Do the napkin math before you panic
Estimate how many buyers exist who clearly have the problem, and a rough price they would pay each year. Multiply them. If you are bootstrapping and want, say, a hundred thousand dollars a year, you need only a few hundred customers at a typical software price. Suddenly a "tiny" niche of ten thousand reachable buyers looks generous. Run the numbers before you decide the market is too small to bother with.
Niche is an advantage when you are small
A sharp niche is easier to reach, cheaper to market to, and simpler to build for, because everyone wants the same thing. You can speak the buyer's exact language, show up in the three places they all gather, and become the obvious choice fast. Broad ideas force you to compete with everyone and win nobody. The biggest companies often started absurdly narrow and expanded only after they owned the first slice.
What the answer depends on
Whether your niche is too small depends on three things: how many buyers you can actually reach, how acute their pain is, and how much they will pay. A small market of desperate buyers with budget beats a huge market of mildly annoyed people with none. If the pain is sharp and the buyer has money, small is fine. If the pain is mild, even a large market will not save you.
The real risk: a niche with no money or no access
Too niche only bites in two cases. First, the buyers exist but cannot or will not pay enough to sustain a business. Second, they are real but impossible to reach affordably, so customer acquisition eats any margin. Test both early. A few sales conversations will tell you fast whether the budget is there and whether you can get in front of these people without burning your runway.