How to Know if You Picked a Good Niche
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You have a niche market selected, but now comes the tricky part: determining whether the niche is a viable client base. Here are 11 questions to help you assess whether you picked a good niche.
You can anticipate many benefits when you focus your practice on a niche. With a successful niche, you will enjoy reduced competition, higher marketing ROI, and overall efficiencies in your business.
But when you are just starting out, how do you know if you will succeed with your chosen niche? While there is no guarantee, you can filter your niche through the following criteria to see how likely you will succeed.
Is your niche feeling significant mental or emotional pain regarding their shared problem?
The more pain a prospect feels about their specific financial problem, the more likely they will act to solve it.
For example, someone who receives a sudden windfall, such as the sale of property or the exercise of stock, faces the very real pain of taxes. Someone who is suddenly single and managing their personal finances for the first time faces the pain of not knowing if they can survive on the money they have. Someone who has more than enough money and just wants to get their finances organized is not feeling that much pain.
Is your niche willing and able to pay your fees?
If your niche doesn’t have the means to pay your fees, you don’t have a business. An ability to pay does not mean they have the assets for your minimum AUM fees. You may have to find a creative pricing structure that matches your niche’s financial situation (e.g., subscription, flat fee, or hourly).
Regardless, you deserve to get paid what your expertise is worth, and if your niche can’t pay you, it’s not a good choice.
Easy to target
Is your niche easy to find for marketing purposes?
Some niches will be easy to market to, and others will not. For example, finding a list of employees working for one business (e.g., Pfizer) is easy because you can search LinkedIn. Finding a list of people interested in family legacy planning is harder.
Can you easily find or purchase a marketing list of people in your niche (e.g., LinkedIn or a direct mailing list)? Can you easily identify where members of your niche gather (e.g., conferences or associations)? Answering “yes” to either of those questions is a good sign that you’ll easily reach your niche.
If you can’t buy a list of prospects or determine where they gather, it doesn’t mean that your niche is a bad choice. But it does mean that marketing will be harder for this niche.
Is your niche market growing?
While you don’t have to pick a niche in a fast-growing market to succeed (e.g., advising clients on NFTs), you don’t want to invest your time and money in a slowly dying market either.
For example, I have seen two instances where an RIA specialized in utility company pension plans that eventually phased out. While some employees got grandfathered in, new employees did not.
It was clear this niche was no longer a long-term feasible client base. In both cases, the firms shifted their business away from the niche.
Is it urgent for your niche to have their problem solved?
The more urgent it is for your niche to solve their problem, the easier it is for you to attract them.
For example, dealing with the immediate aftermath of a spouse’s death is an urgent need. Someone who has money scattered across different employers and investment accounts and just wants to get their finances organized doesn’t feel an urgency to solve their problem.
If there is no urgency, don’t automatically eliminate the niche – but be prepared for a longer, more difficult sales and marketing process.
Is it possible for you to dominate this space due to a lack of competition?
How much competition is there in your niche? If there is a lot, it may mean you need to narrow down further.
For example, there is a lot of competition for financial advisors serving business owners. If you choose business owners as your niche, you will want to be more specialized so that you can dominate the space.
You may work with individual partners within a business who want to sell their stake. Sure, your competition may deal with clients like these, but you can become the dominant expert if that’s all you do.
Is the niche’s primary financial problem complex enough that most other financial advisors can’t address it adequately or profitably?
Complexity is one of the key factors that will help protect your dominance in a niche.
If your niche has an issue that takes a lot of time and research, most advisors will not adequately serve these clients. But once you have worked with several of these clients and developed the expertise and a process, you can profitably serve these clients in a way the competition can’t.
Do you have personal or professional experience with this niche?
Choose a niche you have experience with, either professionally or personally. You may already have a handful of clients in the niche. Or you may be in the niche yourself.
For example, if your niche is families with special-needs children, it’s okay if you don’t have any clients in this niche if you have a child with special needs. You have experience with this niche because you are part of this niche.
Do you have credibility working with clients in this niche?
If you have no experience working with your chosen niche, it will be hard to convince the first few clients to work with you.
For example, I once spoke with an advisor who thought airline pilots would be a good niche. But he had never worked in the airlines and didn’t have any airline clients. He had no established credibility, which made that niche very difficult for him.
Can you access the niche through an existing network and opportunities?
How much access you have to your niche will make all the difference in your ability to market. Say you want to work with physicians at Kaiser – this is not an easy group to access. But if your spouse is a Kaiser physician, they can help you gain access to that network.
The best-case scenario is if you are a member of the niche (e.g., your niche is special-needs planning and you have a child with special needs). But if you aren’t a member, make sure you have other ways to access the group.
Do you have the skills and knowledge to serve this niche?
Finally, do you have the expertise to serve the niche? When you are just starting with a niche, you won’t have a lot of expertise, but you should have some basic skills to serve this group.
For example, when I started my business 13 years ago, I had worked for an RIA in marketing for three years. While I was not an expert with my niche like I am today, I had the basic skills and knowledge to help my first few clients.
What’s your formula for success?
There is no exact calculation to tell you whether a niche will succeed. But go back and look at your answers to the above questions. If you had only a few yeses, reconsider your niche. Your likelihood of success increases with the more affirmative responses you have.
Kristen Luke is the president of Kaleido Creative Studio, a marketing agency that helps transform Registered Investment Advisors and their employees into experts in a niche, making it easier for them to stand out from the competition and attract ideal clients. Over the past 16 years, Kristen has consulted with hundreds of financial advisory firms and shared her marketing expertise via industry conferences and publications nationwide.