Internet

Can people make money on the internet? Part 2

Why make money on the Internet?

It is now a well-known fact (see Graph from the previous page) that only 1.2 per cent of all retail sales are made on the Internet!

Although things may be different now, at the time this figure was obtained a May 1999 report from the Commonwealth Department of Industry Science and Tourism entitled, Electronic Commerce in Australia confirmed the figure, which found of the 1.5 billion electronic transactions made in Australia in 1997, only 500,000 transactions were conducted over the Internet. That means of the $16 trillion or so dollars for all electronic transactions in 1997, the Internet only accounted for about $55 million. A very small sum of money indeed!

With such a pittance of actual online transactions (well, at least prior to July 2000), why the big fuss by the business community to get online so quickly?

Perhaps there is a feeling among some businesses that because one business competitor decides to go online, everyone else thinks they have to do the same as well. A kind of "following the herd" and "what you can do, I can do the same or even better" mentality in the business world.

However, there is another reason. A web site, the means of getting a business online, is literally a complete shopfront. Without having to pay the potentially huge costs of employing a team of salespeople or renting a physical business premises, it is now possible to set up a 7 days-a-week, 24 hours-a-day virtual shopfront on the Internet for little or no cost. As TradeLink states:

"Maintaining a virtual store is far cheaper than stocking a real one, enabling you to work to just in time ordering and avoiding many overheads." (1)

And while your web site is online, you can (with good advertising and a quality product) literally sit back and watch the orders come in on a daily basis!

Web sites are truly the lazyman's way of doing business in the 21st century. With the right products and infrastructure, web sites are literally your license to make money.

To give you an idea of its potential, just imagine you have a product or service that earns you a profit of around $30. While you're asleep or processing the day's orders, you can watch how your profits multiply over time from the number of orders that come in.

Orders per day Daily ($) Weekly ($) Monthly ($) Yearly ($)
1 30 210 840 10,080
2 60 420 1,680 20,160
3 90 630 2,520 30,240
5 150 1,050 4,200 50,400
10 300 2,100 8,400 100,000
15 450 3,150 12,600 151,200

But the key to earning this kind of money involves (i) selling quality (and preferably unique) products in demand by Internet users; (ii) advertising the products (and thus get enough hits to a web site); (iii) making it easy for Internet users to find the products they need (e.g. the less number of clicks on a web site the better); and (iv) having the required infrastructure to deliver the products quickly and on a commercial level (i.e. high volumes).

As Dorien James and Malcolm Wolf writes in the May 2000 edition of Business Review Weekly:

"It is easy to build a World Wide Web site to advertise products and accept credit card numbers. But to become an industrial-strength, high-volume online retailer, a company must have world-class order fulfilment and distribution - one of the biggest challenges for e-tailers." (2)

To help you see the power of the Internet for doing business in a potentially far more cheaper and convenient way than in the traditional buy and sell method, Mark Neely and Sarina Kreitmeier, the authors of Australian Beginner's Guide to Creating Web Sites that Wow!, had this to say:

"Imagine for a moment that you own a clothes store in a busy shopping mall in an inner-city suburb.

In the last few years, your store has endured flat consumer spending and pressures on profit margins. Although you've established market share, your cash flow is often barely enough to cover operating expenses such as inventory, rent, staff and advertising. In short, times are tough.

Now imagine that a complete stranger walks in and claims you can halve your advertising costs, reduce your rent by more than two-thirds, slash operating stock expenses and never pay staff again. You'd think this was impossible.

But this is exactly what many people say the World Wide Web can do - and it has plenty of vendors very excited." (3)

Yes, but will anyone buy anything over the Internet?

People are buying goods and services online as we speak. Although not as great as in the traditional buy-and-sell over-the-counter at a local corner store, it is happening as we speak.

For example, in Australia alone, of the three million or so individuals who have used the Internet in 1999, about 210,000 (or 7 per cent) made purchases over the Internet. Of these, about 85 per cent spent their money overseas and 82 per cent paid directly over the Internet (i.e. through online credit card facilities rather than sending money orders to an address marked on a web site). (4)

Furthermore, the initially poor online retail sales between 2000 and 2001 is now being quickly revamped by marketing experts such as Jupiter Communications (or perhaps this is just another marketing drive to get people on the Internet). As more and more businesses make their move online, Jupiter Communications claims the value of Internet retail sales (excluding car sales) is expected to reach $US37.5 billion worldwide by 2002 and will have originated from affiliate sites. (5)

So yes it is true, people are buying online. And it can only get better as time passes with the ABS now claiming up to 10 per cent of Australians have purchased products over the Internet in 2000. You only need:

  • to find a quality and unique (i.e. not readily available from the local shops) product that people will want to purchase online;
  • to promote and advertise the product in a simple and easy way so that people are aware of it and can see its benefits;
  • to make the financial transaction easy and safe for your customers; and
  • to deliver the product to the customer's door in the quickest and easiest way possible,

for an e-business to be truly successful.

The only crucial things to remember are (i) to keep it unique and useful; (ii) to keep it simple; (iii) to keep it safe and quick, and (iv) to get noticed, and more and more people will feel comfortable in using the new technological medium of the 21st century to buy your product and in general as a convenient way of doing shopping.

And now how many people have purchased products and services over the Internet?

According to the latest research as of January 2001, it is claimed that 63 per cent of Australian Internet users have already purchased a product online. Only the US leads the way with a figure of 74 per cent.

About the only thing stopping people from purchasing products online nowadays is if the transaction and personal details sent to an e-business are not secure. It seems people keep away from sites that are not secure.

How important is setting up the infrastructure for delivering products or services to customers over the Internet?

Very important. The term now being used to describe the efficiency and effectiveness of the distribution chain from the manufacturer to the customer is called e-supply-chain management.

The e-supply-chain may be nothing more than managing electronic documents among organisations, or using email, or merely taking orders from customers online. Thus each business will have different uses for the Internet. However, how efficient is this e-supply-chain will determine precisely how successful an e-business or e-organisation becomes.

To understand how important this is, ask yourself this: "How long are you willing to wait for your product or service to arrive over the Internet?"

If you represent the average customer, you will probably say the products or service should be delivered as quickly as possible, perhaps within 7 days! So is your e-supply-chain good enough to handle that kind of turn-around time? If it isn't, you may lose customers just as quickly as you can attract them through good advertising and promotion.

However, if your e-supply-chain is good, you will soon be, or should already be, benefiting from reduced overall business costs, greater customer satisfaction and, in the end, higher profits.

How do I make my e-supply-chain work for me?

For any business to have a chance of being successful online over the long-term, the first thing you have to do is make sure your product(s) and/or service is ready for your customers. Certainly the last thing you want to be doing in your business is to continue fiddling around with finalising your product, deciding who will supply your materials or labour, and/or finding out how to distribute the final product or service after a customer has made a purchase.

If you are not tied up to immediate profits, then don't be afraid to keep your business aside as you develop a quality product or service for customers. It is better to sell a good quality product rather than a mediocre one. As a reporter of The Australian has noted regarding the excellent conduct of one e-commerce company called WebMatchit Interactive Marketing:

"E-COMMERCE group WebMatchit Interactive Marketing has shelved listing on the Australian Stock Exchange until early next year.

It says it is electing to fine-tune the business before exposing it to the vagaries of the sharemarket.

Managing director David Delaney said yesterday the company would focus on its e-procurement business and developing its products further before listing." (6)

The next important step is to simplify and standardise your business activities by looking at such things as the type of software (e.g. database system, operating system etc) you will use to record all your financial transactions and customer details, to the type of payment model you will use to make the transaction. When simplifying and standardising whatever you are doing, make sure the systems you put in place are common enough and reliable for people to be using.

As Neil McMurchy, research director for enterprise applications at Gartner Group, remarked:

"It is not uncommon to face connectivity, lack of standards and lack of interoperability. There are still issues of standardisation of formats - for example, invoicing and payment formats due to different data fields and formats used by different partners." (7)

AXA Australia's Chief Information Officer (CIO), Mr Ian Campbell, said:

"The rules of the game are we have a standard operating environment, because it makes sense to do that from a cost/complexity position." (8)

And in a Toshiba advertisement published on 23 June 2000 of Business Review Weekly, page 27:

"Standardisation brings down training, service and support costs."

Standardising processes is now becoming so important that it requires businesses to be cooperative with customers and other businesses in order to see what's in common between all things rather than being competitive all the time. There has to be a careful balance between competition and cooperation, doing one's own thing and working with others, for maximum effectiveness and minimal cost for all concerned.

Adobe Systems Inc. has understood this idea very well. After cooperating with its customers by listening to their needs and concerns, Adobe has managed to standardise the interface of all Adobe software products, making it relatively easy to use and helping Adobe make a handsome profit over the long term. This concern from consumers has also sunk into Microsoft management with an excellent improvement in the latest version of Microsoft Office 2001.

This big management word for the day we call standardising came about because there was a need to balance the many independent processes that was going on even within one company which can have many different departmental sections. This independence was necessary to help adapt to change quickly and to find things that did a specific type of work in an efficient manner.

However, the technology of the internet has made it abundantly clear the one simple fact of life: everything is interrelated and interconnected. So when it came to communicating with others and integrating all these independent decision-making processes, people realised it is necessary to standardise certain functions.

There are many different words used to describe this standardisation technique. Compliance, toeing the corporate line, centralisation and cooperation are all examples of the same term.

Whatever terms we use to describe the standardising of various processes, it must always be balanced with the opposite approach of independence and decentralised decision-making for the maximum success of any e-commerce business.

For example, you must decide on a range of different payment models that best suits your business and your customers. As Philip Gomm, director for Financial Services Consulting Group at PricewaterhouseCoopers, said:

"There are different payment models offered by different banks with differing banking fees. Enterprises should make a forecast of transactions before negotiating with banking partners." (9)

Once a standardized, simplified, reliable and flexible "long-term" new system is in place to meet all your current and future needs in the business, as with any new way of doing things, you will then have to get the trust of all your suppliers, your partners, and your customer to use the system. People do not like to change the way they do things unless they can clearly see something familiar (or a sense of stability) between the old and new system as well as all the benefits the new system will bring to everyone. As McMurchy noted:

"There has to be something in it for everyone, whether or not they are in a position of market dominance." (10)

Technological change, or any change for that matter, requires people change. So start communicating and developing a clear vision to help people adapt to a quality and stable new system. Get people to ask lots of questions so they can understand the big picture and not just the specifics of how the new system works.

And through all of that communication, always make sure people can properly understand how the e-supply-chain works and how it is no different from the normal supply-chain. The only difference are the tools people will use, which will be more efficient and effective for everyone.

In essence, people need a stable reference frame and to become aware of all the major benefits if people are to do anything different.

What happens after that? Do I need to do anything else to my e-business?

If your e-supply-chain, your products and services, and the rest of your system is well-designed and planned out, you shouldn't have to do very much after that, other than refining the techniques you employ in your business.

Remember, no method or tools you will ever use in your business will be perfect. Your business will need some fine tuning over time. As Seelan Nayagam, IBM's supply-chain management executive, once remarked:

"We are constantly improving our business processes, including our supply-chain..." (11)

What kind of products can I sell over the Internet?

If you are ready to tackle the e-business challenge, then the kinds of products or services you can sell are almost endless.

Ideally, what you are looking for is any easy-to-distribute, unique or different (i.e. not available elsewhere in the world), useful and easily mass-produced product or service to form the flagship of your e-business because this is the sort of product or service that will do well over the Internet.

For example, the following products are all good examples of online products:

  • computer software and hardware
  • electronic (i.e. CDs) and hardcopy books and magazines
  • music
  • videos
  • flowers
  • greeting cards
  • small consumer electrical goods
  • tickets to concerts and plays
  • clothing
  • jewellery
  • gifts
  • groceries
  • sporting goods
  • toys
  • wines.

Then there are a host of information-based services that do well online such as advertising and financial, as well as selling specific research material like bulk email addresses (or perhaps previously untold big secrets that the US Government doesn't want you to know about).

As Alex Kiam writes in his popular publication, Australian Beginner's Guide to Making Money on the Internet:

"An Internet presence lends itself especially to unique products that are hard to get (or simply don't exist) elsewhere. It's also perfect for retailers offering goods that don't need to be used immediately (as buyers generally need to wait for delivery), as well as goods that don't need to be handled or tried on before purchase." (12)

What about making money from subscriptions and advertising?

This is another legitimate and effective way to make money on the Internet.

A subscription is the process of collecting money from interested customers who want access to all the information or products you hold on your password-protected web site. The advantage of this approach is that you don't have to sit down and calculate the cost for every piece of information or product you want to sell. Subscriptions are best employed for web sites that have a large amount of very low-cost information or products.

For example, a web site selling over 5,000 images from professional photographers around the world would make it impractical to sell them one-by-one as individual products having a different price tag for each one. Instead, the whole site is password-protected and customers pay a monthly or yearly fee to give them access to all the photographs at any time.

As for making money from advertising, this works well so long as your site is already a popular place to visit and advertisers can see the benefit of advertising on the web site.

This latter approach has been used extensively by people like Yahoo.com, Geocities.com and some of the web sites that provide free popular MP3 music such as Qtrax.com.au.

How do I choose a suitable product or service for selling on the Internet?

Most business entrepreneurs will usually listen to their customers' needs first and then develop or find a product that meets those needs rather than choosing any kind of product and see what happens when they try to sell it.

You don't always have to go out and talk to customers to determine a good product. If you can think of a very common and useful product and make it better and unique, there is an excellent chance of selling it well in the marketplace with the help of good promotion and advertising.

The choice is yours to make.

What about those money-making schemes on the Internet?

If you are serious about making money on the Internet, we recommend that you make your own popular and unique product for selling online rather than working for someone else on a money-making scheme such as the pay-per-click banners, or following the rest of the herd in areas like domain name selling.

For example, with the domain name selling approach, you have to choose a very good name to have any chance of earning some serious money. Unfortunately, nowadays, you would be hard pressed to find a name that people would want. In the early days, if you chose a name like www.business.com to cybersquat for yourself, you could have earned US$7.5 million according to official reports when LA-based eCompanies purchased the domain name from an undisclosed individual. Now, people are struggling to make US$10 for a good domain name, even with the help of online auctions like eBay to sell the name to people around the world.

As for the pay-per-click banners approach with their one or two US cents per click money-making scheme, you are guaranteed of some money so long as visitors to your site notice the banners and do something to click on them. But exactly how much money will you earn? Apparently very little. The crux of this scheme involves attracting a lot of people to your web site in order for them to notice and click on your banner(s). In other words, you still have to do a lot of work in promoting your web site, not to mention the importance of making your web site a good one for attracting your visitors. Unfortunately, to make any meaningful amounts of money from the scheme, you have got to get at least 10,000 people to click on the banner(s) to earn roughly US$100. Unless your web site is a www.microsoft.com, you would be lucky to earn enough to pay for your meal at the end of the day.

But I don't have a unique product to sell online!

Well yes, that can be a bit of a problem especially if you have a lot of competitors online selling the same thing as you do.

If you think your product will still sell well but need to convince your customers to buy from you and nowhere else, then your best weapons to win the hearts and minds of your customers are to advertise, make your web site look good, have excellent content, is easy to find your products quickly on your web site, and is simple to perform the transaction online and delivery the products.

There is also one other useful thing you can do in this situation: try to provide full information about your products. In other words, the more information you can give about your products, the more likely the customer can decide on-the-spot whether or not to purchase the products from your web site.

This is especially true today for online international booksellers and publishers who are competing with traditional bookstores and local publishers. As managing director of Cooksweb Ltd, Natalie Miller, said:

"A customer handling a book in a bricks & mortar store prior to purchase assimilates a huge amount of information about a volume. We need to provide this data in the virtual world...

'We are more likely to sell the books from publishers who have provided bibliographic data in full." (13)

When we mean full information, this should also include an image of what the product looks like. As Bibliographic Manager at Waterstone's, Gabrielle Wallington, said:

"They say you can't judge a book by its cover, but the advent of e-commerce has changed all that. Book covers are by far the easiest way of conveying what a book is about, especially in a virtual book store. We have found that titles presented with a jacket image sell much better than those without." (14)

Or consider providing a sample of the product online. For example, book publishers such as Penguin have gone as far as to place sample chapters of their new titles online in an effort to entice readers to purchase products from the company.

Otherwise you must do something to make your products stand out from the crowd. Perhaps you need to consider pricing your products such that it is considerably cheaper to buy them from you online than from another competitor. It is really up to you to decide what and how you should sell your products.

Why can't I sell my products over the Internet straight away?

Having a good Internet-ready product or service, an excellent web page, and a world-class e-supply-chain are certainly important factors for a successful e-business. Now the final hurdle many people must face is selling it successfully. This means you have to advertise and promote your web site (i.e. your products and services) well. As the May 2000 edition of the UK magazine entitled, .net, states on page 11:

"Dot.com companies are pouring millions of pounds into marketing and advertising their products. As the number of Internet users increases, so too do the number of ISPs, portals, e-commerce sites and on-line businesses. Now the battle is on and the most important criteria for success is to get noticed. Increasingly, these companies are turning to advertising mediums other than the Internet to get their message across."

As we speak, many of the bigger online companies are starting to spend big bucks on advertising and promotion as news of increased numbers of Internet users hit the business world. It is possible that if this rigorous commercial approach to the Internet continues over the next five to ten years, we could see the demise of many of the smaller entrepreneurs trying to make it big on the Internet. Unless smaller sites can show better quality information and/or more unique products and services, big companies may decide to duplicate and/or buy out many smaller sites in the aim of grabbing a bigger share of the profits.

The next section will explain some of the methods of advertising and promoting your web site and all your products and services.

NOTE: We strongly recommend going for those advertising services where the user is interested in your products. For example, Google.com allows sellers to have their web site address and a small caption of the product to appear when a user specifically searches for a product just like the sellers. If the user is not searching for a product similar to and exactly like your own, your advert will not appear. So you'll know the people who will notice your web site are the ones who will be interested. Furthermore, you don't have to pay for the advertising until the user chooses to click on your web address.

But I still can't sell my products online even after promoting and advertising them?

It is either that people don't find a use for your products or you haven't advertise to the right group of people, or the Internet may not be a suitable medium for selling what you've got, especially if you cannot provide a safe and secure means for people to make a financial transaction or whatever.

Why not try eBay.com as a test-ground to see how your products will fair in the real world? For example, it costs virtually nothing to sell one or a few products (not thousands or millions). Just state a reasonable starting price (nothing too expensive). Just enough to cover your costs and perhaps make a small profit (we recommend no more than a 33 per cent markup on the cost price). Then, with the right words to sell the features and benefits of your product, let users decide to find the product themselves. If they do find your product, then you will know this is what the users are looking for. Now sit back and wait as users decide whether to bid for your product or not. If they bid for your product, you can see what price people are prepared to buy it.

Give your product listing on eBay a good 7 days to get enough exposure. Are people interested in your product? If so, you may wish to consider setting up a store on eBay to sell more of your product?

Remember, even the most successful e-commerce business can find it particularly tough selling products online. It has been estimated by some experts for some businesses (e.g. online florists) that it can take up to 100,000 hits to a web site to achieve around 1,000 orders for a product. That's around 1 per cent of all hits. It is a very small number. So you have to make sure your products are good and very useful and relevant to people today, apply good marketing and advertising, and you are persistent in sticking around long enough until enough people are aware of what you have to offer.

Source: A Net-Zero poll conducted in the year 2000 showing the concerns people have in using the Internet for shopping. Figures are approximate and represent percentage of US population (Mason 2000, p.28.).

Maximise profit by minimising the costs to setup and operate your online business

We have concentrated our discussion on the product or service and making sure it is unique, preferably real, useful and relevant to your clients when creating your online profits. But there is another way to increase profits: reduce your business costs!

One of the biggest problems to face online businesses after the big e-bust or crash of a number of high-profile "dotcom" companies in May 2000 was how many new or unfamiliar "online-only" e-businesses collapsed, and those that were familiar to consumers had overspent or relied too heavily on the Internet for all of their business dealings with customers.

Firstly, many new online businesses thought it was not necessary to have established a solid client base through traditional avenues because all they needed to do was advertise on the Internet.

Secondly, online businesses took on too many shareholders (and other investors) who, after a while, demanded a profit (or a return for their investment).

Thirdly, the purpose for why the businesses had to be online and whether enough customers were interested in what they had to offer was not particularly clear among the managers of those businesses. In fact, many collapsed online businesses had apparently little, if any, solid "in-the-hand" and ready-to-purchase products and/or services considered useful to enough customers. As the December 2001 issue of the leading Australian Internet magazine Internet.au said and as Sally Richards, the author of .com Success: Surviving the Fallout and Consolidation, would agree:

"In the post crash world, you need not only a good idea, but a sound business approach, and a deep understanding of the industry segment in which you've set up shop. And even then, success is not sure thing." (15)

Fourthly, online businesses in those days tended to employ far too many people to maintain the business and/or produce/deliver the products or services to the customers and so putting a tremendous burden on the overall business costs.

And finally, online businesses were relying too heavily on the Internet to promote their business. While it may have been hellishly effective for attracting some investors who were taken in by what they saw on web sites, it was certainly not the most effective way to attract enough customers when selling the actual products and services online. The businesses should have employed other advertising avenues like newspapers and radio and should have established "bricks-and-mortar" shops in the city to help support the business properly.

An investigation into the stockmarket crash of a number of high-profile "dotcom" companies has revealed some interesting findings. Perhaps the most important reason for the sudden sell-off jitters among investors in Internet stocks was due primarily to the way online businesses were operating in an electronic environment that was not quite ready to support the same kind of big-thinking approach many of the big-name and well-established traditional businesses enjoy today.

Here are some interesting things people have learnt after the "dotcom" crash of 2000:

  • Early startup.com (or pure Internet) businesses run by mostly men tend to start quickly and gather lots of money from investors before getting their products finalised and ready for sale.
  • Not enough people were aware of or were using the Internet around 1999-2000, let alone those who felt comfortable making a transaction online. So Internet businesses often had trouble starting up and selling products and services on the Internet.
  • The people running these businesses often had grand figures running in their heads of the total value of the Internet market thinking this will guarantee them of a successful business. But, in truth, they have no experience or knowledge of exactly how much the business is actually worth on paper when selling the products or services. It doesn't matter how big the market is and how much it is worth. It is more important to know whether you can actually make money in your Internet business rather than imagining it will be worth a certain amount of money in x amount of years from now.
  • Many Internet business people thought the value of a business and how successful it was going to be is determined by the amount of money investors are prepared to put into the business. In reality, these people didn't realise how easy it is for the investor's money to disappear. The true value of a business is in knowing right now how many products and services have been sold and how this compares with previous years.
  • When running a business, make sure the business people and the investors are pragmatic enough to look more closely at the actual cash flow and profits made from selling the products and services online to determine the true worth of the business.
  • Early Internet business people of 1999-2000 usually thought they had the right to do whatever they like without thinking about it and therefore expected any business to be successful as soon as it goes online. In truth, more realistic projected cash flows and profits and solid marketing research of actual customers on the Internet was needed.
  • These Internet business people, predictably men, like to choose famous physical locations to establish their online business such as Silicon Valley in California, USA, or the very centre of New York. What many people didn't realise is that this turned out to be a very expensive exercise, especially before the products and services were sold. You must have a large number of products and services sold first before considering such a move and even then it must be justified why such a move is necessary.
  • What many Internet business people often failed to realise is that with an online business, you don't have to be centralised in a city or technology park area. You can start an Internet business from the South Pole if you like and it won't matter one iota to your customers where you are located. What matters more is being able to deliver the products to customers anywhere in the world in the quickest way possible.
  • To sell Internet products and services to government or local businesses, there may be a necessity to have the Internet business located near government departments and other businesses to gain the trust of this group of often "hard-nosed" and very fussy customers. But if the products or services are more suited to the consumer market, it doesn't matter where you are located or what you sell (so long as it is useful and of a high quality). The customers are more interested in getting the products and services quickly.
  • Buying and wearing business suits may be a mandatory business expense when quickly establishing a small but lucrative client base with government or local businesses. However, customers in the consumer market usually don't give a hoot what you wear. What matters most is knowing there is a good product or service they can buy and enjoy quickly.
  • Internet business people of 1999 and 2000 tend to start big and think big. These people would often talk about multi-million dollar deals in the pipeline and an Internet business worth billions of dollars after say 5 years or less. However, you should be modest and start small. Then build it up from there. At every step of the way, try to reduce unnecessary costs so you can make it easier to establish and run the business.
  • High startup and running costs were considered a major issue for early dotcom businesses in 1999 and 2000. For example, it was not surprising to find these businesses employing too many people to run the show. And the more equipment these people needed to do their jobs, the more expensive it got to start-up and run the businesses.
  • When there is a financial strain to startup and run the Internet businesses because of extra costs and expenses, many Internet business people were forced to attract investors to the business. In 1999 and early 2000, there were enough investors willing to give these Internet businesses an opportunity to strut their stuff on the market. But a point came when investors began to ask questions about what they were getting in return for their money. Eventually enough investors saw the Internet businesses were too expensive to run and not enough products and services were sold within a reasonable time frame. So the investors pulled out their money from the new economy and, like a herd of sheep, other investors did the same.
  • Nowadays, not everyone is willing to give money to any business, let alone an Internet business unless it is of the size of Microsoft and you have a very good business plan. For most Internet businesses, it is better to keep it simple, start small, and have the absolute minimum needed to run the business. Have only the essential people needed to run the business. Ideally, the person who owns the business should be the only one running it. In fact, if you can do it all yourself, there is a kind of immunity to things like market crashes and investors suddenly taking out the money from your business.
  • When the business is well-established and the products and services are selling well, consider employing a few people. But certainly not while the business is starting up and especially if you are trying to sell products and services to customers in the consumer market.
  • Be careful with people in your personal life who may impinge on your ability to make money in the Internet business. Don't create unrealistic expectations in others of what you can achieve in your business. It is better to build up slowly and quietly in your own time. If necessary, have a normal job and do the business on the side. If someone close to you is talking about wanting to have a new house, have children etc, this must be dealt with quickly (and gently of course) before starting the business.
  • Get the product ready before running the business. You should not be doing substantial building and development of the products and services while you are getting finances for your business. The products should be substantially finished and able to do the things customers want.
  • For an Internet business to be successful, it often requires the people running it to know something about technology and the Internet. In fact, you should be an engineer of web technologies, product development, as well as the manager and salesperson.
  • When running a business with people in it, always look after the relationships. Business is second after relationships. Relationships are with customers, employees and business partners.

But it is the business cost that is often the real killer. Many businesses have to consider this business cost issue just as much as choosing the right product or service and finding ways to maximise sales when going online. Otherwise the business will fail.

To lower business costs, find ways to minimise the annual fee for setting up an online web site with credit card processing facilities; to lower the monthly fee for accessing your web site whenever you need to update information; to have fewer staff to manage the day-to-day running of the business and to create the information in-house as a product or service for customers (if this is your kind of business); to have fewer shareholders demanding a quick profit from the business; and to outsource part of the work of the business to other specialised businesses from time-to-time whenever there is a sudden extra demand by customers to acquire a product or there is a need for specialised help.

And if you are really clever, you should be able to have almost no online business costs to worry about other than the occasional advertisements to help highlight any new products you may have and the costs in processing credit card details on a per transaction basis whenever you make a sale to customers.

The essential tools to running an online business

Here are the 12 essential tools and knowledge you will need to run an online business successfully:

  1. Find yourself a web page building software tool.

    Remember, there are lots of freeware web page building and editing tools to choose from. Need inspiration? Try Nvu.

  2. Find your profitable niche market.

    Want to know who your market is and what they're looking for? Visit Yahoo Search Marketing's Keyword Tool and Wordtracker for this kind of valuable information.

  3. Get your products ready

    Have you chosen on a product? Is it something you must build or make? Then get cracking. Get the product ready, because as soon as customers start purchasing your products, you need to deliver the products virtually immediately (and it helps if you can automate as much of this delivery process as you can).

  4. Let your customers know about your products

    Now comes the hard sell. Fortunately, it isn't hard anymore if you know where to sell. Want to move merchandise on eBay, read up on how to become a seller via http://www.ebay.com/. Need your web pages to be online for customers to see? Try putting your web pages on Google pages. The big advantage here is that Google will index your web pages fast and make the results available on its search engine. And since the Google search engine dominates the internet searching scene by 49 per cent compared to Yahoo 22 per cent and MSN 11 per cent, you would do well to create your pages here. Want selling on-demand merchandise? Try sites such as Cafe Press.

  5. Create an affiliate program

    Need to sell more? How about setting up an affiliate program. This is nothing more than recruiting affiliates (i.e. people) for selling your product. The more they sell for you, the more money they can earn from the percentage of the profits you make. To keep track of your affiliates, try AssocTRAC.

  6. Send emails to potential customers

    Another way to sell your products is to send emails to millions of email addresses. However, we recommend you get a tailored-made selection of email addresses to better suit your product and type of market you are looking for. Also, because many email software can filter SPAM, you may have trouble getting through to your customers. If you choose this method, make sure the emails you send satisfy the CAN-SPAM Act. Basically, the law states you should have as a minimum an "unsubscribe" link in the body of each email you send out. Also, consider carefully how you write your email. It needs to be particularly appealing and valuable to your customers if you want them to read it and hopefully act on it.

  7. Advertise!

    There is no better way to get your products known to your customers than to advertise. In the past, you could advertise by using well-chosen meta keyword tags and try to notify a heap of search engine sites about your products through your web pages. Now, the choice is simpler. There are really only three main choices: Google, Yahoo and MSN. And these search engines can provide additional advertising options to get your products out there. For example, paying a small fee for every click a user makes to get to your web site can help search engines drive traffic to your web site. This is known as pay-per-click advertising. Google is famous for this. Yahoo and MSN have their own versions on the same theme. Actually, MSN's recent introduction to this form of advertising means it is competing with the rest of them. So check MSN out. We hear it has the only PPC engine to offer keyword-based demographic targeting. Remember to set a limit on how much you are prepared to spend on pay-per-click advertising so you won't break the bank.

  8. e-zine articles to drive traffic to your web site

    Have you thought of driving traffic to your web site by writing a short article relating to your industry and post them on e-zine article directories. Make sure you are not actually advertising products. Just give people information to help them see the value of visiting your web site. Once you have them hooked, you can advertise to your hearts content at your web site. Make sure you include a tagline at the bottom of each article you write.

  9. Use sounds and movies to get the message across

    The internet has come a long way since the days you wrote a piece of text to someone. Together with the fast broadband network, there is no excuse not to use sounds and videos to help promote and sell your products. To keep it quick and zippy, make sure you use appropriate compression technology that doesn't sacrifice quality. For example, use MPEG4 for video and use Macromedia Flash for highly compact moving illustrations. Add a little sound (WAV is fine). But make sure the sounds and videos are short and direct. And use it to give greater credibility to your web site.

  10. Try blogging on your web site

    If your products are good, why not try establishing a discussion board, informal web forums, or simply a place for people to write their own views about your products online for all to see. This is called blogging. Good products will often receive good positive remarks from people which in the end will help to sell more products. Need help to establish a blogger on your web site? Try http://www.blogger.com/.

  11. Podcasting

    Another recent invention is the podcast. This is a way of delivering your message to interested customers subscribed to RSS "feed" via the delivery of audio files (in MP3). You pack the message in the audio file and the customers receive a feed every now and then from the RSS "feed" system. There is no need for customers to visit your web site with the help of a podcast!

  12. Testimonials

    Finally, every good product you sell should have testimonials from customers who use it and enjoy it. This is still the best way to get your message across.