But deciding what niche to focus on is daunting. There are a never-ending array of options, and with so much on the line, the pressure to segment your market in the correct way—or perhaps more importantly, to avoid selecting the wrong option—is huge.
So if you are going down the path of exploring a niche to target, you need to follow a process to help you come to a decision that is right for your practice’s future.
Here are eight key steps to take when identifying your firm's ideal niche:
1. Look at your current clients
Download a list of your clients and place it into a spreadsheet that you can sort and re-sort. You can download this template to help.
If you’re not using that template, add some additional columns to your client list so you can identify each client's:
Now you'll need some additional columns to identify:
Your favorite vs. least favorite clients
Your working relationship (one for good points and one for bad points)
Plus a notes column
2. Describe your clients
Complete these columns for each of your clients, and feel free to get help from your staff. You might even ask them to complete the details for the clients they work with.
In the notes column, ask your staff to comment if they have complaints about working with the client, or what they enjoy about that relationship most.
Here are some of the most common ways you can segment your clients:
Industry: Hospitality, dentists, lawyers, construction, eCommerce, warehouse management, healthcare, manufacturers, etc.
Business size or complexity: Small businesses, medium-sized, or larger? A startup, or well-established organization. How many staff?
Business revenue: Hobbyists or part-timer making less than $100k? $500k-$2M? $2-$5M? $5-20M or beyond?
Location: Are they based in your local community, globally, or online?
Age or tech savviness: Are you clients younger, older, or a mix? Are they an early adopter? Or perhaps a tech laggard?
Type of service: Do you currently provide a full-service, or is there a particular service or group of services that you provide?
Finally, rate each client based on how much you enjoy working with them (you can do a numbering or point system—whatever works for you). You should also describe your working relationship (good points and bad points), and any other notes you think are important.
3. Sort your favorites
With this information entered into your spreadsheet, sort it by your favorite to least favorite.
Pay attention to any similarities these preferred clients have. Perhaps they all come from one industry, are all of a similar age or size, or they are all based in one location.
Enter details into the notes column to identify characteristics you enjoy or gravitate towards.
4. Sort the industries
Sort by industry, and identify whether you enjoy working in that area, know about it already, or can easily learn more about it.
Think about whether that industry is growing (there’s not much sense specializing in video rental shops, for example), and whether there are any related industries that might make sense to explore (you may have several electricians as clients, so plumbers or HVAC technicians may be potential clients to look at).
Once again, detail the observations for each industry in the notes column.
5. Sort by size
Sorting by size will show whether your preferred clients are startups or more established companies. Or if they’re businesses with a small number of employees, or larger.
These are all important demographics that will identify the types of services they may require. A growing company may need assistance with accounting processes, while a larger, more established company may have those processes mastered, but need HR assistance for their large number of employees.
Again, make notes to identify characteristics that you enjoy or gravitate towards.
6. Rinse and repeat
Start again from step 3, but this time, pay attention to your least favorite clients.
Deconstruct these clients similarly to understand what demographics make them less attractive. This is important. Focusing on a niche that you hate working with is a recipe for disaster.
7. Decision time
After going through these steps you’ll have a detailed idea—or at least a shortlist—of your firm’s ideal client. You’ll know the industry, size, location, revenue, age (and more) of who you prefer working with, and who will give you growth opportunities going forward.
If this process hasn't given you a clear answer, repeat it again with your shortlist. Keep going until you confidently settle on a niche that makes sense.
8. Go all in
With your ideal niche identified, involve yourself in everything about them.
Learn how they think, how they speak, what they want—do what it takes to become the expert in their field. And use this knowledge to shape the services you offer and how you market them.