The best way to start selecting a niche market is to define who your best clients are. What industry are they in? How tightly can you define that market? What size is the company either in dollar sales or number of employees? What geographic region are they in?
Next, look at your competitive advantages to analyse what you do best. What product or service do you provide that your competitors can’t? What vertical market is not being serviced well by your competition? Once these questions are answered you can search for prospects that match those criteria and then target your marketing to that niche market. You will be highlighting the competitive advantage that you identified in your sales pitch as well as your advertising.
Please keep in mind that this doesn’t mean that you won’t accept business outside of that niche, it just means that you won’t invest marketing dollars to solicit that business. By targeting your sales and advertising dollars your return on investment will be much greater.