Entrepreneurs, Increase Your Startup Success Rate: Exploit A Trending Niche In Large Markets

Forbes

10-04-2025

Either target the niche in the industry, or the niche in the target market.
No large and successful company got there by focusing on the largest industry and all the customers in the marketplace all at once. The entrepreneurs started with a smaller focus on either a niche in the industry or a niche like focus on a subset of customers in the market. With Patagonia, it was just outdoor climbing gear. With Van's, it was skateboard shoes. With Meta, it was to connect alumni at Harvard. Even Amazon, with greater ambitions, focused just on books for three years.
The most successful entrepreneurs are the ones who have a zealous focus on either an industry niche or a customer niche. They have been watching shifting trends and see a 'small' opportunity to solve a problem for a select group of customers. Do they really know that the industry or market will turn into a large mass market? No. But they do see either a problem or opportunity. They hope the market will expand and grow, but in order to succeed, they first have to create and dominate a small niche.
There are many advantages to focusing on a small niche market. First, there is instant feedback and potential revenue traction. Second is the opportunity to prove the business model. Third, is low initial competition. In addition, there are several other advantages that entrepreneurs should love.
Small customer base equals focus.
One of the main benefits of starting a business in a niche market is the advantage of having a smaller customer base that has an identified problem. The good news is that you hardly need to do any marketing as the customers know they have a problem and are actively looking for a solution.
With a niche market, you can target their unique needs and wants. This allows you to focus on creating a product or service the customer want. Think Sun Bum and Gen Z.
Differentiation right away.
Some companies spend millions to differentiate their brand. By focusing on a niche and hyper-focusing on the product or service, you will differentiate the company immediately. And, by bringing your attention to bear on a smaller unique set of customers, it allows you to set your business apart from the competition.
By specializing and differentiating your products and services, you can establish yourself as a thought leader in your industry. Think Vitamin Water. An instant defacto leader in a commoditized water industry.
Entrepreneurs embrace change.
Amazon. Airbnb. Meta. Netflix. All these companies initially focused on a niche that they then rapidly expanded into larger markets. You would have to have been around in 1995 when many analysts and other market leaders ridiculed Amazon for selling books online. But Amazon's initial focus, and thirst for change/disruption, is what gave them their advantage. And all great leaders usually have a strategy if they can get beyond the initial niche….for Amazon, it was always about ecommerce.
Gain insights on customer needs.
What you learn from your initial set of niche customers is invaluable to your long-term survival. As an entrepreneur, you will get insights, learnings and are constantly making small pivots to better serve the customers. Guess who is not doing this? Your competition. Even if they finally wake up, it may take them years to learn what you have already learned. Netflix gained so many insights from studying and monitoring their DVD mail business that it propelled them when they shifted to streaming. Blockbuster saw all this too late.
Less competitors.
Another key benefit of starting a business with a focus on a niche market is that there are fewer competitors to face. When you focus on a specific and targeted group of customers, you are entering a market that may not have as much competition as a broader market. This gives you the opportunity to grow your business, build a strong brand, and capture a significant portion of the niche market share.
Unlike other energy drinks that targeted younger adults, 5-Hour energy initially targeted a slightly older working adult that needed a burst of energy in the afternoon. Now, they sell to everybody.
Potential for higher profit margins.
Usually, when you create a new product or service in a niche market, customers are willing to pay a slight premium to get their problem solved. So, you can charge more. That should help profitability and differentiate your brand.
If you are self-funded and don't want to take on debt, higher profit margins allow you to invest more dollars in your business for inventory, marketing or hiring more employees. This helps you grow your business more rapidly. Think Shopify who built their own platform and now dominate ecommerce.
You will need a strong brand.
For quite a few entrepreneurs, building a great brand when starting the company may not be a priority. Oh sure, you want it to happen, but what you really need is sales. It's funny, that if you are successful, you will then need a strong brand in order to grow and gain new customers.
So, with that in mind, be conscious of everything that you do helps to support and grow the brand even when you have little money. Uber spent no money on marketing in the early days and yet created a strong brand with its minimalist app and focus on service. Tesla spent no money on traditional marketing; instead it focused on events, public relations and word of mouth.