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Ways to Identify your Niche

It’s hard enough to think of a powerful business idea. It’s harder still, once you have dreamed up a concept that keeps you buzzing all night, to find that some big company has the main market sewn up leaving you to fight for the scraps they left behind.

That’s no bad thing though. Choosing a finely focused niche rather than a general market area is usually the best way to build a successful business. Start a company that sells laptop computers, for example, and you’ll need a production line more efficient than Dell’s. Start a company that sells designer laptops for students or for gamers or for people who work in cafes and all you’ll need to do is be able to meet their needs. You’ll have fewer customers but the customers you have will be happier and you’ll have a shot at being that market’s main player.

Niches let small businesses fill the spaces left by companies too big to squeeze into every corner of the market. They give entrepreneurs a foothold, a place to start and room from which to grow.

So how do you find your niche?

Spotting your Niche
There are a number of different ways. The most obvious is to focus on the activities you love. It’s always going to be easier — and a lot more enjoyable — to turn a hobby into a business activity than to spend time learning about a specialty in order to make sales.

You’ll begin with a knowledge of the industry and an understanding of what the market wants — after all, you’re part of it. It’s a fun thing to do and a fun way to work too.

An alternative route is to look at your work experience. Creating a piece of software that makes life easier for graphic designers or a tool for better home repairs might not be as enjoyable as building a company that makes custom surfboards or strange lenses for cameras but again, as a professional user you’ll understand the market — and you’ll know there’s a demand for it.

Perhaps the worst way to identify a niche — although that doesn’t stop it from appearing to be one of the most popular, and even occasionally succeeding — is to feel that you’ve spotted a gap in a market that you use occasionally, and try to fill it. LookBetterOnline.com, for example, matches online daters to portrait photographers so that they can improve their appearance on dating sites. The service was formed by a couple who met on a dating site and had grown fed up trying to pick dates based on blurry holiday snaps.

The problem here is that an occasional buyer will have limited familiarity with the market. If a service isn’t available, the reason may be that you’re the only person who wants it, rather than that no one else has thought of it.

Wherever the niche idea comes from though, there’s always a second stage to go through before work can begin on the business plan and you can start looking around for employees. An idea might seem promising, exciting and destined to make you wealthier than Simon Cowell, but the real test will only come when you open up to customers and start selling.

That means asking a number of questions and making sure that at the very least you have answers — and at the most, the answers you want.

The first question you’ll need to ask is how big is the market. There’s always a danger of assuming that because you want something or think one way, that everyone else does too. While some people might agree with you, you want to be sure that there are enough people on your side to be able to provide a steady stream of sales.

There might well be a market for vegan wallets, for example. Vegan wallets for children could be a market too small.

Climbing the Wall
And the second question is how big is the niche — or rather how widely can you broaden it. A niche should be a place for a business to plant a seed and put down roots but most entrepreneurs want their company to grow. They might not be able to take over the entire building but they do want to be able to use their foothold to expand into other products and the servicing of related needs. Lensbaby may have produced a lens with a moveable sweet spot but the company has also produced a range of other lenses that build on the same idea.

Before you get to work on filling your niche, it’s worth spending a little time looking beyond your first idea to consider your company’s future direction — and whether it’s likely to have one.

No less important than the product itself though, is the way you’re going to market it. Specialized products can sometimes demand specialized marketing methods. LookBetterOnline, for example, relies in part on joint ventures with several leading dating sites to bring in customers. It’s important to understand the product and the market, but you should also know how you’re going to bring the two together, and whether you’ll need any special techniques to do so.

Ultimately, a niche is always the best way to start a business, but spotting one is only the first step towards filling it… and growing out of it.


  1. Paul Singh Says:

    One additional way to find your niche would be to simply ask your customers what you're especially good at. If you're consistently hearing similar things from your customers, it's time to investigate a little further.

  2. Sam Pardue Says:

    Hi Alex,

    Thanks so much for mentioning Lensbaby, LLC as a company that has found a niche in the marketplace. We actually have a wonderful entrepreneurial story to tell. I am one of the Co-Founders of the company, and I met Craig because he was my wedding photographer. About a year after our wedding Craig hired me to do some marketing consulting for his photography business. One day he walked into my office with this very funny, ugly duckling of a prototype Lensbaby and told me he wanted to start a business to sell them.

    As a non-photographer, I was completely mystified by the device he was holding. I suggested that we do some beta testing, under NDA, with some local photographers. We only had a handful of testers but the feedback was so consistent - "Fun, unique, amazing photographs" that I thought Craig had a potential winner on his hands.

    Craig asked me to partner up with him to start the business. Amazingly we got the company off the ground with just $5,000 in cash. Impossible? Well, we designed the fist generation website ourselves and got it built for $1,200. Another $1,500 went for a provisional patent application. Our big break came when our most important supplier gave us Net 30 terms with no cash due upfront -- they looked at our website, which we had already built, and thought we were a real ongoing enterprise!

    The first big shipment of components came on the first day of the big Wedding and Portrait Photographer's International (WPPI) tradeshow, where we were launching. Well, the little Original Lensbaby was a hit and in that first show we sold about 200 lenses, giving us enough cash to pay the key supplier and order a larger batch of components.

    We were able to start with an extremely simple, low cost business model because initially we sold exclusively over the web and occasionally at tradeshows (where we always made a profit). The internet has profoundly changed the opportunities for niche markets! Within 6 months we had sold directly to photographers in 40 different countries around the world!

    Throughout our 3.5 years of existence since our launch (we are still babies!) we have continued to focus on our niche and have found that being in a niche gives us a lot more freedom to do fun and imaginative marketing and distinctive branding.

    We are always wondering how a niche product like the Lensbaby becomes more popular. Can a niche blossom into a larger market segment? One way we try to figure this out is by listening to all of the candid comments made on forums and blogs. I keep track by setting up a Google Alert, which sends me an email whenever a new comment about Lensbabies appears on the web. This is how I found your post and became inspired to share a little more about Lensbaby's Geekpreneurial history.


    Sam Pardue
    CEO, Co-Founder
    Lensbabies, LLC

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