A grave misconception exists where individuals entering the online business industry harbour a belief that starting an internet business is undemanding and easy. This notion is unfounded, as starting a business online is not in any way dissimilar to the traditional offline business. The fundamental principles adopted by every successful “brick and mortar” business should be applied to every new internet business.
Diverging from these principles will have catastrophic consequences to your online business start-up.
The wrongful approach to a new internet business will undoubtedly render the initiative pointless, and the monetary losses suffered are often irreversible. Gaining comprehensive knowledge of the online industry and arming yourself with basic business skills can be the difference between success and failure.
There are 5 detrimental errors made by people starting an internet business, and possessing the knowledge of what these errors are, is the first step to avoiding them.
The top 5 mistakes made by new internet business owners are:
1. Failure to Conduct Detailed Market Research
New online businesses are being developed everyday, and the level of competition grows sporadically every hour. Many new internet businesses enter sub-markets within the online industry that are oversupplied and highly competitive. For example, some online entrepreneurs start by promoting outdated SEO solutions when this market is already saturated with the latest products in this field. This fatal error is the direct result of failing to conduct exhaustive market research.
In the offline world it is nonsensical to establish a tiny burger outlet next to a fast-food giant like McDonalds, but due to lack of market research in the online industry this is exactly what many internet businesses are effectively doing. A systematic and detailed approach to market research is pertinent to the success of a new internet business.
2. Non-Existence of a Business Plan
Marching into battle without a plan is undeniably the easiest way to be defeated. Formulating a comprehensive business plan is a fundamental element that predetermines what your new internet business proposes to accomplish, and how you intend to accomplish these objectives. A clear business plan prepares you for what lies ahead. Most internet businesses owners start a website with no plan.
Contrary to common belief setting up a successful online business requires money and time. A business plan should serve as a precursor for what resources will be required to manage the business effectively. You should take a holistic approach when developing a business plan, where every aspect and function of the business is considered, and appropriate resource plans are then formulated for each function.
3. Failure to Adopt a Unique Selling Proposition (USP)
A unique selling proposition (USP) is an element that differentiates your online business from another internet business that sells the same product; it provides a business with a competitive edge. In a competitive area like the web industry where homogenous websites, products and services are in their multitudes, it is imperative that your internet business offers something unique.
A unique selling proposition can be embedded in the pricing structure, promotional strategy, product/service offering, or in the placement (location or distribution) strategy.
4. Early Diversification
While diversifying your business allows for expansion, it must be noted that premature diversification is a prevalent factor that leads to business failure. A new business’ core competencies require complete focus in the initial stages. By diversifying too early you essentially remove your vision from the goals and objectives that you set out to realize.
Diversification should only be considered once your initial objectives are met, and the business is seeing substantial positive cash-flow.
5. Failure to Prioritize Your Business
Many new internet business owners categorize their business as a hobby—something they carry out in their spare-time. This mindset is a predicator to business failure. Neglecting your internet business will certainly impact the business negatively, and treating your business as a “hobby” will undoubtedly mark the end of that particular internet business.
Prioritizing requires an investment of time, money, and “heart”. If your heart is not in it then the business will dissipate into nothingness.
These basic principles are essential to the success and growth of a new internet business. Abiding to these principles will leverage your business, and it will ensure you possess the critical tools necessary for success.
Alex Papa is an entrepreneur and investor. In the last 8 years he has set up many offline and online businesses.