Avoiding the Online Business FAIL
I’ve been working a lot more lately with brand new business owners – working more directly (as in there’s no one else involved) and with owners that are brand, spanking new to the concept of business, and who are way too new at the concept of the Internet to be turned loose on their own. This is a recipe for “Epic Fail.”
Contrary to what my friends might believe, that’s a not a disparaging remark – quite honestly, you can get yourself into a heap o’ trouble if you just decide to jump into some sort of business on the internet without doing your homework. This ain’t the wild west anymore, buckaroo. You need things like SSL certificates, and privacy policies, and you have to abide by the CAN-SPAM act, and you can’t just steal other people’s images off the web… the law came to the internet a while back. You have to play by the rules. You need to be informed. It takes work and planning.
Take A Hard Look Around
I can understand how someone can get all caught up in the excitement of the next big thing and feel like you just have to get your shingle out on the web before someone else steals your idea. I got news… if it’s a good idea, there’s about a 95% chance that someone else has already done it. Take the 80-20 rule and shift it by about 15 to account for internet half-life. The 80-20 rule goes something like this: 80% of whatever it is your talking about is provided by 20% of whatever does it… for example, in pay per click advertising, 80% of your conversions might come from only 20% of your search terms. In basketball, 80% of your points might be scored by only 20% of your players. In WalMart, 80% of their sales might be to only 20% of the local population.
Everything on the internet is high-speed, so let say this is now the 95-5 rule*. That would mean that 95% of all the killer applications on the Inernet are being constructed by 5% of the web architects out there. We can extend that to say that about 95% of the “great ideas” on the internet are already in use, with only about 5% of the “new great ideas” actually qualifying as great ideas.
Take An Internet-Minute To Think
What does this mean to the average online business entrepreneur? It means you have TIME. Since the chance that you have a truly unique business (or business model) is so slim, 1) there’s no need to put the cart before the horse and 2) you need to put a little something extra on your idea to make it outstanding.
Develop a business plan. Write it all out, then put it in a drawer for two weeks and forget about it – don’t talk to anyone about it, don’t let it percolate in your head – dismiss it. When two weeks is up, take your business plan out of the drawer, read it, laugh at it, write a new one and repeat…
By the time you get to the third version, you should be ready to run your idea past someone whose intelligence you respect. Notice this qualification – someone whose intelligence you respect. This might mean you have to ask your dad. This might mean you have to ask your professor. This might mean you have to ask your spouse. The point is, you don’t want to ask someone who will just jump on your bandwagon. You need thoughtful, objective feedback. Be sure it’s someone you trust. It’s even better if you can ask someone who has a background or some practical experience in what you’re planning. You want to have an honest opinion of the value of your proposition. You won’t get this from your best bud who’s just as keen about your favorite hobby-turned-business as you are. You will, instead, get contagious enthusiasm. There’s a place for that, but it’s not while you’re assessing the validity of your potential business effort.
If your idea sucks, better to find out before you launch it.
Avoid The EPIC FAIL
This is what Google thinks you can bid on the term GOOGLE - if it's too good to be true...
One of the single, most devastating mistakes I see happen on a regular basis with respect to failure of new internet ventures is lack of planning and development. The budding entrepreneur gets in a hurry and fails to lay the proper groundwork or do the proper research and pays for it eventually. Here’s a short list of actual things I’ve witnessed first-hand that have caused disaster (or near-disaster):
- make sure you have permission to use the “stuff” you cram into your web site. One web-entrepreneur I worked with tried to use a well-known R&B classic on a web site without permission (Marvin Gaye’s rendition of Heard It Through The Grapevine). This was before the DMCA but but after John Fogerty was sued by Saul Zaentz, the owner of Fantasy Records, for plagiarizing himself. Fail.
- buying and using bad domain names because you’re infatuated with a certain phrase… this includes buying hyphenated names, names with common homonyms (like youthere. com or youtheir.com or youtheyre.com), sometimes names with numbers (you can’t tell by listening whether they are spelled out or using digits), and buying the .net version of a name when the .com is already in use by a major competitor who just didn’t have the sense to buy the .net – owning the name isn’t necessarily bad, but using it is usually a horrible idea.
- not looking out for your users’ welfare. A commonly recurring oversight is the collection of personal information on unsecured pages – I can’t count how many times I run across this during a typical month, point it out to site owners as a conversion-killer, and am summarily ignored. First, you’re liable to miss out on sales when that warning pops up in the browser, but more importantly, you are puting other people’s personal information at risk if you collect it in the clear. Even if no one hacks your data or steals your customers’ identities, you can be held negligent if someone decides to get nasty with you for your mishandling of their personal data. Major fail!
- collecting credit cards online but processing charges through a local keypad terminal. Visa and Mastercard sent out nice little letters way back in 2000-2001 announcing that businesses using their keypad terminals to circumvent online merchant accounts (where address can be verified) would be subject to a nice $1000 fine per occurrence but still there are people who either don’t read the fine print or don’t realize the risk they take by processing these transactions under the card company’s “cardholder present” rules when the cardholder, in fact, is NOT present. Blatant violation of these Terms of Use not only get you fined, they get your in-store merchant account cancelled. Screwed-yourself fail.
- lack of basic, common-sense research on a topic . I was once asked to prepare a $30,000 per month AdWords account for a gentleman who wanted to sell video lessons on how to use Google… ok, no, stay with me here… he wanted to use Google Search Engine Marketing to sell lessons to people who don’t know how to use Google – AND – (there’s more) he believed that he could bid on the word “google” for 4 cents a click and get 8,000 impressions a day. I’m all for selling “Google How To” on Google itself, but come on, do you really think Google is going to let you bid on their NAME for 4 cents a click? The bid/traffic estimator says what it says because NO ONE ELSE CAN AFFORD TO BID ON “GOOGLE” so it looks like you can bid 4 cents. If it sounds to good be true, it probably is.
- letting “friends” and/or “relatives” design the web site for free. You get what you pay for – ’nuff said.
- not adequately checking out the competition – I once worked for a place that sold individual 3.5″ floppy disks for $3 each because “that’s what they cost at the college book store.” The problem here was that the business owner never noticed that 1) WalMart and Radio Shack also carried floppy disks in 3-packs for $3 and 2) you could buy them mail order for 59 cents each – sure you had to order 30 at a time, but an industrious college kid could make a fortune selling those 59 cent disks on campus for $1.50 each. We failed to sell floppy disks.
- misunderstanding your competition – one of my favorite examples of this is the local business owner who opens a web store and thinks he’s just expanded his potential market, without realizing that now, he’s expanded the size of his competition. He’s no longer just competing with the other vendors in his town; he’s competing with vendors all over the country, perhaps even all over the world. I also have this argument on a regular basis, where I research companies bidding on paid keywords, send back a list of “competitors,” and I’m told, “no, that’s not who I compete with.” Sorry, but if you are paying for keywords in AdWords, yes, that IS who you compete with – you compete for ad visibility with everyone else who bids on those same words, whether they sell the same products or not. Nincompoop fail.
While it may be true that it’s easier to get into an internet business than a brick and mortar business, that doesn’t mean you can ignore common sense, or civic laws. You may not have to go down to City Hall and apply for a business license in order to sell your home-made soap from a web site, but you do need to have a viable shopping cart, payment methods, and an established method for packing, processing and shipping orders all lined up before you take any orders. You need to take adequate measures to protect your customers’ information and you need to establish guidelines for acceptable use of your site, and how you intend to use your customers’ email and other personal information before choosing to just email everyone who’s ever made a purchase without having asked their permission first.
Yes, the internet moves fast, but failure to plan ultimately results in failure to execute, and that can mean your great idea ends up in the recycle bin.
* yes, I realize that the 80-20 rule doesn’t have to equal 100 but I don’t want to have to explain that here.Sorry, ouija has no special extra insight.
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