Excerpt From: How to Start An E-Business: Offline and On the Web By Louise Hart Published by:
How to Start An E-Business:
Offline and On the Web
Published by:Sirius Publications ™
© Copyright 2000 by Author.
All rights reserved. You must have written permission from the author and/or publisher
to copy any of this material or post it in any form.
TABLE OF CONTENTS
About the Author
Chapter 1 Getting Started
Chapter 2 Who Are You?
Chapter 3 Location, Location, Location
Chapter 4 Rules and Regulations
Chapter 5 Licenses, Permits and Regulations
Chapter 6 Other Sources of Helpful Information
Chapter 7 Street vendors
Chapter 8 Business Plans
Chapter 9 Suggested Business Plan Outline
Chapter 10 Additional Resources
Chapter 11 Population Requirements
Chapter XII Format for Financial Statements
Chapter XIII Marketing and Capital Resources
Chapter XIV Insurance
About the Author
Business Consultant Louise Hart has counseled and trained entrepreneurs and executives for over 25 years. As part of her work with businesses and business owners, she has researched, developed, written, produced and successfully placed over 250 business, marketing and financial plans with federal, state and local, public and private agencies, financial institutions and venture capitalists.
A former trainer and statewide project coordinator for the U.S. Small Business Administration and Community Development Corporation Executive Director, she has worked with Eximbank, U.S. Small Business Administration, Small Business Development Corporations, Minority Business Development Corporation, the U.S. Department of Commerce, Community Development Finance Corporation, Industrial Finance Agencies, International Trade and Development Agencies, regional, state and local community development corporations, historic preservation agencies, domestic and international banks, private lenders and venture capitalists. She has worked with businesses throughout the United States and in Canada, India, Australia and Europe. She was instrumental in developing economic policies adopted and implemented by two foreign governments. She has been commended in Washington, D.C. for her work with minority, women and underserved populations. Her work with Southeast refugee entrepreneurs resulted in the formation of a bank and community development corporation.
Her skills and abilities won her recognition with listings in Who's Who in the Computer Industry and Who's Who in U.S. Executives. A graduate of Boston University, the University of Massachusetts and Harvard University, she completed the Institute in Economic and Urban Development at Tufts University in Medford, Massachusetts and attended law school. A former journalist and published poet, she is the author of over ten books, including Tales of a City Maid, The Book of Trees, Celebrations, and Grandmother's Book of Recipes and Helpful Hints.
You have dreamed of owning your own business. You have a hobby in which you make pottery, quilts, fishing poles, birdhouses, cakes, candles or potpourri. You have always dreamed of opening your own shop, restaurant, grocery store or luncheonette. You have worked in these businesses before, possibly managed them for someone else, but always wanted to own your own. You do not know where or how to proceed. You do not have a lot of capital and are thinking of opening the business on the Internet, but how?
How to Start An E-Business has been written as a guidebook to provide you with the knowledge and sources you will need to answer your questions and succeed. You will find down to earth answers in plain language to your questions on how to proceed, what licenses or applications you will need, how to plan your business, where to get help, who to see, how to complete data, market and other research, how to write a business plan, how to construct budgets, balance sheets and other financial projections, how to find a banker or source of capital, what type of insurance you need, what kind of facilities, how to advertise your business and the other questions that every new entrepreneur or business owner considers in starting their own ventures.
The information provided is applicable whether you are just looking to start a part-time venture to add to yours or your family's income, an e-commerce site on the Internet or a shop or push cart in your downtown. In addition to practical answers to your questions, you will find advice on meeting your financial, marketing and other business needs in this book.
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Before the Internet, to start a retail business, an entrepreneur had limited options. Entrepreneurs were advised that they needed start-up capital equal to the first six months' to one year's expenses. Depending upon the product line, the business started in the home of the entrepreneur, in the homes of others and/or in rented commercial space. Those developing their own product or product lines might start a business in their homes or garages. Some businesses were marketed through home parties held in the homes of family, friends and acquaintances. Each of these required capital for development or advance inventory purchases (demonstration kits).
More generalized businesses required the rental of retail commercial space. For these, the primary consideration (besides overhead and product lines) was location, location and location. Location in high traffic areas was key to exposure, building and retaining a customer base, ease of access and residual trade from walk-ins. Location with space sufficient to display products and hold enough inventory for a week or month in advance.
To determine the right location, entrepreneurs needed to study demographics, traffic flow, access to public parking, security and safety reports and, of course, the location of direct or potential competitors. The availability of banks, nearby shopping centers or malls and complementary commercial sites that might attract walk-in traffic were also a consideration. The availability of public transportation and highways and workforce were also to be taken into consideration.
Beginning in the 1990's, with the opening of the Internet to commerce, the model and dynamics of starting one's own retail business changed dramatically forever. Gone was the need for inventory, samples or demonstration kits. Gone was the need for commercial space. Gone was the need for an advance customer base. Gone was the need to study nearby competitors, parking space, facilities or availability of mass or public transportation or employees. Gone was the gateway (that many failed entrepreneurs viewed as a deadly moat) of large capital investment. No longer was there a requirement for thousands or tens of thousands of dollars for samples, display products, inventory, leases, utilities, payroll, advertising, equipment, furnishings, etc. Businesses could now start in one's living, dining, kitchen, bedroom or computer room. They could even start on the computers of a public library or cafe. All one needed was to click onto an auction website like ebay.com or one of its competitors, follow the prompts to sign up, list your product(s) to be sold and the host website would find the buyers for you.
Once you had the cash, you could either order the inventory or use the cash to register your own domain name, start a website and start your own business. Pictures or graphics of what one wanted to sell or the ability to write descriptions of the products to be sold, an auto responder, email or other means for customers to contact you with their orders and a way to collect their money was all that seemed to be needed. Services offered to set up the advertising, order taking, customer contact and management, money collection for your business, for a "low" monthly fee, of course. The promise of profits was so great that major search engines began to offer to host e-commerce sites for free. They even had cooperative advertising offers for you by which you could place advertising banners, buttons, links and graphics for other e-commerce companies on your website and be paid commissions for "referrals" or on sales. Refer another website owner and you could earn a portion of their commissions as well. They would even help list your site with other search engines and set you up with consultant newsletters that could be delivered to your email for free. You still had to buy the services for customer service and order processing, and the website host would place banners on your site (advertising their services on the Internet), but you were in business. Relax. Wait for the orders and money to come in.
Not surprisingly, many of these new businesses failed at the same rate as their brick and mortar predecessors. Fifty percent of all new businesses fail within the first five years of operations. The reasons are myriad. Some attribute their failures to under capitalization, poor location, poor marketing, poor money management, theft, newer products, etc. The list of reasons given is individualistic and never ending. However, traditionally, as has been reaffirmed with the recent fallout in e-commerce, the reason for the failures is because business is business. When high tech first emerged, engineers thought they could defy traditional business models and principles. Their products would sell themselves. The money would flow freely. Image and location were matters of large, new buildings and offices, not market positioning and perceptions or finance. Engineers with no background in marketing were given marketing and sales directorships. The public, they thought, would buy whatever new technological gadget their minds devised. They spent lavishly. They briefly lived lavishly. Many of them failed. They forgot that the reason they spent so many years in school is because the human mind can only absorb information at a certain rate. The same is true for the adoption of new products and technology in the marketplace. One cannot push the market and only technocrats buy widgets because they are new. Most consumers wait. It is estimated that 87 percent of all transactions begun on the Internet are aborted before completion. Further, in spite of the hype and the media, the truth is that even in the U.S., only 40 percent of the population is estimated to have access to the Internet. Some urban areas are twice that. Many rural areas are less. In Europe the Internet has not reached that level of saturation of the population, and in emerging and third world countries, even fewer consumers have access (if any) to the Internet. One cannot be more successful than competitors if one reaches less than half the potential consumers. The full potential of the Internet is thus yet to be realized. There are reasons that even the successful e-commerce companies advertise via traditional media. They know that that is where the consumers still are.
That is not to say that the dream of many to establish their own website or e-business is wrong or that one should delay that dream. What it does indicate is that this is the time to begin - cautiously. The market is still in transition. Common sense is still required. Trying out a commercial idea on the Internet (for a home-based business) may work, but remember that even large Internet retailers have brick and mortar facilities. Doing business in cyberspace is not the same as only being in business in cyberspace. The products being sold have a real world existence. The consumers live in this world, not cyberspace (even if they are addicted to the Internet or use the latest technology, they remain in and of this world). Cyberspace is a means of communicating, marketing, selling and negotiating business. To accomplish all of those tasks still requires human input - even on the most automated of sites.
Growing up in a family business, we learned early to treat our business as a member of the family. That is, it needed care and attention. Money must be managed, for money is what it does and not an end in itself. The principles of business are well established. The computer whizzes learned that. As recent consolidations and closings have demonstrated, the Internet and e-commerce developers who similarly thought that they could reinvent the principles of business have now also learned that same lesson. Knowing business principles and how to operate a business are requisite on and off the Internet.
If you are new to business, you will find that you have many decisions to make. The United States Business Administration's Management, Checklist for Going into Business, covers basics such as choosing the legal form for your business, record keeping, laws and regulations to which you must conform, pricing and credit for your customers. If you are considering starting a business that combines both commercial space and Internet presence, the aid also covers building, equipment and supplies, merchandise and employee management. That aid and a packet of information on starting a business can be obtained from the SBA website (http://www.sba.gov) or from your local SBA or Small Business Development Center (SBDC) office. Portions of this checklist are included herein.
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As a potential new business owner, whether e-commerce on the Internet or traditional or combination of brick and mortar (the term for traditional business models) and e-commerce (the "e" is for electronic), you need to be able to answer the questions who, what where, how when and why. You know who you are (hopefully) and why you want to go into business (to make money, of course). However, to answer the remainder of these questions should require some thought and the raising of other questions, including some of the following:
Should my business be a sole proprietorship, a partnership, a limited partnership, a s-corporation or a c-corporation? What does each of these mean? What are my obligations under each form? What are the advantages and disadvantages, benefits and liabilities of each?
Where can I go for financial or organizational help?
What is a business plan? What type of information should be included in it?
What about the legal aspects of naming my business?
What taxes will I be liable for and should I be concerned about?
What type of insurance do I need for my business?
Information to help you answer these questions and many others is provided in the pages of this book, others like it and in the publications from the U.S. Small Business Administration.
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