One of my clients is in talks with another business to buy a niche operation. He is very optimistic about this niche which is completely new for his business. So, as advisors (aren’t we marketers always playing advisors?) it is our job to do some deep digging and either encourage him or caution him with solid numbers. Hence this post.
If you are planning on starting your business, or entering a new niche, there is some basic homework that you need to do to ensure that the market will yield the appropriate returns to justify your investment.
There are 4 basic things you need to look at.
All these can easily be ascertained by spending some quality time with your favorite keyword tool.
Demand: By analysing search traffic in different creative ways, you can ascertain if there are customers in your niche, thereby confirming demand for your product.
Profitability is a little bit more tricky since it depends on your ability to source low and sell high. You also need to see if there are enough other products in the market that may be comparative. Also, you need to make sure that the market is needy and that they are willing to pay for your product.
Caution: I know of enough software startups that went nowhere because developers are accustomed to opensource.
Competition: Every keyword tool worth the name will provide you withe enough information regarding your competition. Basically what you need to do is to study what they do correctly and then replicate it properly.
Traffic : More appropriately, repeat traffic. Please ascertain that there is a possibility of repeat traffic in the new niche. For example, lets consider “sewer cleaning”. People may search for it once to get someone to fix a broken pipe, but it is difficult to get them to subscribe to your newsletter. Without repeat traffic, you are swimming against the tide.
Having generated our reports, it quickly became obvious that our client should focus on a niche that was slightly broader than the one he was considering. You can use these generic tips too when you are ready to start your own business.