I will share with you how I chose a niche. One of the criteria: a niche in a growing market.
When the market grows, it's like water, it pushes you up by itself. The increasing demand in the market forgives many mistakes. And they are inevitable. There was no point in developing a network of video rental stores in 2004. Yes, then people rented VHS tapes, but it was already clear that the market was narrowing, and as we can see, the advent of the fast Internet changed everything. But not everyone knows this, so they don't always choose the right idea for a business.
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The next step is to analyze competitors by key criteria. Here are some of them: avatar CA, pain CA, margin, cost, fixed and variable costs, who are the contractors, etc.

Why did I do it?
The fact that a niche is in a growing market does not mean that you will be able to make money in it, because you do not know who your client is and what problems you may face. And your competitor, who already earns a lot, knows this. He has already stepped on all possible rakes and by studying his experience you can avoid his mistakes.
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Another reason is that by studying competitors and learning their strengths and weaknesses, you will find your competitive advantage. There is only one criterion in which you will be the best and, by developing it, you will capture the entire market.

That's how all the big companies have become what they are now. Starbucks just focused on customer service and became number one among coffee shops. Nothing superfluous, just a cool customer service.
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To study competitors and find your competitive advantage - that's what is important in my opinion.