Very often, young entrepreneurs make enormous efforts to get their business working, but do not reach a result. Sometimes, they conclude, too quickly, that they have no capacity for business and that the negative results they have are the consequence of not being "made for business".
The tragedy of this situation is that they identify the business with themselves and believe that if they do not achieve the desired results, they are to blame. Very few truly understand that the results achieved are directly dependent on the business niche.
From the moment you choose your niche, you subscribe to certain rules, according to which you play. Whether it's the sale price, the commercial addition or the discount rules, they all determine the restrictions or advantages on the path you take.
Criterion I - The hard way and the easy way
Choosing the rules of the game in business coincides with the vision of choosing a path: easy or difficult, wide or narrow.
The easy way is when the demand for a product or service is already formed. The market and customers know about these products and services and need to buy them. The path does not require effort and resources to form the demand, only to distribute. These are the niches where you will receive leads and requests very quickly.
The hard way is when you create a product or service that will form a new need. There are no predecessors, and you do not know why. Maybe you're not the first with this idea and maybe it's not so great. This does not mean that you can’t be the first one or take any risks, but only that you’ll have to test more.
Criterion II - Visible and invisible niches
Visible niches - products or services that are part of the daily reality. Look around: chairs, tables, food, paper, etc. These niches are on the surface and, without a doubt, many entrepreneurs are starting here.
Invisible niches - those that participate in creating a finished product from the visible niche. These areas are very narrowly specialized, they usually do not meet customers in the daily routine.
How should I choose invisible niches? The source of these niches can be multiple, but most importantly, to find them, you must consciously look for them. Write a list of areas of interest, identify those intermediate products or services that participate in the formation of the visible niche.
If you communicate, seek advice and ask competent people, then what is invisible to the vast majority will become visible to you.
Criterion III - High flow and low price / Low flow and high price
Money is at the intersection of three elements: the flow of buyers, the price and the frequency of transactions. When you operate in a niche with a high flow of buyers, you most likely sell services or products at a low price, and when it comes to low flow, you sell high-priced products.
Let's also define some terms that will help us select the ideal niche:
The transaction cycle, or how long it takes to find a potential customer and make him pay you. For example, in a store, the transaction cycle is extremely short, one chooses the product and immediately pays at the cashier.
However, if you sell services, the transaction cycle is longer. It lasts from the first meeting with the client until the signing of the contract and payment issuing. The longer the transaction cycle, the less cash you have, and the faster you collect money from the customer, the better the cash situation.
Transaction cost or average check value. If you sell products with a low check value then you definitely need to operate in a segment with a high flow of buyers. But if you have premium products that are not sold so often, the flow of buyers is smaller, but the value received per sale is high.
Frequency of transactions or how often the product or service is purchased. In most cases, products with a long transaction cycle and high cost have a relatively low transaction frequency. For example, the purchase of a car (high transaction cycle, high cost) is done once every few years, this means a rare frequency of transactions. Daily use products have a high frequency of transactions because we buy them every day, and cosmetics have an average frequency of transactions because we buy them once a month, possibly in two months.
The ideal business niche is hard to find, but it's worth looking for. For those looking, a few more recommendations:
1. Choose the easy way to start. Develop your business building skills, learn and gain expertise, then climb the hard road.
2. Choose a visible niche, it will be easier and faster to achieve the first results.
3. Analyze the transaction cycle - it’s better to first have a short transaction cycle, as little time as possible from the moment the customer is found until the time the money is collected.
4. Analyze the cost of the transaction - it is better to have a large flow of buyers and a lower cost of the transaction, because the low cost of the transaction also means a low cost price, a not very significant initial investment.
5. Analyze the frequency of transactions - better an increased frequency of transactions than a reduced one. Opt for products with a long shelf life and services that can be provided more than once for a single payment.
