As the saying goes, the Riches are in the Niches. Finding a great micro niche is a fundamental part of Micro SaaS; otherwise it’d just be plain old SaaS with a wide audience.

That's why we need to look at the things into finding a solid micro SaaS Niche. In this chapter, I will discuss some of the reliable key characteristics that you should look for.

Here are the topics I'll be touching on in this chapter:

- The niche should be expanding not contracting
- Do the users have money for tools?
- Are you capable of understanding the Micro SaaS niche?
- B2B or B2C or B2M?
- You should like your potential users
- Specific and focussed

Instead of looking for huge markets with few identifying characteristics, you want to niche down to a micro-niche that has a highly targetable potential customer base for your app. For example, think about how you’d go about targeting the following user base:

The more micro you go, the better. Not only will you be able to find and engage with potential customers much more easily, but you’ll be able to serve them better with a much more tailored solution.

Imagine being a Real Estate Lawyer and searching for a Case Management Solution …. you’d immediately be drawn to the below link as it is so specific to you:

With that in mind, the next step is to find a few micro SaaS niches that could be a good fit for you. You’re not yet looking at the possible problems/solutions in these niches, rather just shortlisting a number of suitable niches you’re interested in exploring further.

Here are some of the key characteristics you’ll want to look for:

• An Expanding Niche
• A User Base With Budget For Tools
• An Understanding Of The Niche
• A B2B, B2C, or B2M Niche
• A Customer Base That You Like
• A Specific and Focused Niche

The niche should be expanding not contracting

Clearly, we don’t want to be building apps for a niche that is in decline. Instead, we want to be targeting niches that are either stable or ideally expected to grow (hopefully significantly) over the next 5 to 10 years.

If it’s an emerging market, there will be less competition and you may be able to claim a stake of the market early on. You have to balance that approach against the “safer”, more established niches that have been and will be around forever (accountancy, law, health, etc).

The first Micro SaaS apps I developed were chrome extensions for Merch By Amazon creators which certainly was (and still is) an emerging niche. I came across this niche whilst looking at passive income opportunities myself.

The Merch niche is mainly made up of graphic designers & entrepreneurs, uploading their art to Amazon to sell on various apparel products. Each time Amazon sells a product with their design on it, they’re paid a small royalty. This platform and niche only started in 2015 but it has expanded exponentially since then.

Whilst Amazon doesn’t release the actual number of creators on the platform it was fairly easy to estimate the size of the community by looking at the size of Facebook groups, Reddit channels etc.

Critically, I could see that the community was increasing week by week, with more members joining the groups all the time. Merch was a great niche to get into as it was certainly up and coming, plus the creators made money each time their designs would sell. All I needed to do was to create some apps that would allow the creators to focus on what they really wanted to do - create more bestselling designs.

Take a look at this Google Trends graph below showing how this niche has grown in popularity and whereabouts in the growth phase I launched my apps and finally when I was able to quit my day job!

Do the users have money for tools?

For example, if they’re students, you’re going to struggle to convince them to spend what little money they have on a monthly subscription to your study-system app (ahead of video games and beer).

Conversely, let’s say you have built a great Shopify plugin that automates emailing potential users when a product is back in stock. If your plugin only takes 5 product sales a month to justify the cost of your plugin, it’s a clear win-win value proposition for all concerned (just be mindful that one day Shopify could potentially re-create your plugins’ functionality within its core offering making your app redundant 😱).

Do the users in the niche spend money on tools right now? If it’s already the case, then this is certainly comforting. If not and you’re attempting to be the first, then you better have a damn good value proposition for your end user.

This should take the form of how much time or money your app can save or make them - which will be a no-brainer for the user.

Are you capable of understanding the Micro SaaS niche?
Ideally, you’re already passionate about the industry/niche and are already knowledgeable in this sector. Maybe you’re thinking of solving a common problem that you’ve seen from your day job or from freelance work.

If not, then you should consider how long it would take you to get up to speed with the niche’s users. For example, whilst the Health & Fitness niche is relatively easy to relate to and understand, trying to understand hedge fund derivatives trading is going to be far more challenging.

That said, if you can compete in these complex (and lucrative) sectors, it can certainly give you an advantage.

B2B or B2C or B2M?

An important consideration is the type of users your user base would contain. Will you be targeting and dealing with businesses each day, or consumers or perhaps a blend of both? Let's look at the different types of customers:

• Business to Business (B2B) - where your customers are other businesses. Examples from Micro SaaS up to SaaS include UpVoty, Plutio, Slingshot, Salesforce, Atlassian & Hubspot.
• Business to Consumers (B2C) - where your customers are consumers. For example, Nomad List, Canva & Duolingo.
• Business to Many (B2M) - where your users are a mixture of businesses and consumers, for example there’s my app KDP Wizard which has a mixed user base of publishing businesses and also entrepreneurial consumers selling low-content books on Amazon. In big SaaS, there’s Dropbox which has enterprise offerings as well as personal plans.

There are significant differences in what you’re getting yourself into when targeting a B2B niche vs a B2C niche. The main difference being in the sales cycle:

• B2B requires an outbound sales team to call out to target businesses. Usually there are lengthy sales, legal & contractual negotiations per business to convince multiple people to give the green light. Whilst the recurring fees are much larger than B2C, the cost of acquiring a new customer is significantly higher than that of B2C.
• B2C is almost always self-service sign up with lower recurring fees and a short sales cycle as there is usually just one person making the purchasing decision. Costs of acquisition are much lower than B2B as most of the time there is no outbound sales team in B2C.

B2B vs B2C User Characteristics

It’s also worth considering where the users for your niche gather as you’ll want to build up a presence on these platforms if you haven’t already got one.

B2B users are likely to spend their time on LinkedIn & Twitter. Whereas, B2C users can be found on social networking platforms such as Facebook/Instagram/Reddit/Twitter etc.

Churn is typically higher in B2C than in B2B due as the consumers haven’t jumped through all the hoops that would have been jumped through during a B2B sale. Consumers are also more unpredictable than a business, as they let their personal bank cards breach limits or don’t update the card details when they expire and simply drop off the radar.

Conversely, with a B2B solution, there’s a contractual agreement and the business will continue to pay the subscription whilst the solution is working for them and there’s still a need for it within the business.

Depending on how you feel about the above (setting up a sales team vs income vs churn vs targeting) will dictate which niches are a good fit for you.

You should like your potential users

Would you be ok hanging out with your prospective users?

You will certainly be regularly connecting with your users in the future, whether it’s at conferences (in-person or virtual), webinars, seminars, screenshares, Facebook groups, emails, support calls, support tickets, etc.

If the thought of spending time talking to a niches’ user base makes you shudder, then you’re setting yourself up for a tough road ahead. Whether it’s due to them being extremely demanding or dull or whatever … you’re best to steer clear if possible.

In my case, the Merch user base is mainly made up of graphic designers, side hustlers, entrepreneurs. These users are fairly laid back and love any tools that help accelerate the growth of their Merch business.

When I had been in the niche for a while, I noticed that there was only one annual conference for this niche, held in Seattle, USA. For some reason, I thought it would be a good idea for me to arrange a conference for the UK/European based Merch creators, even though I’d never organised a conference before! 🤯

Hosting this conference for over 80 people was quite stressful, and in the end it turned into a much bigger event than anticipated with several attendees flying in from USA & Europe, as well as the UK.

However, I was able to meet many of the users in the niche, build relationships, establish trust, and crucially pick their brains in person. Many of the users that came were already Merch Wizard users and getting their feedback and ideas for new features made all the effort worthwhile.

In case you landed on this page directly from a search engine, then you’re reading chapter 4 of my 12 part guide to Micro SaaS.

Download the entire 12 chapter guide as a PDF eBook for free so you can read it where you want, when you want.

Specific and focussed

Instead of building for a generic market that’s hard to target, it’s going to be much easier to target a specific set of people.

I like to compare it to fishing in a small, undiscovered pond that not many other fishermen know about. This small pond only has one species of fish in it and you become an expert on that fish, knowing exactly what type of bait that fish loves. Contrast that with casting your fishing net far and wide into the ocean and trawling for hours to try to catch as many fish as possible, even if some of those fish aren’t what you’re looking for.

If we relate this back to the earlier case management example, you’ll struggle to target leads given that a broad number of niches could use such an app. How would you find out where your potential user base hangs out? Would your generic solution resonate with them? Probably not.

It’s far easier to immerse yourself into a community of Real Estate Lawyers and see if you can solve their PITA problems with your app idea.

In this chapter we've looked at the most important attributes of a potential target micro niche. Now that we’ve got a handle on the characteristics of the market we’re aiming for, let’s take a look at what makes a solid Micro SaaS app.

Characteristics of a solid Micro SaaS App