Starting an Internet Business
Have you ever fancied yourself as an internet entrepreneur. There is a general misconception that building an internet business is a simple case of designing a website and waiting for the money to roll in. The honest fact is:
Building a website is easy, building a successful internet business is far more challenging!
You could be forgiven for thinking that it’s relatively straightforward to build an internet business, there are plenty of high profile success stories involving internet related businesses and there are plenty of people out there who make considerable online incomes. Consumer internet spending has risen to over $45bn, this figure has risen year on year since the internet was founded and everything suggests that online spending will continue to grow for the foreseeable future.
The internet is changing the way we live and as I have mentioned in previous posts it levels the playing field somewhat, giving small businesses the opportunity to compete and win business from major corporations. The question is just how simple is it to get a new internet business off the ground?
The first thing any prospective entrepreneur should do is write a business plan. Ideally your business plan will be a concise, clearly written document outlining your business objectives:
Consider your product, how much is your product going to cost, how much do you intend to sell it for, calculate your profit margin. Estimate your indirect expenses packing and delivery cost, advertising and marketing, light heat and power internet hosting, telephone etc. etc. etc. Will you still make a profit after all these costs are factored in?
Consider your competition and how can you create a competitive edge. How can compete with them in the same market place and how you can be better, cheaper, or provide a value added service that will encourage potential customers to spend their hard earned money with you.
Consider your customers, who are they, where do they live, what age groups do they belong to, what social groups are they likely to be involved in. Once you know who your customers are, consider how you plan to retain your customers and keep them coming back for more.
Consider how you plan to market yourself to your target customer. What forums and websites do they visit, what keywords do they type to find the information they look for.
Consider all the start up costs involved in getting your business started and if required where you think you may be able to secure the funding.
Establishing your market
You must establish that there is a market for your business concept, is there a genuine interest in your product / service. Start-up businesses need to establish a niche or a competitive edge something that defines them from the competition.
Raising finance is particularly difficult given the current economic climate but there are several financing options available to business owners. For many companies, funds may be required from several different sources.
Bank finance by way of a loan or overdraft can ultimately be less expensive than the sale of shares or equity in your company. However, equity investment is probably a better proposition for companies who don’t want to increase borrowing or are unable to provide the necessary security.
With equity investment there are two options “business angels” or venture capitalists. Business angels are ‘high net worth’ individuals who look for high potential, fast gowing businesses who want to raise up to $250, 000. Business angels can also add value with a wealth business advice and a rolodex of useful contacts. Venture capitalists don’t usually get involved until your dealing in figures of over $2,000,000 – they will usually expect to see a return on their investment within a three year period.
There are normally some government backed funding or small business grants that can be applied for. The availability of these funds are continually changing so it may be worth doing some research to see if there are government funding options available to you when you start your business.
A lot of small businesses finance themselves using a mixture of credit card debt and loans from friends and family. In my opinion these are both high-risk strategies, before using either of these options, consider why you have not been able to raise money using more traditional methods. If knowledgeable business financers don’t think your business proposition is viable, why do you? Credit card debt is about as expensive as it gets so before opting for credit cards make sure you have your calculations correct and only use credit cards when you require very short term financing. Accepting money from family and friends can also be very costly but from a personal point-of -view. Before you borrow money from family or friends make sure they know the terms of the loan. Always repay them when you say you’re going to or risk getting a sometime very unwelcome business partner.
Another common business error is to under finance. If you start your business with too little funding you risk running out of cash before your venture gets a change to really take-off.
Website development can be very costly if you don’t know where to look. However, you can pay as little as $150 for a simple ecommerce script. In fact OSCommerce is released under the GNU General Public License, which means it’s completely free. There are also a multitude of website scripts and ‘off the shelf’ products that can give your website a market leading feel without spending a massive amount of your budget. However, a little technical knowledge can go a long way when your running a internet business and if you don’t have the aptitude for technical work, my suggestion is, find someone who has and get them involved either as an employee or partner. You can also find a wealth of knowledge on sites like Digital Point. If your looking for something specific, something that can’t be bought ‘off the shelf’ you could consider having a site developed for you. Take a look at getafreelancer this site has a multitude of highly skilled developers from all over the world at surprisingly reasonable prices.
Don’t forget, your website is your storefront make sure you update your website constantly. Content is key, give your visitors a reason to keep coming back again and again.
The various marketing options open to internet businesses are covered in many other posts that can be found on this website but it’s one area where new internet start-ups often fail. It’s not unusual for webmasters to develop their site and just expect the orders to start streaming in. However, the reality is you could have the best website in the world but without visitors it won’t receive a single order.
There are plenty of paid traffic services but in the early cash-cautious days really try to concentrate on the numerous ways traffic can be generated for free.
Get involved in community sites such as forums, social networking sites and blogs. These are all great ways of introducing yourself to your potential customers without parting with a penny. You may also find that commenting on community sites with a backlink to your website will increase your search engine standings and will thus provide you with more free traffic.
The Customer experience
Make sure your site is fast and easy for customers navigate. Make sure the order process is straight forward, as a site with a complicated sales process is likely to leak customers. Customer information must be kept safe and potential customers should be assured that your site is data secure. Give your customers as many ways to communicate with you as possible and where possible use toll free methods so it does not cost them anything.
Don’t give up your day job
Starting any business takes time, in my opinion this is even more the case with internet businesses as traffic momentum has to be given time to build. So don’t hand your notice in straight away, as there may not be much in the way of income in the early days. Make sure you really like the product or market that you’re trading in. You’re going to be spending a lot of time working with it and if it gets boring it will be difficult to maintain the passion, determination, energy and enthusiasm required to get your business off the ground. It’s also important to be realistic. Contrary to popular belief, success on the internet is not that common and while there are many new start-ups very few make any money. That said, although building a web based business is one of the hardest things you ever do, if you make a success of it, it will be one of the most rewarding.