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Your Niche = Your Income

Your Niche = Your Income

High profit niches have this is common...

April 22, 2024

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Welcome to another issue of Passionate Income.

Today we’ll be discussing why the niche you serve is by far one of the biggest factors that will affect how much you make.

In particular, we'll examine sub-niches and how to choose one that maximizes your earnings potential without burning you out.

Let’s dive in.

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When most people start a business, the first question they ask themselves is:

"What kind of business do I want to start?"

Should it be an affiliate marketing company? eCommerce? Freelancing?

In most cases, these decisions are pre-determined by someone's past work experiences, skills, introversion vs extroversion, etc.

Sadly, once people choose a business model, they don't put nearly as much thought into which segment of the market - aka Niche - they should work with.

Instead, they see other people working with coaches, eCom stores or SaaS companies and decide to go that route themselves. The problem is, each of these niches has their Pros and Cons. And most all of them have sub-niches that are much more cash heavy than others.

As an example, let's take the experts / coaches / Personal Brand niche.

On the surface, this looks like an amazing niche. Guru types can be identified and contacted easily, they congregate in the same areas / industry circles, and they have a serious need for everything from graphic design to marketing and sales services. The problem?

99% of gurus / people running Personal Brands are broke.

To the point most of them couldn't even afford a $3K per month retainer.

Yes, there are some guru types whose companies make 7-8 figures/year.

But unless you're top 1% at what you do, and have the track record and reputation to back you up, you're not getting hired by them.

I should know: I spend years working with guru types before finally realizing it's a horrible niche!

Next, let's take a look at a eCommerce companies.

Which, similar to coaches and experts, is another solopreneur favorite.

While it's true any legitimate eCommerce company will be making $1M or more per year, what service providers don't understand is that eCom companies operate on very low margins. Typically in the 15-30% range.

Meaning, of that $1M in revenue they make each year, only $150,000 to $300,000 is profit. Set aside funds for the owner's salary and taxes and there's almost nothing left.

Given this, for an eCommerce company to have enough excess revenue to pay for a $3K or $5K per month retainer, they need to be making multiple 7-figures per year.

But as you may or may not know, only 1% of businesses ever crack the $1M+ mark. And even fewer climb to multiple millions.

Meaning, despite what looks like success on the surface, eCommerce is (for the most part) a terrible niche (unless you have a foot in the door to access the truly successful 0.5% of companies).

So what makes a good niche?

One where the companies generate excess cashflow.

A good "tell" is that the businesses in the niche have dozens of employees and/or physical office space.

Mainly because it's impossible to build a business with dozens of employees - or a five-figure monthly office rental - unless you're highly confident your business will generate enough sales to pay for said expenses.

Fortunately, these companies are dead easy to find.

Just skip all the solopreneurs working from Bali and go straight for the real businesses. Ya know, the SaaS, Med Spa franchise, and boring logistic companies nobody ever targets.

More important, go after the larger, more established sub-niches.

In the SaaS niche, there are are plenty of indie hackers and solopreneur startups that have zery money. On the flip side, there are hoardes of SaaS companies that get 7-8 figures in funding.

Which do you think is going to have an easier time paying you?

Same for Med Spa and brick and mortar businesses in general.

Don't go after your local dentist with his one tiny office.

Go after the franchise that has 17 locations and dominates the entire Tri-State area or county where you live.

And it's not just service businesses this wisdom applies to.

From information products to eCommerce, it's common sense that consumers who have more disposable income will be easier to sell to than ones that can barely pay their bills.

See, whether it's because of limiting beliefs, confidence issues, or something else, most people working online fight to land the bottom of the barrel clients.

In reality, however, business is only competitive at the bottom.

Because the higher you climb, the fewer people you compete against.

Yes, you have to be more "legit" to work in the upper echelons of an industry.

But most of that is positioning and reputation.

Both of which you can spend 90 days improving so you can spend the rest of you life collecting premium fees.

The choice is yours.

💡 Takeaway: Once you choose a business model, the sub-segment of the market you serve is the #1 factor that will affect your earnings.

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