If you think you are going to setup a business and appeal to everyone, you can think again. One of the biggest mistakes new entrepreneurs make is that they try to be everything to everyone. Corporations can do this because they have reputations and huge stockpiles of resources to expand into other areas of the business world. As a small business, you cannot afford to do this.
The answer is in finding the perfect niche for your business, and this guide is going to show you how to do it.
The big secret of entrepreneurship is that just because you start a business in a certain niche doesn’t mean that you have to stick to that niche. Many successful startups have pivoted multiple times because they discovered that their chosen niche wasn’t right for them.
You shouldn’t allow the fear of making a mistake paralyze you. Go out of your way to try something and if it doesn’t work you can move to another niche. The worst thing you can do is to allow fear to stop you from taking action.
What are You Passionate About?
Chasing the money in business is one of the worst motivations you can have. Unless you are one of the few people in the world who is genuinely passionate about money, you need to find something you care about. What you are passionate about is also what you are good at.
And when you are good at something you are more likely to succeed. Think about what you love and use that as a rough indicator of where you should start your business.
So Where is the Money?
Once you have found your industry sector, it’s time to start drilling down into the profitability of each niche. You should never opt for a niche you are passionate about if there’s no money there. It would be foolish to do so because business is still ultimately about money.
Figuring out where the money is involves market research. You may have discovered an area where there are no competitors. It may be because you’ve stumbled across a gap in the market. More likely, though, you’ve discovered a niche where there are no competitors for a reason.
You need to study the market demand for something.
A Problem that Needs to Be Solved
Good organizations are in the business of solving problems. Every product or service you come across is about solving a problem. Without solving a problem, you are not going to convince someone to buy. But why does a product have to solve a problem you ask.
There are products that have made a lot of money on the back of a trend. These products simply appeal to certain emotions. They have no long-term value, and that’s why they are lucky to succeed for more than a few months. This is not building a sustainable business.
Businesses that succeed in the long-term have done so because they have created something that people are going to use long into the future.
Do You Have the Funds to Make It Happen?
Real estate is harder to get into than the clothing industry. Jewelry is harder to get into than fast food. Every business and every niche has a certain amount of investment required to get off the ground. There are no exact figures, but that doesn’t change the fact that for new entrepreneurs some industries will be simply closed off to them.
Whenever you are making a decision as to which niche you wish to operate in, you need to consider whether you can afford to get into that niche. And if you can get into that niche you have to think about how long it’s going to take you to turn a profit.
The Long-Term Prospects
Every niche has a lifespan. Whether it’s due to declining customer interest or an advance in technology, every niche will come to an end one day. Take a look at the tobacco industry as an example. Due to changing customer attitudes, the industry is dying in some parts of the world; in the US smoking rates have declined to 17.8%.
Before you start to invest your money in anything, take a broader look at the industry and try to figure out whether there are any long-term prospects.
Finding the perfect niche for your business isn’t easy and will take time. Look at all the facets of your niche before committing to it.
What is your perfect niche?
About the Author
I am a regular writer for Forbes, Inc., Huffington Post, Entrepreneur Media (among others), as well as CEO and Chairman of Alumnify Inc. Proud alum from 500 Startups and The University of San Diego. Follow me on Twitter @ajalumnify