"Should I pick a niche?" It’s one of the most common questions freelancers and founders ask. Discomfort around this decision is natural. It comes from a concept called loss aversion. That's the fear of losing out on potential opportunities by narrowing your focus. But the reality is that choosing a niche can be one of the most impactful decisions you can make for your business.
Let’s explore the benefits and risks of niching down, so you can make an informed decision about your next steps.
Why Niching Feels So Uncomfortable: The Psychology of Loss Aversion
Before talking about the benefits and risks, it’s important to understand why niching feels so uncomfortable. Loss aversion, a psychological principle, tells us that humans feel the pain of losses more than the pleasure of gains. This concept explains why many freelancers and founders hesitate to niche. They fear losing out on the larger market by focusing on a smaller segment.
However, niching down often leads to long-term gains that far outweigh the initial discomfort.
The Benefits of Picking a Niche
Deeper Understanding of Clients' Problems When you specialise, you develop a deep understanding of your clients' specific problems. Making it easier to provide targeted, high-impact solutions. This improves your efficiency, and often allows you to take on more clients at once.
Stronger Personal Brand Niching down allows you to target your ideal client directly, which makes it easier to create a recognisable brand. Instead of offering generic advice, your messaging is super-focused and talks to their unique issues. Making it easier to attract and convert clients.
Charge Premium Prices Specialists often earn more than generalists because they’re seen as experts in their field. In niche markets, clients are more likely to pay premium rates for your specialised knowledge. I personally know a number of multi-six figure writers who write for tiny, specialised (non-technical) niches.
Stronger Network and Referrals Focusing on a niche can create a more powerful referral network. Testimonials and referrals from others in the same industry are more compelling to potential clients. And those referrals come from people who can articulate the value of your specialist expertise.
The Risks of Picking a Niche
With all of the above said, there are a few risks to picking a niche too.
Market Vulnerability Niching down comes with a risk: if your chosen niche experiences a downturn, it can impact all your clients at the same time. For example, in 2020, freelancers in hospitality and event planning saw significant income drops due to the impact of COVID.
Skill Atrophy Specialising in a niche that doesn’t evolve quickly could result in your skills becoming outdated. If your niche moves slowly, there's less need to update your skillset, which could hurt you longer term (if you wanted to change niche in future).
Pigeonholing Becoming known for a specific niche can be a double-edged sword. While it helps build your reputation, it may also limit your ability to pivot to new areas in the future. If you want to transition to a different niche or expand your offerings, it could be difficult to shake off the "pigeonhole" effect.
Won't Picking a Niche Lose Me Clients?
A common fear is that niching means you'll lose access to a huge pool of clients. This is particularly scary when you're just starting out. That's loss-aversion at work.
In reality, there are more potential clients in even the smallest niches than you could ever serve. In fact, niche businesses often thrive because their smaller, more defined market leads to stronger relationships with clients who need exactly what they offer.
Should You Niche?
The decision to niche down is a personal one. It’s driven by your tolerance for risk and your willingness to specialise in a particular market. The benefits; more income, stronger branding, and closer client relationships often outweigh the risks. But it's essential to choose a niche that aligns with your skills and interests!
What Next?
Still unsure about whether to niche? Let’s talk. As a coach, I specialise in helping freelancers and founders navigate key business decisions like this one. Reach out today to explore how we can work together.
Comments