Then, think about your competitors. This is where it pays to think clearly about what market you're in - because you may have more competitors than you think. So, to take our earlier example, our aromatherapist isn't just in competition with other aromatherapists. They'll be competing with other providers of healthcare/stress-relief - eg other complementary therapists, health-food stores (with their stress-relieving teas) and perhaps even gyms and GPs. To identify your competitors, try to think like a customer - when a customer is in the market for my service, who else may think of buying from? And don't forget to ask your customers who else they buy from - they're the best people to help you to identify your competitors!
Once you've identified your competitors, do some analysis. It really depends on you how much detail you go into, but the questions on the Business Link site offer a good starting point:
What do they offer?
How do they price their products?
Who are their customers?
What their competitive advantages and disadvantages?
What might their reaction be to you entering the market?
Competition is a fact of life - what differs is how people manage it. In a niche market, competitors can be very useful - sometimes you can find ways to work together to increase the size of the market - so you each get a piece of a bigger pie.
Now, it's worth trying to estimate the size of your market - to give you an idea of how big your business could be.