Propelling a small business idea into reality is a tedious but fulfilling process. As the captain of this ship, you have to learn how to translate your ideas and plans into a sustainable business. One way to do this is by choosing a profitable niche.
A business niche or niche market refers to a smaller group or area within a broader market or customer base. Instead of trying to appeal to everyone, the business chooses to meet the specific needs and problems of their chosen niche (smaller group) by offering tailored products or services based on their lifestyle, demographics, needs, pain points, buying behaviours, etc.
If you're about to launch your own small business idea, here are 5 important steps on how to pick a profitable niche.
Evaluate Your Interests
Running a business is a lot of hard work. Choosing a niche that you are passionate about will not only boost your drive to keep going but also act as an advantage for you and your business since you already know what you're getting into.
List down your qualities as a user if it's a product, or experience preferences if it's a service. See how these reflect on others and the industry. This can aid in identifying the characteristics of your target niche or market.
Do Your Research
After evaluating your interests, try to know more about your market. By doing market research, you'll be able to identify what customer-based problems are there to solve.
Remember that the number one goal of starting a business is to provide solutions to your customer's problems. Knowing the statistics in the industry you want to enter will also allow you to see the hard data on how the industry is performing. Look into the demand, the competition, and other external factors that may possibly affect your business operations.
Start by conducting surveys and interviews from your inner circle with the same interests. Read books and journals from credible sources. Research potential competitors and learn what works for them.
Have a Business Plan
Now that you have a solid business idea using all the information you've gathered in the research process, it's time to create a business plan.
Creating a business plan allows you to have an objective overview of your idea. It also makes it easier for investors to visualize your business, and establishes a clear game plan on how you can provide value to your chosen niche.
Some important components of a business include your product or service description, organization set-up, target market, expected profits and costs, timeline and more. Your business plan will serve as the backbone of your business so it is important to strategize it well.
Register your business
After securing all your business information, the next step is to register your business. This step may be a bit tedious and difficult, however, registering your business legitimizes it and allows you to mobilize more effectively.
Registering your business may also help you when applying for government subsidies. Depending on your registered location, industry, structure, and business development stage, having a government registered business is an advantage when applying for grants. It allows you to filter out which grants your business is qualified for.
Your registered business structure can also allow you to have a lower tax rate. Business Tax laws have different provisions based on your indicated location, industry, and etc.
Having a legal business status also distinguishes the boundaries of your business and your personal finances. This creates liability boundaries, and recognizes your business as a different entity from you. This also ensures legal protections like intellectual property, and allows you to comply with regulations.
Business registration solidifies your position in the industry. It allows you to be officially part of your chosen niche.
How Does the Industry Look 5 Years From Now?
In choosing your niche, make sure you look into how the industry will be moving forward. This will allow you to assess how sustainable the industry is, and if it is actually profitable in the long run.
Although you cannot foresee everything, it will be practical to estimate how your sales and environment will play out in the future. Objectively assess if people will be needing this product or service after some time, or if there are possible external factors coming towards you. These may be trends and new policies that could potentially help your business grow or shrink.
As a business owner, it’s important to make an informed choice of niche. Be prepared to be part of your chosen industry and make sure to play in the landscape well.
Ready to make your ideas a reality? Set up your business today!