We live in interesting times. So many things are happening so fast, and a good chunk of that for most people is because of the Internet. Yeah, you’ve probably heard it all before, but have you really stopped to think about its impact on your life?
Anyone born after the 1990s have no real appreciation for it, but for those that were teenagers the first time computers became affordable for everybody, and the first email service became available, it was the best thing invented since sliced bread.
For would-be entrepreneurs, the Internet opens up a vast array of business opportunities. Anyone with an Internet connection can start any of 14 businesses tomorrow with nothing more than the panting desire to make a bucket load of money.
That said, starting a business is easy, but making any considerable strides to that bucket of money? Not so much. You have to realize that since anyone can start an online business tomorrow, anyone does. If you don’t know what you’re getting into, you’d better not quit your day job. Here are what you need to know before starting an online business.
You Are Going to Fail
Ouch! So much for the vote of confidence.
However, the first thing you have to know is that 90% of startups fail for a variety of reasons. One of these is because no one even knows you are offering them. Your website is generic and as an online business in these times, that’s enough to get you handed your walking papers. You can look at some great examples of website personalization to avoid those mistakes.
Whatever the reason (which will come out in the postmortem about 20 months down the road), knowing there is a 90% chance you will fail will keep you motivated to work hard at getting into the 10% that actually make it. There is no room for complacency and misplaced confidence in an online business. Prepare for the worst and hope for the best would sum it up pretty nicely.
You Will Encounter Problems Along the Way
Even if you have all your ducks in a row before you start your online business, you should still be prepared for roadblocks along the way. Nothing is ever as you envision it will be, so if you find yourself in a situation for which you are not ready, it can stall your engine.
Know that the path from point A (start business) to point B (bucket of money), is often convoluted, and may even involve a point C. When planning your online business, have contingency plans for every problem you might encounter.
For example, if you are planning a drop shipping business, make sure you have more than one supplier for each item so that if one supplier fails you, you have another one you can tap.
You Will Underestimate Your Expenses
Most people have an optimistic streak when planning how much money they will spend.
When they go to the grocery, you plan to spend X amount, but by the time you roll out the cart, you’ve spent X+. This happens to first-time renters as well, where most people fail to accurately predict how much they will spend for electricity or entertainment.
This is parallel to first-time online business owners, who may think that since they’re working from their garage, they can just “wing” their expenses. The fact is, running a business takes money, and you will get into trouble if you spend more than you earn.
Budget all your expenses at 25% more than what they currently are, and that is a good place to start. Adjust your budget as you get a better feel of where and how fast your money goes.
You Will Overestimate Your Projected Income
Many people say “claim your dreams.” That sounds great as a motivational speech, but there is a a lot of work between claiming your dreams and achieving them.
If you claim a bucket of money from your online business, it will not just magically appear in your PayPal account. You have to be realistic about the stages you have to go through to achieve success, and that includes planning your cash flow.
Poor cash flow management aka you ran out of money is one of the top reasons many startups fail, but that doesn’t have to happen if you budget all your projected income at 70% less than what you expect.
For example, if you have 100 orders for an item, project that only 30 will actually push through and can be counted as income. The other 70% may comprise of people that cancel their orders or return the item and ask for a refund. You may even run out of stock, or your supplier fails to deliver as expected. If you are pessimistic about the flow of your cash, you tend to be more careful about your expenses.
Your Business Idea Will Not Sell
One day, you may sit bolt upright from a strange dream and think, “What a great business idea!” Not to put a damper on your dreams, but you need to take some time to consider if it will sell. It is hard for most people to accept that their great business idea may not be so great after all, especially if they feel very passionate about it, but it happens more often than you think.
Some people come up with solutions to problems that don’t even exist, put a lot of work into creating their business model, then are devastated when there are no takers.
Everyone has a slightly different view of the world and the people in it, but if you want success for your online business, you have to put your ego in check and see what other people might think of your idea. After all, you need them to buy into it, so you need to check if your business idea will actually sell.
Run it by a few friends and family members. Post an online poll on Facebook or Twitter, and see what people say about it. This last one presents the risk that someone might get a jump on you, so phrase your questions carefully, and infer conclusions from the responses. Another way to get a feel for the public response is to check the comment section of relevant forums and blogs and see what people are saying.
If you are feeling discouraged because of all the work and disappointment for which you should be prepared, then you may not be cut out for entrepreneurship. An entrepreneur is someone who is willing to work hard and take risks to bring about success.
As American entrepreneur Victor Kiam says, “An entrepreneur assumes the risk and is dedicated and committed to the success of whatever he or she undertakes.” If you find the prospect of commitment and risk an exciting one, then you are already on the road to success.