Three Steps to Business Success – Step one: Find your Profitable Niche of the Market
Three Steps to Business Success
STEP ONE – Your Niche of the Market
Find a Niche and Make it Work
Now you’ve decided to start your own business, you need to work out exactly which corner of the market you are going to target. Whether you’re selling a product or a service (or both) you will not have much success unless you can narrow down your market to a specific area. If you cast the net too wide and try to cater to too many different consumer fields, you will end up pleasing none of them.
What interests you?
The first place to start looking for your niche is within your own set of interests and hobbies. Many people will recommend that your niche should always be an area in which you have worked before as you will already have a high level of expertise – but I disagree with this.
First, if you have a high level of expertise at something but find that area of work boring, you’re going to find it really difficult to enjoy your work and stay committed. Second, I’m confident that you have plenty of interests or hobbies outside of work. If so, chances are you know more about this particular field than 90% of anyone else out there. Doesn’t that give you a high level of expertise?
For example, if one of your interests or hobbies is Dog Grooming I would happily wager that 9 out of 10 people you ask on the street wouldn’t even know where to start!. Expertise is all relative – so you should focus on what you enjoy as chances are you already know more than enough to bring value to your future customers. So, pick yourself a hobby or interest that you know you enjoy and can commit to and you’ve found your niche. Next, we need to make sure your niche can actually bring you some income.
Can Your Niche be Profitable?
I’m going to give you the short answer first: YES!
Pretty much any niche can be profitable if you approach it in the right way. In fact, think of the strangest, most specific and narrow niche that you can think of and type that into your favourite search engine. Chances are you’ll see at least one business making a good living out of this. For example, try typing “Dwarf for Hire” into Google and you’ll see what I mean! It doesn’t get much narrower than that.
So chances are your chosen niche is going to have a pretty big market base already. A good way to measure the popularity of the area you’ve chosen is by using the Google KeyWord Tool. This tool is completely free and allows you to type in any keyword(s) and find out how many people are searching for that term in any particular geographical area. Using my previous example, the term “Dwarf for Hire” gets around 800 searches a month on average!
This tool will also give you suggestions on other similar keywords that people are also searching for, which will help give you an idea of the total possible market out there for your business just by telling you who’s looking at what, and where they’re looking.
Of course niches with a wider appeal get much more attention, but if you want to work in a narrow field this just means that there’s less competition. I won’t get into the debates between whether “narrower is better,” but will only say that it’s more important to find a niche you’re interested in – rather than worrying about search engine traffic or monthly volume of enquiries. It’s quality that counts, not quantity.
If I could recommend just one article for you to read that covers this very subject it would be “one thousand true fans” by Kevin Kelly. This short piece (about 5-10 mins reading) essentially argues that you don’t need a huge customer base, rather a loyal one. If you can find one thousand loyal customers who regularly purchase from you then you will see a steady income for life. This figure can even be decreased somewhat depending on what sort of price point you are aiming for.
This article uses the example of a recording artist to illustrate its point. Let’s say you release 2 albums each year, plus some merchandise and concert tickets. For argument’s sake we’ll say that you charge $80 for all those things combined. If you have one thousand true fans each of these fans will purchase everything that you sell – meaning that you can expect an income of $80,000 each year.
This concept doesn’t have to apply to just recording artists, however. Whatever you decide to sell, if you can find a loyal customer base that regularly purchases from you then you’re all set. This figure doesn’t necessarily have to be one thousand, but would need to be enough to give you the income you’re looking for. This could be one hundred, fifty or even just ten people – the key is making sure that your customers find value with you and have a reason to make repeat purchases.
Let’s say you decide that you want to sell computers. If each unit sees a net profit of $200 and you are aiming to make $40,000 in a year, how may units would you need to sell? Based on these figures you would need to sell 200 units in a year. However, you also sell software packages which have a net profit of $20 per unit and you also sell extended warranties which make an average of $100 profit per unit.
On top of this you also have a premium rate support line which pulls in another $20 a year for every computer that you sell. Finally, you also offer component upgrades for everyone who buys a computer for you which will earn you an average of $40 profit per year for every computer sold. In total, you make $360 net profit each year for every loyal customer.
With these figures, to make $40,000 a year you would need 112 loyal customers. That’s less than 10 customers per month or one every 3 days. The best bit is that these customers will continue to purchase your products and services regularly, meaning that you can continue to make profit by selling your software, upgrade and support services for an additional $160 per year per loyal customer.
Using these figures, a loyal customer would spend $360 in the first year and then $160 each following year until they decide to buy a new computer, where the whole process would start over! This example can be applied to pretty much any niche – the key is identifying and targeting a loyal customer base and then making sure those customers are well looked after and get real value from your business.
If you can achieve this then I can guarantee that whatever niche you decide to focus on, you will be able to make a steady profit for life.
Is Your Niche Long-Term?
Once you have decided on your niche and made sure that you can make a profit, you need to make sure that any profits you make can be repeated in the long term. It’s no good starting up a business if you know that your revenue stream is going to stop after a few months.
For example, seasonal goods such as Christmas trees, Halloween pumpkins and Easter eggs quite obviously sell by the truck-load at certain points of the year, but aren’t very popular outside of these times. Does this same problem apply to your product or service? For example, have you picked a niche based on a short-term trend or fashion? If so, you need to make sure that you have a plan in place for when your product or service inevitably runs out of juice.
During the worst stages of the recent recession, many supermarkets saw a huge increase in the number of people purchasing their “eat at home” ranges and special offers – because people couldn’t afford to eat out any more. This was a fantastic profit machine while it lasted, but eventually people started to venture out to restaurants and bars once again. The reason that the supermarkets managed to take advantage of these polar-opposite trends is that they all saw it coming!
When data suggested people weren’t eating out any more, the supermarkets ran special offers on premium ready meals and bottles of wine. Once people went back to going out, the supermarkets addressed this trend by promoting special offers on clothing – with the accurate assumption that if people are going out more often, they are going to want to get dressed up!
While it’s unlikely that you have the commercial clout of a major supermarket, there’s nothing stopping you from keeping an eye on market trends and adjusting your approach to suit. If your niche is in a traditionally seasonal market area, is there anything you can do to promote your products or services during other times of the year?
This will obviously very depending on the niche you have chosen, but make sure you do your research to make sure that there aren’t any times of the year that are going to cause problems. As mentioned before, a great tool to help you with this is the “Google Trends”– which allows you to see trends in the number of people searching for your keywords, helping you identify times of the year where you are likely to see a drop in sales.
Google KeyWord Tool will also suggest “related keywords” which you can see alongside your main keywords. If you can find related searches that are high in volume during times that your main keywords are low, this will help you find ways to adjust your approach in hard times. Make sure you do your homework!
Carve Your Corner of the Market
Once you’ve decided on your niche and made sure you can see a steady income from this area, you need to think about finding your own corner of the market. If you don’t do this, any prospective customers are going to find it difficult to identify exactly what it is that you’re selling and are likely to look elsewhere.
Let me introduce you to Jill.
Jill is looking for a way to carve out her own corner of the market in the area of Dog Grooming – an example we touched on before. Will Jill be selling a product or a service, or both? Her focus is going to be different depending on which area she chooses.
For example, if Jill is selling a product she is going to need to make sure that her store or web page makes it clear what’s on offer. If she’s selling a product will she ship items long distance or will focus only on the local market? Will she stock a wide variety of products, or only products related to a specific aspect of Dog Grooming?
If Jill decides to sell a service, will she carry out this service herself? If so, she is going to be limited to a local area only, so how does she plan to promote herself within this geographical region? If she is selling someone else’s service (e.g., a national agency or franchise) then how does her target market vary within different geographical regions?
The reason that this section is SO IMPORTANT is because you need to make sure that any prospective customers stick around long enough to purchase from you. You’re not going to be able to do this unless you are offering them exactly what they want, so it is VITAL that you make it clear exactly what you’re offering from the start. Without this approach, even with a high volume of traffic, you will see a very low conversion rate.
For example, with her Dog Grooming business, Jill has decided to offer the following:
1) Products – “No more expensive Grooming fees! No more kennels! You can give your dogs all the care they need from the comfort of their own home. We sell all the products you need to get started in the exciting area of dog grooming. We offer 3 packages for you to purchase, depending on your level of expertise. We have the Starter Package, Intermediate Package and the Expert Package – each of which contains full instructions and everything you need to take care of your dog’s grooming needs at home!”
As you can see from the above example, Jill has made it clear from the first sentence exactly what value her business can provide (an alternative to professional grooming) and lists three specific packages that a customer can purchase from her. If Jill were simply to list all of her stock, how would people know what to buy? By narrowing down the options Jill has given her prospective customers a reason to stick around and hopefully make a purchase.
2) Services – “Don’t know where to start? We also offer a great value tutoring service for those of you who want to give your dog the best care – at home! We can send one of our trained groomers out to your home to show you how to make the most of your grooming package – at a time that suits you! We can visit you on a one-off basis, or you can choose one of our block-bookings at a discount and learn techniques usually reserved only for professionals. Get in touch to find out more!”
In additional to a well defined product line, Jill will also visit customers’ houses to show them how to use their purchases properly and teach them the techniques they need to do a good job. By doing this Jill is making sure that customers who buy her products have a reason to buy from her again – which also gives her the opportunity to meet them in person and form a strong relationship. This, in turn, makes it more likely for the customer to visit Jill’s business again in the future.
Due to all this hard work, Jill has managed to carve herself an easily identifiable corner of the market. When visiting her online web page or shop, prospective customers can easily see that Jill offers a great way to groom dogs without having to pay expensive grooming fees or take a trip into town and pay for a kennel for the day. Customers can also easily identify products that suit their exact needs and are given a range of products and packages to suit their individual circumstances.
If Jill hadn’t bothered to structure her business in this way, she would run the risk of not appealing to anyone because her approach was too vague. The key is to appeal to a specific type of customer and do it properly – rather than trying to please everyone. If you try to please everyone, you will inevitably end up pleasing no one, so make sure your customers know exactly what you can offer them and how this can address their needs.
SUMMARY OF STEP ONE
1) Find your niche. What interests you?
2) Is your niche profitable? Do some research on businesses already trading in this area.
3) Is your niche long-term? Use some online tools to measure your niche’s popularity throughout the year and make sure you identify and adapt to any potential drop in sales.
4) Carve yourself a corner of the market. Make sure your customers know exactly what to expect when they visit you – and don’t try to please everyone!
Steps two and three will follow soon in future articles – links will be provided here once they are published and available to view.
Until next time.
Nick Stephenson is a qualified marketer, ex-lawyer, and author. He is best known for his fiction work – the bestselling Leopold Blake series of thrillers – now available on Amazon.
Book One: Panic
Leopold Blake sighed and removed the gun from the hand of the dead senator. The body lay face-down on the hardwood floor, dressed in an expensive suit, a fresh exit wound to the back of the head staining the dead man’s white collar and neatly trimmed gray hair with dark blood. Leopold examined the left hand carefully, lifting it from the floor to get a better view in the dim light. Slowly, he sniffed the skin in long, drawn inhalations and noted a distinct smoky, metallic scent. The forensics team stood back, shuffling impatiently, waiting to get back to work. Leopold took no notice and continued sniffing. Satisfied, he stood and turned to the police lieutenant who was glaring at him from the back of the room.
“Thoughts, Bradley?” asked Leopold, brushing the dust from his knees to the floor.
The living room was spacious and decorated with expensive furniture, although it was in need of a serious cleaning. Warm cinders glowed in the fireplace, the flames having died hours earlier.
The lieutenant folded his arms. “You’re supposed to be the expert.”
“You look like a man with something to say. What’s your take on this?”
Bradley arched his eyebrows, further creasing his wrinkled forehead. Leopold wondered if another fifteen years would have the same effect on his own face, but he pushed the thought to the back of his mind and reminded himself he was still young, if a little scruffy around the edges. The lieutenant paced over to the body and glanced down, taking a second to compose his thoughts…
– end of sample –
You can find out more about the author and his available work here: http://www.amazon.com/Nick-Stephenson/e/B004MYQ8K6/