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How to Research and Evaluate Niches

Today, I will teach you how to research and evaluate potential niches for your website.

You may have a few niches in mind, but I will teach you a framework to ensure you pursue the right one!

If you learn how to do this well, you’ll save a lot of time avoiding high competition and saturated niches.

And you’ll maximize ROI by pursuing niches with low competition (but high profitability).

Unfortunately…

People overestimate profitability and underestimate how much it costs to compete.

They end up spending all their time and resources on a niche that is:

– Saturated
– Too competitive
– Out of their budget

I used to be an investment banker, so I take an “investment analysis” approach when researching and evaluating niches.

I evaluate income and expenses to ensure I make the best “investment”.

Here’s how I do it, step by step:

Evaluate Profitability

First, you want to evaluate how much money you can make in a niche.

If you found this niche on Flippa or Empire Flippers, that’s perfect.

They reveal traffic and earnings.

However, if you found this niche elsewhere, you can use Ahrefs to come up with a good estimate.

Here is an example in the woodworking niche:

1. Pick a decent-sized site in the niche (not too large, not too small)

2. Enter the site URL into Ahrefs’ Site Explorer

3. Divide “Traffic value” by 4

This is usually the minimum monthly revenue you can expect from this site.

So, for https://woodsmithspirit.com/, we can estimate a minimum monthly revenue of around ~$6,000.

Based on my experience, this is a good estimate.

Use this simple trick to estimate the monthly profit in your potential niche.

Next, we want to estimate the investment needed to compete.

We do this by estimating the cost of content and backlinks.

Why?

Because you must fill the content and backlink gaps between you and your competition.

They’ve published more content.

They’ve built more backlinks.

And until you fill these gaps, it’s unrealistic to think you will outrank them.

Content Gap

Let’s first take a look at the cost of content.

Let’s continue using https://woodsmithspirit.com/ as an example.

You can see that they have published 204 posts in their XML sitemap.

The average article is between 1,500-2,500 words.

So let’s assume an average of 2,000 words per article.

204 posts x 2,000 words = 408,000 total words

Assuming a cost of 6 cents per word:

408,000 x 0.06 = $24,480

Given these assumptions, the content investment required to compete in this niche is around $24,480.

Link Gap

Next, let’s take a look at the cost of link building.

You can use Ahrefs‘ Site Explorer to do this:

1. Enter the site URL into Ahrefs’ Site Explorer

2. Click “Backlinks” on the left-hand-side

3. Filter only dofollow backlinks with a minimum domain traffic of 500

4. Then select “One link per domain”

We end up with “116 groups of links”

This is the best estimate for how many backlinks you have to build to compete in this niche.

According to this survey by Authority Hacker, the average cost of a paid link is $83.

116 x $83 = $9,628

Given these assumptions, the backlink investment required to compete in this niche is around $9,628.

Bringing everything together

Estimated monthly revenue: $6,000
Estimated content investment: $24,480
Estimated backlink investment: $9,628

Given these estimates, the woodworking niche looks lucrative if you have a $34,000 budget.

Of course, this evaluation doesn’t account for your skill as an SEO. Or the time and effort you have to put in. But it gives you a pretty good idea of what you can expect.

Now you know how to research and evaluate niches like a pro.

The next step is to actually build a profitable niche site.

Stay tuned because next week, I will teach you the perfect website setup.

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