214831
 
Search

7 Steps to Defining Your Niche Market

In their book, Start Your Own Business, the staff of Entrepreneur Media, Inc. guides you through the critical steps to starting a business, then supports you in surviving the first three years as a business owner. In this edited excerpt, the authors explain how you can find the right niche for your entrepreneurial needs.

You’ve come up with a great idea for a business, but you’re not ready to roll yet. Before you go any further, the next step is figuring out just who your market is.

There are two basic markets you can sell to: consumer and business. These divisions are fairly obvious. For example, if you're selling women’s clothing from a retail store, your target market is consumers; if you're selling office supplies, your target market is businesses (this is referred to as “B2B” sales). In some cases—for example, if you run a printing business—you may be marketing to both businesses and individuals.

No business—particularly a small one—can be all things to all people. The more narrowly you can define your target market, the better. This process is known as creating a niche and is key to success for even the biggest companies. Walmart and Tiffany are both retailers, but they have very different niches: Walmart caters to bargain-minded shoppers, while Tiffany appeals to upscale jewelry consumers.

“Many people talk about ‘finding’ a niche as if it were something under a rock or at the end of the rainbow, ready-made. That's nonsense,” says Lynda Falkenstein, author of Nichecraft: Using Your Specialness to Focus Your Business, Corner Your Market and Make Customers Seek You Out. Good niches don't just fall into your lap; they must be carefully crafted.

Rather than creating a niche, many entrepreneurs make the mistake of falling into the “all over the map” trap, claiming they can do many things and be good at all of them. These people quickly learn a tough lesson, Falkenstein warns: “Smaller is bigger in business, and smaller is not all over the map; it’s highly focused.”

Creating a good niche, Falkenstein advises, involves following a seven-step process:

1. Make a wish list.

With whom do you want to do business? Be as specific as you can. Identify the geographic range and the types of businesses or customers you want your business to target. If you don’t know whom you want to do business with, you can’t make contact. “You must recognize that you can’t do business with everybody,” Falkenstein cautions. Otherwise, you risk exhausting yourself and confusing your customers.

These days, the trend is toward smaller niches. Targeting teenagers isn’t specific enough; targeting male, African American teenagers with family incomes of $40,000 and up is. Aiming at companies that sell software is too broad; aiming at Northern California-based companies that provide internet software sales and training and have sales of $15 million or more is a better goal.

2. Focus.

Clarify what you want to sell, remembering that a) you can’t be all things to all people and b) smaller is bigger. Your niche isn't the same as the field in which you work. For example, a retail clothing business is not a niche but a field. A more specific niche may be “maternity clothes for executive women.”

To begin this focusing process, Falkenstein suggests using these techniques to help you:

  • Make a list of things you do best and the skills implicit in each of them.

  • List your achievements.

  • Identify the most important lessons you've learned in life.

  • Look for patterns that reveal your style or approach to resolving problems.

Your niche should arise naturally from your interests and experience. For example, if you spent 10 years working in a consulting firm but also spent 10 years working for a small, family-owned business, you may decide to start a consulting business that specializes in small, family-owned companies.

3. Describe the customer’s worldview.

A successful business uses what Falkenstein calls the Platinum Rule: “Do unto others as they would do unto themselves.” When you look at the world from your prospective customers’ perspective, you can identify their nee