Image by Ciprian Boiciuc

Translated by Núria Adell.

I’m sure you’ve heard before that the philosopher’s stone of every entrepreneur is finding an unexplored niche market to develop their great startup.

Let’s start with the definition, what is a niche market?

A niche market is the subset of the market on which a specific product is focused. The market niche defines as the product features aimed at satisfying specific market needs, as well as the price range, production quality and the demographics that is intended to impact. (source: Wikipedia)

Concerning needs that aren’t completely covered by the general market, you might think that everything’s already invented. But no, interestingly there’s no day in which a new idea or product doesn’t arise. So if this was your concern, don’t worry ?.

It’s interesting to see how sometimes even great entrepreneurs and expert investors fail to appreciate the potential of some ideas. Surely you’ve heard of Juicero,where 120 million dollars were invested, but proved to be a failure.

Juicero Press Packs
I recommend reading about the story of this startup. It’s hard to believe.

But in the same way, you may also be surprised to hear that a patented invention like the Ta-Ta Towels has done so well this summer that they’re currently having problems to deliver the orders.

In this case there’s no doubt that the Ta-Ta Towels, although they have their detractors saying that they’re not sexy, have found their niche market.

As you can see, this isn’t easy at all. Statistically speaking, it’s much more likely that our ideas end up leading some list of the most absurd ideas ever invented, than making the startup a unicorn.

There’s also the option, if you’re unable to invent anything new, of turning a product that’s “normal” into an essential article based on convincing your audience of the importance of sharing the experience with that product. An example is the last two summer’s fashion among celebrities and not so famous people with pink flamingos, or how Hawkers managed to create a great company selling sunglasses. Personally, this alternative seems even more complex than coming up with a new idea.

So, knowing that your main objective when creating a startup is to make it profitable, look for a niche market.

The importance of finding a niche

If we look at the US, for instance, the figures provided by the Statistics of U.S. Businesses (SUSB) show that there were a total of 5.8 millions of firms and 7.6 millions of establishments.

Taking into account that the population in that same year didn’t reach the 320 million, and that 64% of the people were between 16 and 64 years old (source: United State Census Bureau), we’re talking about less than 204 million active people. Therefore, in the USA we have a ratio of 1 firm or establishment for every 15 people of working age.

Fortunately, not all of us want to sell the same product, but still, the conclusion is that competitiveness in this country is brutal.

Reduce competitiveness

Although it may seem contradictory, with this level of competitiveness trying to have a product of general interest isn’t a good idea. Why? Well, because this means entering the league wanting to compete with big dinosaurs such as Amazon, Microsoft, SAP, etc. Finding your niche market is like fighting the white walkers in Game of Thrones; even having Daenerys’ dragons doesn’t guarantee the victory.

So, instead of going fishing in the ocean, start with a small lake. There are also fish in there and a large fishing boat won’t enter.

If you find your niche, you can focus on knowing exactly the needs, problems, habits, and preferences of your customers. The smaller your niche, the more personalized your product can be and the more value it will bring to your customer. Precisely, one of the difficulties that large companies have to be profitable is reaching this level of personalization that you, as an initially smaller company, can reach.

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Marketing is easier

When you’re able to select your market segment, it’s easier to maximize all your marketing efforts. You can segment by topic (for example, instead of offering guitar lessons, offer guitar lessons for jazz), geographically (instead of having a blog talking about the best restaurants in Barcelona, start with those in the Gracia neighborhood), and by audience (by age group, gender, their personal or professional situation, etc.).

The advantage of identifying your market segment is that you’ll be able to position yourself more quickly as the leader in that area. By better identifying your customers, you can more easily maintain contact with them and get messages across more easily, leading to greater conversions. Precisely this close contact with the customer is what allows you to be more attentive to possible changes of preferences and identify if you have to make strategic changes in your company.

Once the niche positioning is achieved, growth will be easier.

Limitations of market niches

Let’s not fool ourselves, not all are advantages in finding a niche. When a niche market has no competition, it could be because you’ve identified a unique idea (remember what I said about big ideas), but it could also be because there are not enough consumers interested in paying for your idea. So don’t be delusional and believe that you can “do what you love and you’ll succeed” if your passion is a unique eccentricity in the world.

Another problem you may encounter is that the competition is so specialized that it has already positioned itself as a big leader in that niche. In this case, getting your slice of the cake can be very complicated.

How to find a niche

If you’re already convinced that finding a niche is a good idea, let’s go to the most practical part: how do I find it? Here’s the process that we followed in Nelio.

1. Identify your interest or passion

Creating a startup isn’t easy and it’ll take a lot of headaches. So it’s highly advisable that the product or service around which you’re going to create your business is of great interest to you.

Beware that this first step isn’t about defining what product you want to create, but what subjects you’re interested in and willing to study in depth, even if you’re not an expert at this point.

For example, in our case, in which we’re talking about a team of computer scientists, it was fairly easy for us to agree that what we wanted to develop software ?.

2. Identify problems you can solve

This point requires a little more creativity, but it’s less complicated than it seems. Each member of the founding team should generate a list of problems that they believe aren’t well resolved and where they could contribute by finding a better solution.

In just over an hour, each of us had about 4 or 5 ideas (from an app that recommends possible walks with your dog, to a system that passes on your social accounts to your loved ones when you pass away, or the automatic generation of legal documents, among others).

Once you’ve got the list, discard those points that the team feels less enthusiastic about. For example, some of us didn’t love the idea of a system related to the customer’s own death.

3. Analyze the competition

For the different proposals, identify and analyze the competition in detail. On this step make a more exhaustive search of whether the product you have in mind  already exists and see what features you think it lacks. Furthermore, analyze the product’s market in detail to figure out whether there’s still room for you.

In our case, for example, before we decided to create Nelio A/B Testing at the end of 2013, we believed that finding out what works best on a website was a real issue. First, we looked for information about the A/B tests, which at that time was a very new concept. We found that there were no native WordPress tools that could do all kinds of A/B tests and heatmaps. We also found products like Optimizely and VWO, which confirmed that there could be a potential market. But they weren’t native WordPress tools and, therefore, they couldn’t offer types of tests like the one for Widgets that we now offer. In addition, they were tools aimed at a segment of medium and large companies. We thought there could be a market of WordPress businesses or bloggers with tighter budgets that might be interested in improving the conversion of their websites.

4. Determine the profitability of your product

Another important point, which is especially hard at the beginning, is determining the profitability of the product.

You’ve identified a need that you believe you’re able to develop a solution for. You’ve analyzed the market and you see that potentially there’s space for you. The next step is as simple as asking the following question: assuming that the average price of my superproduct is X, how much do I have to sell to reach my breakeven point, where the revenue covers the costs?

This is about making a quick estimation without making your life complicated: if we’re talking about a digital business, simply establish the fixed costs such as rent and the telephone line, and the salaries of the people needed to develop the product, that’s it. Same with your average price. Even if you have no idea, make a hypothetical assumption. Then calculate if the number of units that you have to sell seems a reasonable figure or an outrage. If, for example, you get to the breakeven point when selling 10,000 units of a product but foresee that you’ll sell just over 50 a month, you’ll clearly realize it won’t work.

Anyway, this is just about making quick calculations to get decent numbers to decide whether you should stick to that project. But hey, it also helps at the beginning to understand how to monetize your superidea.

At this point, projects that looked like really good ideas are automatically discarded. And you’ll possibly also identify the project that’s most attractive and viable. We went through this whole process in one very super-intensive day, but I don’t think this is the usual. I even know of a case in which the team took almost a year to decide what project to embark on.

5. Test your MVP

The next step is taking the plunge. But remember that anything and everything can be said on paper and no matter how much studying and analyzing you’ve done, you still don’t know what the outcome will be. So, before mortgaging your entire life in the project that will launch you into stardom, create that minimum viable product with which you can truly get evidence of interest in your product in the market. And not only this, one of the great advantages of starting with the minimum product is that the customers themselves are the ones that will help you to identify their real needs and, from there, it’ll also be easier for you to prioritize how the product should evolve.

Become the leader in your niche

So far you’ve done the easiest part of the job. Now comes the complicated bit. How do I become the best?

Be an expert on the subject

If you’re already an expert and have great experience in similar projects, you may already be a leader in your niche and so you won’t need read this bit. But if this is not the case, there’s no magic here: you have no choice but to put in some effort. How? Here are some ideas.

  • Never stop studying: read books about your subject on a regular basis. Take courses online. Don’t stop reading blogs. Listen to audio books. Consume all the content you can find on the subject related to what you want to offer.
  • Stay updated: read the news, follow blogs as well as new trends that are emerging.
  • Connect with the people in the sector: know who they’re referring to and, if you can, contact them personally through social networks or any other means. Try to enter their network of contacts.
  • Attend sector events: for example, in our case we started attending WordCamps, and entrepreneurship and marketing events.

Of course, everything requires time and, in some cases, money. But acquiring knowledge is the best investment you can make if you want to become an expert in any area.

Show your experience

Knowing a lot of things and becoming an expert on something is great. But if you’re not able to convey that knowledge, you won’t get any reward other than the enjoyment from studying.

Therefore, the best way to demonstrate your experience is by consistently creating relevant content. In fact, you’ll succeed the moment you’re able to become a consistent and relevant source of content for your niche.

As we’ve said in a previous post, the creation of content is as important as its promotion. And remember, (let me add a bit of publicity here ?): for us, Nelio Content is the most useful tool to promote the content of our blog efficiently in all our social networks.

Another way to show your experience is by participating in events or interviews. It may be hard and expensive at first, but it’s still another way to interact directly with your audience and demonstrate your knowledge. After a while, you’ll get invited to big events.

As you can see, it’s about continuously creating and promoting content.


Finding a niche market isn’t an easy task but, if you don’t have a big budget, the best way to find your place in this highly competitive ocean is to specialize in a niche. Try to specialize in something that you’re passionate about, but don’t take the plunge without validating the market first.

Once validated, invest as much the time and effort as you can in trying to be the best in that area. If you succeed in positioning yourself as a leader there thanks to your knowledge and expertise, you create the confidence that makes your niche want to buy your products ??.

Featured image by Ciprian Boiciuc on Unsplash

2 responses to “Find Your Niche and Be The Best”

  1. Chetan Maini Avatar
    Chetan Maini

    Thanks for sharing this information is useful for us. It’s a great pleasure reading your post!

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