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How to choose the right niche to focus on for your business

Good morning! This is The Zero to One. Equipping you with the best tools, resources, and actionable tactics to take your startup to the moon.

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Here’s what’s in store for you today:

  • ICYMI: How Grammarly grew from a spell-checker to helping over 30M people communicate more effectively.

  • How to pick the best niche for your business and why it’s the best way to grow.

  • Videos and articles to take your business to the moon.

  • Opportunities for you and your business to take advantage of.

  • Top tools for your business.

  • Cool jobs currently open in the startup world.

ICYMI ⏮️

Last week I deep-dived Grammarly. The $13B AI giant helping you communicate more effectively.

In 15 years Grammarly went from a simple spell-checker for students and researchers to a full suite communication tool for ideation, planning, spelling, grammar, clarity, and effectiveness.

Click the button below to see how they went from 0 to 30M daily active users, and how you can replicate their growth.

How to find your ideal niche audience, and why it’s the quickest way to revenue

I’m back again to one of my favorite entrepreneurs, G from Lemlist. This time I’m revisiting an older video of his where he breaks down why you should focus on a niche for your business and how to pick one. Here’s the breakdown:

Why niche down when starting? 🎯

When you’re a new business, getting off the ground is hard. You don’t have a reputation or track record. But you need to find a way to convince people to use your business or service over someone else’s.

The best way to do this is to stand out with a very specific offer.

But what does this mean?

If you sell copywriting services for everyone, your market penetration will be extremely weak.

  • Your competition is huge.

  • People don’t have any reason to choose you over other, more established companies.

But suppose you sell copywriting services to CEOs of scale-ups that recently raised Series B funding. Now your market penetration becomes extremely strong.

Instead of competing. You become unique - this reminds me of that Peter Thiel quote, “Competition is for losers”. 

CEOs of these businesses will choose you because they feel heard and understood by your specific positioning. There is no one serving them specifically - other than you.

Niches also allow you to charge higher prices because of your uniqueness.

The five objections (myths) to niches 🙅‍♂️

1. Focusing on a niche means you can’t expand later

If anything the opposite of this is true.

It is easier to expand once you have established yourself in a specific niche.

Look at Facebook for example, it started as a Harvard-only social network, then expanded to other universities, then expanded to everyone, literally everyone with internet access.

2. Niche products can’t attract big investments or high valuation

Investors understand the value of a strong niche audience. You can capture a more loyal user base, while still having the flexibility to expand.

Take Supercell, the creators of Clash of Clans, for example, they make mobile games and are valued at over $10B.

3. Targeting a niche market means lower revenue potential

Even if you decide to stay in your niche, you can make a tonne of money.

But establishing a loyal customer base in one niche gives you leverage to grow even bigger when expanding.

Lulu Lemon are a great example of this, they started by focusing on yoga doers (not sure of the right collective noun here 🤣). Focusing on high-quality products, that led to a loyal customer base and established them as a premium brand.

This allowed them to then expand into broader athletic apparel while entering with their already established image. GymShark did something very similar with gym goers (again not sure 🤣)

4. A niche focus limits innovation

A niche business can often be a great testing ground for more widely applicable technology.

Take Tesla, who focused on a high-end electric sports car to start.

But in doing so, could Innovate in battery technology and electric powertrains, which later became the foundation for their broader range of cars.

5. Niche markets are too small for significant impact

Niche markets have the potential to completely disrupt industries.

Dollar Shave Club changed the shaving landscape with the introduction of affordable, high-quality razors delivered monthly.

Eventually it was acquired for $1B by Unilever.

Framework to use to pick a niche 👷‍♀️

Step 1: Start with a crowded market

This might sound counter-intuitive, but in crowded markets, Product-Market Fit (PMF) has been proven. The pain points needed to be solved have been identified and people are willing to pay for solutions.

Take email marketing for example. Mailchimp are the industry giant - but they appeal to everyone.

Beehiiv founder, Tyler Denk, saw this and took advantage of it - creating the newsletter tool for creators (including this newsletter). Which has now become one of the quickest-growing startups in the industry.

Step 2: Pick the right niche

There are three different options to pick the right niche for you. Ranked in order of ease.

  1. You’ve worked in the niche. So you know the ins and outs of it - the founder of Beehiiv previously worked at Morning Brew, one of the largest newsletters in the world.

  2. You know someone who can introduce you to people in the niche.

  3. You don’t know anyone in the niche, but you know you can easily get in touch with people in it.

Step 3: Make sure to do these two things

When you’re picking a niche, there are two important things you need to keep in mind.

  1. Always pick a profitable niche. You want customers who have deep pain points, but also money to spend.

  2. Only focus on qualified clients. You might be able to close both qualified and unqualified clients if you’re a good salesperson. But unqualified clients make it extremely difficult for you to deliver your promised results. These clients need more work and support, and are often the least happy about your services.

Having qualified clients sets you up for success to deliver awesome results and spread your brand name.

How to find people to skyrocket your business’ growth ☄️

Generally, the goal of a niche business is to get huge traction amongst a group of well-identified customers so that later you can expand.

G defines this group of well-identified customers as a “magnet persona” - a specific persona in your niche that will allow you to attract a lot more customers down the road.

To pick this magnet persona, think about these three things:

  1. Is this persona currently underserved?

  2. Is the persona in a growing market?

  3. Is the persona considered cool by people who are not part of that persona group?

Think about Apple and their first target persona, designers. Underserved, in a growing market, and people wanted to be like designers, they were the cool kids back when Apple first launched.

Finding the right type of person to target can be a huge factor in your business’s success.

So make sure to take some time to think through this thoroughly. And if you see it’s not working with the persona you identified, don’t be afraid to pivot.

Videos or articles to help your startup go from Zero to One 📽️

  • 2 simple ways to improve your product’s quality (link)

  • How Perplexity AI grew to $20M ARR (link)

  • How Uber overcame its chicken and egg problem on its way to becoming a $140B business (link)

  • A winning pitch deck structure (link)

Learn how to become an “Intelligent Investor.”

Warren Buffett says great investors read 8 hours per day. What if you only have 5 minutes a day? Then, read Value Investor Daily.

Every week, it covers:

  • Value stock ideas - today’s biggest value opportunities 📈

  • Principles of investing - timeless lessons from top value investors 💰

  • Investing resources - investor tools and hidden gems 🔎

You’ll save time and energy and become a smarter investor in just minutes daily–free! 👇

Founder Opportunities 🛎️

  • 45 angels (all Notion current or ex-team members) are looking to invest in interesting opportunities (link)

  • Trenton Hughes is looking to connect cool projects and founders with investors (link)

  • Neo Accelerator: Maximize your productivity and build lasting relationships. Live and work with other founders and mentors for the first month of their intensive 3-month program. Formal applications are closed for this cohort, but they encourage you to apply and will reach out if they’d like more info. (link)

  • 500 Global Flagship Accelerator Program: One of the first accelerator programs, 500 Global started its Flagship Accelerator back in 2010. Applications are on a rolling basis year-round. (link)

Tools of the week 🔨

  • YouTube Summary: Summarise YouTube videos with this AI Chrome extension.

  • LoopIn: Remove the hassle from meetings with concise meeting summaries, automated recaps, and conversational assistance.

  • Megahit: Find sponsorship leads among your subscribers.

  • ManyExcel: Generate formulas for Excel and Google Sheets in seconds with AI.

Cool startup jobs I found this week 🕵️

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