The Niche of Few: Why Smaller Markets Win Now

· 15 min read

The previous essay, “The Toolmaker’s Discipline,” made the case for the niche of one—building tools for yourself, never releasing them, keeping your weapons private.

But there’s a middle ground we only gestured at. Between “niche of one” and “general purpose” lies the niche of few. And the economics that make personal tools viable also make specialized products viable in a way they never were before.

This is that essay.

The Old Math

Building software used to be expensive. Really expensive.

A sophisticated tool might take a team of five engineers six months. Call it $500,000 in fully-loaded costs. To make that investment worthwhile, you needed to spread it across many users.

If you charged $100/year, you needed 5,000 paying users just to break even. More realistically, you needed 20,000+ users to build a sustainable business. That’s a big market. That’s general purpose. That’s building for the average case.

The math pushed you toward broad appeal:

  • More features to capture more use cases
  • Simpler interfaces to serve less sophisticated users
  • Compromises to satisfy conflicting needs
  • Documentation for people who don’t share your mental model

Every decision optimized for market size. The product became a watered-down version of what any specific user actually needed.

The New Math

Now building a sophisticated tool takes a lunchbreak. Maybe a weekend for something complex.

The $500,000 tool is now a $500 tool (your time for a weekend, plus API costs). The break-even calculation inverts completely.

If you charge $100/year, you need 5 paying users to break even. Not 5,000. Five.

At $50/month, you need ONE user for a few months.

This changes everything.

The Niche of Few

When you only need 50 users to build a sustainable product, you can build for exactly those 50 users. Not a watered-down compromise—the exact tool they need.

Every click matters. You’re not building for hypothetical users with hypothetical workflows. You’re building for specific people doing a specific thing. You can optimize every interaction for THEIR flow.

Edge cases are bounded. With 50 users in a tight niche, you can enumerate the edge cases. You might even know them personally. The support burden doesn’t scale infinitely—it plateaus.

Users share your mental model. They’re in the same niche. They understand the domain. You don’t need to explain the basics. You can build for experts.

Feedback loops tighten. You can talk to all your users. You can watch them work. You can iterate based on real needs, not analytics abstractions.

This is the opposite of general-purpose software. It’s SPECIFIC-purpose software. And it’s now economically viable.

The Streamlining Principle

Here’s the insight that makes niche products WIN against general-purpose alternatives:

A tool built for 500 people can be twice as good for those 500 people as a tool built for 500,000.

Why? Because every decision can optimize for the specific use case:

  • No feature bloat from serving adjacent markets
  • No UI compromises for users who don’t exist
  • No documentation explaining things your users already know
  • No backwards compatibility for workflows you don’t support
  • No abstraction layers for flexibility you don’t need

The general-purpose tool has to handle everyone. The niche tool only has to handle YOU (plural, but small).

Think about it from the user’s perspective:

General-purpose tool: 20% of features are relevant. 80% are noise. UI is cluttered with options you’ll never use. Documentation assumes you might be anyone. Every workflow has three extra clicks “for flexibility.”

Niche tool: 95% of features are relevant. UI shows exactly what you need. Documentation speaks your language. The workflow is exactly three clicks because that’s all it needs to be.

For the 500 people in the niche, the niche tool is dramatically better. They’ll pay more for it. They’ll be more loyal. They’ll tell the other people in the niche.

The Support Equation

The Toolmaker’s Discipline warned about the second user. The second user brings support burden, defensive coding, the death of velocity.

The niche of few threads this needle.

Support burden scales with user DIVERSITY, not user COUNT.

100 users from the same niche, doing the same thing, with the same mental model? Manageable. They hit the same issues. One FAQ serves everyone. One fix solves 50 tickets.

100 users from different backgrounds, different use cases, different expectations? Nightmare. Every user is a unique snowflake of edge cases. Support scales linearly (or worse) with count.

The niche of few keeps diversity low. Users are similar BY DEFINITION—that’s what makes them a niche. The support burden plateaus rather than exploding.

Finding Your Niche

Not every small market is a good niche. The good niches share characteristics:

They know they’re a niche. The people in them self-identify. They have forums, communities, conferences. They already talk to each other. They’ll find your tool through word-of-mouth because word-of-mouth actually works when everyone knows everyone.

They have money or budget. Hobbyist niches are fun but don’t pay. Professional niches—people doing this for work—have budget. B2B niches have MORE budget. The tighter the niche, the more you can charge.

They’re underserved by general-purpose tools. The general-purpose tool handles them as an afterthought. They’re frustrated. They’ve hacked together workarounds. They’re WAITING for someone to build the real thing.

They’re stable enough to exist for years. The niche needs to persist long enough for you to build and sustain the product. Avoid niches that might evaporate.

You understand them deeply. Ideally, you’re IN the niche. You have the problem. You know the workflow. You can build the niche-of-one version first, then expand to niche-of-few.

The Ladder

This suggests a development path:

Stage 1: Niche of One. Build the tool for yourself. Make it work for YOUR workflow. No users, no compromise, no support. This is the Toolmaker’s Discipline.

Stage 2: Niche of Few. IF the tool generalizes—IF others in your niche have the same problem—consider expanding. But only to people who share your mental model. The first external users should be people you could explain the tool to in 30 seconds.

Stage 3: Niche of Some. IF Stage 2 works, IF support burden is manageable, IF the abstraction is stable—consider growing. But stay in the niche. Resist the temptation to broaden appeal. Depth beats breadth.

Stage 4: Maybe Never. Most tools should stop at Stage 1. Some reach Stage 2. Few should go further. The ladder exists, but climbing it is optional.

The mistake is jumping straight to Stage 4 thinking. “This could be big.” “Everyone could use this.” “Let’s build for scale.” That’s the old economics talking. The new economics rewards staying small.

The Counter-Intuitive Marketing

Niche products market differently than general products.

General product marketing: Cast a wide net. SEO for broad keywords. Ads targeting demographics. Content marketing for search volume. Try to be discovered by anyone who might be interested.

Niche product marketing: Go where the niche is. Post in the one forum they all read. Sponsor the one conference they all attend. Get reviewed by the one person they all trust. Word-of-mouth works because everyone knows everyone.

The niche is SMALLER but DENSER. You don’t need to reach millions to find your 500 users. You need to reach the 5,000 people in the niche, and convert 10%.

This is cheaper. Faster. More effective. And it builds a moat—once you’re the known solution in a niche, you’re hard to displace.

The Revenue Math

Let’s make it concrete.

General SaaS:

  • 10,000 users at $10/month = $100,000/month
  • Need massive marketing spend to reach users
  • High churn because users aren’t committed
  • Race to bottom on pricing
  • Support nightmare from diverse use cases

Niche SaaS:

  • 200 users at $200/month = $40,000/month
  • Find users through community presence
  • Low churn because it’s the ONLY good solution
  • Premium pricing because it’s specialized
  • Manageable support from similar users

The niche version makes less revenue but probably more PROFIT. And it’s achievable by one person with AI, not a team of 20.

The Defensibility

General-purpose tools compete with everyone. There’s always a bigger company with more resources who can out-feature you, out-market you, out-price you.

Niche tools compete with no one—or at least, with few. The market is too small to attract the big players. It’s not worth their time.

This is a moat.

A $40,000/month niche product is invisible to companies thinking in billions. They’ll never come for your market. You can own it indefinitely.

Meanwhile, THEY’RE worried about competitors with more funding, more engineers, more marketing. You’re just… building for your 200 users. Improving the tool. Charging a premium. Flying under the radar.

The Lifestyle Match

This also matches how many people actually want to work.

Not everyone wants to build a unicorn. Not everyone wants to manage 50 employees. Not everyone wants to raise venture capital and chase hypergrowth.

Some people want to build a good tool for a specific community, make a sustainable living, and keep their freedom.

The niche of few makes this viable:

  • One person (with AI) can build it
  • One person can support 200 similar users
  • $40k/month is life-changing money for a solo operator
  • No investors, no board, no growth mandates

This is the “indie hacker” dream, but with new economics that make it more achievable than ever.

When NOT to Niche

Not everything should be a niche product:

Foundational things should be broad. Languages, protocols, infrastructure—these need wide adoption to be useful. The value comes from ubiquity. Don’t niche a foundation.

Network effects need scale. If the product’s value comes from other users (marketplaces, social networks), you need critical mass. Niching breaks the network effect.

Some problems are genuinely general. Text editors. Browsers. Operating systems. These aren’t niches—they’re universal needs. Don’t artificially constrain something genuinely general.

The test: Does narrowing the focus make the product BETTER for the remaining users? If yes, niche. If narrowing just makes it SMALLER without making it better, don’t.

The Connection

The Toolmaker’s Discipline argued for building tools you never release. This essay argues for a narrow exception: the niche of few.

Both are expressions of the same underlying shift. Production cost collapsed. Maintenance cost didn’t. The economics now favor depth over breadth, specific over general, few over many.

The niche of one is the logical endpoint—and the safest. No second user, no burden, no compromise.

The niche of few is the adjacent possible—viable if you’re careful, rewarding if you pick right, but carrying real commitment.

The general market is the trap—the old economics pretending it’s still the new economics, the path to support nightmares and competitive hell.

Choose your niche wisely. Or choose no niche at all, and keep your tools for yourself.

Both are valid now. That’s what’s new.

This is the third piece in a series. “Future Work Mythology” describes the macro shift. “The Toolmaker’s Discipline” describes personal tools. This essay describes the middle ground—products for the niche of few.