If you're interested in building an Internet business, there are plenty of opportunities. But with those opportunities come just as many pitfalls. The high-tech industry experienced these pitfalls firsthand back in the 1990s. When the stock market bubble burst in 2000, it put hundreds, if not thousands, of Internet companies out of business.



The question is, why did those companies fail and what can you learn from them?

Most of those companies failed simply because they thought doing business in the virtual world was different than doing business in the real world. It's not! The same business principles that worked before the Internet came along work just as well on the Web.

My good friend Richard Schmidt, who is a venture capitalist, financial newsletter writer, and former CEO, agrees. He said, "Having been involved in a number of my own businesses, spending years at Fortune 500 companies, and in consulting turnarounds, it became obvious years ago that there are certain ingredients or keys to success in operating a business... Those keys to success are different ways in which you can be available in the best possible way to serve the customer. Yet, in the 1990s, the customer was taking second place -- or worse, last place -- to a lot of the pseudo ideals."

Richard also said you could see the problem simply by walking in the door of most companies. "Casual Fridays turned into sloppy everydays and respect was replaced by self-expression... Somehow every distraction from pets at work to pizza and pasta are there, but something was missing... the business."

As a venture capitalist, Richard reviews a lot of business plans, so he saw firsthand how bad things got. "One business plan I reviewed, which was not atypical, showed a need of $7 million dollars for start-up expenses, with $6.75 million of it going for salaries and perks."

That's not much of a plan -- unless you plan to skip the business and move right into retirement. But I don't know of many venture capitalists willing to fund anyone's retirement but their own.

If you want to try your hand at an Internet business, go for it. Just make sure you've got a plan. It doesn't have to be anything fancy to start out. But you've got to have an idea of what product or service you're going to offer, how you're going to market it, and how you're going to capitalize it.