Starting a lifestyle business will for sure take you a lot of energy in the coming years. There will be time when you want to give up. In those hard times things are easier if you are doing what you love. I think that choosing a niche is better if you are solving a problem in the area you have a knowledge. That could be your big asset [1]. What are your hobbies? What do you like to do?

Many niches are very saturated. That doesn't mean you should give up. If you have something that your competition didn't solve good (or at all) there is a place for you. Your competency in certain area will help you beat them. Even if you take a small fraction of their pie, probably it should be enough for your lifestyle business.

OTOH, if you are looking for non-saturated market and find it, you can ask yourself is there any money in that market? Is it worthwhile? You can find it is, but do you like that market? Do you know anything about it?

My point here is do what you love and money will come after years of hard work.

[1] http://faso.com/code618/34150/how-my-lifestyle-business-beca...