Most entrepreneurs fail when they start an internet home business because they make one simple — but avoidable — mistake. They don’t find out if there are potential customers for their product before deciding on what to sell.

Before deciding on a product to sell on the internet, successful internet entrepreneurs need to find an underserved niche market.

Then, when they come up with a product or service for that niche, they do lots of market research to make sure they’ve got a winning — and profitable — business idea.

Follow these three steps if you want to avoid this deadly mistake when starting your internet home business.

Step #1: Jot down all of your interests and passions

Entrepreneurs who start home Internet businesses based on their own knowledge, experience, and expertise are far more likely to be successful.

After all, if you’re not passionate about what you’re doing, you simply won’t find it as enjoyable — and you’ll be less motivated to stick with your business and do the work necessary to grow and improve it. So before you even begin to find an untapped niche of hungry customers, you should brainstorm your interests and passions… and let them guide you!

Unique skills and interests can come in a surprising variety of forms. For example, knowing how to pass the exam required to become a firefighter is a skill on which you could base a business. So is quilting, or collecting model trains, or kicking a bad habit like smoking or biting your nails. But a lot of people find it difficult to think of their own unique expertise.

You should sit down and create a list of all of your jobs, hobbies, interests, volunteer work and any challenging situations you have overcome in your life. You will see this is a good place to start…don’t be modest!

Once you have your list narrowed down to a few areas that are of most interest to you, you are ready start your market research.

Step #2: Find your niche

When finding your niche market you should think small if you want to find large profit online.

Smaller, specialized, untapped niche markets can be the source of big revenue streams.

An online niche market is a group of people who are looking to solve a common problem and not finding many or any useful results.

Most people go online to find useful information to help solve a problem, not to buy (at least right away).

And that’s where you come in. Once you’ve found a group of people who are all looking for a solution to the same problem — without much success — you’ll have discovered the “hidden treasure” that will form the basis of your successful internet home business!

If you think small you will avoid finding a market saturated with competition like you would in a large, general market.

To strike gold you have to be patient and not rule out any possible avenues you have brainstormed. You need to keep drilling down to make a small market even smaller.

How do you find these markets?

With a simple keyword research tool like BeBiz you can find out exactly what people are looking for — and failing to find - on the internt, based on the passions and interests you identified in Step One. Then all you have to do is think of a way to sell them what they’re looking for.

Starting your internet home business in this manner will ensure you know there is a market of potential customers out there who want your product…all before you spend any time or money. When you think you have your niche you still need to validate the market before running out and creating the next hot product.

Step #3: Validating your market

You need to confirm your market has profit potential in it at this stage. Can you actually make revenue from it?

To find out, ask yourself these four key questions:

1. Can you easily reach and define the market you are validating? Most potential market groups will have a place they congregate on the internet. Use places such as forums, discussions boards, club sites and online groups to analyze exactly who your potential customer is.

Find out who your potential customer is and you will have a better idea of whether or not they will buy from you.

2. Is the market small enough so there aren’t many competitors, but big enough to be profitable?

If you find there are lots of well established, well funded and well supplied competitors in your market…get out! You want to find a small pond but it needs enough fish to make your efforts profitable. If there are too many competitors keep looking for a more precise and smaller market.

3. Do your potential customers have money… and are they willing to spend it?

It is a good sign if there is already some competition selling products to your maket - this means these people are willing to buy. It will be hard to sell to people in a market where there are already lots of free sites or free products.

4. Are they passionate enough about the problem they’re trying to solve that they’re willing to spend money on your product?

A motivated market eats, sleeps, and breathes their interest… so you want potential customers who are so passionate that they must have all the information related to their subject.

Think about quilters or stamp collectors…their obsessive interest is a large reason those markets are so profitable.

Final thoughts

When starting your internet home business it is essential you follow these three steps. If you find a niche market based on your passions you will be able to create a business you are motivated to make work. If you validate your market before you create a product, you can be confident you internet business will be profitable.

It’s a simple, but effective, formula and it will set you on the road to internet business success.

About the Author:
Derek Gehl, CEO of Internet Marketing Center, helps Internet business owners on how to create incomes online. Get the proven Internet Marketing strategies to quickly start an online business.