Once you've identified your best target market, you have to identify the products you can offer the people in that group. (If, for example, you've picked fellow stamp collectors as your niche group, you could possibly offer them information products such as books, e-books, video courses and so on. Or you could offer physical products such as themed albums/album pages/binders or giftware based on stamps, like mugs or mouse pads printed with stamp themes. In short, items one individual can produce.)
If you've already got an idea of a product you can offer to your target group, you still must consider your resources and know how you'll actually be able to make the product. Whatever niche you are in and whatever product you know enough about to design and produce, you'll probably choose one or more of the following methods:
1: Design and/or make it yourself from scratch.
If you are producing information products, you'll usually get the best results by writing your own content. However, even though the point of developing your own information products is having the skills to produce all by yourself, you may be an outstanding expert but not very good at writing. In that case, you can get a ghost writer or a writing partner -- you'll provide the content expertise and the writer will provide the structure and wording.
If you are providing a non-informational physical product, you need the know-how, know-where and know-what to get the materials, the experience of having made the item and the ability to produce it and reproduce it in a timely and consistent manner.
You also need the capital to buy the materials to make your product and to support yourself until you have sufficient sales to cover production costs and provide income. That's why most people who choose this method have day jobs or a supportive partner.
2: Assemble it from components.
Hobbyists turned entrepreneurs often find this the best way to go. Often it's less expensive (and almost always less time-consuming) than making a product from scratch.
There are an amazing number of products you can make by this method. Let me just give you examples of two that you've undoubtably seen in practice and maybe done yourself: furniture and cars. Few people haven't seen a "replicar" made from a kit. And hundreds of thousands of folks have assembled furniture items like computer stands and bookcases.
One of my friends started a profitable business by assembling unfinished wood furniture and doing the fine finishing herself. She did all kinds of finishes from the popular cheerywood look through a traditional tole painted item to the difficult "japanning." She even developed her own version of découpage for furniture finishes.
3. Design it yourself but have others make it for you.
If you have a great idea and the ability to create a design, pattern, model or prototype, you have a variety of choices. You simply have to research the costs of production and the terms/conditions of the producers.
There are manufacturers who will produce your product to your specifications in small lots, making a large initial investment and the holding of large inventories unnecessary.
There are trained and talented craftspeople who can produce your item in their homes or small workshops on demand. Or you can use more than one person to make components of your product, which you later assemble and finish yourself.
There are "on demand" printers that will publish your information products (books, e-books, CD's, Videos, etc.) or print your artistic images on a wide variety of products. Some of these product creators will provide an online shop for you, advertise your designs to their visitors, take the orders, do the shipping and send you a check for your net profit. (You've heard of many of these folks, of course. If you want to sell your photographs and artwork, you can't have missed vendors like CafePress, Zazzle and Spreadshirt.) There's a whole slew of similar vendors, but few allow you to create your own shop with them. With most, you'll have to take care of collecting enough money from the customers to cover the costs of the printing and shipping as well as make a profit for yourself. And they won't refer any customers to you. Not to worry, though: even with CafePress and the others that do provide some referrals, you really have to do your own promotion and supply the largest part of your customers.
With the advent of "3d printing," you can also design products like jewelry and small decorative items that are "printed" in layers to make actual three dimensional objects. If you haven't yet seen this in action, you should "Google®" "3d printing." But remember, no matter how fascinating it is, you need products that are made for your target market, not just cool items.
If you've done your homework well and know your target market, you'll have a good idea of what products fit that group. If you choose a product from your "possibles" list that you can produce cost-effectively and within your financial means with one of the methods above and ship it at a price your market deems fair, you are well on your way to profit.