Now's the time for web start-ups to go online
Article by Helene Zampetakis
from: 
WITH money tight and jobs scarce, now is an opportune time to start an online business.
Web
start-ups stand to defy the downturn by riding a wave of online sales
that surged 27 per cent in 2008 and 22 per cent in the last quarter,
according to the Interactive Advertising Bureau Online.
Twice as likely to export, and more profitable than their
bricks-and-mortar competitors, online businesses deliver performance
indicators that are higher in every key area of operation, including
sales and capital expenditure, according to a survey conducted last
November by Sweeney Research for the Sensis Quarterly Business Index.
With low overheads that can be passed on to customers, web
entrepreneurs can strike a chord globally if they pitch the business to
niche markets, leverage innovative marketing strategies and set good
pricing.
"It's an excellent time to start an online business," says
entrepreneur Jessica Kiely, founder of the FRANK Team, a web-based
advisory service for young entrepreneurs.
"The capital required can be a little as $500 or nothing, if you're
using freeware, and by keeping your costs low, you can pass that on to
the customer.
"You can track your performance and respond instantly when your business needs it.
"It's a lot less risky than a traditional business."
Nevertheless, any business that is going to work needs to be treated seriously.
Like its offline counterpart, a web start-up needs a solid business
plan backed by international research, says Llew Jury, managing
director of online business adviser Reload Consulting.
"I've seen absolutely cracker ideas come a cropper because the owners haven't done their groundwork," he says.
Jury also cautions that a low-cost business has less likelihood of
success given that a viable online operation needs a very
user-friendly, secure website supported by search engine optimisation
and marketing to channel traffic flow to the site.
These costs can quickly mount up. A search on roses on St Valentine's Day, for example, can cost a website owner $10 per click.
Nevertheless, it's essential to strenuously market the brand. "You
are only one domain among millions and it takes a long time to get
people to remember you," says Jury.
Indeed, the conversion rate for online sales in Australia is only
around 2.9 orders per 100 online sessions, according to digital
marketer Coremetrics.
So Jury advises entrepreneurs to devote a third of their budget to
setting up the website and two-thirds to operational costs such as
technology infrastructure, staffing and marketing. An early
consideration is to identify a promising market, and consultants
suggest targeting niche areas where competition is lower and the
business can stand out.
Having done that, the next step is to consider how to generate revenue.
This is a critical consideration and somewhat different when done
online, say web start-up consultants such as Miles Galliford, founder
of SubHub.
A major challenge is to attract customers.
Galliford cautions against discounting on price to drive up
business, saying owners should rather sweeten sales by offering new
members extra value such as a free e-book, giving away some content or
using guest writers.
An effective strategy is to build an online community using email
newsletters, RSS feeds, forums, member profiles, comments and also
webinars. Websites can then capitalise on this to generate multiple
revenue streams from sources such as text and display ads, classifieds,
paid directory listings, affiliate partnerships, courses and promoting
events.
But getting all this in place takes time.
"Building an online business is a marathon, not a sprint," says Galliford.
There's no question that laying down the foundation blocks takes hard work.
However, there are now some factors in the entrepreneur's favour,
says Mick Liubinskas, business strategist and founder of web advisory
firm Pollenizer.com.
"Costs are lower, great people abound, big companies are investing
less in innovation, and you have time to build a foundation before the
next boom comes around. Go for it."
STARTING OUT
- Low overheads and a trend to online shopping make web businesses a good proposition during a recession
- A solid business plan is essential
- Entrepreneurs should not skimp on the website or on marketing
- Create an online community to develop the customer base
- Leverage this to generate multiple revenue streams and boost profit
Article by Helene Zampetakis at The Australian Newspaper