04 Nov 10 Tips to Starting a Successful Online Business
10 Tips to Starting a Successful Online Business
It doesn’t matter if you are starting on eBay, Amazon or setting up a product website, starting and running an online business shares many of the problems, risks and issue inherent in any business. Here is my hit list of the ten most common mistakes online sellers make that lead to failure.
- Have a Plan – I am always amazed when I learn how many people buy a book or a training program and just dive right into it without thinking about what they are doing, setting goals and taking the time to work out a budget and a list of tasks they will need to do.
- If you want to start your business –you have to start your business –This is the opposite of the first tip, Have a Plan. I cannot tell you how many people plan and plan and plan and never get started. They are perfectionists and simply will not dive in until the water is at a perfect temperature, they are wearing a life vest and there is a lifeguard standing ready. At some point you just have to dive in. Yes take the time to write a basic plan, but every online business that I know about takes some experience. It really is a question of learning as you go. Starting an online business is the ultimate in on-the-job training.
- Set up Your Business Correctly – If you want to sell the occasional garage sale item on eBay you don’t have to worry about this, but if you want a real business then you have to take the time to set it up and organize it correctly. Most communities do not require a business license for people operating businesses out of their homes, but some are starting to do this as they see it as a source of revenue. So first check with your local community to see if you need a license. Next get a sales tax number. Whenever you sell an item that is shipped to someone in the same state you live in, then you need to collect and pay sales tax. To do this you need to register and get a number. Here is a link to an article that explains more about this and has links to the various state taxing agencies where you can apply for a number online. The other reason for getting a sales tax number is that a lot of wholesale sourcing companies will not deal with you unless you have one. Lastly get an IRS Tax ID Number. You can get this online at IRS.gov. This is just an ID number in the name of your business. This way you are not always giving out your social security number to people you don’t know. And once more –a lot of companies will not deal with you unless you have one of these numbers.
- Invest in Your Success – This is a common problem, especially if you’re not used to taking risks. Ask yourself where you want your business to be in three, six or twelve months. How big do you want your business to be and invest accordingly? If you are just looking for a part-time income then you don’t want to invest in expensive services and tools. However, if this is the way you hope to make a living, then you have to take some risks and invest in your success.
- Guard Your Time – Time has a price tag and it’s easy to overspend. Years ago I used to run a large commissioned sales force. Our sales people had two tasks; Setting appointments and making the sales presentation. I showed out sales people that assuming they closed half of their sales the time spent in front of a client was worth over $200 hour. So why not pay someone $10 an hour to prospect and set appointments for them. I even pointed out that our top three salespeople were doing that with great success. Yes almost none of them would invest the money to hire someone. That is like walking down the street and stepping over a $20 bill to pick up a $1 bill.
There are two types of tasks: high value tasks and low value tasks. Doing minuscule tasks that you could easily farm out or that you could subscribe to an automation service to perform is just silly. It wastes your time and therefore hurts your income. Spend your time on the high-value tasks that make you money.
- Stay on Top of Your Business – Nothing in the business world is static. Things change all the time and this is probably truer in the online business world where change happens quickly. Once you get your business up and running and you are making money, it is easy to put your feet up and relax. That is a crucial mistake. You should always be on the lookout for new products, new services that can help your business and new methods of marketing. I was guilty of this when it took me two years to recognize the marketing value of Twitter and Facebook. That mistake cost me thousands of dollars.
- Take your losses early – Believe me I have been there. You purchase some inventory knowing you are going to make a killing and then it turns out it just won’t sell. Or maybe you set up a new venture and no matter how hard you work or how much you spend you just can’t get it to work.
There is a time to be persistent and a time to quit. If you have inventory that is not selling, drop the price and get rid of it. You can use the money to invest into inventory that will sell. If you start a new venture give it a fair amount of time to become successful. As long as you see improvement and growth –even if it’s slow, then you should keep going. But if you are not seeing a light at the end of the tunnel –take your losses and move on.
- Get help when you need it – I never had any formal training in writing. When I started writing my eBay books it showed. I would get email from readers pointing out mistakes in my books. Finally I realized that I needed help. Fortunately my son had recently married a British lady who was a very good writer. I hired her to edit and format my books. Over time my writing improved just by looking at the corrections she would make in my books. Over time, she was making fewer and fewer corrections as my writing improved. Do I still make the occasional error –of course I do (and my readers still point them out). But now my books have a professional, yet personal look and feel that I strive for.
- Network – Networking is nothing more than making friends and acquaintances with others who work in your field or related fields. I have even made friends with a few of my competitors. These are folks I can call on for advice. For example, my friend Jim Cockrum has become an expert on outsourcing. I was reluctant to try outsourcing because of all of the horror stories I had heard. Recently I was looking for some help with some web tasks and I reached out to him and he put me in touch with the perfect person. Had I not had that relationship there is no telling how many people I would have had to go through to find the right person.
- Understand your expenses — I see this all the time. People go into business and start spending money and they have no idea if they are profitable or not. Experts claim that most new businesses fail because they are undercapitalized –that may be true for brick and mortar businesses. But I am willing to bet that most new businesses fail because they don’t understand their expenses and have no idea hot to track their cash flow. At first you can track your expenses on an Excel worksheet. Just put down the money coming in, in the left-hand column and list your expenses in the right-hand column. When the total of the left hand column is greater than the right, then you are making money. If after a while you are not making money, start looking at the expenses in the right-hand column and figure out which ones you can eliminate or reduce. After a while you may wish to invest in a bookkeeping program like QuickBooks. It is easy to learn and can be a very powerful tool to help you understand and manage expenses.