The High Profits in Niche Markets

When you are just starting out in business the strong temptation is to work with anyone who knocks on your door and offers to pay you, no matter how far off it may be from what you were planning to do.

If you started a house painting business but someone sees you have a ladder and asks you how much to clean the gutters, you’re likely to give them a quote, not correct their mistake!

But the problem with this is you never really build up a brand and reputation and you never get really good at any one thing. If you’re not the go-to person for something specific then you’re just one of the crowd. For example, you could be a plumber, or you can be the Leak Master.

Sure the Leak Master isn’t going to get a lot of calls for routine sink backups or new shower installs, but if you get nearly every call for hard-to-find leaks and you become the top choice for that service it’s a powerful advantage!

It’s a little scary to limit yourself with your name or branding when you are starting out, but the upside is that you reap so many benefits once you’re up and running.

The chances are you won’t be able to take over your whole industry and build a giant company on general services. But if you specialize and really own a very particular segment, it’s almost the same as having a monopoly and that’s a very powerful place to be.

Let me illustrate the idea with an actual example.

I have a friend who is thinking about starting his own tax business and he mentioned one area he might like to focus on is doing taxes for people whose business, or at least side hustle, is short-term vacation rental owner.

But he’s not sure he wants to pigeonhole himself too much by doing so. Here’s why I think he absolutely should niche down to explode his business.

How to Exploit the Advantages of Being a Niche Business

If he sets up his tax business not as a general tax service but as one dedicated to working just with short-term vacation rental owners, he can:

• Pick a distinctive domain name that immediately sets him apart: maybe something super clear like vacationrentalcpa.com or a similar idea. By having such a clear name the niche and specialty are immediately obvious- no long explanation or fancy marketing materials needed!
• Have a website that focuses on the benefits of working with a tax pro who knows the details of the market in and out and will make sure all the special deductions and write-offs that go with the industry will be covered unlike someone less familiar with the business.
• He can offer very targeted freebies to build business- like a PDF called Top 5 Deductions for AirBnB Owners- that will immediately build credibility and differentiate how he can help.
• Finding customers will be easy, because there are lots of forums, podcasts, YouTube channels, and more who focus on teaching and helping AirBnB owners he can advertise next to or partner with for referrals. By being in exactly their space, they will have an immediate interest in his service vs a general provider.
• Pricing won’t be a problem- by offering a specific and specialized service he can pick prices that work for him rather than having to compete with low-cost providers and discounting rates. By having a definite value add people are no longer judging you on price.
• He can be picky about the clients he takes! Unlike the example above where you take whatever you can get, with a business like this you can easily end up in a position where you have more interest than you can accommodate and that means if you have someone who isn’t a good fit you can let them go because you’ve got a waiting list of people to take that spot!
• He can be efficient, which further improves profits. He doesn’t have to worry about doing all different kinds of returns- one day a trust, the next day a partnership, the next day a complicated family business. If he just does rental property owners, then he just needs to be really good a one thing and it becomes very routine. He can build resources to help his clients work with him and really focus on just one area to know really well.
• It's not as niche as you think- Google tells me there are over 4 million AirBnB hosts in the US!

To me the choice is clear- you can be “just another tax provider” competing with all the others out there for general clients and competing on price as much as anything else. Or, you can be the AirBnB tax pro-niche down but in such a better position than a general provider for marketing, pricing, demand and efficiency and profitability.

So how does this apply to your business? What one niche can you really dominate and become the go-to person for?

If you haven’t figured it out yet, now might be the time to really decide how you can create a virtual monopoly on one slice of the business world and then own it!