Start with a niche but be careful…


I almost always advise my mentees to start with a niche, even if they think everyone who can walk and chew gum at the same time is in the total addressable market. But what is a niche anyway?

The dictionary define it as:

a specialized segment of the market for a particular kind of product or service:

But let’s take that further: a niche is determined by a significant commonality amongst prospects – those people you hope will become your customers.

There are several characteristics that may define your target niche:

  • Geographic – for many startups, especially service ventures, starting locally, e.g. in the same locale as the company, is one way to start with a niche. Once you dominate the local scene for say hairdressers, you can then expand to other locales.
  • Purchasing power – Uber started with a black car – limousine service. A very easily defined niche for high end customers. Once they worked out their operations they were able to expand to take over the taxi industry. How do you find high end customers? The same way Uber did – by other high end products or services they consume that are related to your product or service.
  • Vocation – workers in specific jobs may be a good target for you. For example, say you had a great speech to text app for mobile phones that could be customized by the user with industry specific terms. Construction workers or architects, who often have to work on a site, take notes quickly without having hands-free, and use a lot of industry-specific terms may be a good niche for you.
  • College students – startups often target college students, and for good reason. They tend to be early adopters as they are driven by FOMO – feat of missing out. They also tend to be willing to experiment with new offerings as they haven’t developed fixed buying habits as older adults may have. And they can be easily located – on their college campuses.
  • Associations and Affiliations – If you have an application or service for those interested in environmental sustainability your might try to reach them through the Sierra Club. There are thousands of associations and there are even directories of associations. 

The key aspect of your niche is that the members are easily definable and reachable. It doesn’t help  to define a niche if it’s going to be very costly and time-consuming to pursue it. And keep in mind, you either have to solve a problem for your niche market or offer them a compelling new opportunity, otherwise why would they be interested in your offering?

There is one danger of the “dominate a niche then expand from there” strategy. I just ran across this with one of the ventures I’m mentoring. They found a great niche for their product. The prospects were very enthusiastic about their  offering.  The company started getting so involved with this niche that they began adding features requested by these customers. Then when they started looking for funding investors pigeon holed them as just targeting a narrow vertical –  too small a market to interest an investor. So make sure you don’t fall into the trap of customizing your product or service for your niche in ways that won’t be of interest of use to other users.

Entrepreneurs hear a lot about listening to their customers and evolving their products based on customer feedback. But if a new feature is only going to be useful for a very specific market segment, unless you plan to build your entire business on that segment, resist the urge to add that feature.

Finally, your niche should be early adopters. Check out my post Who are your early adopters? for details



Author: Mentorphile

Mentor, coach, and advisor to entrepreneurs, small businesses, and non-profit organizations. General manager with significant experience in both for-profit and non-profit organizations. Focus on media and information. On founding team of four venture-backed companies. Currently Chairman of Popsleuth, Inc., maker of the Endorfyn app for keeping fans updated on new stuff from their favorite artists.

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