To find a profitable niche you can start by looking at:
Is there an intense need, are your prospective clients/customers screaming out for your solution to their problem? Are they concerned enough with the problem that given a solution they would be throwing their bank card at you with a smile.
Frequency of need
How often does your customer experience this need? Consider Autotrader.co.uk, buying a car is hard, but it’s something people only do once every 7 years! Meaning you have to expend a lot of effort to gain a customer that’s going to use your service once over the lifetime of you starting up. On the flip side you have Facebook, communicating with friends is less of a problem in this day and age but people want to do it continuously. It’s part of the human condition to want to feel connected so people will often use a site like facebook 10-20 times in a day.
Once you have found a need that’s both burning and needed frequently. Then you can look to see if you can generate profit by commercialising it. To do this you need to make sure you consider the following:
- Size – the problem you’re solving must be big enough to supply you with enough clients to bring in enough revenue to keep the lights on.
- Money – the potential clients or customers that need you solution must be able to afford your fees or prices. For example, ‘marketing consultant for IT businesses in a specific region’ has a vastly greater potential for income than ‘marketing consultant for start-up companies’ (because start-up companies tend to have small or no budgets).
- Reach – you must be able to reach your clients easily through targeted promotions. For instance, you can offer your services to an international audience via the internet so long as you have the ability to reach your prospects wherever they are in the world.
- Contactable – you must be able to contact your clients by telephone, the internet, or face to face.
- Under-served – how many similar services are already being offered to the niche? Your business will grow faster in an underserved industry than in a highly developed one that has many providers trying to meet the given need.
- Precedent – are there already successful businesses operating in this niche? If so, it suggests that people will pay to have a specific need addressed.
- Be the first – take a successful niche and narrow it further.
- Narrow focus – it’s much better to offer your service to a narrow professional industry (divorce lawyers) than to a broad group (all lawyers).
- Industry focus – are members of your niche from a single professional group or industry? If you focus on a subset of a specific professional group, the niche is much easier to penetrate. You can email a specific newsletter to your target group. You can market the niche through its local, national, and even international professional organisations. You can forge alliances with suppliers who serve the same niche.
- A coherent group – it’s a major advantage if members of your proposed niche feel they belong to a coherent group. Members are more likely to forward your promotional material to others if they know who the others are.
- Improved financial or performance benefits – can you help your niche to make money or improve performance? While they’re not essential criterion for being hired, it’s easier for clients to justify hiring you month after month if you’re helping them to make more money or perform better professionally.