What they are, why you need one, and how to find one that’s profitable
Many years ago, before the internet and globalization, the supply of goods and services was limited. If you needed a lawyer, you went to one of the lawyers in your city and paid whatever price they charged you. Today, you can compare lawyers online, check their reviews, and even compare prices — or even better, get the legal advice you need through specialized AI-powered apps and websites for a fraction of the price.
In the past, if you were looking for a specific product, like spirulina tablets, you went to your local health food store and bought whatever they had, and probably paid a premium because it was expensive for the store to import. Today, you can buy everything online. You can compare prices across websites and suppliers, check their reviews in detail, and then make the best choice. You can even get the product shipped over from China if you want — and it might still be cheaper than buying it at your local store.
That’s the power of the global digital marketplace: anyone can access anything from anywhere.
This makes competition extremely fierce. As a graphic designer in London, you are not only competing with other designers in London, you are also competing with Indian, Chinese, American, and Eastern European designers offering their services on sites like Upwork and Fiverr.
For most companies, especially small businesses, the global marketplace makes it extremely difficult and unsustainable to compete on price.
But if you don’t want to compete on price, you need to compete on quality.
And the easiest way to compete on quality is to become the best in ONE thing.
A niche is a specific segment of a larger market. Let’s say fitness is your market: possible sub-markets, aka niches, could be pregnancy yoga, supplements for vegan bodybuilders, luxury skiing holidays, and weight loss boot camps for busy professionals.
In its essence, a niche is a combination of three elements:
1. The WHO:
This is the target group you are serving, e.g. busy professionals, new mums or vegans bodybuilders. The who should be specific: “Women” is not a great target group, because it’s too broad. “Busy female professionals in their 20s” is a great target group.
But be careful — the who should not be too narrow, either. For example, if you have a local health store in a small town, focusing solely on vegan bodybuilders might not get you enough clients.
2. The WHAT:
People buy products and services in order to achieve a certain improvement in their lives. They want to become healthier, happier, wealthier, less stressed, and to increase their social status.
The WHAT is about the specific result your target group will get from buying your product or service. This should be something they really, really want.
Let’s take the example of a single male professional in his twenties who wants to get a girlfriend: to achieve his goal, he might buy protein powder to increase his muscle growth (improve his appearance), get a premium Tinder subscription, buy new clothes, or hire a dating coach.
On the other hand, a busy mum of four who wants to have more time for herself might look at hiring household help, buying products that make cleaning and cooking more efficient, or getting a time management coach.
3. The HOW:
In order to achieve the WHAT, you need a vehicle to get there — this is the HOW. The HOW is basically your product or service. For example, to achieve the result of muscle growth, your target group could be a physical product, like protein powder or supplements, or a service like a gym membership or personal trainer lessons.
It is very important to understand that the target group often does not care about the HOW — they only care about the WHAT (the result). Thus, your product or service is usually competing not only with direct competitors that are offering similar products or services, but also alternatives of an entirely different nature. For example, if a customer needs an energy boost in the afternoon, coffee competes with energy drinks and Coca Cola. If on the other hand, the customer is very thirsty, Coca Cola competes with other soft drinks and even water.
Putting these three elements together offers an easy way to define your niche. Just fill in the blanks in this template:
“My company helps ___(the WHO)___(the WHAT: solve a problem or get a result) with/by ___(the HOW)”
Here are some examples:
- “Our company helps digital nomads (WHO) save time (WHAT) by organizing their apartment, co-working space and necessities like sim cards and VISAS for them (HOW).”
- “We are a marketing agency helping Shopify stores (WHO) increase their revenue (WHAT) with FB ads (HOW).”
- “With my coaching programs (HOW), I help busy entrepreneurs (WHO) streamline their life so they can focus on what matters (WHAT).”
Why You Need a Niche
Let’s say you are a woman and you want to lose your excess pregnancy weight. In a world where everything is so easily accessible, would you rather go to the health coach that offers everything from diabetes consultations to diet plans for professional athletes — or to the health coach that offers a highly targeted weight loss program for women after birth?
The market is overcrowded, and the only way to stand out is to do exceptional, unique work. But this is only possible if you focus on a highly specific niche and become the best at what you do.
In short, because of the state of the economy, the riches are in the niches.
But there is another reason why niching down is so important: FOCUS.
When I started my coaching business next to my day job, I dreamed of spending a full 40-hour workweek on my business because I thought I would get so much more done. But when I actually quit my job and had ALL this time I dreamed about, I realized it was still not enough to do all the things I wanted to do. I looked at the big guys in the industry and thought I needed to be on Instagram, Facebook, Twitter, YouTube, Medium, and have my own podcast — all while creating my website, training to become a coach and acquiring clients.
But what I didn’t realize was this: when you are trying to do everything, you end up doing nothing.
If you want to make real progress towards your goals, you need to use your time, energy, and resources very wisely. But when you don’t have a clear niche, it’s difficult to find the necessary focus to make real progress. That’s why it’s so much easier to go after a specific niche. When you know exactly which target group you want to serve and what you can offer them, you are able to direct your energy much more effectively to the things that really matter.
Let’s take content creation as an example: when you have a clear topic focus, you will never feel overwhelmed by all the possibilities of content creation. Just draw up a big mindmap exploring all aspects of your topic, and then pair them with the typical headlines (how to, why you should, x ways to do, the ultimate guide to, etc.) — etc., and voila — you have your content plan for the entire year. This way, you’ll be able to create a much better quality of content which will, in turn, allow you to sell your products and services better.
The Profitable Niche Checklist
Finding a niche is one thing, but finding a profitable niche is another. Since your niche is at the core of your business and determines everything else, you want to be choosing it very wisely.
Here are the six key signs of a profitable niche:
- The niche is based on YOUR core skills, capabilities and passions: When looking for a profitable niche, you should always start with yourself/your company first: WHAT can you help people with? WHO do you enjoy helping? HOW can you help them? That way, you avoid starting a business or getting into a segment that you are not passionate about and don’t have the capabilities to create value for the target group. Remember: you want to be the best at what you do and people tend to be better at the things they enjoy doing!
- It’s a sub-segment of a mega niche: There are three mega niches within which people keep buying products and services to improve their life: health & fitness, relationships & dating, and business & career. Thus, if you are targeting a sub-niche within one of these three, it will be much easier for you to sell your products or services.
- Your target group is able and willing to spend money: I made this fatal mistake early on in my coaching career when I tried to sell coaching to wanna-be entrepreneurs and to help them start their business. I loved working with entrepreneurs and I had tons of great skills and knowledge that I could help them with. There was only one problem: the target group didn’t have money. Most of the people I tried to sell my services to had just quit their job and were living off their savings while building their business. Their main goal was to keep expenses low. Thus, a $3,000 coaching package was simply not in their budget. Be aware of not making the opposite mistake: just because your target group is wealthy does not mean they are willing to pay for your product or service! For example, if you are selling an online group coaching program that involves 2 hours of video content, a 1-hour group coaching call, and a 30-minute accountability call each week, you might not be able to sell to a person who is well able to afford the program but is not willing to spend so much time on it. They might rather go for a private coach that can get them the same results in less time. What you need is a niche that is both WILLING and ABLE to pay for your products or services.
- There are existing players in the market: Think you found a great niche because nobody else is doing it? Think again! It is a huge red flag if nobody else is already selling similar services. Too little competition is a sign that there is no money to be made in this niche: Pioneers Get Shot, Settlers Get Rich. So don’t be afraid to enter a niche with existing competitors in the market. What you really want is to find the sweet spot between the number of competitors vs. the number of customers in the market.
- It’s an evergreen market: People will always want to find ways to lose weight, make more money, become more productive, and find a partner. However, things like teaching people how to make money from YouTube ads, how to do a specific type of yoga or selling unicorn colored ice cream, might just be trends that go away. And even if, for example, YouTube is here to stay, the strategies that will help you maximize ad revenue will change every year, if not every few months. That’s why you want to find a niche that is here to stay, meaning the same thing can make you money today and ten years from now.
- There is great upsell potential: A good niche is when you are able to help people fix a problem and they are happy. A great niche is when you help them solve a problem and they will come back for more. For example, if you have a flooded basement, you want it to be fixed and never worry about it again. That’s a problem-solution niche. However, if you teach people how to be more productive, they might start out with learning how to plan their day, but then they come back and learn how to increase their focus, manage distractions, use certain tools, optimize their emails, increase their energy, etc. Thus, productivity coaching is a market with great upsell potential because solving one problem actually surfaces other problems (e.g. planning their day makes them realize how bad they are at managing distractions). When you can sell your audience something again and again, your marketing and sales efforts and spending will significantly decrease because you’ll have tons of returning customers.
To get all these questions answered, you might need to do additional research about your niche. Don’t be afraid to invest some time in talking to your target market and doing online research to get some data — it could save you from making a bad choice that negatively impacts your business!
In a Nutshell
Because of the internet and globalization, products and services are more accessible than ever and thus, competition is fierce. The only way to avoid competing on price is to find a niche and become the best at what you do.
To define your niche, think about the WHO, WHAT and HOW of your product or service, and make sure to check your niche for profitability with the checklist above.
Liz Huber is a Mindset & Productivity Coach and Founder of refinedlife.io. With her books, courses, and 1-on-1 work, she helps entrepreneurs overcome overwhelm, lack of focus, fear, and self-doubt. As a result, her clients are able to confidently achieve their goals by prioritizing what is truly important and streamlining everything else.