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First, if you haven’t done a SWOT Analysis or a Competition Analysis, it will be helpful to do those first. Figuring out your story and core values may also assist you in finding your niche and target market.

Before we dive into your niche, let’s explore why nicheing is important and why you should have a defined target market.

I oftentimes hear, why wouldn’t I want to appeal to everyone, then I can maximize my business. I’ll ask you, what business do you know that appeals to toddlers, middle aged, and elderly people, regardless of gender, income, educational level, interests, or location. The only business that I can think of is the post office, and I don’t hear many people raving about their post office to their family and friends. I’ll remind you as well that the post office has run at a loss for decades. Don’t get me wrong, post offices supply a very necessary service to all of us, but their not a place you should be trying to emulate. If they were not government funded, they’d have been out of business years ago.

Therefore, it’s at least logical to assume that appealing to everyone isn’t the best idea, but I’ll show you why it’s beneficial to choose a very select amount of people to market to. The more targeted you are, the more money you can make because you are giving that customer exactly what they need and desire instead of just some of it.

Many of you may already be familiar with the Pareto Principle, or the 80-20 rule. It refers to the idea that 80% of your income will come from 20% of your guests and on the flipside, 80% of your problems will come from 20% of your guests (Note: the problem 20% is likely opposite your most profitable 20%).

Therefore, if you can target your most profitable guests, you will make more money and deal with fewer problems. To think of this another way, McDonald’s does not bother pandering to customers that complain that they don’t have spaghetti; that’s not what they make there, and that’s not the type of customer they are targeting. It’s okay to tell this customer to go somewhere else.

Further, if you have a customer that causes problems or complains every time they come in, fire them! Yes, that’s right, fire your customer. Kindly acknowledge that everytime they come in they leave unhappy and that obviously you are unable to meet their needs. Ask them to please not patronize your business anymore. You’ll both be better off for it.

So, how do you go about finding your target niche? If you are currently in business, take a look at what type of customer you are making the most off of. What is their general age range; are they typically male or typically female; what is their projected income level; what are some of their interests; why do they come to your bar or restaurant? If you aren’t sure, consider inviting some of your best customers to a round table discussion in exchange for some free food and drinks. Let them know you are trying to further improve your business and are looking to get some feedback from them.

If you do such an event, don’t just extract demographic information about them. Ask them how they would improve the place. Give them some ideas that you were considering and their thoughts on it. Find out where else they frequently go, those companies may be good joint-venture partners for attracting more business.

What if you’re not crazy about the people that currently are regulars and would prefer a different demographic? That is fine too, as long as you can determine who you do want, and ensure that the niche is untapped. Note that this doesn’t mean you have to kick the current group to the curb, just that you aren’t targeting them. You are trying to pander to a certain customer, if other people also see benefits within that experience, great, they can enjoy too. However, you are not overspending on time and money to convert these people to like you.

But what if you’re a start-up and you don’t have a base yet? In this case, it is even more important to niche. By targeting exactly who you want, you will keep costs lower, you’ll create a coalition of followers touting how great you are, and you’ll grow your business more quickly. On the contrast, if you open trying to appeal to everyone, you will have nothing unique, there will be no reason for people to go to your restaurant instead of where they already go, and you won’t be remembered when they leave.

You need to be the best at something your customers value. That means 5 out of 5s. There are plenty of good burger places, and you could go to whichever one is closest. However, the best burger is worth driving across town for. The best burger gets talked about to family and friends. The best burger gets remembered. And most importantly, the best burger has to be tasted again.

It doesn’t have to be a burger, but it has to be something. You have to have one thing that is better than any of your competitors. Find a space that no one can compete with you in. Be specific. It’s a lot easier to expand a niche that may have been too small than to compress a niche that was too undefined.

If you are unsure of what to pick, you can look at city data charts for income levels, demographic information, or competing restaurants (again do a SWOT Analysis and Competition Analysis). What does your area need?

Here are some possible examples of niches and their target customer. Again, be specific:

The best outdoor dining space for sustainability-minded, craft beer drinkers in Columbus, Ohio.
Target Market:
25-55 year old fathers with a household income over $70,000 a year that enjoy quality beer, and appreciated hand-crafted original recipes and will pay extra for quality. They enjoy nature and prefer to eat outside when possible.
The best place for wine in the state, with more award-winning, top level wines than any one else and a sommelier that can educate you on any one of them.
Target Market:
40-80 year old females that are retired or have a household income above $100,000 per year that are experienced wine drinkers looking for a place to enjoy a bottle of wine, presented correctly, by experienced, knowledgeable staff and are willing to pay for the best.
The bar with the cheapest beer and liquor prices of any bar around the college campus.
Target Market:
Low income, single males age 21-25 that are looking to drink several drinks in a short period of time, are looking to meet women, and enjoy playing darts and billiards.
A family-centered restaurant with home-style cooking and an atmosphere where you feel like you’re at your grandmother’s kitchen table.
Target Market:
Families with parents ages 25-45 that need a nice place to eat dinner, and possibly bring their parents (the grandparents) for a hearty, rib-sticking meal. They will target entrees in the $8-$14 range and favor meatloaf and mashed potatoes over burger and fries, but also appreciate a good kids menu, and lots of attentive, personal service from their waiter or waitress. This may be the only place they go out to eat at that isn’t fast food in a three-month span and want a good escape from the stresses of life.
The bar with the best happy hour deals in the business district.
Target Market:
Office workers age 25-45 that enjoy socializing and that use the bar as a place to relieve stress after work. They are looking for easy, finger foods, good drink specials, and larger communal tables for socializing.
The place you go every Friday to get the best fried, all-you-can-eat fish for under $15.
Target Market:
55-95 year old couples who want consistency in schedule and experience, enjoy a strong drink, and are looking to get a good deal. They will likely sacrifice a little on quality if it means a larger quantity, but will complain if the quality is too poor.

As you can see from the examples, your niche and target markets can vary greatly, so pick something that matches what you do best.

It may help to actually create a profile of your ideal customer. What is his or her name, what does he/she look like (find a sample picture online), how old are they, what is their income, what are their interests, where do they live, do they have any children or any pets? Put all of this information down on a sheet a paper and print it out. This will help to reiterate to yourself and your managers what type of person you are looking for. When making decisions ask if ‘Betty’ would be for or against it. If she’s your target customer, she better be for it.

By meeting the exact needs of this ‘person’ you will bring in customers that match the profile, that will talk about you with their family and friends, and will come back over and over again. When, they are deciding where to go, your name will come up first, every time.

That’s why it’s important to have a niche. That’s why it’s important to have a target market. Because, having both, keeps you relevant, desired, and profitable.