Whether you are setting up a small business in the real world or doing so online, it is absolutely essential that you start off with a plan. As the saying has it, ‘if you fail to plan, you plan to fail’, which is definitely a saying that accurately applies to starting your own business.
If you are a starting a business online, you have a significant advantage in that all of the information you could ever need is available on the internet, and most of what you need to know is available at no cost.
As you would expect in the planning stage, you need to look at every aspect of your proposed business with a very critical eye because this is certainly no time for ‘rose tinted spectacles’. However much you might love to set up a business that panders to your passions, there is little point in doing so if that business has a very limited chance of achieving success even before you launch it. While you might have a passion for Mongolian nose flute playing, you are (unfortunately for you) in a very small, select group of people who are interested in the same topic, and it is extremely unlikely that you would be able to build a viable business around such a narrowly defined interest.
These are therefore the questions that you must ask as a way of establishing the initial viability of your idea.
Does this business idea work as an online business?
It is a fact that there are some e-commerce business ideas that are just going to work better than others, and if your idea falls into the category of ‘difficult to do profitably’, you might be better coming up with an alternative idea. If the business is apparently not suited to the internet and e-commerce, then you’re better dropping the idea from the beginning.
Think about any artificial limitations that might be applicable to your business as well. For example, if you are considering launching a business to supply heavy plant and machinery, that business immediately has a very limited geographical appeal because you cannot realistically deliver a crane or a dumper truck to the other side of the world at a reasonable cost. Consequently, by choosing this business model, you have immediately removed some of the major advantages of e-commerce, namely its ability to attract customers nationally or internationally and to do so in an economically attractive way.
There are some businesses like running sports clubs or bowling alleys, amusement parks and the like that are never going to work online. While you could take bookings and sell sports and bowling equipment 12 and clothing from an e-commerce web site, the basic idea of running something like this does not work online.
Think about your local electricity company. Although they can accept bill payments online, most of them already have perfectly acceptable home delivery systems in place, so there is no scope for expanding their business via the internet at the moment.
You need to adopt a practical approach to your ideas from the beginning. If whatever you want to do is unlikely to be successful, drop it before you waste any more time and effort.
Study the competition…
Most people who are planning to launch an e-commerce based business probably think that they have come up with a completely original idea, but in truth, it is highly likely that other people have got there before them no matter what your idea is.
However, you should not necessarily view competition as a bad thing, because without competition, you would not be able to establish what works and what doesn’t. The problem with being the first into a particular market, a pioneer, is that you are the person who is going to make all mistakes. On the other hand, if there are other people already on the market, they have made the mistakes for you, so you should be grateful for competition.
Competition also indicates that there is money being made in the business in which you are interested, and that is an extremely important consideration. While you do not want millions of competitors, because that might make entry into the market extremely difficult, if there are other people already doing what you plan to do, then you know that you are on the right lines, as there is money being made.
If you were to open a business in your local shopping mall, you would look at other competitors who are operating in the same local market, but if you want to start an online business you have to look at competition on a much wider scale. There are probably people in your business already operating all over the world, and you need to know what advantages and disadvantages each of those businesses has.
Research and analysis of what other people in your business are doing online is absolutely essential. While it might be a time-consuming process, it is necessary and time that is very well spent.
Imagine for example that you are thinking of starting a weight-loss industry business, so you want to research what other companies in the same sector are doing. You type the name of a well-known weight-loss product like ‘hoodia’ into Google to see how many web pages there are that feature this particular word:
There are 14 million web pages that feature ‘hoodia’, and while many of these will not be pages from companies who are supplying hoodia based products, many pages are. These companies represent direct competition in your market, so find those companies whose names come up most regularly, and study their websites.
Look at the product range that a potential customer can access through their site, the kind of prices they are able to offer, what delivery terms are available and whether they are running any specific promotions.
Take the domain name URL of the top rated companies in your market and search to see what other information is available about those companies. This might help you to find out how they operate, who their target audience is, whether people are happy about dealing with them and the like.
Remember that the internet is a largely democratic place where people can say (or write) pretty much what they want about other net users, so you will find other people commenting and reviewing your competitors, highlighting both the good and the bad.
From this research, you should be able to establish one very important thing.
You already know that if there are competitors in the market, there is money being made, but your research should highlight the weaknesses of many of your potential competitors.
This is crucial because what you should be looking for is a point of advantage or a unique selling point that you can use to differentiate your business from the competition.
As a newcomer to the market, you have to be able to demonstrate to potential customers why dealing with you is a better option than dealing with more established competitors. After all, if there are already e-commerce enabled sites in the market in which you hope to make an impression, those sites already have customers.
Your job is to convince as many of those customers as possible to switch their business to your site, but you have to give them a concrete reason for doing so. Human nature dictates that people do not change unless for a very good reason, so you have to supply that very good reason, which is why you need a unique selling point that no one else in the market is currently offering.
It could be something as simple as free delivery if no one else is already doing this, or even if your competitors are already offering free delivery within 100 km of their geographical location, you might consider extending your free delivery boundary to 200km or even more.
Perhaps you could offer bonus products to customers who spend a certain amount of money, or offer long-standing customer loyalty bonuses.
Although having competition is a good thing, you have to differentiate your business in some way in order to be successful.
The practicalities of running an e-commerce site…
Online businesses operate 24/7, 365 days of the year. You have an immediate advantage over real-world businesses that are only capable of operating their businesses during normal business hours.
However, running a business 24 hours a day every day makes significant demands on your time, and depending upon those demands, you might need to seek assistance to make sure that the ‘always available’ nature of your enterprise doesn’t swamp you.
For example, because your e-commerce site is always available, you may have new customers from the far side of the world that place orders while you are asleep. How are you going to dispatch goods, and how soon after payment is confirmed will those goods go out?
Most importantly, who is going to deal with it?
As your business develops, you would probably want to add products, new offers and the like to your site. Internet technology is always changing, and you might therefore want to include new features on your site from time to time as well.
Who is going to handle all of this?
The natural reaction when you are first starting out is to imagine that you can do everything, but in reality, it is impossible for one person to do everything. You will quickly find that you are buried under administrative tasks that make no money, whereas you should be focusing on sales and marketing.
For this reason, you should consider the requirements of your business, and then look at the practicalities of either finding people who can handle the day-to-day running of the business for you locally, or look at outsourcing through a site like Elance, Get A Freelancer or Guru.com.
The advantage of using outsourced workers is that you only pay them for the work they do and you only need them when there is work to be done. Consequently, using outsourced workers tends to be cheaper and far more flexible than employing your own people.
However, when you find good outsourced workers, try to build a long-term relationship with them, because doing so means that you have people available who understand your business and what is required of them, whenever you need them.
Your audience is who?
You must define your target audience, because knowing whom you are selling to will to a certain extent define how you operate.
For example, if your business is selling school supplies, then your target market is school administrators and boards. Your website would be created to appeal to people like these.
If you manufacture heavy-duty cold weather clothing, then you are going to have a very limited market in the tropics, so this would define what parts of the world you target your marketing at.
If you know who you are selling to, it becomes far easier to do so effectively. Defining your target market is therefore essential.
How will you deal with these people…?
Rather than trying to define a target market by requirements, you can do so by simply deciding that you want to limit the geographical reach of your business. For example, if you are running a US – based business, then you might decide only to deal with US citizens so that you always get paid in dollars.
However, to some extent this defeats the object of setting up an e-commerce site that otherwise has access to a truly global marketplace. It is also a very narrow view – how do you know whether your best customers are likely to be US citizens, when it could be people in the UK, Australia or mainland Europe, for example?
Dealing with customers overseas raises additional questions, such as how are your overseas customers going to pay you, and once they have done so, how are you going to ship their goods to them?
However, these are not major considerations, because there are plenty of solutions available already, and there are more solutions coming to the net every day.
For example, most US banks will accept credit card charges from overseas, and online payment processing companies like Paypal and 2CO operate on a pan-global scale without restrictions.
Furthermore, most e-commerce sites use an online shopping cart to make buying a more convenient experience for customers, generally integrated with a suitable merchant account. This is something that we will look at in a little more detail later, but suffice to say that it is nowadays easy to integrate many of the necessary logistics under one heading, so this should not be a primary concern.
Shipping charges…
Most e-commerce businesses that have a major problem do so because they did not fully appreciate how much of an effect shipping charges can have on their bottom line.
Far too commonly, a customer will find a suitable e-commerce site offering exactly the product they are looking for at a fantastic price, only to discover that the shipping charges quoted are so high that they remove any cost advantage of buying from that particular business. Consequently, they cancel the whole transaction seconds before they are due to make payment, and turn to the Yellow Pages to look for a local dealer instead.
All too often, this happens because online merchants get greedy. They offer attractive discounts on products they list in their online catalogue, only to try to get back some of the money that they are ‘losing’ by offering a discount with an artificially inflated shipping charge.
This is not going to work, because most national delivery services (US Post, The Royal Mail etc) and international courier companies show delivery charges on their websites, and if you can see those charges, so can your customer. It is very easy for them to see whether you are ‘cheating’ on delivery costs, and if you are, that is your business relationship with the customer concerned at an end.
It is in the interests of the long-term future of your business to find the most economical and reliable way of delivering your goods to your customers, and you should never try to grab an extra few cents here and there by inflating delivery charges. Do so and you will lose far more than you could ever gain.
You need a customer service policy…
Before you start, you need to know what level of service you are going to provide to your customers, because providing customer service is resource heavy and labor-intensive.
For instance, many online businesses provide 24-hour customer service ‘chat lines’, and because this is becoming the norm rather than the exception, it is something that your customers might expect. Looking on the bright side, providing on-call 24 hour customer support could be the unique selling point you are looking for, so this may be a silver lining in what might appear to be a cloud on the horizon!
Nevertheless, if you want to provide this level of customer service, you are going to need other people to help you. Although this work can be outsourced, you need to know what you are going to offer and how you are going to handle it before you start.
Do not fall into the trap of underestimating the importance of customer service, because when you make a commitment to a certain level of service, this is exactly what your site visitors, prospects and customers expect.
If you state on your site that you have a 24-hour chatline, then people must be able to get through on that chatline 24 hours a day. If you state that every e-mail will be answered within six hours, then that has to be what happens.
Making a commitment to a certain level of customer service, and then sticking to what you have promised, is crucial, because there is nothing more likely to turn potential customers off than a company that does not supply the level of service that they promise.
Whatever you promise must be fulfilled, and you have to factor the necessary resources to make sure that this happens into your initial plans.
