How to Launch a Hyper Niche Focused Venture with Fat Profits from Year One
Why Niche Focus Brings Fat Profits
Focusing on a niche when you launch your business lets you sell your products and services at higher prices, lower your marketing costs, and achieve healthy profit margins right from the start.
You can charge premium prices because you avoid becoming a commodity. Without a niche focus, your product becomes just another option in a market where everyone sells similar things, forcing you to compete on price. Prices spiral downward. But when you focus on a specific niche, you can quickly become a category leader. You’ll beat weaker competitors with your focused, superior product. By providing better solutions for specific target problems, you gain a dominant position and authority. This allows you to raise your prices significantly.
Your costs drop too. Marketing becomes much cheaper because your target audience is more specific and easier to reach. Since you’re solving problems your customers already worry about, you spend less time explaining your product’s value. Marketing costs decrease dramatically.
The Fear of Missing Out – and Why It’s Wrong
It’s almost insane not to focus on a niche, considering these benefits. But it can feel scary because it means turning away customers outside your niche. You might worry about losing sales opportunities. Think about this though – even if you could sell more units at a lower price as a commodity, you might make less profit overall. Higher prices are crucial for profitability.
Simple Math Shows Why Niche Focus Wins
Here’s a simple example:
When you sell to everyone as a commodity: you sell 200 units at $1 each, making $200 in total sales. Your costs are $194, leaving just $6 profit – only 3% profit margin.
Now compare that to focusing on a niche: you sell 100 units (half as many) but at $1.10 each (10% higher price because you’re focusing on a niche), making $110 in total sales. Your costs drop to $97 because you only need half the operations, giving you $13 profit – more than double the profit while doing half the work. See, you can achieve better results without working crazy hard chasing high sales volumes.
Here’s how to find and validate your perfect niche:
1. Narrow Down Your Target
Start with your business and keep narrowing your target and specific problem until you find a niche small enough to dominate. Let me give you an example of an accounting firm. Accounting firms can offer many services – tax preparation, auditing, CFO services, bookkeeping, consulting on internal controls, cost cutting, cash flow management, personal financial planning, and more.
First, I chose cash flow management for small businesses. This wasn’t focused enough, so I narrowed it to “cash flow maximization.” To get even more specific, I chose “bootstrapping,” then narrowed my target to SaaS companies. My final niche became “bootstrapping for small SaaS companies” – small enough to dominate. This niche can work well because bootstrapping solves a huge problem for SaaS companies. Many can’t get capital and stop growing. Even when they secure funding, their ownership gets so diluted it’s like pouring water into a bathtub with a spoonful of sugar in it and calling it juice.
2. Research Search Volume and Competition
After picking your niche, you need to research two key things: search volume and competition difficulty.
First, let’s talk about search volume. You can use Google Keyword Planner to get rough search volume estimates. It’s available for free if you’ve run a small Google ad campaign in the past. For example, “SaaS cash flow” gets only 10-100 average monthly searches. The volume might be very small, and perhaps those aren’t the terms people actually search for when they need cash to fuel growth.
In this case, targeting multiple keywords within your single niche might be a valid strategy. This way, you can reach enough potential customers to make your business viable.
However, if you’re selling low-priced products like $10 per month, even 1,000 search volume isn’t enough. For example, if 20% of searchers visit your site, 10% become leads, and only 10% become paying customers, that’s a 1-in-500 conversion rate. This means you’d only get 2 customers per month, generating just $20 in additional monthly sales—clearly not enough to survive.
In this situation, you need to either find better keywords or choose a different niche entirely.
Now, let’s talk about difficulty. Google Keyword Planner shows competition levels, but this is advertising competition, not SEO difficulty (how hard it is to rank organically in search results).
If you want accurate search volume and SEO difficulty data, you’ll need paid tools like SEMrush or Ahrefs. The choice is yours, but for serious niche validation, paid tools provide much better insights.
3. Check Market Size
Google search volume doesn’t represent the actual market size. For example, even though SaaS businesses want growth, they don’t necessarily search for “SaaS growth” on Google. You need to estimate the actual market size using other methods.
Making sure your niche isn’t too small is crucial. For example, “bootstrapping for email service SaaS” might have fewer than 100 potential clients—too small to build a sustainable business.
Here’s how I estimated my market size for “bootstrapping for SaaS” using “guestimation”.
Guestimation is making rough calculations using reasonable assumptions when you don’t have exact data. It helps you get a good enough sense of market size quickly. The numbers don’t need to be perfect – just realistic enough to decide if your market is viable.
So here’s my guestimation:
- About 5% of the population are small business owners
- About 0.1% of those are SaaS businesses
- Starting with 80 billion people: 80B × 5% × 0.1% = 400,000 SaaS businesses
- Maybe 10% generate significant revenue = 40,000 businesses
- Assume 30% have cash flow problems = 12,000 potential clients
- If I can get 30% market share = 3,600 customers
- Each might pay $10,000 for consulting
- Total market potential: $36,000,000 – not small at all
If your market seems too small, you can choose a broader category. Just make sure you can still dominate it easily – as they say, in the land of the blind, the one-eyed man is king (though this saying is more about opportunity than ability).
4. Learn Everything About Your Niche and Create Solutions
You need to deeply understand your niche to create products or services that solve their specific problems. Watch videos, read books, attend seminars, and actually meet with potential customers to interview them about what they think and what problems they face. Learn everything about your target.
Then develop your product using the ‘Purple Cow’ concept created by great marketer Seth Godin. A Purple Cow is a product or service that solves customer problems in such a focused, extreme way that it stands out like a purple cow in a field. This uniqueness comes from deeply understanding and solving customer problems – not from being different just to be different. Your customers will appreciate this focused solution.
For example, in Osaka (known as the central kitchen of the whole country), people are serious food lovers who spend more on food than anywhere else. When they eat ramen, they order two bowls plus rice in one sitting.
Understanding this love for big portions, a former sumo wrestler opened a restaurant serving extremely large pork cutlets. He solved a specific problem – there were no restaurants offering portions big enough to satisfy serious meat lovers. Now people travel from around the world to eat there.
You can see what it looks like here: https://www.youtube.com/watch?v=PIBfAJCwyJs
5. Market Only to Your Niche
This part becomes easy because you already know exactly who your target is. Simply show up where they are and present your solution – specific events, websites, magazines, email newsletters, or communities they use.
Don’t waste money marketing in general places like newspapers or radio. These broad marketing channels make your cost per customer acquisition very expensive because you’re paying to reach many people outside your target niche too.
Marketing without targeting your niche is as ridiculous as walking around a supermarket trying to sell to every random shopper you see.
Having a specific target makes marketing easier and allows you to charge higher prices. You can always expand your range later.