One of an entrepreneur’s tasks is finding the right direction in the business. The modern market is constantly changing, it is difficult to predict what will bring profit tomorrow and what will turn out to be unprofitable.
What niche to choose for business and how to do it right to receive a stable income? After all, any industry is oversaturated with offers. But high competition is not a reason to abandon the idea. To develop a promising project, you need to know the main criteria and stages for choosing a direction of activity.
Niche selection steps
First of all, it is worth clearly defining what a niche is, so as not to confuse it with a category and a subcategory.
A category or segment is a volumetric part of the market of a particular industry. A niche is a narrow area of activity in a segment, which is aimed at producing or selling a specific type of product.
An example is a construction. This is a separate large category with its subcategories: the construction of residential buildings or commercial real estate, repair work, design services, etc. The subcategories are already divided into niches: window installation, landscaping, roofing, and more.
There are certain stages on how to choose a niche for a business. First, analyze the types of activities that exist in your area. Pay attention to how many are presented. This will help determine:
- which niches are occupied, which are free;
- how they meet the needs of the audience;
- what strategy do your potential competitors use and how do they position themselves in the market?
The next step is to think about what you would like to do. In this case, you need to take into account your resources: experience, education, finances, and connections. Identify several promising areas. Based on the analysis of competitors and personal capabilities, weed out unsuitable options.
Think about what the project will be based on:
- what is unique you can offer customers;
- what are your main advantages over competitors?
- whether a license is required for the selected type of activity;
- what legislative changes are being prepared, and how they may affect the company’s future.
Check the selected options against several criteria:
- how much do you understand the technology of doing business;
- transaction cycle – how quickly you can sell goods or services;
- monthly and annual returns;
- consumer demand;
- development prospects.
To understand how to choose the right niche for a business, you need to work out each stage in detail.
We analyze free and occupied niches
Initially, you need to collect information about what types of businesses are represented in your city or region. This can be done based on:
- personal experience as a consumer;
- search queries, limiting the issue to a certain region;
- information from business directories.
The information obtained is best collected in a pivot table. This will help you visually assess the industries in your region and understand which niche to choose for business from scratch.
If you are planning to open an online store or information business for which georeference is not important, you need to study Yandex and Google search query analytics. The frequency of searching for products or services will show what users are interested in.
Please note that you need to use commercial request statistics. Informational keywords are not suitable for this. Sales inquiries are all about sales, so the words “buy, buy, cheap” will often come up. Information queries are what people enter when trying to find information. They are often accompanied by the words “what is, which are better, where, how”, etc.
Such collection of analytical data will also allow you to get an idea about the target audience: its age, interests, and characteristics.
Analyze your skills and preferences
There have been many historical examples when ordinary people founded large corporations by turning a hobby into a profitable business. Such success is due not only to luck but also to excellent knowledge of the direction. If you are good at something, you will be able to captivate others with it.
Therefore, when thinking about how to choose a niche for a business, listen to yourself, what would you like to do and what opportunities do you have for this? To clearly articulate your inner desires, answer yourself the following questions:
- What skills and abilities do I have? Is there anything I’m better at than others?
- What do I like to do? Do I need additional knowledge or am I already well versed in the direction that interests me?
- How can you monetize a hobby or ability that currently brings nothing but personal pleasure?
At the same time, one should not forget that to monetize talents, initial investments will still be required. It is not only the money needed to purchase materials or rent an office. To launch your enterprise, you will also need time, experience, and useful contacts.
You can proceed to the choice of a specific niche only after you weigh your desires and possibilities.
Identify 5-10 promising business areas for yourself
Only 5% of start-up entrepreneurs clearly understand in which area they will work. Therefore, when giving recommendations on which niche to choose for a business from scratch, experienced businessmen advise compiling a list of the most interesting options for themselves, including no more than a dozen areas.
At the same time, ideas should be real and promising, correspond to financial capabilities, and be interesting to the audience. It is desirable that each of the potential projects can be scaled in the future. But no matter how much you want to implement everything at once, you need to choose one optimal option for entering the market.
Assess demand and discard unpromising ideas
To determine how to choose the right niche for your business, make a table of possible options. In it, enter the selected areas of activity, as well as:
- the number of active companies in this niche;
- demand for services and goods (high or low);
- target audience (men, women, children).
At the same time, it is also desirable to indicate what costs will be required for each of the options. For example, to run an online service, it is not necessary to rent an office. But for offline trading, you will need to rent a store, hall, or kiosk.
Check each niche for top criteria
A controlled check of the prospects of each idea will help to weed out the unnecessary. To understand which of the remaining options can bring success, evaluate it point by point:
- How much do you understand the technology of doing business and own the resources for its implementation?
- Profitability, monthly expenses, and income.
- Payback period of invested funds and the cycle of the direct transaction.
- What are the development prospects of your enterprise, is it possible to expand and scale it?
The answers to these questions will help you make the right decision before you finally choose a niche for your business. In addition, by analyzing directions in more detail, you will be able to anticipate possible difficulties and think about ways to solve them.
Study competitor products
The next step is to evaluate potential competitors. This item can be skipped only if you decide to offer customers something fundamentally new. But in this case, it will be difficult to interest the audience – they still do not know anything about the new product.
To assess the demand, it is necessary to identify the main competitors in the niche. What you need to know about them:
- How long has the company been on the market?
- does it have branches or subdivisions;
- what category of goods or services does it offer (premium/standard/budget);
- what exactly is included in the range of goods or services, etc?
Assess the potential benefit
After analyzing competitors, and learning their strengths and weaknesses, you will understand how you can attract consumers and what conditions of cooperation to offer future customers. Think in advance about how your offer will differ from what is already on the market.
In addition, take into account other misses of opponents. Find a better location for a retail outlet or office, launch a custom advertising campaign, or try to attract customers with a level of service. Before choosing a niche for a business in 2022, it is worth assessing whether you can work under quarantine restrictions.
You can understand how profitable the project will be even before its opening by starting a test advertising campaign on social networks, bulletin boards, or on specialized platforms on the Internet. The number of responses and live calls will show the real interest of the consumer in your services.
Start trial sales of the product, for example, through social networks or specialized platforms. If demand is stable, it will be possible to start the enterprise.
Mistakes when choosing a niche
Even a promising idea can burn out if gross mistakes are made at the initial stages. This can happen if there is no:
- experience and knowledge in the chosen field;
- business plan with detailed calculations;
- analysis of competitors and target audience;
- testing demand for services or goods.
If you doubt that you can open a successful enterprise from scratch, consider buying a ready-made business. A working company already has established relationships with counterparties, a staffed staff, and a well-established reputation in business circles.
Promising business niches in 2022
This year, many enterprises are switching to a remote work format. Therefore, the instruction is also relevant for those who want to understand how to choose a niche for business on the Internet.
Based on the results of the current year, we can say that the following will remain in demand:
- sale of “smart” gadgets;
- courier services, including food delivery;
- educational courses and programs;
- production and sale of organic products (food, cosmetics, household goods);
- construction works;
- sale of goods for animals.
Keep in mind that the greater the personal involvement in the work of the enterprise, the higher the chances of success. Therefore, you need to choose only a direction that is interesting to you not only for making money but also as an opportunity to realize yourself.