Expanding the business

An obvious choice is to add products or services to your existing site. The purpose is to use variety to attract a wider customer base while bringing in larger revenues. This strategy is certainly the one that many entrepreneurs implement regularly, whether they realize it or not. After you consciously identify it as your preferred growth strategy, you can become more aggressive and targeted with your actions.

Here are the pros of expanding your business:

• You retain full control of the business, just like always.
• You can explore different areas, which can be fun for an entrepreneur.

The cons of expanding your business are that they

• Can take more time to show results
• Might require a large investment in back-end systems to support added inventory or a product base

We discuss ways to expand your product base in Chapter 5 of this minibook.

Acquiring other sites

Buying existing sites is another fairly typical development strategy. You can easily start by making a list of competitors’ sites that might be worth purchasing. Also look at sites that complement your current business. These noncompeting sites offer products or services that are different yet still a good fit.

Of course, the larger or more established a site, the higher its asking price. Sometimes, a better strategy is to identify up-and-coming sites or sites that (like yours) have also remained small.

The pros of acquiring other sites are that they

• Provide a quick way to expand or diversify
• Introduce your current site to a wider customer base

The cons of acquiring other sites are that they

• Usually require substantial out-of-pocket cash
• Sometimes aren’t for sale, so it takes time to convince their owners to negotiate a price

Becoming an affiliate or a partner

Maybe you’re not ready to purchase another company outright. A better solution might be to expand through partnering opportunities or affiliate programs. For example, you might partner with a national membership-based organization as the sole provider of a particular service or product.

Expanding your business through partnership agreements is a good idea. You’re typically unrestricted in the number of partners you have, and you retain control — and can cancel an agreement if the partnership doesn’t work.

In a similar arrangement, starting your own affiliate program becomes a viable option. Unlike in a partnership, you're developing a specific program that another site can replicate in exchange for a commission.

Although an affiliate program is often associated with e-books and other content products, it’s a viable delivery method for almost any product or service. You even see traditional e-commerce stores offering a flat percentage of revenues to affiliate sites that sell their products by using links. Or you might see payroll services companies that create affiliate opportunities. In that case, the affiliate earns a flat dollar amount for every customer referral that comes through the site.

To make affiliate programs attractive (and worthwhile) for others to participate in, you should have a viable product to promote and pay a decent commission.

The pros of going the affiliate or partner route are that they

• Are relatively easy to set up
• Are inexpensive to develop
• Are compatible with almost any type of business (whether it’s product-, content-, or service-oriented)
• Can produce a quick return on sales

Here are the cons of going the affiliate or partner route:

• Brand control becomes an issue (primarily with affiliates), as you lend your name for others to use.
• Administrative duties increase (monitoring affiliate sales, cutting checks, and distributing 1099 forms, for example).
• You’re essentially marketing two companies now (your original concept and your affiliate or partner program).

In Book 4, Chapter 2, we discuss signing up for affiliate programs.

Going international

Expanding your operations outside your home country is a proposition that’s both exciting and scary. This strategy becomes easier when you have, or a partner has, experience in working outside the United States. However, the return on the investment can be lucrative. Products can become oversaturated in the ever-competitive American market. Yet overseas, the product might be a relatively new and sought-after item with few — if any — distributors.

The pros of taking your business internationally are that they can

• Have more opportunity for growth and increased sales in foreign countries
• Achieve global name recognition

Here are the cons of taking your business internationally:

• Language barriers can complicate the process.
• Selling the product might require setting up foreign distributors and manufacturing plants.
• Laws and regulations vary by country, which adds another layer of compliance.

Bringing in financial partners

Recruiting a financial partner might be a desirable option for your site. If you do it correctly, you end up with needed money for growth and a business partner who has expertise that you might not possess. Finding a financial partner is a little different from simply going out and finding money to support your expansion because you’re taking on an actual partner in this scenario.

Unlike a bank or another lender, a financial partner is a person who has a say-so in your business. She participates in both operational and financial decisions. You can consider angel investors, depending on the arrangement, and venture capitalists as examples of investment partners (see Book 1, Chapter 4). More than likely, your financial partner will end up being a former coworker, a business associate, or a friend or family member.

The pros of finding a financial partner are that the person

• Provides needed capital to upgrade and expand your site
• Introduces fresh, alternative ideas from an experienced financial partner

Here are the cons of including a financial partner:

• You sacrifice some control (and ownership) of your business.
• The situation can become ugly if you find out that you don’t share a united vision for growth.
• Your partner might bail out at an inopportune time.

An alternative to bringing in financial partners is to get a peer-to-peer loan or investment by using websites such as Prosper (www.prosper.com) or Lending Club (www.lendingclub.com). Recent changes in finance laws have allowed smaller companies to crowdsource, or raise funds from lots of small investors, rather than seek out a small number of large investors. Check out sites such as Grow Venture Community Group (group.growvc.com) or MicroVentures (www.microventures.com) for more information.

Going public

The good old days are connected with a bit of nostalgia. You might remember the heyday of the dot-com era, when companies went public with shares breaking Wall Street records. Well, going public remains a viable option for your Internet business, even if it takes more work (and a good battle against skepticism). Companies such as Google, GoDaddy, and LinkedIn certainly have proven that the dot-com magic is still viable.

Here’s the catch: You have to follow the same game plan as any other company that wants to go public, which includes these tasks:

• Create a sustainable business concept that’s capable of keeping shareholders happy over the long haul. Your financial statements must be in tip-top shape, and you must have a critical strategy in place to support sustained growth.
• Take a closer look at your employees, vendor partnerships, and customers, and then begin investing in some heavy hitters (if you haven’t already).
• Attract executives who are knowledgeable about the process of going public, and who have substantial experience with recognizable companies. You also need to partner with, or sell to, big-name vendors and customers. The more attention your company gets, the higher your public stock will be.

The pros of going public with your company are that you

• Increase its net worth (you hope)
• Jump into the big leagues

The cons of going public with your company are that

• The process is complicated, time consuming, and expensive.
• You get no guarantees.
• A venture capitalist (a firm or person that prepares your company to go public) might ask you to step down as CEO or president if your skills aren’t a match for taking your company public.

You usually don’t decide to go public overnight. If you’re on this path, you will experience some lower-level rounds of fundraising first. During that time, you typically work with angel investors and work your way up to venture capitalists.

Passing on your company and retiring

For some owners, passing the company on to a family member might qualify as following an exit strategy rather than making plans for growth. We disagree. In this particular strategy, you’re in essence growing your heir, who in turn grows the business. The first step is to decide whether you have a next-generation family member interested in taking over your business. Then you have to take an honest and objective approach to deciding whether that person has the necessary skills or talents. At this point, it’s like hiring an employee whom you plan to groom for a management position. Obviously, it’s not always easy to be objective.

The upside is that you might find an untapped resource who has a terrific energy level and pushes you.

The pros of handing off your business to someone else are that

• You continue to have a lifeline to the business, even after you step away from it.
• The person brings a fresh perspective that can accelerate your site’s growth.
• Your business stays within your family.

The cons of handing off your business to someone else are that

• “Grooming” an heir can take several years.
• You might hurt your relationship or cause increased tension in the family.
• The business stays within the family. (Yes, this one is also a pro — family has a tendency to have both positive and negative aspects in running a business.)

Selling your site

Selling your site is considered an exit strategy. Yet, selling your site is sometimes the only way to grow it.

You might be tired, tapped out of money, and looking for a way out. Maybe you recognize that your site has fantastic potential and you lack the experience and knowledge to make it happen. You might also have a limited window of opportunity, or you simply might not have the resources to expand your site within that optimal time frame.

Keep in mind that developing a plan to identify a buyer is quite different from someone unexpectedly calling you with an offer. If selling is your strategy, preparing your business can take as long as 6 months to a year. If you have a smaller site, or have been lax in sticking to a management regimen, you need a few months just to clean up your organizational act.

Depending on your asking price and the current market, finding the right buyer can take another year (or longer). This time frame is where you see the difference between selling as an exit plan and selling as a growth strategy. When expansion by selling is your goal, finding the right buyer match is critical. A professional broker can help you identify key characteristics.

In general, you want to look for someone who has these characteristics:

• A shared vision for your site
• Experience in taking a business beyond the start-up phase or past the early-growth years
• Peers in the industry who can substantiate her reputation and skills
• Verifiable liquid assets and net worth to invest in the business beyond the purchase price

You can locate a reputable business broker through BizBuySell (www.bizbuysell.com). The site has a free, searchable database that’s broken out by state, as shown in Figure 6-1.

You don’t have to work with a professional to sell your site. However, a broker often has extensive contacts of potential buyers and can speed up the selling process. Regardless, selling your site might be the ideal opportunity for you.

Following are the pros of selling your company outright:

• You receive a potentially large chunk of change for all your hard work.
• The burden of growth is removed.
• You can try something else.

Here are the cons of selling your company outright:

• If you stay with the company, you lose control.
• If you leave outright, you have to start a new business from scratch, find a job, or retire.
• You have no guarantee that the buyer will succeed in growing the site.
• Because payment terms might be spread out, realizing the full sale price can take a while.
• The buyer may require you to sign a non-compete clause, which means you cannot compete with the buyer by starting another business in the same industry for many years. Given that your experience is heavily tied to the company you just sold, this could limit your opportunities in the future.
• The business could go under before you collect all your money, leaving the site wiped out and you fighting in court for restitution.

Selling your domain

An alternative to selling your entire business is to sell only its URL. A popular domain name can fetch a pretty penny, which can help you expand your site.

Suppose that you have a limited amount of money to invest in any type of tools for growth. However, a key asset is your domain name. You can, in theory, sell the domain — to provide a needed influx of capital — and retain, as a condition of the sale, the rights to all content and services. That way, you move the content to another domain and use the money from the sale to build up the new site.

This strategy is particularly feasible if you already own a domain for a smaller site that has a similar theme or customer demographic. Of course, unless you have another domain name in your back pocket, starting over might be difficult.

The pros of putting your domain name up for sale follow:

• The process is fast and can have a high monetary return.
• You retain ownership of your content, products, or services.
• You gain capital to reinvest in a new site.

Here are the cons of putting your domain name up for sale:

• The purchaser of your domain can develop a competing site that uses your old URL.
• The purchaser can use your domain name for a less-reputable type of site or as a gateway to a scam site.
• You lose traffic, search engine rankings, and ratings for your previous site.