Starting up a new business is one of the most difficult tasks a person can undertake. In fact over 70% of new startups will crash before completing two full years in business. Only a handful will survive to grow into profitable enterprises. Nevertheless there are new entrepreneurs entering the business arena every day.
Often cash-strapped and with little practical knowledge of business, these hopefuls are searching for ways to get their foothold in the market. A large number are now looking into an online business as the first step in getting into the market for various reasons. However, starting an online business is not easier than a ‘real world’ business and this is where many new entrepreneurs make their very first mistake. It takes time, money and effort to make an online business work although it has distinct advantages over its traditional ‘real world’ counterpart.
We look at some of the reasons why new entrepreneurs should look to the Internet first especially if they have limited resources.
Larger Target Market
An online business does not have the restriction of limiting its target market to its geographical proximity. This simply means that while you will mainly, or often only, sourcing your customer from the area around the physical location of your business in the ‘real world’, an online business can reach customers beyond your vicinity, even into other cities, provinces and possibly other countries. It therefore seems to make more sense to opt for an online business but not every business model is suitable for the Web.
Most people are still prefer to transact with businesses that they can visit in person or deal with service providers who are from their area of residence. Extending to a larger target market online requires extensive marketing and the trust factor especially in a scenario where you want customers to part with their money first and then receive their product several days or even weeks later. As a new entrepreneur you are not guaranteed of the local business and the Internet can allow you to trade with customers from far and wide. Ultimately it increases your chance of surviving the startup phase and growing your business into a profitable enterprise.
Lower Business Expenses
Rent and salaries are two of the major savings you can expect with an online business. In a traditional brick-and-mortar business in the ‘real world’, rent and salaries for employees can be some of your biggest operating costs. These days web hosting is cheap and your business essentially exists in cyberspace. It also allows you to work from home thereby saving on travel costs. As a new entrepreneur who may have other commitments, the idea of working from home in your garage or basement may fit in perfectly with your lifestyle. Not to mention the savings on rental premises which can quickly eat into your capital.
With an online business, fewer employees may be needed to run the same operation if it existed in a traditional store or office. With the labour issues that keep making the news in South Africa, fewer employees not only makes financial sense but can remove the headache of dealing with staff. And then there are all the hassles of workman’s compensation, UIF and PAYE. An online business can allow you and your family to run a business with minimal labour costs until the day arrives when you truly need employees for your growing enterprise.
Longer Operating Hours
Whether you do not wish to pay your staff overtime or your customers are not willing to do business with you after hours in the ‘real world’, the reality is that most small traditional businesses have limited operating hours. The same does not apply for an online business. The Internet never sleeps and there are always potential customers on the Internet, be it at work or home, through their computer or mobile device. As an entrepreneur trying to establish a business, this is highly advantageous as you may want to trade well beyond the traditional hours that customers will consider in person.
Similarly your website can stay open 24 hours a day and continue to operate even when you are not in front of the screen. Your website is essentially your store or office, albeit virtual, and can remain operational every day of the year even when you are you are on holiday. Automated payment gateways, billing systems and shopping cart software can allow customers to conclude their part of the transaction at any time. All you need to do is complete your side of the transaction once you are back in front of your computer.