Most internet home business entrepreneurs fail when they start their internet business because they make one large error.

They decide on a product to sell without finding out if there’s a market of potential customers who want to buy it! That’s the “bass-ackwards” way to go about it.

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.

To avoid this fatal mistake follow these three simple steps.

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

You are far more likely to be successful if you base your internet home business on something you are already knowledgable about.

If you don’t find your internet business idea enjoyable you will not be motivated to stick with it and put in the necessary work needed to make it a success. Before finding your underserved niche make sure to brainstorm your interests and let them be your guide.

You can find unique skills a variety of ways. Knowing how to pass the exam required to be a paramedic is a skill on which an internet business could be started. Think of your own unique experiences. Maybe you collect stamps or sew quilts - these are all examples of unique niche markets.

A list is a great place to get started - write down all of your unique experiences, careers, passions, interests and any life challenge you have overcome.

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 #3: Find your niche

Think small if you want to find big profit when starting your internet home business.

Specialized, underserved niche markets can be a source of large profit streams online.

On the Internet, a niche market is a group of people who are searching to solve a common problem but not finding many (or any) relevant results.

The fact is, most people do not go online to buy at least not right away. They go online looking for information to solve a problem.

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!

But you’ve got to think small. If you start with a large, general market, you’ll likely find it saturated with competition.

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?

You can find out exactly what people are searching for online by using a simple tool, such as BeBiz. Are people searching for your potential product and not finding it? You may have just found your niche!

If you start your internet home business this way, you’ll know there’s a market of eager potential customers out there who need your product even before you’ve spent any time or money creating it! But even when you think you’ve found a niche, you can’t just rush off to create the hot product you think everyone will want to buy. The next step is to validate your market.

Step #3: Validating your market

Validating your market means confirming it has profit potential. In other words, can you actually make money from it?

To validate your market, ask these 4 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.

You will have a much better idea if your market will be likely to buy from you once you know who they are.

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

You want a small pond, but it still needs enough “fish” in there to make it worth your efforts. If you find lots of competitors who are well established, well supplied, and well funded, back away! You should look for a smaller, more precise niche.

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

You need to know if these people actually buy stuff… so it’s a good sign if there’s some competition already selling products to the market. You’ll have a much harder job selling to people if there are too many free products or free sites available.

4. Is your niche willing to spend money on your product in order to solve their problem?

You want a potential market that is so passionate about their interest that they eat, sleep and breath it. They will want ALL the information they can get on the subject.

People who are obsessive about their passions, such as video gamers or stamp collectors make a profitable market!

Take away

You need to follow these 3 steps when starting an internet home business. You will be able to create a business you are passionate about if you find a niche market based on your experiences. You can be confident your internet business will be profitable if you validate your market BEFORE you create a product.

This simple, but effective formula will start you on the path to internet home business success.