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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.

Successful entrepreneurs start home businesses by finding under-served niche markets — BEFORE they decide what product or service to sell.

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

Internet home business entrepreneurs are more likely to succeed if they base their business on something they have experience on or expertise in.

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!

Maybe you have kicked a bad habit such as smoking or maybe you know what is required to pass the exam required to become a policeman - these are all unique experiences that can be used to teach others on the internet.

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!

Then go through the list and pinpoint where your particular areas of skills and interest lie. When you’ve got a few different topics, you’ll be ready to do some research into potential businesses.

Step #3: Find your niche

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

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

On the Internet, niche markets are groups of people searching for an answer to a common problem, but aren’t having much luck finding 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.

The basis for your successful internet home business will be when you find the group of people who are looking to solve the same problem without much luck. This will be your “hidden treasure”.

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

To be successful you need to drill down and down further and be patient. Also, don’t overlook any possible avenues!

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.

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 a market

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

Ask yourself these four questions to find out:

1. Is your niche easily defined and reachable? Most potential niches will already have places they meet online such as online groups, forums, discussions boards and special websites - use these places to analyze who your potential customers actually are.

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 big enough to be profitable, but small enough that there aren’t many competitors?

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 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.

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

Final thoughts

It’s essential you follow these three steps when you start an internet home business. If you can find a niche market based on your interests, you’ll be able to create a business you’re passionate about. And if you validate your market before you create a product, you can be confident your business will be profitable.

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

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