Choosing a niche for your online business

Choosing a niche for your online business                                               Part 3- 8

By now, your mind should be primed and ready for success after you’ve read The Mindset. It's time to take action and get started on building your new online business.

First, a little warning. This chapter, "The Idea", is going to be fairly long and relatively detailed, so it's time to turn off all distractions and set aside some time to go over this completely. I would recommend that you read it through from start to finish, then find some time to take the action outlined.

Some of you might be tempted to skim read and think you know it all already. This is a mistake. Something I've learned over the years is that the devil is in the details. This outline is a carefully crafted blueprint to create exponential effects. If you miss a step, you're destined to have dramatically less success. So read through this part carefully.

The chapter covers two aspects. First, it introduces you to the business model I'm recommending for people who want to make their first $1000 a month online. It may be similar to what you've read elsewhere, but it's more deliberate and calculated. So follow along carefully.

Second, this chapter will guide you on the selection of the right niche to apply this business model to. If you follow the steps outlined for this, it might take you a few hours. It's fun stuff though.

I'm going to cover the business model part on a fairly high level without getting into lots of details. It's more to put your niche selection in context. More specific instructions will follow in later weeks.

We'll be digging deep with the niche selection part.

Let’s jump right into it.


THE BUSINESS MODEL

The business model I’m outlining is designed to take into account most people's lack of resources. Specifically I'm talking about time, money and extensive expertise. It's not really glamorous, but it works.

There are 3 levels to this business model. This model works within the context of a particular niche area. I’ll be using an example throughout for the niche of “Golf Putting.” We’ll be looking at ways to discover your own niche later in this chapter.

If you’re a visual person, this flow chart should help you as I explain it below.

The whole business model can be explained simply like this. It’s worth reading slowly.

We aim to attract website visitors who need help with a subject that involves a financial transaction (for example buying a product or paying for information to solve a problem). We provide solutions for these people in the form of useful information that pre-sells them into the right products for their needs. The products can either be other people’s products (via affiliate links) and/or your own products.

Many of you may think you’re doing that already. But you probably aren’t.

Remember how I discussed the 80/20 rule in “The Mindset” chapter? It applies here as well. Niche selection is critical. We want to focus on subjects that involve a financial transaction. We don’t want to focus on topics that lots of people search for information on, but rarely will engage in a transaction. I’ll expand on this later in the chapter.

Let’s take a look at the how each of the 3 levels in the business model work.

Content Level

The content level is the foundation for this business model. We’ll be setting up a website that has lots of good quality content that serves two purposes. The first purpose is to generate targeted traffic via search engines. The second purpose is to position you as an expert and to get people to trust you. If they trust you, they’ll trust your recommendations for other products and will be happier to buy the products you’ve created.

Both these purposes will be covered in more detail in following chapters, including exact instructions on the best ways to leverage these principles.

Traffic Level

Traffic is the lifeblood of your site. It’s important to remember that the word “traffic” is a poor way to describe what’s really going on. You need to remember that you’re referring to REAL people interacting with you. Always keep that in mind. It will help you connect more with your audience.

It’s everyone’s quest, no matter how big you get, to attract lots of targeted traffic. As I mentioned above, creating great search engine friendly content is a great way of doing this. Easily the best FREE method.

There are many other ways to attract free traffic other than via SEO (search engine optimization). I’ll cover what to ignore and what to focus on in a following chapter dedicated entirely to traffic.

Monetization Level

Once you’ve got targeted visitors to your site, you need a way to turn that into dollars. It’s often the trickiest part for people.

This business model has a 3 prong monetization strategy. The three prongs include:

Contextual Advertising. This simply means using Google AdSense to generate some pay per click income. This is likely to be your smallest monetization source. If your other two prongs are working well, you may be wise to ignore this prong all together.

Affiliate Sales. This is simply writing about good products in a fresh and enthusiastic way that pre-sells people towards purchasing. For example, you might review a particular putter model and provide honest and helpful advice. You’ll then want to find the cheapest online store for that particular model (that has an affiliate program) and direct people there for the best price.

They’ll trust you because you’ve given an objective review of the product, so they’ll be more likely to buy from you. If your review is high quality, you’ll also find other sites linking to you as well. Of course I’ll expand on this in the monetization chapter and give you the nitty gritty on making this work. I’ll also explain how you can do objective reviews without having to buy the product in the first place.

Oh… I’ll also be drumming into you information about what content to focus on following the 80/20 rule in that chapter as well.

Your Own Product. Now don’t freak out. Creating your own product is much easier than it sounds and it possibly could be the income stream that blitzes your $1000 goal. The way I recommend that you create this again fits into that 80/20 rule.

What I’ll be getting you to do is to find experts on your chosen niche. Write a really powerful set of questions that grills them on the subject they are an expert about, then interview them using those questions.

You’ll record the interview and then outsource the transcribing of these interviews. Write an intro paragraph and then again outsource the formatting and PDF’ing of the word document. Hey presto, you’ve just developed your first (of hopefully many) info products.

I’ll go into these processes in detail in a following chapter. For example, I’ll tell you how to get the interviews, what questions to ask, how to make your product high value and where to outsource the time consuming work for very low cost. I’ll also explain how you can easily handle the payment and delivery logistics as well. Yes… it’s going to be a pretty big chapter!

Now you understand the business model, you’ll have a more educated approach on selecting your niche. Let’s get into that.


NICHE SELECTION

This is an absolutely critical part to your success and should be given plenty of attention. Not so much that you get paralyzed, but enough so that you don’t paint yourself into a corner by picking a loser.

If you follow my selection process here, with a little luck you’ll pick a winner.

Brainstorming

The first thing you’ll want to do is brainstorm as many potential ideas for niches that would fit into the business model described.

Don’t worry about anything at this stage except for generating ideas. Even if you have no knowledge at all about the subject, write it down.

Give yourself a week on this. I find that a week is long enough to get your subconscious involved, but short enough not to get bored or worse, paralyzed. I don’t mean a week of solid work. I just mean work at it here and there over the course of a week.

Here are some brainstorming strategies I use. I focus first on ideas that come to the top of my head.

You can do the same by asking yourself the following questions:

- What do I enjoy doing in my spare time?

- What conversations do I have with other people that interest me?

- What industries have I worked in before?

- What did I learn in each of those?

- What is something I’m interested in knowing more about?

- What do I know more about than most people around the world?

- Which experts do I have access to in my circle (family, friends etc.)?

- What problems have I solved for people before?

- What problems would I like to solve for people in the future?

You probably have a decent number of ideas for subjects by now. Nonetheless, we need to keep digging. Now remember that some subjects may be too big, or too small for our final niche selection. Don’t worry about that now. It will probably help if you group your smaller niches into sub niches to help clarify things.

You can keep expanding your list by getting active. Here are a few things I like to do once I’ve exhausted what I can think of off the top of my head.

- Go to your bookshelf and write down all the subjects you own books on.

- Go to your local library or book store with a pen and paper and write down book subjects that interest you that might fit into this business model. If someone has published a book on it, there’s a good chance that people are interested in the subject.

- Read the newspaper.

- Go to a news stand and flick through magazines.

- Go to www.boardreader.com and browse the popular topics.

- Go to Yahoo! Answers and browse the categories that interest you.

- Go to Google Answers and browse the categories that interest you. It doesn’t matter if it’s retired!

- Be constantly aware of people’s common questions and frustrations in conversations.

You should have a pretty big list by now. It’s time to sift out the gold.

Drilling Down

In this step of the process, we’ll want to drill down to pull out the subjects that will lend themselves to having the best level of success. At this stage we want to cut our list down to just 5 or fewer subjects.

We want to make sure that the subject we choose fits the business model we’re going to follow. This is an important step in the process and you need to be as impartial as possible. You might have your pet subjects that will be easier for you, but if they don’t meet these criteria, you need to be willing to either cut them, or adjust them.

Here are the criteria that your niche must meet. If you’re already working on a niche website, see how your chosen niche stacks up.

) Not too big or too small. How do you assess that? As a rule, what I do is use the Google Keyword Research tool here:

https://adwords.google.com/select/KeywordToolExternal





Type in your major terms and press submit. Your major search terms needs to attract at least an “average” search volume. You can see if they are “average” by holding your mouse over the green bar and looking at the words that pop up. Simple. If it’s any more than average, you need to start looking at the sub-niches within it. It’s likely that the topic is too broad if it’s above the “average” mark.

2) Have commercial interest. So it must have people spending money within that niche. More specifically people must be spending $50 or more on average. Small transactions are not normally conducted online and people normally don’t have much motivation to research, or look for the best deals. Stick to subjects that have decent transactional value. Sure, knitting might be an OK niche, but the transaction costs are too low, and you’ll never make much money from it.

Microsoft have a largely unknown tool that detects commercial intention of particular keywords or phrases. Now this isn’t to be treated as gospel, but it’s certainly a really useful guide. Don’t despair if a few of your major keywords come up non-commercial.

However, take that as a warning and dig deeper.

See: http://adlab.msn.com/Online-Commercial-Intention/oci.aspx

 


The term "golf putting" came up with a commercial intention with a score of 0.755, which is pretty good. As always, common sense should prevail over such tools.

3) Has plenty of available, largely evergreen content. You want to make sure your chosen niche has lots you can write about. Then you want to make sure that what you can write about doesn’t quickly go out of date. For example, you don’t want to create a website around something that rapidly changes. While new putters will come out, it’s not as dynamic as developing a site around say, iPods, for example. Whatever content you can write should make money for you for years.

4) Isn’t risky. I personally wouldn’t recommend developing a site that could have legal implications for you. Think carefully about the implications of covering a subject where you’re giving advice that could have serious negative effects on someone's life if you are not an expert (and insured) on that subject. The health and finance industries come to mind.

5) Has a learning curve. If the subject you’re looking at has a learning curve, then people will be researching online and they’ll have problems you can solve or educate them on.

6) Has affiliate programs. This is important because if the subject has no affiliate programs on the topic, we can’t monetize one of our prongs. Plus, it’s an indication that the market is not commercial enough. You can search our directory here for affiliate programs in your niche.

7) No biz op. It may be obvious for some, but under no circumstances should you create a site around the subject of home businesses or how to make money online. For some reason, this is the first thing people jump into. It’s the most crowded, cut throat, unforgiving market you can choose. Remove it from your list immediately.

As you’ve run all your niches through this filter, hopefully you’ll still have a couple left. Now we make our final decision on which one we’re going to pursue. Think of it like the grand final of “Niche Idol.”

Detailed Analysis

It’s now time to do some final, more detailed analysis on our top 5 (or fewer). We’re going to look at 3 factors in particular. These are competition, monetization potential and difficulty. This can take a little time to complete, but it’s worth the analysis.

Competition

First, let’s look at the competition levels. I’ve created a little tool to help you here. For each of your top 5 finalists, do the following:

Go to the Google Keyword Tool: https://adwords.google.com/select/KeywordToolExternal

Type in your major keyword again, but ensure you have the “Use synonyms” check box checked.

Sort by Average Search Volume (so click on the blue link that says, “Average Search Volume”).

Grab the top 10 keywords by clicking the “Add” link to the right of each keyword. Then download a CSV or text version of this.

Go to this little tool I created here: http://www.AssociatePrograms.com/competitiontool

Type in each of those 10 words using the default settings. This will launch a window showing a Google search result. What this does is show how many pages are highly optimized for those terms. In other words, the number of people you’ll need to topple to get in front of people searching on those keywords.

Look at the section that says: Results 1 - 10 of about X

Record that X value. If the screen looks blank, then there are no results, which is a great sign.

So do that for the top 10 keywords of each of your final niche top 5. Then add up the total of number of search results shown for each niche.

The lower the number, the less the competition. Obviously less is better.

Monetization Potential

To analyze the top niches further, we want to look at the monetization potential. In particular, we want to look at two factors. The first factor is the raw demand. In this case, it’s search volume.

To get this, return to the Google Keyword Tool:https://adwords.google.com/select/KeywordToolExternal

Type in your major keyword again and ensure you have the “Use synonyms” check box checked.

Sort by Average Search Volume (so click on the blue link that says, “Average Search Volume”).

Grab the top 10 keywords by clicking the “Add” link to the right of each keyword. Then download a CSV or text version of this.

Now have a look at the green bar. Roughly guess and score the amount of green on that bar for each keyword between 1 and 10, with a score of 5 for a half green bar.

Record this against each of those top 10 keywords and total them up. This will give you a score for raw demand for each niche. Now we’re going to look at the commercial value of the niche.

We do that by looking at each of the keywords and how much people are paying per click to advertise on Google AdWords against this keyword. We can see this by using the dropdown box labeled, “Choose columns to display:”. Show the Estimated Avg. CPC.

It should now show the average cost per click that people are paying to rank number 1-3 on that keyword in the AdWords advertising system. This gives us an idea of the commercial value of those keywords. The higher those costs are, the more valuable they are to people and potentially, the more money you can make.

Now, we don’t have to pay that money, but someone is, which demonstrates how valuable the market is. If you want to give yourself a fright, try it out for the keyword “insurance”. :)

So again, total the CPC for each keyword to give a total for each niche. You can now compare each niche against one another for commercial value.

Difficulty

This part is simple. I want you to do a personal assessment of how difficult you think it will be to tackle that niche. For example, you might be intimately familiar with one of the niches in contrast to another one that you have no idea about. Obviously the one you’re familiar with is going to be less difficult to tackle.

Also take into account how difficult you think it will be to create a product (How available are experts on that subject?) and develop content for that subject too. These are all important factors.

Now you need to give each of your finalist niches a score for its difficulty factor. A high score means an easier niche. A low score means it’s more difficult.

Final Selection

Hopefully by now you’ll have scores against each of your niche finalists in competition, demand, commercial value and difficulty. Now I’m not going to say you can simply add up the results and you’ll have a winner. Some factors are more important than others here.

For example, a niche might be a winner on the analysis, but simply impossible to cover. I challenge you to get out of your comfort zone, but if you’re simply scared out of your mind, then there's no point pursuing the topic because you’re probably not going to work hard on it.

You need to take a good look at the scores and decide for yourself what looks the most attractive. It’s your decision. Embrace what the data is telling you, but also use your gut feel. Give it a few days to work through your subconscious and go with the one that your mind gravitates to. It’s probably telling you the right answer.

Once you’ve decided, don’t look back. Congratulations, you have the topic for your new online business. It’s time to begin work!

In our next article, we’re going to look at “The Plan”. This section will outline the specific tools and procedures you’ll need to move forward on your new project. It’s exciting stuff as we’ll be putting together the infrastructure to make the $1000 a month a reality, but be prepared to spend a little money to set this up.

Oh… and make sure you’ve done your homework as outlined above so you’re ready to go. :)

Part 4

How to plan your online business