No business can sell to everyone though many make the mistake of trying. It may feel counter-intuitive to restrict the market you intend to supply but if you can find a niche that is narrow but deep you will make it easy for enough people to recognise themselves as your potential customers. This has advantages for the way you design and market your offer. If you have an in depth understanding of your target customer you will understand the problems they have and want to solve. This means that you will know what products and services will appeal to them and you will be able to market them using language which is familiar to your ideal customer. If you can find a niche that your competitors are not targeting so precisely you may have a competitive advantage.
What do I mean by a narrow and deep niche?
You could target women who are mothers; that would be a niche but a wide one. If you target new mothers with babies under three months old that would be a narrow niche because it is very tightly defined but it’s also a deep niche as lots of women have babies each year (around 700,000 annually in the UK). How you define your niche will depend upon the services you are offering and where you are located. For example if you are a photographer in a major conurbation you may well be able to specialise in taking photos of new-borns but if your business is based in a lightly populated rural area you may need a wider target.
Niches don’t just apply to the consumer market. You should apply the same principles to business to business services. Business buyers like to purchase from suppliers who really understand their businesses. A restaurant owner wants an accountant who understands the restaurant trade and who gets why it is important to differentiate between bar and restaurant purchases for instance. An accountant who deals in small businesses in general may not have the degree of understanding to help the business owner recognise whether their costs are adequately controlled and in line with the most profitable businesses in their sector.
How do I find the right niche?
In the ideal world your business idea and your why will have been born out of the identification of a problem that enough people want to solve with a solution exclusive to you. Sadly few of us live in an ideal world so your why may be the starting point for defining your target customer. If your why isn’t narrow enough to form a niche list all the different types of customer you could supply. How many of each type are there in your local area? Who else is serving their needs? Are there some groups whose needs are better met than others? For instance if you are thinking of selling clothes and your local shopping centre is filled with fashion boutiques and chain stores there may be a space for you to sell high end classic clothes to affluent women. But of course there will need to be enough affluent women in the local area to make your business viable.
Your local authority should be able to supply you with demographic data for the local population but much of this is gathered in the population census that is only carried out every 10 years. The last one was in 2011. Other data may be gleaned from electoral registration records, planning applications, council tax and business rate records. The local authority may have done research of their own to inform infrastructure and other development plans. Contact the department responsible for business support to see what data is available in your locality.
If there are large housing or commercial building developments happening in your area you may find that the people behind them have commissioned some research which they may be willing to share for a fee. It’s also worth a visit to your local library to see what information they hold. Some Chambers of Commerce have research departments and demographic and business data so could be another source of useful information.
Make use of your own local knowledge too. What do you know about local businesses or residents? What do your neighbours struggle to find? Are there local Facebook groups that you could tap in to to source the information you need?
This article is a short extract from my forthcoming book, working title ‘How to start a locally based business after 40’. Have you developed a niche for your business. If do I’d love to hear about it and may feature you in my book. Please comment here or fill in the short survey here.