Ultimate Guide to Choosing a Niche For Your Business

how to choose a niche

Getting into business these days has never been easier. All you need to create a business in the digital era is a decent computer and an internet connection.

But when you start selling whatever product or service you have to the world, you’ll need to select a specific type of “world”. After all, not everyone wants to buy what you have.

However, someone does. You just have to figure out what niche they’re in.

In this article, you’re going to learn the following:

What is a Niche?

According to Google’s definition, a niche is “a specialized segment of the market for a particular kind of product or service.”

Essentially, a niche is a very narrow subject. They can be very deep or relatively broad, but a niche is something that focuses on a topic beyond the general subject it lies in.

For example, marketing is a niche within the subject of business. Marketing is a very broad niche though, so let’s dig deeper. The next step would be digital marketing, then social media marketing, then Facebook marketing, then Facebook Ad marketing.

Each time, the niche becomes narrower and narrower.

When starting a new business, it’s important that you choose a niche. You see, the issue with how easy it is to create and market new businesses on the internet is that there’s an overwhelming number of competitors. Not to say the world of business has ever lacked competition, but it certainly was never like the way it is now.

Furthermore, there are way too many businesses that do the exact thing and look the exact same online. For instance, I own a web design and digital marketing firm named PurpleCup Digital. I couldn’t tell you how many similar businesses are out there.

There are literally millions.

Yet, I’ve been able to establish credibility and win clients.


I chose a niche.

Why You Need to Choose a Niche.

For business, niching down is essential in order to get your first round of clients/customers.

It might seem contradictory. Why would you do something that will shrink the pool of people you’ll be marketing to? Wouldn’t that result in fewer sales?

The truth is that niching down will increase your sales, actually. At least in the beginning stages of your business.

Choosing a niche allows you to develop a marketing plan that is highly specialized and well-tuned for the people who are going to be most interested in your services.

In a nutshell, that’s why you should pick a niche. But let’s go over other reasons.

1. Picking a Niche Will Allow You to Establish Authority Quicker.

Building authority in a small niche is a lot easier than building authority in something as broad and general as “digital marketing”.

Creating content is the name of the game when it comes to marketing. As all the gurus say, “Content is King”. But realize that when you create content or market any of your services online — nosediving straight into the largest swamps where big firms are spending massive marketing budgets trying to outbid other million-dollar competitors — don’t expect to get very far.

Instead, focus on a niche. For instance, if you’re a health coach, talk about the specific diseases you help people with. Write blogs or make videos about specific nutrition plans that people with type 2 diabetes can go on rather than simply blogging about type 2 diabetes as a whole.

Obviously, the subject of type 2 diabetes and nutrition is very large, but you can certainly dive into other avenues that aren’t talked about as much and bring light to those topics.

The smaller you go, the more credible you become to your target market, as you’re now filling in the gaps of service that they haven’t been able to get. You become the authority in that space.

2. Differentiate Yourself From Competitors.

Let’s say your market is very competitive and you need to find a way to make yourself look different. Instead of lowering your prices, target a niche.

Being really good at one thing is better than being able to do a lot of things when you first start your business.

Back to my own example. The issue I faced when I launched PurpleCup Digital was that we offered nothing different compared to any of the other digital marketing firms.

However, my strategy wasn’t to niche down — that seemed too risky. Instead, I figured I’d just cold email a bunch of firms until someone gave me a shot.

So, through both accident and design, and an awful lot of cold emails, I finally landed a client. This then turned into a series of referrals, all of whom had something in common.

Everyone I worked with after my initial client was a nonprofit organization.

A lightbulb went off.

Instead of targeting just any firm out there, I began to target nonprofit organizations. One, because I now had a list of case studies to back me up. Two, a lot of digital marketing firms don’t target nonprofits because they believe there’s no money to be made. And three, I knew a lot more about nonprofit marketing than I did before, which actually has some stark differences compared to traditional marketing.

Granted, my firm isn’t a full-fledged marketing machine. Most of my work still comes from within my personal network, but that’s also because they know me as the go-to nonprofit marketer. These days, however, I work with pretty much any firm that wants help regardless of industry.

Even in something as vast as digital marketing and web design, I was able to differentiate myself through niching down.

You can too.

3. You Might Be Able to Charge Higher Prices.

Think about it.

The goal of a niche is to target a market that’s relatively underserved. You’re trying to fill a gap for them.

If there are no other competitors or even just a small amount, don’t you think these potential customers may be willing to pay a premium for a product or service they haven’t been served yet?

Basic pricing fundamentals say yes.

But here’s the deal: it’s a lot harder than it sounds.

Finding an untapped market is incredibly hard and requires a little bit of genius and really good execution. There was nothing genius about PurpleCup Digital serving nonprofits, it was sheer luck and hard work (sending cold emails is tough).

Is it possible, absolutely! Everything pretty much started as an untapped market.

But remember that untapped markets require large marketing budgets and ad spend to educate the market of what you’re doing and why they need it.

But, if you can weave your way into a tight niche and market effectively, you’ll likely be able to charge higher prices until competitors find out what you’ve been up to.

How to Find, Select, and Begin Working with a Niche.

Finding your niche can be done in five steps. I won’t call them simple because there’s a lot of research involved, but the steps themselves are relatively straightforward. I’m assuming that you’re entering this stage with a business idea in mind. If you don’t, I encourage you to brainstorm business ideas that relate to things you’re passionate about. Then, go through these steps to identify, target, and market to a niche.

Step #1: Select a Target Market.

Selecting a target customer is central to your business success. While I’ve met and worked with people who’ve stumbled into a niche without a target market, including myself, I don’t recommend starting off like that.

As I said earlier, I got pretty lucky. I wasn’t targeting nonprofits from day one.

But once I realized I was able to get business from them, I started targeting them.

Your niche depends on the type of customer you’re trying to acquire, as your niche is their niche, so to speak.

Here’s an example: you’re thinking about selling courses on different learning strategies. Learning strategies aren’t a new topic, it’s been researched and theorized for centuries. So, to avoid the noise, you want to niche down to specifically target the “second brain” concept which is basically a formula of storing information effectively.

There’s not a lot of people that have heard about the second brain, but the point is that some have. You need to find these people. That means looking up second brain information on Quora, YouTube, Reddit, Facebook, and other platforms and see what people are saying about it, the questions they have, and how much buzz is centered around it.

Below is a screenshot of one of the first things that pop up when you type “building a second brain” into Quora. Notice how there’s only two answers? To me, that would indicate there’s not a lot of hype surrounding this niche.

quora second brain niche

But scroll down and you’ll notice a whole bunch of related questions regarding the brain and using it better. Is there a way to potentially reach out to this audience by promoting the second brain concept to them? Maybe.

Quora related questions

Once you have this information, you should begin analyzing who these people are. How old are they? What other interests do they have? Who do they associate with? What jobs do they have?

Most importantly, what would make them want to learn about the second brain?

Is it to streamline productivity? To keep track of their lives? To better store information? Keep information accessible?

You can apply these questions to any business, but it’s a required step. Yes, you can get lucky and stumble into clients and sales, but it’s rare.

Step #2: Target Their Needs.

Now that you’ve identified an active niche, you need to get the people in it on board.

This means giving your targets what they need. Think about this: everything we buy has a deeper purpose for why we bought it. Usually, we have very simple reasons.

I made a major upgrade recently and purchased a MacBook Air instead of continuing on with my three-year-old ASUS laptop. This was a need for better productivity, which results in more money. Thus, Apple targeted my financial needs.

But some people buy from Apple for other reasons that are central to the human condition. Sometimes, it’s a need for status. Apple products are known for luxury and, believe it or not, sex appeal, which is a biological need.

You also go to the grocery store for food. This is a hunger need that’s essential for survival. But sometimes you pass up the grocery store for a restaurant. Why? To fulfill social needs, happiness needs, status needs, and hunger needs.

Let’s say your second brain course needs to identify a need. That need can be productivity, which can increase someone’s bottom line. Another is to have better organization of information, which can fill a student’s need for better grades, thus, potentially earning them more status or wealth due to graduating higher in their class.

Your job is to target the needs of your market. The easiest way to start thinking about this is to brainstorm what they need the most right now. Something that will compel them to buy from you sooner rather than later. These are called “pain points” and they’re very effective at generating sales.

Step #3: Figure Out Who You’re Competing With.

The point of niching down is to minimize the level of competition you’re facing, but often you’ll wind up facing some form of competition.

The goal is to identify competitors, analyze their businesses, their content (if they have any), their messaging, and their strategy.

A common marketing tactic is to conduct a SWOT analysis. SWOT stands for strengths, weaknesses, opportunities, and threats. You should do this as it will help you understand your positioning in the market relative to your competitors. We’ll talk about this later.

I recommend researching your competitors by going through each of the items I mentioned above.

First, identify your competitors by looking up your main business topic online. So, for the second brain business, look up “second brain”. Browse through the results. Take note of who ranks on the first page.

Be sure to look through each link on the first page. Some might be articles that simply talk about whatever topic you’re working with, but aren’t actual competitors. For instance, if you look up “digital marketing” you’ll likely end up with articles from Search Engine Journal, Content Marketing Institute, HubSpot, and others. These wouldn’t be your competitors. You would instead want to find other digital marketing firms.

Pro tip: Browse through the links on the second, third, fourth, even seventh, and eighth pages of the search results. These pages are often filled with companies that are likely competitors on your level. Just because these firms aren’t on the first page of Google for the broadest topic possible, it doesn’t mean they’re not ranking for other terms or not getting business at all.

This is an often overlooked part of market research, but it’s helped me strategize with clients I’ve worked with in the past. I’ve also written an in-depth guide to this here.

Step #4: Planning Your Business Around the Niche.

I know, we’ve talked about a lot. Feel free to save this article for later reference.

Here’s the thing, you can’t just declare that you’re going into a niche. I mean, you could, but that’s dumb. Instead, you should be going through each of these steps, determining whether or not this niche makes sense in the first place.

It’s a lot of work, but what good thing isn’t?

If you’ve made it to step four, it means you’ve found a niche that works for you and you’re ready to start building out your business. The goal here is to base your entire offering on the main needs of your target audience.

So, for the second brain business, you could offer a course on building a second brain.

Don’t overcomplicate your offering. For one, most people don’t like complicated things. Two, overcomplication makes it easy to miss crucial spots that can derail everything. Three, overcomplication is boring and more likely to make you not like your business. That’s a recipe for disaster.

However, your offering needs to be good enough that prospects will find it worth the price you’re charging for it.

Once you’ve developed your offerings, you’ll want to set up a website of some sort, devise a marketing plan, and some other things that are outside the context of this article.

With your business visualized, conduct a SWOT analysis before you begin marketing. This is a very simple but effective technique that anyone can do.

Here’s a brief description of how to move through each part:

Strengths: What does your company do better? What is your key differentiator? Your competitive advantage? Come up with 2-4 things that can help propel your business past the competition.

Weaknesses: What are the pitfalls of your business? What will make someone choose a competitor over you? What are they doing better than you? What are things that you don’t have (money, employees, knowledge, skills)?

This is a section for real self-reflection. Getting these points on paper will help you mend any issues, so it’s important to be honest.

Opportunities: Are there parts of the market that you can weasel your way into? Do you offer something that other people don’t and if so, how can you make that work well? This is a segment for brainstorming your strategy on entering the market.

Threats: What can take you down? How could your competition get ahead of you? Which of your products or services are weak? Does a competitor have a strategic ally that will hurt you in the long run?

Conducting a SWOT analysis is super helpful. It can be tough to come up with different points for each, but that’s what makes it such a good exercise. If you’re willing to do the hard things that other people aren’t willing to do then you’re that much closer to winning the game!

Step #5: Marketing

Yes, marketing is part of identifying your niche. Why? Because this is where you’ll learn what works and what doesn’t.

There are a number of marketing strategies that you can use, whether it be pay-per-click (PPC) ads, SEO, social media, direct mail, or whatever else you can think of. But the most important thing is that you pick marketing strategies that are measurable and definable, as Allan Dib talks about in his book The 1-Page Marketing Plan.

You need to be able to measure the results of your campaigns. The easiest way to do this is by setting up Google Analytics for your website or running ads through a PPC platform like Facebook Ads or Google Ads. Whatever it is, measure it. This will let you know what works and what doesn’t.

Marketing and advertising in both paid and free forms are way too long to talk about in this article. But marketing is crucial because it will let you know if your niche is truly monetizable.

Without looking at the balance sheets of your competitors, you don’t know how much money they’re making. Therefore, it’s hard to know exactly how much money is possible to make once you enter the market. You can get a decent idea, but execution and earning money is a whole other ballgame.

When you start marketing, it might take some time, especially if you’re going the SEO route, but at some point, given you’re doing things correctly, you should see some results.

At a minimum, you’ll collect data, which can tell you a lot.

But once again, there’s a lot to talk about with marketing, so we have to end the conversation there.

The Characteristics of a Good Niche.

Not every niche is created equal.

Some won’t give you good returns on your investment. Some aren’t very active. Some are not large enough to engage in business.

Here’s a list of characteristics that usually define a “good” niche.

  • Customers can be easily identified.
  • Customers can be reached through strategic marketing plans.
  • The target market is underserved (which means the market is unsaturated).
  • The market has room for expansion.
  • The market can provide sustainable profit.
  • The niche is large enough so that there’s plenty of content to be made about it.

Three Common Questions About Niches, Answered.

Question #1: Does being in a niche hurt sales?

No, as long as it’s a good niche. I’ve found that being in a niche can bolster sales because you become the primary authority on that particular topic. The whole entire point of niching down is to avoid competition.

However, if you pick a “bad” niche, then you should probably pivot to something better.

Question #2: What if I can’t find enough information about my niche?

Your niche might be too small. Whenever you make content though, you don’t necessarily have to create content specifically on the topic of your niche every time. You should in the beginning, but over time you can expand.

Start by answering common questions. You can get tons of ideas by using websites like Answer the Public or one of my favorites, Quora. Quora is full of real people asking and answering each other. You can get some great content ideas from social media communities.

Question #3: Where do I start?

Start with what you’re passionate about. It’s cliché to say, but you should build a business that you enjoy working on every day. Obviously, you’re in business to make money, but I encourage you to look beyond money as the primary reason for why you’re doing it.

Maybe you’re working to improve the lives of your potential customers? You want to educate them, give them something valuable, or help them get through a struggle?

At its core, business is about helping people do different things. Figure out what you want to help people with and money will follow.

In Closing.

I hope you found some value in this guide. Let me know if you’ve had any experience working within a niche. I’d be happy to hear!

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