One of the first things you will have to decide when setting up an Internet business is whether you want to sell a product or a service, both of which have their advantages and disadvantages.

Products:

• Advantage: unlimited income potential because you are not constrained by time, the way you are with a service (the more product you sell the more income you make - especially when you are automated).
• Disadvantage: requires stocking and shipping (or drop-shipping from a supplier).
• Disadvantage: generally requires you filling large amounts of orders to make a reasonable living, unless you have a product with a very high profit margin.

Services:

• Advantage: it is easier to make a profit quickly because the entire price of a service is paid to you (except for any overhead).
• Advantage: services can generate a great residual income because the client may want to hire your services again and again.
• Disadvantage: you are limited to a modest income because you can provide only so many services each day (unless you hire employees to perform services for clients).

In my opinion, selling a product online has, by far seen the biggest profit potential in the long run. Once you get a successful product, you can automate the system and move on to new products that will generate multiple streams of income.

If you need immediate cash flow, providing a service is the fastest way to produce instant income... but it will never pay off as big, in the long run, as selling a product with a high profit margin.

If you sell a service, think about how you can transform it into a product. One of the best examples I can think of is regarding the people who submit websites to search engines. Because the competition got so fierce and their business began to suffer, some wrote and sold reports revealing how search engines work and tricks for getting sites listed higher etc. The reports were priced at $20 -$100, and the entrepreneurs in our example found new markets to tap.