Starting your own business can be an overwhelming experience. One minute, you’re too excited about the growth opportunities and the freedom that comes with living the entrepreneurial dream. The next minute, though, you’re faced with the endless possibilities of things that could go wrong. What if your business doesn’t succeed? What if you find the right footing? Is your idea even good enough to survive the competition?
Instead of focusing on what could go wrong, how about taking effective steps toward figuring out how to make your business succeed? To do that, it all starts with finding the right niche. We know that it’s one of the hardest things to decide. Not to worry though, we’ve got you covered in this guide.
Here are 5 questions you should answer to find the right niche for you.
1. Where Does Your Passion Lie?
It may sound repetitive, but you’ll first need to define your passion. After all, there’s no way you’ll be able to endure the hectic entrepreneurial life unless you have the internal motivation to move you. Defining your passion starts with identifying your strong points: what are your best skills and talents that you can confidently show off? Out of these skills and talents, what do you enjoy doing the most? That will give you the first answer you’re looking for.
2. What Problems Can You Solve Using Your Passion?
If passion is all it takes to run a business, we’d all be entrepreneurs. The first thing that makes entrepreneurs different from others is their ability to find the connection between their passion and the market gap. Frankly speaking, you don’t always have to start with identifying your passion. Sometimes, finding a need gap in the market may prompt you to get an idea. At the end of the day, the main factors of the equation remain: there has to be a problem (a need or a gap) for which you can utilize your passions in a way to provide a solution.
3. How Can You Use Your Passion to Solve Problems?
Sounds a little redundant, doesn’t it? After you read the question for a second time, you’ll realize that it’s completely different. How you use your passion is another word for the business model you’ll adopt. Let’s say you’re passionate about cooking. You can provide a market solution using your passion through various business models, but we’ll stick to the basic four models for now. Your business model can be any of the following:
- Product/Service: You make your own dishes and sell them to your customers.
- Reseller: You get food items, like groceries or ingredients, from other brands and resell them with a profit margin.
- Broker: You act as the middleman between the food providers and the customers for a commission fee.
- Aggregator: You create a community and then charge other businesses for access to this community.
Moreover, you’ll need to consider the means through which you’ll operate your business. Will it be online? If so, will you launch a mobile application or an e-commerce store? If you’re operating offline, then where will you be based? Will you rent a space or start your business from home?
4. What Kind of Competitors Will You Run Into?
You may feel overwhelmed at the idea of jumping into a niche where competition is strong, but it can be a good thing. Finding no competition means one of two things: you’ve stumbled across a goldmine of profit that no one had discovered before you, or the market is empty for a reason. In both scenarios, you’ll have to start with raising awareness; in other words, convincing the public that they need your solution. That makes entering an already existing niche much simpler and easier.
If you find a niche in which competition is present but not excessively strong, then that’s a good signal that the market isn’t saturated yet profitable at the same time. That’s when you’ll need to analyze your competitors and identify their weaknesses so you can get a competitive edge.
5. How Profitable is a Niche?
This is where you start your financial analysis. Although you may have not settled yet on a particular niche, you should have at least narrowed down your options. Now, you’ll list down the shortlisted niches and determine your profitability in each one. To estimate your profitability, you’ll start by getting the most accurate estimate of the niche market value, analyze past trends, identify your entry point, and research the audience’s willingness to pay for your products/services. You’ll also need to analyze your competition’s share in the market and determine the market share you’re expected to dominate.
Now that you have the first steps down, you should be able to settle on the most profitable niche – preferably, one that aligns the most with your passion. Next, you’ll need to test your idea in real life. You can simply start by creating a landing page and testing the pre-sales waters for the products or services you have in mind, and then leverage paid advertising to drive traffic.