Is now the right time for your business to Niche Down?

Today’s video was inspired by a question for one of our Data Driven members.

Oob says: “My biggest challenge is zeroing in on the right client and service niche for my one-person agency.”

So let’s answer Oob’s question and talk about when you should choose a service niche, and how you figure out which niche provides the best opportunity for your business.


Two schools of business advice

There are typically two schools of thought (or advice) when it comes to choosing a niche for your business:

1) Throw sh*t at the wall and see what sticks; meaning take-on just about any project that comes your way and see if you can make it work.

2) Choose a niche, and only focus in one area - Be a specialist.

Both of these approaches can work over time.


But they apply to different stages of your business evolution.


That means the advice to choose a niche might be the right advice, but it's given at the wrong time. This is especially true when your business is young, and you are still fighting to survive. 

Survival mode

When you’re in survival mode, your primary goal is to make enough money to keep your business going.


You might be trying to find a way to replace the income you would need from a job so you can pursue running your business full-time. Or you might be struggling to build an audience or find product-market fit. 


Survival mode usually involves taking on as many opportunities as you can find, with a goal of generating experience and income as quickly as you can. In my experience, this phase can last anywhere from one to three years. But I've seen it last even longer if you're an extreme bootstrapper.

To move beyond survival mode, you need results. You usually need to produce at least ten results - customers, deals, people paying you money for services, etc., before you can move beyond survival mode, and start to think about specializing.

Transitioning from surviving to thriving

Once you've survived, it’s time to optimize.

You have probably heard of the 80/20 rule. The 80/20 rule states that 80% of your results come from 20% of your efforts. As service-based business owners, we trade time for money. So the best way to scale our profitability is to focus on the services that lead to 80% of our successes.

But, here’s the thing.

You won’t be able to figure out which services generate your best outcomes, i.e., the most efficient 20% of your efforts, without at least ten results. And ten results is just the minimum. It can take 100+ paying clients to figure out which service niches provide the best opportunities for your business.

Accumulating enough results to find your business’s niche can take time.

But here’s the good news:

There’s very little risk in survival mode

When you’re in survival mode, you can shift your time and energy into new services areas as needed. You can also try new things, and adjust to the opportunities that come your way.

You can even stay in survival mode for six months to a year longer than you need, without hurting your long-term business prospects. As long as you remain hungry, actively pursue opportunities and use the opportunities you’re offered to support your business, you can stay in survival mode as long as you need.

There’s a lot of risk in specializing too soon

On the flip side, if you specialize too soon, you can kill your business. Many of the most specialized consultants I know have known in the past are no longer in business. They had to get jobs  because their niche was so hyper-focused, they couldn't generate enough business.


They turned down work they didn’t fit their “ideal” business model, and as results, they passed up opportunities to keep their business alive. 

Idealism is the worst business survival skill.

Focus vs. Idealism

While “idealism” can limit your ability to find your business’s niche, your focus can help you find the specialized service areas that will allow your business to thrive.

Focus comes from gaining experience and learning how to translate your skills to your client's needs.

Matching your focused services to the right clients can lead to highly profitable results…

Because in those scenarios, your experience virtually guarantees your client's success.

But, before you focus your services, two things have to happen:

1) You need to produce enough results to gain experience and confidence in the work product you deliver.

2) You need to have enough new customers coming in that you can afford to say “no” to opportunities outside your area of focus without hurting your long-term ability to survive in business.

So how do you know if it’s time to focus your skills?

You can use the questions below to help you analyze the results you’ve produced for your clients so far, and figure out if there’s an opportunity to specialize your services.

How many clients have your or your agency worked with to date?

  • More than 10
  • Less than 10

If the answer is less than 10, then you should try to generate at least ten results before you define your client and service niches. You can still use the rest of this exercise to evaluate your results to date.

​​Service Discovery

​​Write down the services you have delivered so far, based on the category of those services. If you have performed more than one service for a client, separate each of those services into their own category

For example:

SEO - 2 clients
Conversion Rate Optimization - 3 clients
Email Marketing - 2 clients

​Revenue and Profit Discovery

​Write down the total revenue and approximate profit margin for each service you have provided.

Then calculate the profits your agency earned from that service and the time it took you to generate those profits.

For example:

PPC - Revenue $25,000/ Profit Margin 45% = Profits of $1125 over 7 months

​Client Discovery

​Profile the clients that have produced the four highest revenue and profit totals on your list. Also, Identify the primary problems you solved for these clients and how you solved these problems.

For example:

ACME Industries: Distributor of anvils. Approximately 150 Employees. 3 to 4 million in revenue per year. Location: Phoenix, AZ. Increased Sales of primary product (roadrunner killing anvils) by 15% using Google ads - (search, display, and shopping) campaigns.

​Process Discovery

Can you turn your best results into a repeatable set of steps that you can offer to other clients? Is your process something you can train others to do?

Will leveraging your experience or process allow you to increase the profit margins on delivering your services over time?

​Opportunity Discovery

Based on your Growth Projections how many your “top clients” will you need to land & retain to hit your 1 to 5-year targets?

Are there enough clients that need your specialized service for you to hit your growth targets consistently?

If you’ve generated at least ten successful results from providing services…

AND there are enough clients who need the results your deliver to hit your growth targets…

AND you can increase your profit margins by focusing your services…

Then, you may be in the right position to niche down and focus your services, as long as you can build a lead generation machine around these services that will allow you to continue to grow.

We’ll talk more about how to build your lead generation machine in the weeks to come.

For right now, leave a comment below sharing the services you provide. And if you have already chosen one, share your service niche.

Finally, if you haven’t yet joined the Data-Driven Service Provide Rolodex, you can submit your information here:


Add Your Business to the Data Driven Service Provider Rolodex.

We are already referring leads to several of the service providers who joined our Rolodex!

P.S. Be on the lookout for an email from me next Friday about how to overcome limiting beliefs and go after big-time clients.