions of your solution.
This may be a specific geographic market like New York City or Seattle. Or it can be a much tighter niche within a specific market.
For example; in real estate, a tight niche would be luxury condos in Manhattan, which are brand new construction and start at $1M and up.
In fitness, it could be US yoga instructors with their own studios and at least 20 students enrolled. Or it could be yacht owners with vessels at least 100 feet long and who dock in South Florida.
These are examples of niches that you can go embed yourself in to understand better and build a network. In these cases, you can go to Realtor and builder events in Manhattan, visit these yoga studios as a practitioner or national events where they congregate or spend your days at waterfront restaurants and bars in Fort Lauderdale.
What Will & Won’t Change In 10 Years?
Asking these two important questions has been in the DNA of some of the most successful supersized startups when thinking about how do you find a profitable niche for your business.
Think Jeff Bezos and Amazon. Be careful of jumping into a niche just because it is hot today and has been growing for the past five years. It could be dead tomorrow.
Instead, consider what won’t change in 10 years. What will people still need and do in 10 years from now?
Then ask what is likely to change? How are new technologies creating new platforms that the tools and experiences of tomorrow will be built on? What are the most pressing problems people and other businesses are likely to have in 10 years from now?
How Big Is This Niche?
Maybe you’ve already shortlisted a few niches you are interested in exploring. How big are they? What is the size of the total addressable market in these niches?
Knowing this isn’t just critical for your ability to balance the finances and make a profit or scale. It is vital for fundraising and finding a profitable exit.
If it is not at least billions of dollars, forget about it. It’s too small.
Learn more about measuring the size of your market in this fundraising training.
Remember that storytelling plays a key role in fundraising. This is being able to capture the essence of the business in 15 to 20 slides. For a winning deck, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.
ACCESS THE PITCH DECK TEMPLATE
Who You Resonate With
Who does your personal and corporate brand resonate with?
It’s not always the same as what you want. Your values and style and branding make you unique. You might think you are going in one direction, and find your offering resonates and gets the best feedback and attention and retention from a completely different group.
It’s far better if you can get a handle on this in advance and avoid wasting a lot of time, money, energy and frustration.
Who are you, your brand and company culture at its most authentic? Who else is like you or drawn to that?
What Is Championable?
A lot of people would like to create a new internet browser and search engine or hit social media network. Most don’t stand a chance at creating that. At least not with the budgets and market position they have today.
The purpose of finding a niche is to find one area you can dominate in fast. Some niches are already far overcrowded. Some have more providers than there are monthly customers. That’s not to say you can’t win big in niches with competition and even big competition. That can have advantages too. But you have to be able to win this niche.
We’ve seen Uber competitors in other countries get great traction, market share and raise hundreds of millions of dollars. We’ve seen startup mobile phone service companies get great traction against a few giants. We’ve seen disruptions in the insurance industry.
Whichever way you go, be confident you can own this niche. Then you can expand after you control this base.
A big part of this is being able to get enough data on this niche, being able to really know your target customers in this niche and having a unique competitive advantage that isn’t easily wiped out or replicated.
Who Will Pay For Your Product & How Much?
The greatest test when finding how do you find a profitable niche for your business is to know how many people will actually pay real money for what you are offering. To be profitable they have to be willing to pay enough to create a great margin. You need to be able to attract enough people at those prices. Start asking them to pay and see what you get.
Above all, get out there and test, test, test.