The Missing Menu of Starting An Online Business
Updated: Oct 5, 2020
Let's say you are interested in having an online business. It maybe a role such as dropshipping, amazon store, freelancer, blogger, affiliate marketing, or selling digital products. Eventually you want to make enough recurring or maybe even contractual revenue to support yourself. Here is the missing menu:
Table of Contents
What is e-commerce?
What are components of an online business;
What is online and what is off line?
One does a one man online store work financially?
What are the key questions to ask yourself?
What are the steps to create an online business
What are tips and cautions for starting and running online business?
Tips and cautions on building a website or landing page.
Caution for first time entrepreneurs
About the author
What is e-commerce?
An e-commerce store is a web address with a website.
The website automates functions of a physical store. A physical store is like this. It has clerks, inventory, display, attractive things to draw customers in, store front, and traffic.
Just like a real store, people need to walk to your store, walk inside, browse, try things on, and pay you. Each one of the steps is very difficult for first time entrepreneurs.
The store can be a hosted store on Amazon, or a drop shipping store hosted by yourself or by Shopify, can be a simple Facebook account, etc etc.
The website is not all there is. You must physical acquire and ship things to people, digitally or by mail. You can do your own shipping and inventory, or ask Amazon to do it for you (but you pay Amazon). A store with zero inventory is called “drop shipper”. The factory (say in China) hold things for you.
What are the components of an online business
A business is a transaction. You provide a product or service, and the customers pay a price to acquire it. Generally speaking the value has to be much greater than the price for people to conclude it is worth it.
People don't buy a lot of things. They don't owe you a reason.
For an online business, you are acting as a store. The store carries a bunch of products, and it faces a certain type of customers. You must find a way to determine if the customer will pay for the product, how much they are willing to tolerate, and then find a way to get them to your online store.
The two key issues of having a good online business is to find out what people will buy and where to find them.
What is the key difference between online and offline business?
For the time before 2010, the world is largely entirely populated by off line business - physical stores.
Physical shops or stores are setup near the street, and they pay the landlord rental for using their space. The customers are drawn in by foot traffic, car traffic. There are wholesalers and retailers connecting the factories with the product companies. The physical stories eventually carry these products - called retailing.
The retailing store sells items at MSRP (manufacturer's suggested retail price), but they actually obtained their products from a wholesaler. The store makes money from the difference.
A wholesaler obtained items from the source (say a factory in China), and sells it to the retailer. The wholesaler makes money from that difference.
Price at the Chinese source (Alibaba screen shot).
Price of the similar item on Target store website. The price difference is the margin of the sales channel - it is 1400% of the source price.
Online business is to help moving the products form the source to the consumers, and become part of the chain with a 1400% profit margin, on virtually any products.
Amazon changed that. The huge online business host only storage facilities. Every shopping activities go through their website. The factories make products, the stores on Amazon carry these products, and they sell things on Amazon. A typical product at the source maybe 2 dollars, and the retail price maybe 30 dollars.
An online business is a store - it carries products and attract customers.
The key difference of online and physical stores are:
Online store does not pay physical space rent;
Online store does not have natural foot traffic;
Online store face large competition because of the low cost to start.
But the Amazon store is just ONE online business hosting many online stores. With the proliferation of internet, now anyone can open a store OUTSIDE of the Amazon platform and play the role of an Amazon or a Target.
But you have to work to earn that fat channel margin.
We buy everything all the time. But selling is not easy.
How does a one man online store work financially?
It is important to complete five steps:
Attract audience to the website regularly.
Convert their visit to attentions.
Convert their attentions to sales.
The revenue (sales) and the price customers pay must beat the cost (your time, website cost, product sourcing cost).
Basically you need to develop a LEAD FUNNEL mechanism to lure qualified customers to your website, whether it is a blog, or a social media site, or your own company website, drop shipping store site, or Amazon store site.
The cost is rather minimal if you don't worry about where you live and where your food comes from. But the part of promotion does take money - or shall we say, money will make everything much easier.
Having capital is your unfair advantage.
When you start, you must have concrete preparation for at least the following six questions.
Ask your self these questions:
Who are you going to sell to?
What are you going to sell?
How do you obtain or build the products?
How do you build the connection?
How do you find out if they buy it and what price they will take?
If you can not make income for two years, can you survive and be understood?
What are the steps to create an online business?
Step 1: Pick the product
Step 2: Evaluate the market
Step 3: Source and obtain
Step 4: Build your brand, name, and story
Step 5: Choose a website or e-commerce platform
Find a need and fill it.
Write copy that sells.
Design and build an easy-to-use website
Use search engines to drive traffic to your site.
Establish an expert reputation for yourself.
Follow up with your customers and subscribers with email.
Increase your income through back-end sales and upselling.
Step 1: Start a business that fills a need.
Most people who are just starting out make the mistake of looking for a product first, and a market second.
To boost your chances of success, start with a market. The trick is to find a group of people who are searching for a solution to a problem, but not finding many results. The internet makes this kind of market research easy:
Visit online forums to see what questions people ask and what problems they're trying to solve.
Do keyword research to find keywords that a lot of people are searching, but don't have a ton of competition with other sites.
Check out your potential competitors by visiting their sites and taking note of what they're doing to fill the demand. Then you can use what you've learned and create a product for a market that already exists -- and do it better than the competition.
Step 2: Write copy that sells.
There's a proven sales copy formula that takes visitors through the selling process from the moment they arrive to the moment they make a purchase:
Arouse interest with a compelling headline.
Describe the problem your product solves.
Establish your credibility as a solver of this problem.
Add testimonials from people who have used your product.
Talk about the product and how it benefits the user.
Make an offer.
Make a strong guarantee.
Ask for the sale.
Throughout your copy, you need to focus on how your product or service is uniquely able to solve people's problems or make their lives better. Think like a customer and ask "What's in it for me?"
Step 3: Design and build your website.
Once you've got your market and product, and you've nailed down your selling process, now you're ready for your small-business web design. Remember to keep it simple. You have fewer than five seconds to grab someone's attention -- otherwise, they're gone, never to be seen again. Some important tips to keep in mind:
Choose one or two plain fonts on a white background.
Make your navigation clear and simple, and the same on every page.
Only use graphics, audio or video if they enhance your message.
Include an opt-in offer so you can collect e-mail addresses.
Make it easy to buy -- no more than two clicks between potential customer and checkout.
Your website is your online storefront, so make it customer-friendly.
Step 4: Use search engines to drive targeted buyers to your site.
Pay-per-click advertising is the easiest way to get traffic to a brand-new site. It has two advantages over waiting for the traffic to come to you organically. First, PPC ads show up on the search pages immediately, and second, PPC ads allow you to test different keywords, as well as headlines, prices and selling approaches. Not only do you get immediate traffic, but you can also use PPC ads to discover your best, highest-converting keywords. Then you can distribute the keywords throughout your site in your copy and code, which will help your rankings in the organic search results.
Step 5: Establish an expert reputation for yourself.
People use the internet to find information. Provide that information for free to other sites, and you'll see more traffic and better search engine rankings. The secret is to always include a link to your site with each tidbit of information.
Give away free, expert content. Create articles, videos or any other content that people will find useful. Distribute that content through online article directories or social media sites.
Include "send to a friend" links on valuable content on your website.
Become an active expert in industry forums and social networking sites where your target market hangs out.
You'll reach new readers. But even better, every site that posts your content will link back to yours. Search engines love links from relevant sites and will reward you in the rankings.
Step 6: Use the power of email marketing to turn visitors into buyers.
When you build an opt-in list, you're creating one of the most valuable assets of your online business. Your customers and subscribers have given you permission to send them an email. That means:
You're giving them something they've asked for.
You're developing lifetime relationships with them.
The response is 100 percent measurable.
Email marketing is cheaper and more effective than print, TV or radio because it's highly targeted.
Anyone who visits your site and opts into your list is a very hot lead. And there's no better tool than email for following up with those leads.
Step 7: Increase your income through back-end sales and upselling.
One of the most important internet marketing strategies is to develop every customer's lifetime value. At least 36 percent of people who have purchased from you once will buy from you again if you follow up with them. Closing that first sale is by far the most difficult part -- not to mention the most expensive. So use back-end selling and upselling to get them to buy again:
Offer products that complement their original purchase.
Send out electronic loyalty coupons they can redeem on their next visit.
Offer related products on your "Thank You" page after they purchase.
Reward your customers for their loyalty and they'll become even more loyal.
Tips and cautions for starting and running an online business
The key discipline is to set your expectations rights. To start any business and get noticed take 2-3 years.
Y. Khan wrote
"Many people start an online business expecting immediate results.
They see people talking about their success stories, maybe they were “sold” on the concept by someone talking about how easy and quick it was to succeed.
But anyone who’s made any kind of money online would tell you that it’s not fast nor easy.
You can see people making money in their first week - that does happen - but those people paid for that quick with extremely hard work - so it definitely wasn’t easy."
When I started a dropshipping business, I only got sales from one out of my first ten or fifteen products. Each of them takes a lot of effort to list, but only very few will be “winners” that actually make you money.
Obviously in your online business you won’t have a boss.
When you’ll be tired, or want to watch another episode on that show on Netflix, or go out with friends - nobody will be there to hassle you or push you to work instead.
And it’s those little things that set the winners apart from those who eventually give up.
I schedule my tweets, because it keeps my following engaged while I’m at my 9–5 and when I need to work on my business.
I started a blog a few months ago, and for a long time I was writing pretty much to myself. But I kept posting, aiming at a post every day, and eventually you get seen. For a while now I’ve had at least 1–2 new subscribers to the blog every day.
Tips for building a website
Caution for first time entrepreneurs
Business is great! it is true relationship between you and your customer and your end consumer. Business is building a relationship. In business you provide value and get paid. You got to have followers and fans and subscribers. If the business is designed right and you are lucky, you can be highly profitable. You have a money making tree in your house - you can get money anytime by just working.
However, there are risks especially for first time entrepreneurs (FTE). You may underestimate the difficulty and competition. and you do not understand the competition landscape or the cost of acquiring customers, even if you have a great product.
Here are four general advice:
There is no vacuum in business. There is no smart perfect ideas. You must investigate in the market.
If you have never done business on your own, you must acquire the business mindset of service, value, customer leading, and learning by experimenting.
Social media is a place to conduct business, not a place to build a business. It sounds low cost but it is really lean.
Just building a product or a solution is not automatically business. People may not want to buy. You must also operate and manage the store. A business is buy and sell. Making unique things to sell is not necessary to have a business going.
The top three reasons why business fail after 1, 3 and 5 years are:
You do not have enough capital;
You are under prepared but you did not know until after you start;
Experienced and dirty competition sneaks in.
Business risks are invisible and never told. Just because you don't perceive does not mean they are not there.
The biggest risks for profitability:
Customers don't want to buy your offering;
Customers do not come in large enough numbers for you to be profitable.
Your business can not expand based on cash flow.
Three critical elements of business mindset people:
they recognize competition;
they are humble and yet confident. They work hard to wait for luck.
they don't take anything for granted.
A special reminder for FTE entrepreneurs - if this is your first time in business alone, you need to calibrate your shots and don't expect too much. Business mindset is earned, like riding a bike or going into a pool for the first time. For your first startup, first in real business (instead of on a job or at a position), try to factor in a possible failure after 3 years. You will only know you have failed after three years.
About the author
About the author:
Chang Liu is passionate about entrepreneurship and teaching entrepreneurship . When he was a full professor at Northwestern University, he started teaching entrepreneurship to engineering graduate students in 2012 - it was a great hit with smart engineering students who were never exposed to business. Liu put everything in practice. He successfully started six companies (NanoInk, NanoSphere, Integrated Micro Devices, SensicFusion, TeenSharks startup school, and Seven Parallel Consulting). He has experience in product innovation, marketing, and end consumer store management. He is the author of four textbooks on both technical and entrepreneurial topics. He earned a PhD degree from the California Institute of Technology (Caltech) in 1996 in Electrical Engineering. He lives in Chicago, IL, United States.
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