Starting your own business can be a rewarding venture. One of the first steps for a startup is to find a profitable niche, which can be challenging for budding entrepreneurs.
Did you know that 42% of startups fail because they fail to find a profitable niche for their business?
These aspiring entrepreneurs tend to target too broad of a market segment; you can’t sell to everyone.
On the flip side, some businesses target such a small market that it’s unsustainable for them to operate; finding balance is the key!
In today’s hypercompetitive market, finding the right audience is one of the easiest ways to stand out. Instead of trying to appeal to everyone, identify an existing gap in the market that you can fill. Ponder upon how to find a profitable niche.
In this article, we’ll discuss how to define a niche and give you three super actionable steps to find a profitable niche.
What is a Niche?
With our years of market experience, we have distilled down the definition of a niche to this simple yet powerful statement:
A niche is a hyper-targeted group of people with a specific current situation who all have a specific problem.
This statement can be broken down into three essential components:
- “A specific group of people”
- “A specific current situation”
- “A specific problem”
Concentrating your efforts on these components will solve your problem of finding a profitable niche.
As a business owner or marketer, your job is to identify and create a solution for a specific niche and then promote it to the relevant audience.
Benefits of Finding a Profitable Niche for Your Business
Figuring out how to find a niche market can help you reap the following benefits for your business:
Easier to Compete & Grow
If you focus on low-hanging fruit instead of the largest slice of the pie, you will find it easier to grow. Generally, the more you niche down, the less competition there is.
You won’t need to put in as much effort to prove that you are better than your competitors. Plus, as your target audience is a small group of people, you’ll understand and connect with them on a deeper level.
On the flip side, a marketing campaign that lacks specificity may not be successful in drawing attention to your brand, especially if you are not a well-known company like Apple.
In a highly competitive environment, your brand’s voice could easily get lost in the noise of other campaigns with more reach.
Higher Customer Loyalty & Retention
Finding a niche involves cultivating a group of believers obsessed with your products or services. These devoted fans are your business’s lifeblood, helping it grow and flourish.
They become your fans because they know that you care about their needs and have tailored your products or services to solve their specific problems.
When there are very few businesses competing with yours in doing so, your perceived value in their eyes becomes much higher. They become cheerleaders for your business, rooting for you to succeed. As a result, customer loyalty, retention, and overall customer lifetime value (CLV) are high for businesses that serve a niche market.
Higher Return on Investment (ROI)
Generally, the marketing cost of reaching a niche market can be higher than that of a generic or broad market. That’s because social media ad costs increase as you become more specific with your target audience with factors like traits, interests, etc.
With niche marketing, the cost per acquisition is higher. You get more responses, and the click-through (CTR) and conversion rates are higher. You are fulfilling a particular need, and the competition is low, making your ROI shoot through the roof.
Also, you don’t have to spend much on trial and error to figure out what works in marketing to such a small target audience. You can hit the bull’s eye in a few tries.
Figuring out how to find a profitable niche also involves knowing your target audience better. If you are successful in doing that, you’ll be aware of your audiences’ ins and outs and the problems they face.
With that knowledge in mind, you can tailor your products or services and your marketing message, making targeting much easier for you.
To find a profitable niche, you need to focus your practice on one area, which can help you hone your skills quickly. That enables you to become an expert or a thought leader in your specific niche market.
For the audience, expertise matters more than a brand name. Say you are a small digital marketing firm specializing in managing lawyers’ social media marketing. In that case, your customers will likely choose you over a larger marketing firm with higher brand recognition.
When it comes to industries like legal, health, and financial services, customers try to find businesses that are experts in their respective fields.
If what you do for your customers is mediocre, it’ll be hard to get noticed in the crowd. Offering something you are really good at will help you stand out, gain customer trust, and increase brand recognition. Ultimately, your brand’s name will be associated with what you offer. When someone needs that specific product or service, you’ll be the first one to pop up in their mind.
When you serve a niche market, one of the most significant benefits that come with it is that it’s very word-of-mouth friendly. The audience in a niche tends to be in regular contact with each other. Getting the word out about your business is relatively easy.
For instance, lawyers tend to hang out with each other after work. If one of them finds success working with a digital marketing firm, they’re likely to share that with their friends. That leads to organic leads pouring in, which equals a bigger bottom line.
If you’re operating in a niche market, your existing customers are your best marketers. The more value you provide to them, the more likely they’ll rave about your product or service in their social circles. That’s why figuring out how to find a profitable niche is always worth it!
How to Find a Profitable Niche
Many entrepreneurs struggle with one of the first steps of starting their business: finding a profitable niche. With years of experience in the market, we have boiled down the whole process into three simple steps.
By acting on these three simple steps to find a profitable niche, you’ll be able to launch a profitable business that’s sustainable in the long run.
Step 1: Find a Specific Group of People (Targeting Audience)
To find a profitable niche for your business, first, you need to identify a specific group of people you’ll serve.
Most entrepreneurs, even some established businesses, make the mistake of going after a generic niche. While going for that approach is as simple as it gets, the most significant disadvantage is that the competition is too intense in broad niches.
You’ll compete against well-established businesses with tens, if not hundreds, of thousands of dollars in revenue. If you try to steal their market share, they’ll stomp you with their massive marketing budget and the influence they’ve built in the market over the years.
Instead of being overwhelmed and defeated by the competition, it would be more effective to focus on easily attainable opportunities; go after low-hanging fruit.
You can easily break down generic market segments into more specific niches, with more sub-niches within those niches.
Generic market segment: Fitness Trainers
Niche: Fitness Trainers who closed at least five transactions last month
Sub-niche: Fitness Trainers who closed at least five transactions last month and lived or worked in a transient market.
As seen in the example above, you can go on and on down the rabbit hole until you find a specific group of people you can satisfy with your product or service. An important note is not to be too specific and reduce your niche market value to nothing. Feasibility and sustainability are essential factors for the success of any business.
Step 2: Find the Current Situation of Your Target Audience
Once you’ve identified your target audience, there will still be many people in that group who are not the right fit for your business.
To narrow them down even further, look for prospects with a specific current situation that maximizes the effectiveness of the solution you offer. From the earlier example of fitness trainers, some specific current situations you might be looking for are:
- Fitness trainers who are paying for their leads from large lead-generation firms but not seeing any deal flow coming in
- Trainers who are paying for social media ads but are facing low conversion rates
- Trainers who are spending too much time posting consistently on their social media.
By identifying this current situation to target, you can shy away from the people who might not be a great fit for your solution.
Say that a fitness trainer has never purchased a lead before and only relies on referrals. In that case, convincing them will be much more challenging than convincing someone who buys leads from your niche competition. Offering them something better, faster, and cheaper will make them jump ship and become your loyal customers.
To convince someone already at the bottom of the sales funnel is always easier than making them enter it.
Step 3: Define Problems & Their Solutions
The final step in finding a profitable niche is defining the problems that your solution will solve for your clients. As a business owner, this is what you are paid to do and, therefore, really important to nail down.
Your business will be built on the back of the solution you offer. The more value you create with your solutions, the less competition there is, and the more profitable you’ll be in the long run.
From the fitness example earlier, suppose that you offer a solution to your clients who spend a lot of time posting on their social media. Your solution allows them to post faster and saves them an hour daily.
That’s a great solution, but why are they posting on social media? The most probable answer is that they are posting to get more exposure, so they get more leads and, as a result, close more deals.
In that case, your solution should solve the real problem: closing deals for them. That solution will be worth a lot more to them, making it easier for you to charge more and scale your business faster.
Take our example. At Scaling With Systems, we don’t help our clients by just handing them a fully trained virtual system. That would be a decent value proposition, but that doesn’t solve any of their real problems.
Instead, we work with our clients in a close relationship to systemize their back end and their front end. We offer the systems, tools, and automation to fill their calendars every day of the week. Then we have the fully trained virtual assistant come in and execute all of that for them. That’s much more valuable for our clients.
How To Get Clients For Your Digital Marketing Agency
Some ways you can use to identify problems of your target audience are:
Speaking to Your Audience
If you are unsure what solution you’ll offer, you already have identified your target audience. Try to have a one-on-one conversation with your audience to determine their fundamental pain points and tailor your solution based on that.
Engaging on Forums & Websites
Online forums like Reddit and Quora are great places to research niche markets. There are countless communities for every thinkable niche on these sites, and within those communities, you’ll always find people sharing their pain points and looking for solutions.
Plus, almost every niche has dedicated online community websites you can leverage for your research. For example, there’s an online community for lawyers named “The Law Community,” where they connect and share their typical problems. These online communities are where you might find the inspiration you need for your business.
Surveying Your Target Audience
Start your own online community or join Facebook or LinkedIn groups that can act as focus groups. You can gather vital information from these experimental groups through surveys and polls. These surveys will give you first-hand insights into your audience’s everyday problems.
Another way to identify your target audience’s fundamental problems is through keyword research. Today, whenever people face any problem in their lives, the first thing they do is look for a solution online. The number one site where they put in their queries is Google.
With the help of a keyword research tool like Ahrefs or Semrush, you can easily pull out all the questions people in your niche have. Google Keyword Planner is another useful tool for keyword research, and it’s free to use.
By leveraging these tools, you can analyze most of your target audience’s problems and find a profitable niche.
Read Your Competitor’s Reviews
Reviews are easy ways to identify your target audience’s problems. The review section is where most people vent about the issues they face with a product or service.
To solve these issues in your product or service, this will help you improve your value proposition. This will make your customers willing to pay you higher rates, making it easier and faster for you to scale up.
How to Choose a Profitable Niche: FAQs
What is a niche?
A niche is a hyper-targeted group of people with a specific current situation who all have a specific problem.
How do you find trending niches?
To discover a trending niche market, consider looking at what is currently trending on Google. You can do this by analyzing which products or services are currently attracting the most visitors. Google Trends and Google AdWords are valuable resources for identifying current trends. You can use these tools to search for different keywords and see which ones are most popular at a given time.
How do you know if a niche is in demand?
Surveys and focus groups are reliable methods for assessing the needs of a target market. Suppose you have access to a list of prospects, such as an email list, a blog readership, or previous customers. In that case, you can poll them to determine the level of interest in a product or service you are considering launching. This can help you determine if there is sufficient demand for your offering.
Wrapping Up: Steps to Find a Profitable Niche
Launching a successful business is a considerable challenge for entrepreneurs, especially if they want to enter a competitive environment.
If you find a profitable niche, you can improve your chances of succeeding, even in a cluttered space. All you need to do is find your target audience in a specific situation that gives you leverage, define their pain points and offer a solution based on that.
By following these steps, you’ll have little-to-no competition in the market and increase the perceived value of your offer. That way, you’ll be able to charge more and scale your business faster.
Speaking of scaling, at Scaling With Systems, we have perfected the customer acquisition strategy. With our help, you’ll be able to fill your calendars and focus on scaling your business instead of worrying about where your next client will come from. Learn how we can help you by booking a free consultation call today.