The best businesses in the world started as niche businesses.
Yet most people prefer going broad because they believe that they’ll be missing a huge opportunity.
In this article, I will go through 3 topics:
1- Why you must start a niche business, and what are the 5 most common myths about niches
2- What framework you can use to pick the right niche
3- How do you find what I call your “magnet persona” to skyrocket your business growth
What are the 5 most common myths about niche businesses?
Myth 1: Focusing on a niche means you can’t appeal to a broader market later
Let’s take Facebook as an example.
It started exclusively as a social network for Harvard students, then expanded to other universities, and eventually opened up to the general public.
Today, it's one of the largest social networks globally, serving billions of users across diverse demographics.
Myth 2: Niche products can’t attract big investments or high valuations
Supercell, the video game development company, focused on mobile games only.
They found massive success with a few popular titles like Clash of Clans and Clash Royale.
Despite its narrow focus, Supercell was valued at billions of dollars and attracted significant investment from major companies like SoftBank and Tencent.
Myth 3: Targeting a niche market means lower revenue potential
Lululemon started by targeting a niche market: yoga practitioners.
They focused on high-quality yoga wear, which led to a loyal customer base.
This focus didn't limit their growth; instead, it established them as a premium brand, leading to significant revenue and expansion into broader athletic apparel.
Myth 4: A niche focus limits innovation
Tesla initially focused on high-end electric sports cars, a niche market.
This focus allowed them to innovate in battery technology and electric powertrains, which later became foundational for their broader range of electric vehicles, including more affordable models.
Myth 5: Niche markets are too small for significant impact
Dollar Shave Club started with a simple concept aimed at a specific niche: affordable, high-quality razors delivered monthly.
This focused approach didn't limit their impact; instead, it led to a disruption of the entire shaving industry, culminating in a $1 billion acquisition by Unilever.
Why, from a purely financial standpoint, it’s better to focus on a niche when you get started?
Your market penetration will depend on how specific your offer is.
If you sell copywriting services for everyone, your market penetration is extremely weak, as your competition is huge, and people don’t have any reason to go with you versus others.
However, suppose you start selling copywriting services for CEOs of scale-ups that recently raised their Series B in funding.
In that case, your market penetration is extremely strong because you are a lot more specific.
Instead of competing with others, you become “unique”.
And your uniqueness allows you to charge a lot more.
How exactly do you find your niche?
The first step is to start with a crowded market.
The reason why crowded markets are great is because there’s already what we call product market fit.
The pain point has been clearly identified, and there are solutions people are willing to pay for.
If you take the email marketing space for example.
MailChimp is a clear leader in that market. It even got acquired for $12 billion dollars by Intuit.
But since MailChimp is serving a super broad range of customer types, they’re clearly not the best product for specific niches.
So Beehiiv took advantage of it.
They started as the “newsletter tool for creators”.
And because they adapted their product and marketing to that very specific niche, they quickly became one of the fastest-growing newsletter companies in the world.
But that’s not it.
When you have identified the market - you must also know how to pick the right niche.
Option 1: you’ve been part of that niche for a long time.
In Beehiiv's example, the founders worked at Morning Brew, one of the biggest business newsletters for years.
They knew the ins and outs of the creator niche, so it made sense for them to pick that niche.
Option 2: you know someone who can introduce you to people in that niche.
Option 3: you don’t know anyone personally in this niche, but you know you can get in touch with them easily.
If we go back to our example with MailChimp. Here’s exactly what I would do if I wanted to get in that space.
First, I’ll go to a review website like G2
Then I’ll focus only on reviews with 3 stars or below.
Here we have close to 1000 people who are actually complaining and not enjoying MailChimp.
From there, I’ll reach out manually to each and every single one of these users.
Since you don’t have the full name, you just have to copy and paste all the info you’ve got, and you usually end up on a LinkedIn profile.
To show you how it works, I even decided to message a few of them using the following message 👇
“Just saw your review about MailChimp on G2 {{firstName}} - I understand the frustration.
We’re building something to solve exactly this pain point.
Worth a chat?
Cheers,
G.”
And here are the replies I got 👇
Another way to find more people is to go on Twitter's advanced search to find all the people who are vocal and frustrated about MailChimp.
For example, here, I’m choosing all the tweets that mention MailChimp and that have more than 50 likes.
The assumption is to say that when it gets more than 50 likes, it’s usually a pressing problem.
From that point on, here’s the exact DM I wrote👇
“Just saw your tweet about MailChimp {{firstName}} - I understand the frustration.
We’re building something to solve exactly this pain point.
Worth a chat?
Cheers,
G.”
And again, the replies I received 👇
2 things to always remember when starting a niche business
Now that you know why you must start a niche business and how to find people to sell your product or service to, there’s one pitfall you need to be careful of.
When you start niche, always remember two things:
1- Always pick a profitable market.
I talked about this in the video I made about finding GREAT ideas (so make sure to check it out if you haven’t already)
2- Only focus on qualified clients
If you’re good at sales, you’ll be able to close both qualified and unqualified clients, BUT that’s a BIG mistake.
Unqualified clients are the clients where it will be extremely difficult for you to deliver the promised results.
For example, let’s say that you’re selling SEO services to drive more clients to small businesses.
If you decide to close a local bakery, chances are that it will probably not work or that it will require a lot of effort for you to make it work.
Simply because local bakeries don’t have huge budget and local SEO can be pretty competitive.
The issue with unqualified clients is that not only do they require a lot more work and support - but they’re also the ones with the worst results and therefore are often the least happy about your service.
So when picking a niche, always make sure that clients are qualified so you know you can deliver a lot of value with minimum effort.
How can you find your magnet persona to skyrocket your business' growth
Now I want to touch base on something that people don’t think of when picking a niche, but that can be a game changer: magnet persona.
A magnet persona is a specific persona in your niche that will allow you to attract a lot more customers down the road.
The goal of a niche business is not to stay like that forever.
The goal is to get huge traction amongst a group of well-identified customers so that later you can expand.
For example, Apple started as a computer company for designers.
Their Magnet Persona was designers.
To pick them, they answered the following questions:
1- Is the current persona underserved?
Back in the day, designers couldn’t benefit a lot from computers.
Apple made strategic additions and enhancements to its computers, specifically catering to the needs of designers and creative professionals.
These features have been instrumental in making Apple computers a preferred choice for many in the design industry.
Some of these key additions include high-resolution displays, color accuracy, powerful graphics processing, aesthetic and ergonomic design, etc.
2- Is the current persona in a growing market?
With the rise of the number of personal computers and the Internet, Apple knew that there was gonna be more and more designers using personal computers.
So essentially, they knew that their market would keep growing over time.
3- Is the current persona considered cool by other people who are not part of that persona group?
Designers are like artists, they’ve always been fascinating and inspiring people.
People want to look and feel more creative.
So if you associate your brand with designers, then you’ll associate how people feel when they use your brand.
Today Apple is used by 100s of millions of people around the world, and it’s been scientifically proven that using Apple products makes you feel more creative.
That’s why you call that a magnet persona.
Because it will attract a lot more people down the line allowing them to go from a niche business to a global one.
You will be able to find all the important parts of this article, including unique checklists and resources, in this Notion document.
Every week I’ll publish new articles on how to build and grow a B2B business that generates millions of dollars.
Without any BS and giving you practical templates that you can steal.
Peace, love and profit 💰
G. ✌️
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