Ignore this at your own risk: How to find a profitable niche for your consulting business: Part 2
In Part 1 of this series, we looked at:
- what a niche is,
- why you should care about targeting a niche,
- how to find a consulting niche, and
- researching a consulting niche.
Now, we’ll take a closer look at how you can figure out if a niche is profitable. This is a critical piece, because you don’t want to spend hours, weeks, or months only to find out that you can’t make any money in your chosen consulting niche.
With that in mind, here are 7 reliable ways to assess the profitability of a niche:
#1: Competition is good
“Competition?! We don’t want no stinkin’ competition!” you might be saying. But hear me out.
One of the easiest ways to see that a niche is profitable is by finding potential competitors. If others are in a niche, it’s likely that there’s money to be made in it. Competitors demonstrate that there’s an existing market for the niche. If there’s nobody in the marketplace, then there may not be a market.
#2: Rate and salary surveys
Finding out what others are making and/or charging in your niche is a great way to see how profitable it is. If the average salary is $30k in niche A and $75k in niche B, then all other things being equal, focus on niche B.
So how do you get salary info?
Well, that can be a little tricky, since that info is typically somewhat private, and folks usually don’t go blabbing about how much they make. Even so, there are ways to crack this nut, one of which is to call potential competitors to see what they charge. I mentioned this technique in my post on how to set your rate. Don’t limit yourself to looking only at sole practitioners; if there are companies in your niche, find out what their rate structure is.
If you’re lazy like me though, and would rather just surf the internet, there are other sources for salary info, such as Monster.com and Glassdoor.com. Look for job descriptions and keywords that closely match your intended consulting niche, then see the offered and/or reported salary ranges.
#3: How expensive is it to advertise in your niche?
The more expensive the ad space, the more likely it is that advertisers are able to recoup their marketing costs, otherwise, they wouldn’t be advertising–they simply couldn’t afford the ad space. Similarly, advertisers are willing to pay more in profitable niches. As a result, comparing advertising costs are a good way to assess the relative profitability of different niches.
For example, if it costs $5 for an ad in niche A and $.50 in niche B, chances are that there’s not only more competition among advertisers in niche A, but that those advertisers can justify the higher ad cost because they’re making more money than advertisers in niche B.
Sounds good, but how can you find out advertising costs?
Well, it turns out to be fairly easy. Google Adwords is a great way to find out what advertisers pay for keywords in different niches, since you can see, on average, what each click (i.e., the Cost Per Click, or CPC) costs an advertiser for any keyword. In addition, Market Samurai works great for determining the commerciality of niches too; what’s great about Market Samurai is that it lets you use advanced filtering as well as automating much of the keyword (i.e., niche) searching, both of which can save you many hours.
Again, Google Adwords and Market Samurai are great for lazy folks like me, since I don’t have to spend hours on the phone, plodding down dead ends, or talking to people who’d rather not help me.
#4: Will your consulting services save your client money or time?
Ah yes, time and money. Everybody wants more of them, and your prospective consulting clients are no different. And if you can save your clients time and/or money, you’ll be headed in the right direction.
But before you go blazing off thinking you’ve got a golden idea, hold your horses for a sec. If you can save clients time and money, great, but how much?
Will you be saving them a few dollars? Or is it more like hundreds, thousands, or millions of dollars? Same thing with saving time. Are you saving someone just a few mouse clicks, or are you giving them back their weekend, or saving each person in a department several hours per year, month, or week?
Consider the scale of your savings. The more money and/or time you can save your clients, the more profitable your niche. If you’re saving clients’ time, and if their hourly rate is high, the your niche is more likely to be profitable.
#5: How profitable are your clients?
On a related note, if your potential clients are very profitable (where the average producer makes over 6 figures), you’ll likely be able to charge more. This is closely related to Ramit Sethi’s “Pay certainty framework”, where he talks about clients who are both ABLE and WILLING to pay; you can read a fantastic article of his, where he talks about how to find the right freelancing idea. Clients whose time is highly valued (doctors, lawyers, CEO’s) will be likely to pay more for the value you can provide.
#6: Could you create re-sellable products and/or services?
This is a bit more along the lines of business strategy, but I’m including it here, since it makes sense to look at what you can do within a niche to be profitable.
Assuming you’ve done some of the homework in Part 1 of this series, and you already know that there’s an established need for your services in a niche, if you can create re-sellable products or services, you can leverage your time, and earn more.
You should be thinking about this no matter what your niche and/or rate is, since repeatable revenue can greatly leverage your time. For example, if you created a step-by-step course that you could sell again and again (like an e-course), you’d earn a lot more than simply teaching the same material to one student at a time.
#7: Share this article by clicking on one of the buttons below
OK, so this isn’t directly related to finding out if a niche is profitable, but I’d appreciate you paying it forward by sharing this article with the people on your social networks. It’s easy, and it’s a big help to me. I got the idea for this from a related personal finance website: ManVsDebt.