ONLINE BUSINESS

Congratulations! After you make the emotional commitment to get started, you have to shift gears and concentrate on the next set of actions that will make your Internet business a reality. From evaluating the potential success of your idea to identifying who will buy your products,
you gain in this post the tools to help get your idea off the ground.

In the process, you find out what it means to think in terms of operating a business online. In this post, i get you to think like a netrepreneur and start your business on the right track.

Thinking Like a Netrepreneur
Using the Internet to conduct business is similar in many ways to operating a traditional company. Profitability (or how much money you make after subtracting your expenses), taxes, and customer feedback are examples of factors that affect your business whether it’s online or off. Some exceptions, however, set apart an online business. Even the most experienced entrepreneur can get caught in the trap of forgetting those differences. Particularly important are your attitude and how you approach the business as a netrepreneur.

As you read this post, you see the term netrepreneur frequently. You often hear it used in the business community, too. The term developed in response to the growing number of people moving their businesses online.

The term combines Net, the slang term for Internet, with the word entrepreneur, which is someone who assumes the risk and rewards of a new enterprise. Netrepreneur (or the variation netpreneur) simply refers to an innovative business owner, like you, who conducts business online.

Adjusting your attitude slightly and viewing business from behind the lens of a netrepreneur isn’t difficult. Doing so is simply a matter of recognizing that the Internet changes the way you can and should operate your online business. When you think like a netrepreneur, you;
✦ See the invisible storefront. Although the doors, walls, and even the salesclerk for your online business might be invisible, they definitely exist. In fact, every part of your Web business leaves a distinct impression. Yet rarely do you hear or see the response to your storefront directly from customers.

Consequently, and contrary to popular belief, a Website demands your continual care and attention — new products to
add, bugs to fix, replying to e-mail, and more.

✦ Understand who your customers are. Even if you don’t personally greet
your online visitors, don’t be fooled: The Internet offers the unique opportunity to learn and understand almost everything about your customers. You can learn where else they shop, how much time they spend on your site, what products they’re interested in, where they live and work, how much they earn annually, whether they are parents, and which magazines they read.

Netrepreneurs collect and use this information regularly in an effort to increase sales and better serve their customers. (When you’re ready to meet your customer, go to Core 6, where
I explain how to get and use this wealth of customer information.)

✦ Respond to fast and furious changes. The way people use the Internet to buy, sell, or search for products and services changes rapidly. Also, the rules for operating an online business as imposed by both the government and the business world in general are modified almost daily.
Sustaining success online means that you must take the initiative to keep up with new trends, laws and regulations, safety and security concerns, technology, and even marketing tools.

✦ Speak the language. Communicating to your customers through a Website can be challenging. Your buyers want and expect quick and easy access to information. Because attention spans are limited, content
should always be relevant, easy to find, and to the point.

As an entrepreneur, you must choose your words carefully. Your site’s content, including the words you use on your Web pages, serves two purposes:

• It helps sell your products or services to visitors.
• It plays a big role in search engine optimization, or the way you can increase visits to your site by placing higher on the list of rankings by Internet search engines.

✦ Know when (or whether) to innovate. You might be able to develop a new or different method for doing business online, although it’s probably not necessary. Innovative tools already exist, and you can often find them on the Internet quickly and cheaply. You don’t need to re-create the wheel — you just have to know how to find and apply the tools that are already out there.

✦ Reap repeated rewards. Establishing multiple streams of revenue or maximizing a single source of revenue is a common practice online. For instance, you might have an outstanding information product for sale
on your site. The same product can just as easily be sold on other Websites in exchange for a small percentage of earnings. Or, you can choose to add another netrepreneur’s product to your site and pay that person
a percentage of earnings. (To begin increasing your earnings, read about
affiliate programs in Core 4.)

Putting Your Business Idea under the Microscope
Every successful business begins with that first idea. From fast-food restaurants to selling cosmetics from home, Ray Kroc first dreamed of hamburgers, and Mary Kay visualized selling makeup door to door. Your dream for an innovative new business is no exception. Maybe you have several unique
concepts to choose from or are already firmly set on a single one. Either way, how do you decide whether you should quit your day job and focus on your brilliant idea? You have to pick apart the idea, observe closely, and determine whether it merits a full-time (or even a part-time) business.

This post describes the three methods you can use to decide whether your idea has real potential.

Using informal research to verify your idea
The best place to begin gathering information is from sources closest to you.
Be prepared to receive varying opinions — both positive and negative. Use this input as a general gauge of whether to continue reaching out to the next source of information.

You and your idea are in the center, surrounded by three rings from which to collect input. If the ring closest to you provides mostly positive input, proceed to the next ring. (See Ring below)

Ring 1 consists of your friends, family, and co-workers. Ask them these questions:

✦ Have you ever heard of this type of product or service?
✦ Would you buy this product or service?
✦ Do you think that it’s a good idea?
✦ What challenges do you think I will encounter?
✦ What are the benefits?
✦ Can you envision me selling this product or service? Why or why not?

In Ring 2, seek input from industry professionals, investors, other entrepreneurs, and organizations that offer support to small businesses. Ask questions similar to those listed for Ring 1. Because of the experience the people in Ring 2 have, you should give more weight to their responses. Small-business support resources include:

✦ Small Business Administration (SBA) at www.sba.gov: The SBA, a government-sponsored organization, helps small business owners with loans, navigating paperwork, free seminars, and other services.
✦ Small Business Development Center (SBDC) at www.sba.gov/sbdc: The SBA provides its services through local branches.
✦ Chamber of Commerce at www.uschamber.com: From small towns to
large cities, all local chambers help owners develop their small businesses.
✦ SCORE at www.score.org: This network of retired executives counseling small businesses matches small-business owners with business-exec retirees who volunteer their time to help small businesses develop and prosper.
✦ Women’s Business Center www.onlinewbc.gov: The SBA has a special
group dedicated to women who want to create small businesses.

In Ring 3 are your potential customers. Ask them these questions:
✦ Would you use this product or service?
✦ Have you used something similar?
✦ How much would you be willing to pay?
✦ How often would you use it?
✦ Where would you normally go to buy this product or service?
✦ Would you order it over the Internet?

If you find that you’re receiving a majority of positive feedback from sources in all three rings, you can consider your idea worthwhile. Or, at least you have enough validation to continue to the next phase of your evaluation process.

Applying a SWOT analysis to your idea.
Another popular method for determining the pros and cons of an idea is referred to as SWOT analysis. (SWOT is short for strengths, weaknesses, opportunities, and threats.) Companies use it for several reasons, including as a decision-making tool for product development. The simple process also lends itself to a more thorough investigation of your business idea. This post covers how you can put your idea to the SWOT test!

Create your own SWOT chart by following these steps:

1. On paper, draw a cross (or a box divided in half both horizontally and
vertically) to create four separate quadrants, as shown above.

2. Label the upper-left quadrant as Strengths.

3. Label the upper-right quadrant as Weaknesses.

4. Label the lower-left quadrant as Opportunities.

5. Label the lower-right quadrant as Threats.
After you draw and label the chart, you can begin to fill in the details.

6. In each quadrant, write down the factors that influence or contribute to each of your four SWOT categories.

Strengths and weaknesses are considered internal factors that control or specifically contribute (good or bad) to the business concept. Opportunities and threats are external factors that are influenced to some extent by the environment or are otherwise outside of your control.

7. Analyze the information you filled in. Ask yourself the following questions to start developing your SWOT analysis:

Strengths
• What advantages does the product or service offer?
• Do I have expertise in this business or industry?
• Can I get a patent to protect the idea?
Weaknesses
• How much does developing the product cost?
• Is getting suppliers difficult?
• Am I learning a new industry from the ground up?

Opportunities
• Does my idea take advantage of a new technology?
• Is my product or service in demand?
• Have changes in policies or regulations made my idea necessary?

Threats
• Does my product or service have established competitors?
• Do my competitors sell the product or service for less than I can?
• Will changes in technology make my product obsolete?

Use the feedback you receive from your informal research (during the Three Rings exercise) as factors in your SWOT quadrants.

Combining other people’s opinions with your own provides a more comprehensive —
and useful — SWOT analysis.

8. After you fill in the categories of your first SWOT analysis, take a look at which quadrants have identified the most, or most significant, factors.

The strengths and opportunities that are listed indicate the advantage you might have in the marketplace. If you’re lucky, they outweigh your weaknesses and challenges. Perhaps you can now see what you must do
to offset those disadvantages if you really want your idea to work.

Whatever the outcome of your analysis, you should have a better feel for the
value of your business idea after viewing the completed SWOT analysis.

Creating a feasibility study to validate an idea
After your idea gains a nod of approval from friends and family and the SWOT analysis indicates that your product has merit, your idea must jump through one more hoop for complete validation. A feasibility study is a some-what formal, written process that helps you determine whether your idea is
realistic. The goal of the study is to provide you with final proof, so to speak, that your business concept is viable.

A feasibility study answers these basic questions:
✦ Will the product or service work?
✦ How much will it cost to start?
✦ Can your idea make you money?
✦ Is the business concept really worth your time and energy?

A feasibility study kicks your analysis up a notch. It relies on in-depth research to provide more detailed answers to questions in five primary areas:

✦ Your product and service
• What is the product or service?
• How will my customers use it?
• Where or how will my customers buy it?
• How is it designed, and how is it delivered to my customers?
• Am I testing to ensure that my product works correctly? (Describe
these tests in detail.)

✦ Your experience (including your management team’s experience)
• Who is my management team?
• What experience do I and my employees have?
• What are my specific skills and credentials?
• Which skills am I missing, or in which areas am I weak?
• How much time can I devote to my business?

✦ The market in which you’re competing
• What is the demand for my product?
• Who are my customers? (What is the target market?)
• How big is the size of the market I’m selling to?
• What is the status of the market? Is it growing or stagnant?
• Where and how can I reach those customers?

✦ Your competition
• Who are my primary and secondary competitors? (Describe each of
your competitors in detail.)
• How do my competitors market their products or services?
• What makes me different or better than my competitors?
• Is my product easy to copy? How can I prevent it?

✦ Your costs
• How much does it cost to make my product or produce my service?
• What other business costs do I have?
• What amount of money do I need to start?
• Do I have access to funding?
• When will I make a profit?

Now you know how much information you have to gather in your feasibility study. As you answer all these questions, make sure that you back up those answers with detailed research. Then write your results in a one-page summary that discusses what you discovered. Your summary should answer the five basic questions in each category and provide proof of whether you have a viable idea.

After the validation process is complete, you can turn your attention to the next piece of the business success puzzle: potential customers.

Identifying Your Market and Target Customer
The terms target market and target customer are ultimately defined as the entities that buy your product or service. Although these phrases are sometimes used interchangeably, market is often used to describe a collection of individual target customers.

The target represents the people who are most likely to buy or use your
product or service.

Classifying your customer


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Classifying your Customers (cont'd)

Knowing your target customer is an important advantage when you begin
marketing. As i explain earlier in this post, recognizing your primary customers lends credibility to your business concept. The more you know about your target customers, the more easily and cost-efficiently you
can build your business and market to these folks.

How do you decide who this person is or who the groups of people are?
You can describe or segment your customers. The two most common classifications are:

✦ Demographics: Age, income, gender, and occupation are examples of common factors used to describe your customers.
✦ Psychographics: Music choices, hobbies, and other preferences make up this category. Usually, psychographics reflect lifestyle choices.
You can also describe your customers in other terms, such as these categories:
✦ Benefits: Describe why customers use your product or service. For example, customers might need it for medical purposes, or they might receive a luxury benefit, where they don’t need the product or service but choose to invest in it for perceived benefits.

✦ Geographic preferences: Point out where people live. The location can include a specific neighborhood, city, state, region, or even country. Customers can also be segmented according to home (or residential) locations versus business locations.

✦ Use-based preferences: Specify how frequently customers want or need
your product.

Typically, your target market includes customers described by a mixture of
the terms and categories in this list. For instance, if you sell cotton-candy flavored lip gloss, your target market might be described this way:

Girls
> 10 to 14 years old.
> Live at home, in households having a combined annual income of $50,000 or more.
> Listen to pop music and participate in at least one extracurricular activity per week.
> Buy makeup products at least monthly to enhance appearance.

Depending on what type of product you sell, your target market most likely includes a wider mix of customer types — not just one.

Going to the source
In the preceding post, i talk about what a market description might consist of. Where do you get the information to build this type of description, though? You can use any or all of the following methods to gather information for your customer profile:

✦ Survey potential (or existing) customers. Conduct a focus group in which you interview a small group of likely customers. Or, distribute a survey or registration form online to gather the data.

✦ Observe competitors’ customers. Stake out your competitors by visiting them online. You can often discover exactly what competitors think about their own customers just by reading through their sites. (This information is often readily available on competitors’ Websites, in sections labeled About Us or Company Information.) For competitors with
retail locations, visit their stores and observe the customers and their habits in person.

✦ Use published market research. To identify the types of customers most likely to buy your products, read about trends in reputable market reports. You can find much of the research for free online. Larger
research firms charge a fee (which can range from several hundred dollars to several thousand dollars per report) for detailed reports. If this is something you’re interested in, start with companies such as Gartner
Group (www.gartner.com) or IDC (www.idc.com).

Use this information to pinpoint exactly who your customer is.
Competing to Win: Analyzing Your Competition.
If you’re serious about developing a successful online business, you need
every advantage possible. That means getting to know not only who your
customers are but also who else is after their business. Start by writing down a list of your top three to five competitors.
Keep this list on hand, and document basic information, such as:
✦ Website address
✦ Physical address (if they have one) and number of locations
✦ Annual sales
✦ Number of employees
✦ Types of products or services offered (with full description)
✦ Strengths and weaknesses
✦ Copies of ads, flyers, and brochures
✦ Special promotions (especially online offers)
✦ Pricing information for products or services similar to yours.

As a quick and easy way to keep up with your competition, visit their Websites and sign up for their newsletters and other promotional offers by e-mail.
Be sure to maintain a list of your secondary competitors, too. These companies don’t sell your exact products or services but come close enough to compete for your customers’ dollars.

Hooray! You completed your due diligence and have a fat file of information about all your stiffest competition. What now? This kind of data does you no good when it just takes up space in a filing cabinet. Use it to your advantage.

Sift through your collected information again to refresh your memory (because you probably have lots of information), and follow these steps:

✦ Compare apples to oranges. Using the information you collect, compare both your strengths and weaknesses to that of the competition. (You can even do a complete SWOT analysis on each one of your competitors!) This comparison identifies where you fit in the marketplace relative to other players in your area of interest.

✦ Plan your marketing strategy. You have access to your competitor’s marketing material, so use it to define your own marketing strategy.
Play up your company’s strengths in ads; advertise in markets that your competitors missed; and plan to educate your customers on the benefits that separate you from your competition.

✦ Create a competitive pricing model. Maybe you discovered that you can beat a competitor’s price. Or, perhaps your research shows that you must price lower to survive. Use pricing data of a competitor to map out the best pricing model for your product or service.

✦ Determine growth models and financial requirements. Suppose that a major competitor is ready to partner with a big distributor. Although you might not be able to compete immediately, this information helps you plan for growth. Use this knowledge to better understand your competitors’ growth and financial strategies, and then adjust yours accordingly.

The old cliché is still accurate: Knowledge is power. Don’t let good information go to waste. Use what you learn to differentiate yourself and win points with your customers.

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