Definition: A portion of a market that you've identified as having some special characteristic and that's worth marketing to

Creating a good niche involves following this seven-step process:

1. Make a wish list. With whom do you want to do business? Be as specific as you can: Identify the geographical range and the types of businesses or customers you want your business to target. If you don't know whom you want to do business with, you can't make contact.

These days, the trend is toward smaller niches (Targeting teenagers isn't specific enough; targeting male, African-American teenagers with family incomes of $40,000 and up is. Aiming at companies that sell software is too broad; aiming at Northern California-based companies that provide internet software sales and training and have sales of $15 million or more is a better goal.

2. Focus. Clarify what you want to sell, remembering this: a) You can't be all things to all people and b) "smaller is bigger." Your niche is not the same as the field in which you work. For example, a retail clothing business is not a niche but a field. A more specific niche may be "maternity clothes for executive women."

To begin this focusing process, use these techniques to help you:

• Make a list of things you do best and the skills implicit in each of them.
• List your achievements.
• Identify the most important lessons you have learned in life.
• Look for patterns that reveal your style or approach to resolving problems.

Your niche should arise naturally from your interests and experience. For example, if you spent 10 years working in a consulting firm, but also spent 10 years working for a small, family-owned business, you may decide to start a consulting business that specializes in small, family-owned companies.

3. Describe the customer's worldview. When you look at the world from your prospective customers' perspective, you can identify their needs or wants. The best way to do this is to talk to prospective customers and identify their main concerns.

4. Synthesize. At this stage, your niche should begin to take shape as your ideas and the client's needs and wants coalesce to create something new. A good niche has five qualities:

1. It takes you where you want to go--in other words, it conforms to your long-term vision.
2. Somebody else wants it--namely, customers.
3. It's carefully planned.
4. It's one-of-a-kind, the "only game in town."
5. It evolves, allowing you to develop different profit centers and still retain the core business, thus ensuring long-term success.

5. Evaluate. Now it's time to evaluate your proposed product or service against the five criteria in Step 4. Perhaps you'll find that the niche you had in mind requires more business travel than you're ready for. That means it doesn't fulfill one of the above criteria--it won't take you where you want to go. So scrap it, and move on to the next idea.

6. Test. Once you have a match between niche and product, test-market it. This can be done by offering samples, such as a free mini-seminar or a sample copy of your newsletter.

7. Go for it! It's time to implement your idea. For many entrepreneurs, this is the most difficult stage. But fear not: If you did your homework, entering the market will be a calculated risk, not just a gamble.

Once your niche is established and well received by your market, you may be tempted to rest on your laurels. Not a good idea. Ask yourself the following questions when you think you have found your niche--and ask them again every six months or so to make sure your niche is still on target:

• Who are your target clients?
• Who aren't your target clients?
• Do you refuse certain kinds of business if it falls outside your niche?
• What do clients think you stand for?
• Is your niche in a constant state of evolution?
• Does your niche offer what prospective customers want?
• Do you have a plan and delivery system that effectively conveys the need for your niche to the right market?
• Can you confidently predict the life cycle of your niche?
• How can your niche be expanded into a variety of products or services that act as profit centers?
• Do you have a sense of passion and focused energy with respect to your niche?
• Does your niche feel comfortable and natural?
• How will pursuing your niche contribute to achieving the goals you have set for your business?