Chapter 2
IN THIS CHAPTER
Training yourself to think like an online entrepreneur
Evaluating your business idea’s chances for success
Scrutinizing your future customers
Picking apart your competitors
Congratulations! After you make the emotional commitment to get started, you have to shift gears and concentrate on the next set of actions that will make your Internet business a reality. From evaluating the potential success of your idea to identifying who will buy your products, in this chapter you gain the tools to help get your idea off the ground. In the process, you begin thinking like an online entrepreneur and find out how to start your business on the right track.
Using the Internet to conduct business is similar in many ways to operating a traditional company. In fact, many traditional offline businesses now conduct part of their business online. Today, consumers research products and services online and expect to be able to buy products or services online, even from bricks-and-mortar stores. For those reasons, the lines between online and offline businesses are increasingly blurred.
Profitability (or how much money you make after subtracting your expenses), taxes, marketing, advertising, and customer feedback are other examples of factors that affect your business whether it’s online or offline. However, some exceptions set apart an online business, particularly in regard to how you deliver products and service your customers. Even the most experienced entrepreneur can get caught in the trap of forgetting those differences. Your attitude and how you approach the business as an online entrepreneur can make a huge difference in how successful you are online.
Adjusting your attitude slightly and viewing business from behind the lens of an online entrepreneur isn’t difficult. Doing so is simply a matter of recognizing that the Internet changes the way you can and should operate your online business.
When you think like an online entrepreneur, you
Communicate visually. Equally important to the words you choose are the images you incorporate into your site. Whether you use purchased stock photos or pictures that you take yourself, you want images to be crisp, clear, and relevant to the message you are communicating. In addition, product images should be the best quality possible.
As an entrepreneur, you must choose your words, images — and even music — carefully. Your site’s content, including the words and pictures you use on your web, will
Every successful business begins with that first idea. From fast-food restaurants to selling cosmetics from home, Ray Kroc first dreamed of hamburgers at McDonald’s and Mary Kay visualized selling makeup door to door. When the Internet first provided similar opportunities, Jeff Bezos visualized a way for consumers to buy everything from books to clothing and have it delivered straight to their doorsteps through Amazon. Your dream for an innovative new business is no exception — and the Internet has continued to make it easier than ever to launch a successful business. Maybe you have several unique concepts to choose from or are firmly set on a single one. Either way, how do you decide whether you should quit your day job and focus on your brilliant idea? You have to pick apart the idea, observe closely, and determine whether it merits a full-time (or part-time) business.
One question often asked is whether or not the idea has to be original. Innovative, never-before-broached ideas for an online business certainly exist. But being the first to have and implement an original idea is not a guarantee for success. Likewise, there may be exceptional opportunities for updating or modifying an existing business to an online format. Consider that Netflix became an online streaming version of bricks-and-mortar video rental stores. The video rental concept was not new, but Netflix took video rental online and eventually became part of the reason for the demise of the leading offline video rental giant, Blockbuster. Ultimately, your concept for the business, whether it’s a new idea or a twist on an existing idea, must be well thought out to increase your probability for success. This section describes the three methods you can use to decide whether your idea has potential.
The best place to begin gathering information is from sources closest to you. Be prepared to receive varying opinions — both positive and negative. Use this input as a general gauge of whether to continue reaching out to the next source of information. You and your idea are in the center, surrounded by three rings from which to collect input, as shown in Figure 2-1. If the ring closest to you provides mostly positive input, proceed to the next ring.
Ring 1 consists of your friends, family, and coworkers. Ask them these questions:
In Ring 2, seek input from industry professionals, investors, other entrepreneurs, and organizations that offer support to small businesses. Ask questions similar to those listed for Ring 1. Because of the experience of the people in Ring 2, you should give more weight to their responses. Small-business support resources include the following:
www.sba.gov
): The SBA, a government-sponsored organization, helps small-business owners with loans, paperwork navigation, free seminars, and other services.www.sba.gov/sbdc
): The SBDC is a partnership between the SBA and universities. Together, they provide support, mentoring, training, and educational services to both new and established small businesses. SBDCs are available through local branches, often located in a partnering university or Chamber of Commerce.www.uschamber.com
): From small towns to large cities, all local chambers help owners develop their small businesses.www.score.org
): This network of retired executives matches small-business owners with business-exec retirees who volunteer their time to help small businesses develop and prosper.In Ring 3 are your potential customers. Ask them these questions:
If you find that you’re receiving a majority of positive feedback from sources in all three rings, you can consider your idea worthwhile. Or at least you have enough validation to continue to the next phase of your evaluation process. Later, you may want to return to this list of friends and customers and ask them to “beta” test, or try out an early version of your product or service before it is fully available to the general public.
Another popular method for determining the pros and cons of an idea is referred to as SWOT analysis. (SWOT is short for strengths, weaknesses, opportunities, and threats.) Companies use it for several reasons, including as a decision-making tool for product development. The simple process also lends itself to a more thorough investigation of your business idea. This section covers how you can put your idea to the SWOT test!
Create your own SWOT chart by following these steps:
On paper, draw a cross (or a box divided in half both horizontally and vertically) to create four quadrants, and label them as shown in Figure 2-2.
After you draw and label the chart, you can begin to fill in the details.
In each quadrant, write down the factors that influence or contribute to each of your four SWOT categories.
Strengths and weaknesses are considered internal factors that control or specifically contribute (good or bad) to the business concept. Opportunities and threats are external factors that are influenced to some extent by the environment or are otherwise outside of your control.
Analyze the information you filled in. Ask yourself the following questions to start developing your SWOT analysis:
Strengths
Weaknesses
Opportunities
Threats
Use the feedback you receive from your informal research (during the Three Rings exercise) as factors in your SWOT quadrants. Combining other people’s opinions with your own provides a more comprehensive — and useful — SWOT analysis.
After you fill in the categories of your first SWOT analysis, take a look at which quadrants contain the most factors or the most significant factors.
The listed strengths and opportunities indicate the advantage you might have in the marketplace. If you’re lucky, they outweigh your weaknesses and challenges. Perhaps you can now see what you must do to offset those disadvantages if you really want your idea to work.
Whatever the outcome of your analysis, you should have a better feel for the value of your business idea after viewing the completed SWOT analysis.
After your idea gains a nod of approval from friends and family and the SWOT analysis indicates that your product has merit, your idea must jump through one more hoop for complete validation. A feasibility study is a somewhat formal, written process that helps you determine whether your idea is realistic. The goal of the study is to provide you with final proof that your business concept is viable.
A feasibility study answers these basic questions:
A feasibility study kicks your analysis up a notch. It relies on in-depth research to provide more detailed answers to questions in five primary areas, as shown in Figure 2-3.
Now you know how much information you have to gather in your feasibility study. As you answer all these questions, make sure that you back up those answers with detailed research. Then write your results in a one-page summary that discusses what you discovered. Your summary should answer all of the questions in each category and provide proof of whether you have a viable idea. After the validation process is complete, you can turn your attention to the next piece of the business success puzzle: potential customers.
The terms target market and target customer are defined as the entities that buy your product or service. Although these phrases are sometimes used interchangeably, market is often used to describe a collection of individual target customers. The term buyer persona is also used as a way of providing a detailed description (or persona) of your typical customers. You most likely have several types of customers, each with a unique persona — and you mostly likely have several buyer personas that make up your target customers.
Knowing your target customer is an important advantage when you begin marketing. As we explain in earlier sections in this chapter, recognizing your primary customers lends credibility to your business concept. The more you know about your target customers, the more easily and cost-efficiently you can build your business and market to these folks.
How do you decide who this person is or who the groups of people are? You can create buyer personas by describing or segmenting your customers based on different traits or classifications. The two most common classifications are
You can describe your customers in other terms as well, such as these categories:
Geographic preferences: Point out where people live. The location can include a specific neighborhood, city, state, region, or even country. Customers can also be segmented according to home (or residential) locations versus business locations.
Technology has made it easy to target your customers by location. Knowing where your customers are in terms of geography can be a critical competitive advantage.
Typically, your target market includes customers described by a mixture of the terms and categories in this list, which you use to develop your buyer persona. For instance, if you sell trendy men’s clothing at discounted prices, one buyer persona for your target market might be described this way:
In the preceding section, we talk about the components of a market description. Where do you get the information to build this type of description, though? You can use any or all of the following methods to gather information for your customer profile:
www.gartner.com
), Forrester (https://go.forrester.com
), or IDC (www.idc.com
).Use this information to pinpoint who your customer is.
If you’re serious about developing a successful online business, you need every advantage possible. That means getting to know not only who your customers are but also who else is after their business. Start by writing down a list of your top three to five competitors.
Keep this list on hand, and document basic information, such as
Be sure to maintain a list of your secondary competitors, too. These companies don’t sell your exact products or services but come close enough to compete for your customers’ dollars.
Hooray! You completed your due diligence and have a fat file of information about your stiffest competition. What now? This kind of data does you no good when it just takes up space in a filing cabinet. Use it to your advantage.
Sift through your collected information again to refresh your memory (because you probably have lots of information), and then follow these steps:
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