How To Choose The Right Niche

Abul Hussain Agency & SMMA Rapid Business Growth Consultant

I’ve been getting quite a few questions recently around what niche should a new agency owner choose to serve.

There seems to be a lot of confusion on how one should approach selecting the right niche. 

Some business/agency coaches advise people to pursue their passions, whilst others are advising newbies to chase the niches with the most profit potential.

Unfortunately, many passion niches are not profitable and if you choose a niche that you don’t enjoy working in purely based on potential profit, you will quit and end up making no profit!

Now in this article I will not tell you what niche to pursue, but rather share some key principles to consider before settling on a niche.

One important thing to remember is that if you are in the early stages of your journey, it is a lot easier to switch niches.

However, I hope that these principles will assist you in picking the right niche from the get-go, so that you do not become one of those people who are changing their niche every two weeks.

Principle 1. Do I like the operators in this niche?

If you are a well groomed professional, who likes to work with people in fancy suits and boots, do you really want to serve plumbers?

You will need to spend many hours investigating your niche, getting to know your market and how it operates.

It is super-important that you like the kind of people who operate in this niche.

If you do not feel comfortable building rapport with the business owners in a potential niche, then you should avoid it.

If you’re quite formal, like myself, you may find that you can struggle to find common ground with people who are not similar to you.

Principle 2. Can I easily understand or learn this niche?

You may have heard me say this countless times, every market has its own culture and language.

When you enter a new market, you will need to learn everything about it ground up:

– Who are the big players in the market/niche? 

– Who are the ideal customers for your prospects? 

– What kind of offers work well in this market? 

– What are the different words and phrases that this market uses and what do they mean?

For example, if you have no grounding in how the financial markets work – should you really choose Stockbrokers as your niche.

Principle 3. Who else is serving this niche?

Are there other agencies serving prospects in this niche? 

How long have these agencies been around?

Are they exclusively serving this niche or serving more than one niche?

What services are these agencies providing and how are they priced?

Competition is a good sign. If there are other players in the market, then you know there is money to be made.

If there are no other agencies serving this niche. then it is a sign that maybe you should investigate deeper or avoid it altogether.

Principle 4. What is the average customer value in the niche?

The lower the average customer value is for your client, the more leads and sales you will need to generate for them to make a profit.

For example, if your client is a restaurant owner and your retainer & ad spend is $1,500, how many meals will the restaurant need to serve before they make a profit?

If they make a $50 gross profit per booking, then that is 30 diners that they need to serve just to pay you!

That is why I generally advise my mentoring clients to work in a niche where the average customer value is at least $1,000. 

Just to give you a couple of quick examples… a plumbing job can easily cost $1k+, as would getting a new driveway or an annual subscription to a  fancy gym.

Having said that, there are times when it would be ok to work with clients who have a lower average customer value.

The rule I use to determine if a niche is a good fit for me is this:

How much work would it take to generate a x5 ROI for my client after factoring in my retainer and the ad spend?

I would rather work in a niche where a handful of new customers will hit that target, than in a niche where they will need a boatload of new customers.

One key thing you need to remember is that your client probably won’t have the capacity to follow up with a large volume of leads. 

So lead volume is often not a great metric to judge your performance by!


Principle 5. How quickly can I deliver results for clients?

Another important consideration for me is how long is the buying cycle in this market.

If I am entering this niche as a total newbie and need to quickly prove my worth to a client, I need to have a good idea of:

1) How quickly can I generate leads for my client;

2) How long will it take my client to convert the lead into a sale.

The longer it takes to generate a lead and convert them into a sale, the more the patience my client will need to have with me. They will need to be realistic as to what can be achieved in the short-term.

If my prospect is someone who is desperate for quick results and the buying cycle in the market is quite long, I definitely would not want that prospect as my client.

Just to give you an idea of what a buying cycle could look like, here are a few examples:

– A homeowner looking for remodelling quotes probably would not be looking to buy right away. It may take them a few months to consider their options and reach a decision.

– A landlord with a broken boiler tank will need a solution today. They may consider a couple of quotes, but they will generally make a purchasing decision today.

– A car buyer looking for a certain used-car model would normally be looking to buy relatively quickly. There is only one car available at this price and it will only be available for one buyer.

Now often you can cut long buying cycles by putting out a great offer that requires people to take action now. 

Naturally, such offers will work differently for different markets. 


So what next?

I hope this quick guide has been useful for you and given you some food for thought.

Obviously, choosing a niche takes a bit of careful consideration and isn’t a decision you should rush into.

Should you require any further guidance, then do join our free Facebook Group  – The SMMA Mastermind –  for agency owners.

I would be happy to assist you on your agency journey in there 🙂

Abul Hussain