After years of struggle trying to build a business presence online, I’ve started to have a little success based on one key point:
Succeeding online isn’t a whole lot different than building a “brick and mortar” product or service business.
Now, I’ll grant you, the delivery method online is very different from delivering a product or service from a storefront or through word-of-mouth referrals.
4 components for success online
I liked Noah Kagan’s approach on his Quora answer, because he clearly states the four components that every online business must have
- Customer/Problem:What problem does the customer have- and is a solution to the problem urgent?
- Solution:What’s your solution? Are you charging a price the consumers are willing to pay? Are there enough customers to support a business?
- Channel:(The hard part) How do you get attention and generate interest online? (Content marketing, ads, etc.)
If you’ve had a financial setback running your business, use these tips to recover and move ahead.
Here’s how I would lay out an approach for online business success:
Every startup owner should write a formal business plan before they launch their venture. Writing the plan helps you think through each important aspect of your business. As you write the plan, you’ll identify areas of weakness where you need to make improvements. This process is critical, because it can validate your business idea before you invest time and money.
Your business plan will include many components. You’ll have a section that projects your startup’s financial performance. The plan will include an organization chart and the important roles that must be filled by a staff of people.
Get free chapters for my free ebook: How To Save, Invest and Manage Debt.
A business plan will also include your marketing strategy. In this section, you’ll analyze the validity of your business idea. That assessment includes 4 important steps:
#1- The customer problem that needs a solution
We’ve all performed a web search to find a solution to a particular problem. You may go on the web to find an explanation that helps you solve the problem. In other instances, you may be looking for a specific product or service that provides a solution. You need to clearly state the customer problem that you are solving.
Say, for example, that you manufacture products for hikers and bikers. In your business, you have many conversations with serious cyclists who buy your products. You notice that cyclist really need a tire tube that inflates at the push of a button. This tube eliminates the need to carry a bike pump or other devices to inflate the tire.
#2 Is the problem urgent?
We buy products and services when a problem is urgent. If the problem is simply an annoyance, customers may not be willing to pay for a solution. Based on customer feedback and your research, you learn that serious bikers often get stuck on the roadside. Their bike tire goes flat, and their bike pump or other gear cannot get the tire inflated. These riders want to pay for a solution.
#3 What will people pay for the solution?
In order for your business to succeed, customers must be willing to pay a sale price that allows you to earn a profit. You can survey customers to answer this question. Assume that serious bike riders tell you that they are willing to pay $4 per tube. Based on your financial projections, that sale price will allow you to earn a profit.
#4 How many people are willing to pay your price for the product?
This last step may be the most important. You need to know that approximate size of your market. In this case, how many serious bikers will buy your $4 bike tube each year? Assume that your research reveals that there are 10,000,000 serious bike riders in the US. These people ride long distances at least twice a month.
The average rider would need 3 replacement bike tubes a year, or 30,000,000 tubes annually. You determine that you can capture 10% of the market, or 300,000 tube sales a year. At $4 per tube, your revenue projection would be $1,200,000. You need to determine if that sales level is large enough to justify starting your business.
If you’re interested in just how companies are valued and how private equity works, this video may help.
Have a day job
Finally, Bob Warfield makes this great point in his Quora answer:
“The first issue is one of timing—if you’re broke and without a job, I can’t recommend starting a business. Go find a Day Job first. I always tell entrepreneurs not to quit their Day Jobs.”
Great advice. Good luck!
Ken blogs at Accounting Accidentally.com.
and is the co-founder of Accountinged.com
If you like this post, please share it. This was originally posted on my Quora page.
Image: Bullseye, Jeff Turner (CC by 2.0)