Knowing your Niche Market is the First Step to Selling!

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Is your market too flooded with choices? Knowing your Niche market is Key Knowing your Niche Market is by far, one of the most important steps in avoiding failure with Build a Niche Store or any niche website! Number 3 of the 20 Reasons you will Fail with Build a Niche Store… You Don’t Research your Niche!
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In this post, we will look at several of the factors you need to consider when looking into the development of a new niche website. In less than 30 minutes, you will know whether or not a niche is even worth pursuing before you go out and buy that new domain name or get started with hours of development work.

Yesterday, I talked a bit about your Affiliate Website Budget as a whole and determined a few key monthly expenses. Before you ever start working on a site, you need to determine a baseline for profitability, so you have an idea of how much affiliate revenue the site will need to earn, in order to break even.

You will have a fixed monthly expense of $9.95 for Hosting with HostGator for an unlimited number of websites. If this is your first and only, you need to pay the full amount from earnings on this site alone. I will assume for the purpose of this exercise, you will have 10 sites total on this account.
Your domain name will cost at least $7.15 for the first year through GoDaddy
You will need to spend a few dollars on site promotion, $15.00 for directory submissions through a place like SubmitEdge
Your TIME is worth something, for the sake of this post, lets use $20/hour, but we won’t count your initial development time, only the time you need to spend each month for maintenance of the site. The initial development time is sweat equity, required for almost ANYTHING you do to make money! Why am I using $20/hour versus the $50-$100 I spoke about yesterday? When you start any job, you have to start at the bottom and earn your way up the ladder! After you become more efficient doing this, you would quickly see that hourly number rise!

Niche Site Breakeven Point – How Much do I Need to Earn on this Niche Site in Order to Make Money?

Using the figures above as a broad baseline, I can determine that in order for this site to recognize any profit, I need it to earn AT LEAST $348.55 in 12 months! How did I come to that number?

.95 cents a month for hosting x 12 months = $11.40
$7.15 for 1 year domain registration
$15.00 for Directory submissions every other month for the first year = $90.00
1 hour a month at $20/hour = $240 for the year. (You can adjust this figure up or down, according to what YOU want to earn hourly)

Breakeven Point: $11.40 (Hosting) + $7.15 (Domain) + $90.00 (Directory Submissions) + $200.00 $240.00 (Your time) = $348.55 / Year
If you chose to purchase a keyword research tool or additional services, you need to add the portion of the cost for this single site into the equation as well.

Niche Site Demand – Do People even need Your Niche Market Site?

This is where you start researching the demand for your niche market! Assume for the sake of this exercise that you are only going to attract a small number of the search visitors for the first year as your site grows, hopefully you can get in front of 2.5% of the total! Of that 2.5%, only a small number are actually going to convert to sales… lets shoot for 10% of the visitors converting to a buyer. If you are using free research tools, this does become a bit harder to measure at this point as Google and several others do not provide raw numbers you could use for figures.

I am not going to do the actual research for this, but instead provide a set of values as an example in the broad market of “iphones”. In order to narrow the market, I use WordTrackerto gather my long tail phrases with little to no competition and find that there are more than 15,000 monthly searches across 100 very specific longtail phrases. That tells me that I could hope to see 375 monthly visitors on average for the first year, with 37 converting sales each month!

15,000 specific monthly searches X 2.5% = 375 monthly visitors X 10% = 37 conversions.

Niche Market Average Selling Price – Is it even Profitable?

Thus far, we know that we may only see 375 monthly visitors and get only 37 sales from them, now we need to find out what our niche product will produce for an average selling price and determine our cut of the commission from the affiliate sale. For this, I use Terapeak! You can even use their free tools to get this figure, but they only provide 14 days of history… For the sake of this, I used the term iPhone in the search box and the results are:

$129.91 Average Selling Price
49,000 +/- Monthly Sales Unit Volume

After I know the average selling price and see that there is sufficient sales volume (More than 375 in this case) I head over to an eBay fee calculator to determine what my cut would be.

Visit this site and insert the average selling price in the opening and closing price boxes.
Remove the PayPal fee checkbox and click on calculate fees.
$11.88 is the total eBay fee for this exercise, of which we get 50% or $5.94 per sale.
$5.94 per sale X 37 Sales = $219.00 Per Month

ACRU or Active Confirmed Registered Users also bring a little money to our earnings! I was in the crowd that thought EVERYONE had an eBay account, again, I was wrong! Up until the EPN changeover, my ACRU per lead ratio was in the 2-3 % range. Meaning that for every 100 people I sent to buy on eBay, 2-3 of them were new accounts. Every ACRU = $25.00

2% of 37 buyers is roughly 1 new ACRU or $25.00

Niche Website Earnings with eBay Affiliate Program $244.00 per Month

In todays post about Knowing your Niche Market:

We have determined that we CAN make money with our new store.
Early on, we determined that in order to make this a Profitable Niche Store, we needed to earn at least, $348.55 in the first year.
After researching the market with WordTracker, we were able to see that we can expect 37 sales each month based on the search demand of our market.
When we multiplied the sales volume with the average selling price and that lonely ACRU, we found that our site would earn approximately $244.00 every month, or a total of $2928.00 for the year!

After figuring all of our numbers, we will see a net profit of $215.00 per month!

Now that we know we can make money… its time to get the domain and get started! Split that profit down the middle and use $105 or so to both promote this site more and start developing new sites!

How do you decide whether or not a Niche Market will be profitable?

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About the Author, Mark Hansen

Mark Hansen has written 573 article(s) at the Niche Store Builder site.

I have been doing my part to "Build the Internet" since 1994, when I built my first website! Since then, I have built hundreds of niche websites for myself and many others, focused on design, applications, ecommerce, search optimization and internet marketing.

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Mike said:

Food for thought this one Mark. I’d love to have the conversion rates you talk about but I average less than 1% on my sites at the moment and I’ve had 1 Acru in 6,000 visits.

If these stats are based on your own experience then I have a lot to learn which is a problem because I don’t know what I don’t know. I pretty much do everything I’ve learned from you, Rochelle and Vic so there must be a big gap somewhere.

Knowing your Niche Market is the First Step to Selling!

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About the Author, Mark Hansen

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