
Starting a Marketplace Business: 5 Lessons for Entrepreneurs
Have you noticed how marketplace businesses are transforming entire industries? From Amazon to niche platforms, marketplaces are now powerful engines connecting buyers and sellers in revolutionary ways.
The numbers say it all: by 2027, nearly 60% of all e-commerce sales will happen through marketplace platforms. For small businesses and entrepreneurs, this isn’t just a trend—it’s a major shift in how business is done online.
When I founded NPHub in 2017, I wasn’t trying to build a marketplace. I was solving a real problem: nurse practitioner students struggling to find clinical placements. One urgent phone call uncovered a widespread issue nursing schools weren’t addressing. Some students even called us in tears.
The marketplace model quickly became the natural solution. We could connect students with qualified preceptors (licensed nurses who guide and mentor student nurses)—creating value on both sides and solving a critical need. This business-to-consumer model transformed a broken system into one that works.
What I discovered is that building a niche marketplace comes with unique challenges and tremendous opportunities:
- Targeted focus. Unlike broad platforms, niche marketplaces serve specific industries. Research shows this approach attracts passionate users and leads to higher margins.
- Connecting supply and demand. Success depends on reducing friction in what were once complex transactions.
- Market transformation. Entrepreneurs can make a big impact by solving problems in fragmented, underserved markets.
In this post, I’ll share practical lessons I've learned while building my company. Whether you're pursuing a B2B, B2C, or C2C model, these insights can help shape your strategy for long-term growth.
How to Build a Marketplace Business in a Niche Industry
Lesson #1: Identifying Marketplace Opportunities in Your Industry
Let’s be honest—not every industry needs a marketplace. Before investing time and resources, you need to assess whether your target market has the right conditions for this model to succeed. When I talk to entrepreneurs exploring the marketplace route, I always suggest looking for specific signs of real opportunity.
Signs that your industry needs a marketplace solution are:
- Fragmented supply and inefficient matching processes. When I researched clinical placements for nurse practitioners (NPs), I was shocked by how disconnected everything was. Students went door-to-door looking for placements, while qualified preceptors had no structured way to offer help. A marketplace could bring structure and efficiency to the chaos.
- High search costs for buyers and/or sellers. When either side spends too much time or money finding each other, a marketplace adds real value. NP students spent months looking for sites, delaying graduation. Preceptors had no efficient way to connect. The search costs were sky-high for bo
th.
- Lack of standardization and quality control. In many fields, there’s no way to verify quality. A marketplace can raise the bar and improve the overall experience.
- Inefficient pricing mechanisms. If pricing feels random or opaque, that’s another red flag. In my industry, preceptor compensation varied wildly—some preceptors volunteered; others charged arbitrary fees. A marketplace brings transparency and improves margins for everyone.
Questions to Ask Before Launching
Once you've identified potential signs that your industry might benefit from a marketplace solution, it's time for a deeper analysis. Here are the crucial questions I asked myself—and now recommend to others:
- Is there a genuine friction point in how businesses operate? This is about finding real pain, not minor inconveniences. When 39 out of 40 nursing schools told me to "F off" (yes, that actually happened) when I approached them about helping their students find clinical placements, I knew I'd hit a nerve. The system was broken, people were genuinely struggling, and those in charge weren’t willing to take action.
- Can a marketplace model effectively solve these problems? Not every industry problem is best solved with a marketplace. Sometimes a traditional software solution, a direct service, or another business model might be more appropriate. Ask yourself: will connecting two sides of a transaction really address the core issues?
- How large is the potential market? Run the numbers. In our case, we looked at how many NP students needed clinical placements each year and estimated the potential value of facilitating those connections. For your marketplace idea, consider both the number of potential participants and the value of each transaction you might facilitate.
Validating Your Marketplace Concept with Minimal Effort
Before building tech or spending big, validate your idea with lean, low-cost tests:
- Start with manual matchmaking. It may seem basic, but manual work helps you test demand and refine your process with minimal risk.
- Create a simple landing page. Explain your concept and include sign-up forms for both sides. Even without a live platform, you’ll gauge real interest.
- Talk to your customers. Nothing beats direct conversations. We spent hours on the phone with frustrated NP students and preceptors. Their stories shaped our entire approach.
- Look at adjacent markets. Research how similar industries operate. We studied how other healthcare pros found training and saw what made NP clinicals uniquely tough.
The key to validation is starting small, learning fast, and adapting as needed. And if customers are willing to pay, your idea is likely going to work. By validating early, you avoid wasted effort—and build something people actually want.
Lesson #2: The Chicken-and-Egg Dilemma
The classic “chicken-and-egg” problem can derail even the best marketplace ideas. Without sellers, buyers won’t come—and without buyers, sellers won’t join. So how do you break the cycle and build momentum?
We faced this dilemma head-on. Why would students pay without enough preceptors? And why would preceptors join without students? Solving this puzzle became central to our growth strategy.
Every marketplace struggles early on to offer enough value while the network is still small. Amazon with three sellers or Uber with five drivers wouldn't work.
What makes this harder is that each side has different concerns. For us:
- Sellers (preceptors) worried about student quality, time demands, admin support, and compensation.
- Buyers (students) questioned preceptor credentials, training quality, and whether placements met school requirements.
Understanding these differing needs is key to solving the dilemma.
Strategies to Attract Sellers When You Don't Have Buyers
Most successful online marketplaces start by focusing on one side first—typically the supply side. Here's how we attracted preceptors before we had a large student base:
- Creating value beyond transactions. Preceptors weren’t just in it for the money—they enjoyed teaching and wanted better support. We built resources and streamlined admin work to make participation easy and fulfilling, even before we had many students.
- Offering incentives for early participants. Sometimes, you need to sweeten the deal. We offered competitive rates and reduced friction to get those first crucial preceptors. Other marketplaces might offer free listings or lower fees for early participants.
- Focusing on the highest-quality suppliers first. Instead of recruiting everyone, we targeted top-tier preceptors who could deliver exceptional experiences. This gave students a great first impression and generated early word-of-mouth that fueled growth.
Once you have your initial suppliers, you need to attract buyers—even when your offerings are limited. Here's how to approach this challenge:
- Start with a focused niche within your target market.
- Provide a great customer experience from day one.
- Create urgency through limited availability.
The key takeaway? Solve the chicken-and-egg problem by starting small, focusing on quality over quantity, creating non-transactional value for early users, and using high-touch service before investing heavily in technology.
Lesson #3: Building Trust and Quality Control in Your Marketplace
In marketplace businesses, trust isn’t just important—it’s everything. You can solve the chicken-and-egg problem, but it still fails if users don’t trust your platform. That’s why every part of the customer journey must inspire confidence.
Develop Vetting and Quality Assurance Processes
At NPHub, we personally interviewed every preceptor and verified their credentials. It was time-consuming but essential to building a reputation for quality. Your marketplace needs a strong verification process suited to your industry—whether that’s documentation, background checks, or credential reviews. Quality over quantity is the way to go.
Managing Expectations on Both Sides of the Marketplace
To manage expectations effectively:
- Be transparent about time frames and processes.
- Clearly communicate what your marketplace can and cannot do.
- Educate new users on how the marketplace works.
How to Build Trust Through Transparency and Communication
Trust requires ongoing effort. Here's what worked for us:
- Regular updates to both sides about the status of placements.
- Clear policies for handling disputes or problems.
- Transparent pricing with no hidden fees.
- Accessible support when issues arose.
The lesson? In marketplace businesses, quality control isn't just an operational consideration—it's a strategic advantage that drives growth.
Lesson #4: Technology Considerations for Your Marketplace Platform
One of the biggest mistakes I see entrepreneurs make is rushing to build sophisticated technology before validating their marketplace concept. Our technology journey was deliberate and staged—a key factor in our success.
Essential Features for a Minimum Viable Platform
When you're ready to build technology, focus on the essentials:
- User profiles and authentication. Both buyers and sellers need secure accounts with appropriate permissions. Keep these simple initially.
- Listing management. Sellers need an intuitive way to create and manage their offerings.
- Search and discovery. Buyers need to find what they're looking for efficiently.
- Communication tools. Secure messaging between marketplace participants is essential.
- Transaction processing. Whether facilitating payments or coordinating services, users need a clear process for completing transactions.
Notice what’s not on the list: fancy AI recommendations, complex analytics dashboards, or elaborate rating systems. Quality and security are essential, so start by nailing the fundamentals.
Common Technical Pitfalls in Marketplace Development
- Overengineering the initial platform. Many entrepreneurs build complex features users don't need. We solved our most pressing problems first.
- Neglecting mobile responsiveness. With mobile commerce accounting for more than half of all e-commerce sales globally, ensuring your platform works well on smartphones is critical.
- Inadequate testing with real users. We recruited actual preceptors and students to test our platform before launch, uncovering issues we wouldn't have found otherwise.
- Ignoring scalability. Many platforms work fine with 100 users but collapse with 1,000. We architected our system to grow with our business.
Make vs. Buy Decisions for Small Businesses
As a small business, you face a critical choice: build custom technology or leverage existing solutions.
- Start with existing tools whenever possible. We used Calendly for scheduling and Stripe for payments.
- Customize only what creates competitive advantage. Our matching algorithm was custom-built because it was central to our value proposition. Everything else used off-the-shelf solutions initially.
- Consider no-code and low-code options. Tools like Bubble, Webflow, and Zapier can create functional marketplaces without traditional coding.
Using Technology to Enhance (Not Replace) Human Connections
The best marketplace platforms enhance human connections rather than replace them. At NPHub, we use technology to:
- Remove friction from the matching process.
- Provide transparency into available options.
- Streamline administrative tasks.
- Gather feedback to improve experiences.
This hybrid approach—combining technology efficiency with human judgment—created a marketplace that was both scalable and trusted.
Remember that technology is a means to an end: creating valuable connections between participants in your marketplace.
Lesson #5: Developing a Sustainable Revenue Model
A marketplace with plenty of users but no sustainable revenue model is just an expensive hobby. Let me share what we learned about monetization.
Common Marketplace Monetization Approaches
There are three primary ways marketplace businesses generate revenue:
1. Transaction fees. Transaction fees work well when you add clear value to each exchange. We charge a 5% service fee on all transactions to cover administrative expenses, technology costs, and payment processing. This model scales naturally with transaction volume and value.
2. Listing fees. Listing fees are effective when being featured on your platform has inherent value. These can be flat-rate or tiered based on visibility or duration.
3. Value-added services. Subscription models provide predictable revenue but require delivering consistent value. This works when users engage frequently with your platform. Value-added services can complement these core models. We offer priority matching through a 20% rush fee for urgent rotation requests, providing dedicated support for time-sensitive placements.
When to Adjust Your Revenue Model
- Reconsider your model when growth plateaus. After initial success with our basic fee structure, we introduced flexible payment options that made our services accessible to more students.
- Adjust when user behavior signals friction. When we noticed students struggling with large upfront payments, we created installment plans to reduce financial barriers.
- Evolve as your value proposition matures. After placing 10,000+ students with 2,000+ active preceptors over eight years, we established enough credibility to offer a 100% money-back guarantee, which further strengthens our value proposition.
The key lesson? Be willing to evolve your revenue model as your marketplace grows and matures. What works at 100 users rarely works at 10,000.
Building Your Own Niche Marketplace Success Story
Niche marketplaces bring deep industry expertise and tailored solutions and foster communities around shared needs. Success won’t go to those with the flashiest tech or biggest ad spend—it’ll go to those who truly understand their customers and connect supply with demand in meaningful ways.
What’s been most rewarding about building NPHub isn’t just the growth—it’s seeing both sides win: preceptors finding the right teaching opportunities, and students landing placements that move their careers forward.