Here's an article I wrote for my clients recently about why an online business (in my view) is better to set-up than an offline one. Bit long, but hope some find it useful
Recently, I saw an interesting documentary on the credit crunch that’s really started to bite economic powerhouses such as the U.S. my own U.K. and many European countries among others. It starts with an entrepreneur named Sue who’s locking up her toy shop at the end of the day – for the last time ever. Sue is one of an alarming number of small business owners who are FOLDING due to the credit crunch – it’s bad enough that people are now unable or unwilling to spend money on many things (and unfortunately for Sue, oversized novelty elephants sporting pink sunglasses certainly fall into this category – one of thousands of stock items that remain unsold in Sue’s shop). But the credit crunch has made low cost credit incredibly difficult to get hold of.
Like thousands of other businesses, Sue is unable to get a loan to service her working capital requirements, like paying her staff or the rents during this slowdown.
Sue explains to the camera with a sigh, that in fact she needs to make over $600 a day just to break EVEN – yes, before even a single penny has been made in profit. When asked how much she’s making on average these days, she reveals that she may scrape together $80 or maybe $150 on a holiday. A long haul short of what she needs to keep this business operating on a surplus.
The thing is, this is indicative of what’s happening to MANY small and medium sized companies. Someone has to say it, but the debt bubble that has evaded the pin for decades has now burst in the most explosive way. When cheap credit vanishes in the bricks and mortar world, only strong competitive businesses with underlying profitability and clear unique selling positions survive – because cheap credit can plaster over the cracks in a fundamentally unsound business…but when that credit goes, the structure collapses.
Online, it’s a different story altogether for many internet entrepreneurs. Take for example, Johns Wu, a 22 year old who recently sold his 2 year old finance blog (bankaholic) for a cool $22m – look at the site, it’s really nothing special but the fact that this fellow turned it into a clear, well laid out site that had traffic streams built in, means he ended up with a payday that has allowed him to retire. In fact, the majority of online niches are booming – from travel and finance to internet marketing and more. Because, when you build your site right, and you can find your target customers, an online business can pretty much make money in a variety of ways with minimal capital requirement. It’s an entrepreneur’s paradise.
Now, lets get into the ring and see just why an online business can kick lumps out of an offline one.
1. A Website Or Blog Requires Minimal Start Up Costs – A Bricks & Mortar Business Requires Big Capital Investment Before It’s Made Even A Dollar
OK, if you don’t have the technical aptitude to get a quality site or blog up and running you can still hire a professional to get one developed. But after that, you can professionally host a site with autoresponder for under twenty or so bucks a month. A site also incurs no significant maintenance charges – by contrast, an offline business has immense overheads that the online entrepreneur does not (necessarily) incur – real estate, rents, insurance, repairs, staff costs…the list goes on. The more expenses a business faces, the harder it is to break into profitability and the more likely (especially when the economy faces a downturn) it will fail. That’s another point – when a website fails, the loss is typically minimal (if it's one that has been set-up by a solo entrepreneur). When an offline business fails, the potential loss to the owners can run into the tens or even hundreds of thousands. Online business wins round one then.
2. Online Business Allows Switched On Entrepreneurs To Utilise Technology To Earn From Multiple Sources.
It is difficult for traditional bricks and mortar businesses to form true, mutually beneficial alliances. Take Sue for example – how could she generate additional revenues from people who come into her shop? She really can’t.
In the online world, the site/blog owner can generate income from a variety of sources – they can offer their own product or service, they can affiliate with potentially hundreds (or even thousands) of affiliate programs. They can generate additional income just by referring leads (CPA) to other companies within their industry. Unlike
Sue, they can offer people who come onto their site an option of sending them newsletters if they wish to hear from them again. They can form JV partnerships with authority sites in their niche, and technology means they can offer all sorts of payment structures to make sure it’s a win/win. The possibilities online are endless.
Round 2 goes to online then.
3. Online Is Global – Offline Is (Mainly) Local
My website and blog network is open to anyone in the world, 24/7. There are no opening or closing hours, there are no sassy minimum waged till donkey’s giving out attitude to my valuable customers. Someone from the U.K. or India, or China, or USA (etc) can buy any of my products and services and (in digital cases) download the product right away, without them even having to put a foot outdoors and brave the nasty weather, or without me even knowing about who they are or what they look like. It’s global commerce in the truest of senses. It’s marvellous.
With small offline businesses, this is not so. Generally, an offline shop will operate within a specific geographical boundary. Their clients are typically within that boundary, so a book shop in Potters Bar will sell to the residents of Potters Bar. No one from Trotters Bottom (yes, it’s really a place in England) will go there.
You could argue that it’s possible to start a chain of stores – but unless you have the capital backing of Donald Trump (or someone of his ilk), building a chain of offline businesses is remarkably difficult, and expensive. And woe betide if you grow too fast during the good times…because when the economy slides, you quickly have to slash your overheads by shutting down shops. In my near decade of doing business online,
I have never had to shut down a website or made a loss on one. Not even old Trump can say that about his business record.
That’s three rounds, and it’s a knockout.
Now The Obligatory Disclaimer – It’s Not Always Rosy Online Either
Look, what I’m saying to you is that if you’re at the point of having to decide “online or offline”, it’s an easy decision from my view. But, there are many challenges to meet even when you’re trying to develop an online business.
First, be careful who you take advice from and what you buy. There are sharks out there selling digital snake potions. If you’re new, they’ll eat you alive. There are also clueless people trying to teach things they don’t know (as a famous Politian said, you can put lipstick on a pig, but it’s still just a pig). Because of the vibrant online business conditions, people without any real credentials, ability or substance are coming online to make a fast buck. Don’t fall for everything you see.
Second, choose your niches soundly, after doing your due diligence. Contrary to the hype, developing and marketing a business online requires a fair bit of time and effort. Marketing a good niche requires as much time as a rubbish one, but the end results will be wildly different. So When they try and sell you PLR on headlice remedies, promising that it will make you wealthy…use your loaf and close the browser.
Finally, remember that it takes time, patience and effort to start any business from scratch. Even with the best site or blog, you need to allow yourself a little time to market it and turn it into an authority site that generates traffic on demand. It doesn’t happen overnight, but once you uncover the method that works for you, you can duplicate it – over and again.
Best of luck!