Before you write a business plan, don't overlook this important first step.

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Many new entrepreneurs believe that specializing their business will limit the pool of potential clients they could work with. They enter the market trying to be everything to everyone — appealing to every demographic and meeting every cost expectation. Sometimes they use a more established business as an example, thinking they must launch at the same scale and compete. (This is generalizing.)

The reality is that generalizing does not often provide a solution to a problem. Generalizing positions your small business to compete against businesses who have already filled a market need and have already earned a loyal following. Your chances of success drop when you set out to do something that someone else is already doing.

42% OF STARTUPS FAILED BECAUSE THERE WASN’T A MARKET NEED.

Before you spend the time writing your business plan and funding your idea, it’s important to first find your business niche. This means looking at the broad market your business would serve, then focusing your energies where there is a gap, preferably in an area where you’re knowledgeable and passionate.

 For example…

 Approach 1: You sell clothing for women.

This general statement enables you to design or sell a wide range of sizes, styles, fabrics, and fits. It generalizes your price point from cheap to expensive and everything in-between. You might think this approach would draw in a widely diverse crowd, but most research shows the contrary. Generalized business models often struggle to hook specific demographics. The high-end buyers might assume the products are too cheap, and the low-end buyers might assume they are too expensive. A shot in the dark could leave you with a lot of unsold inventory and a lot of leads who don’t understand your point of differentiation and won’t work to figure it out. Imagine the stress of trying to be everything to everyone all of the time. It’s not worth it.

Approach 2: You sell clothing for professional, middle-aged women who often travel.

While this niche attempts to reach a small pool of buyers within a large market (the retail clothing industry), this approach enables you to micro-strategize your buying, marketing, and sales efforts to organically increase leads within your vertical. Choosing to specialize allows you to maintain inventory that is in demand for your customers specifically, and at a unified price point. This niche demographic will likely want classic, well-made fashions that won’t quickly go out of style, and will remain comfortable and wrinkle-free during a flight. It’s true that niching will deter some leads outside your area of specialization. For example, the trendy teenage girls may not be interested in this business model, but the middle-aged, professional women who travel will feel seen and understood, increasing the likelihood that they will return and/or refer a friend. Sometimes you must (indirectly) turn away some to make progress, but the long-term payoff can be dramatic.

If there are 20 companies in your area who sell athletic shoes, but only one of them offers discounted athletic shoes, it’s easy to guess which business will attract the most customers. We live in an age of specialization and a general idea will die a quick death in a saturated market.

Niching allows you to repeat and practice your craft, perfect your processes, and then scale and train more effectively while becoming a subject-matter expert within your market. By the way, subject-matter experts can charge more for their services. Niching can also increase your online visibility by funneling searches from people who already know exactly what they want. Yes, these are often lower-volume searches, but they are bottom-of-the-funnel shoppers who are ready to buy, helping you save lots of money on lead generation.

How to find your niche

So far, I’ve used product-based examples, but niching isn’t always based on product. So how do you find your niche? First, (for a moment) set aside the future glory from your imaginary business empire. Focus on what’s easy, tangible, and immediately accessible. Start a spreadsheet. Identify your market, then submarkets within that market — maybe even submarkets within the submarkets! Think about what kinds of publications you read and topics you like to learn about. Identify commonalities between the submarkets and where your interests lie.

Research those commonalities and identifying gaps in the marketplace—where is there pain that you could solve? Determine what businesses already exist and where the market is saturated. Research consumer ratings indexes to finds areas with poor service. Review Google Insights or Quora to discover what questions people are asking. Take note of patterns, trends, and anticipate growth. Before you hit the ground running, you want to ensure the market has potential to warrant your investment in that area. Finally, think outside of your comfort zone. This is the space where revolutionary ideas are born.

 How to define your niche

Once you’ve confirmed the viability of your business idea, you’ll need to start a new spreadsheet. Sorry Excel haters, this is where you’ll outline what will later become your business plan.

 By now you should have a solid idea of what your business would provide. Next, spend some time researching and defining your audience, and be very specific: How old are they? Where do they live? What are their interests? Where are they accessible? What problems are they facing and how could your product be their hero?

 Based on your product and audience data, determine your preferred method of sales and the area in which you will operate. Remember, today’s market does not mandate a traditional brick-and-mortar platform. Depending on your product, you could develop a system for subscriptions, memberships, or e-commerce. Choose the method that is most accessible to your niche audience, then decide on a pricing model. Later, you’ll reference this good research to apply for funding and coordinate your marketing efforts for this specific audience, in this specific industry, to promote this specific market need.

 How to dominate a niche market

If your research shows you’ve found a viable idea, then please take the plunge! Write the business plan. Take the online course. Invest the time and money. Do it thoughtfully, and with a brand designer by your side.

DESIGN-LED COMPANIES HAVE 32% MORE REVENUE AND 56% HIGHER RETURNS TO SHAREHOLDERS COMPARED WITH OTHER COMPANIES. (MCKINSEY & COMPANY, 2018)

Research advertising agencies and design studios in your area. To optimize your success potential, you’ll need more than just a logo and a website to launch your business. Invest in custom brand identity design centered around your unique market niche. A strong brand design builds an emotional connection to your product, telling your brand story while boosting its memorability, character, and significance to your targeted audience.  

A brand designer is uniquely qualified to help you leverage your brand to intentionally attract the right people, which is easier done within a specific niche. It’s challenging — if not impossible — to design an all-encompassing, general brand that people will understand. A strong brand design paired with a defined niche can set you up to do the work you want rather than the work you’re stuck with.

Over time, your unique and professional brand can provide you with valuable equity, which can later pay for the initial investment. If you put a Nike “swoosh” on a $2 tee shirt, people will be willing to pay $30 for that shirt. The Nike brandmark adds value because it represents something that resonates with that buyer. Don’t overlook the power of good design.

In summary, before you plunge into your new business, first use market research to confirm that your idea is viable. Look for voids and pain points, define your audience, and determine your point of differentiation. Choose a niche and then a designer, then watch the pieces of your plan fall into place.

For more information on discovering your business niche and writing your business plan, read our book: Discovering Your Authentic Brand.