A business niche is a hole in the current market where the business's USP will be appreciated by a select group of customers, or target audience," Walters told Business News Daily.

A business niche is a specialized or focused area of a broader market that your business serves specifically. 
According to Charlene Walters, business and branding mentor and author of Own Your Other, finding a niche differentiates your business from the competition and allows you to excel in your sector.
Finding a niche is important for small business owners who want to not only create a steady stream of revenue but also establish a loyal audience.

Let us take an example of a niche business:

  • If a clothing company wanted to target executive women who travel frequently, it would make sense to have a line of wrinkle-free clothing to serve that specific need.
  • Now that you know what a niche market is, how do you create a business niche for your company? Let us discuss a five-step niche strategy for entrepreneurs to follow.

 

Select your target audience

Select your target audience

To identify your niche, you can begin by selecting the general market. Woodley said a good approach is to focus on an area where you are knowledgeable and then identify subtopics within that.

Define an unmet or underserved need

Define an unmet or underserved need

Analyze your target audience and identify gaps in the marketplace. Walters said your products or services should soothe a pain point that your audience is currently experiencing.

Choose a sector that also has anticipated growth

Choose a sector that also has anticipated growth

Research your customer base. Walters and Woodley both emphasized researching your target audience to understand their needs, goals, motivations, frustrations and expectations. Walters said that getting your audience involved as early as MVP (minimum viable product) development is essential; although this is something you should do at the start of your business; you should also perform regular maintenance checks to reassess your customer base and competition.

Create your business plan

Create your business plan

Woodley said to create a plan in which you define exactly what you'll provide and the need it will meet, describe your ideal customer, and decide on a pricing model. Fine-tune your business idea to reflect what you've learned about your target audience.

Market your business to your specific audience

Market your business to your specific audience

Just as your product or service is a niche, your marketing efforts should be focused as well. Woodley said that targeted ads, blog posts, and podcasts are invaluable tools for getting your message out to people likely to be interested in your niche business idea. For example, Woodley said a targeted marketing strategy for a small business selling vegan baked goods would be to appear on a podcast or local radio show dedicated to healthy eating.