Every week i am approached by youngsters (and sometimes not so young-sters) asking to evaluate their dotcom idea for development and promotion costs. Being in the business I dutifully provide the cost estimates and whatever advice I can throw in. Without exception all of them have one thing in common – they all think their idea is Unique, Innovative and Sure to Work – “all it needs is a good website and little bit of marketing sprinkle and of we go.”

As someone who has seen tons of dotcoms come and go I thought I would quickly outline some of the most common pitfalls I’ve seen. Mind you I do not intend to discourage anyone, I just want them to be aware

Pitfall #1 – Believing that a ‘twist’ in a old concept equals new concept.

It goes like this – “There are many so-and-so in the market but my idea is to do it differently. They are doing it this way but we shall do it another way.”  The pitfall in this approach is that your ‘twist’ or ‘differentiating factor’ might not be enough of a long term competitive advatage especially against embedded competitors with tried and tested processes.

Pitfall #2 – Starting a dotcom with none or negligible real world infrastructure.

A good idea is just that – a good idea, an ethereal thing. It needs to be translated into reality, both virtual and actual. Most people who come to me with dotcom ideas grossly understimate the on-the-ground requirements that thier little (or not so little) venture will require. A good website is a must but so is a back office, staff, accounts, customer support, legal and all the other requirements for a good business. A dotcom business gives the illusion of being self contained in the website but the reality is that it takes more, a lot more.

Pitfall #3 – Dotcoms eat money for breakfast, lunch and dinner. Do you have enough to feed it.

A very common and deadly misconception is that a dotcom can be started on a shoestring and is much less expensive than a real world business. Thats complete nonsense. When asked how they intend to fund the venture, most people are quite fuzzy with the source of funding. Its either their own money or friends and family, or even a rich uncle. But when the dotcom eats through the money they are quickly in trouble and run from pillar to post trying to raise money. Sadly due to their haphazard financial planning at the beggining its very difficult to get funded at a later stage.

Pitfall #4 – A dotcom business is still a business. Normal business rules apply.

It amazes me how many people who would never be able to run a real world business think they can run an online one. Its as if in thier minds the rules for running a dotcom are somehow different or suspended. In an online business cashflow, sales, receivables, human resources, capital and business processes are just as important as in a normal business. Maybe even more so.

Pitfall #5 – Trying to create something from nothing.

What has an office executive got in common with a florist? Nothing. Yet it does not stop the executive from starting an online florist shop or a sales person from trying to sell chocolates online. Lines which could never be crossed in the real world are easily stepped over in the online one. But industry experience does count and sooner or later the executive or office employee will not be able to handle the rigors of specific business they chose. Each professsion has certain tricks, idiosyncrasies and challenges. In my experience the dotcoms that succeed the best are usually extensions of a brick and mortar business with some years running it in the real world.

Overall, before starting a dotcom or online business you need to get a ‘Serious Reality Check.’  Throw out airy-fairy assumptions. Crunch the numbers. Account for real world costs and issues.

In future posts we shall look at the different aspects to starting and running an online business.

Cheers,
Ron

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Lets look at both, strategy and time.

Strategy: Picking the right strategy is the most important part of going online. Many times clients try to copy what another business is doing or try to copy their brick and mortar business wholesale online. Both strategies may or may not work, but most often they dont. Nothing beats a well thought out tailormade solution for going online.

What are the factors that dictate the strategy you choose?

• What parts of the business easily translate online and which ones should remain in the physical entity (which I shall call offline now). Trying to transfer all the elements of the business online rarely works.
• Is it going to help existing customers as well? Businesses so often are hunting for new customers that they forget that they might be able to give thier existing customers a better experience online as well.
• Is the online process straight forward or do you have to do handstands and convulted processes to try and fit the offline model to the online world. Sometimes a business simply has to invent new process for their websites seperate from their offline processes. It could also end up benefiting the business the otherway around.
• Can some of the online features eliminate some of the offline chores or processes. This works well for customer support and followup processing.
• And finally the mother of all points, is there really demand for your product online?

Time: Many products take a long time to catch up with demand online. Sometimes it take an evangilical belief in your website and tons of patience till you achive traffic justifying the time and cost of the website. Will it take 1 month, 2 months, 6 months or a year? Maybe more? Depends on your promotion budget, SEO, word of mouth and plain dumb luck.

Over time your website might or might not become a blockbuster but it can always become a handy complementary tool for your offline business .

Assessing Demand

Assessing demand for your product online can be a tricky devil. You might do research which indicates that the demand is great but after launch you might end up swatting flies.

Some ways to access online demand

• Google Adwords Sandbox: This is a handy tool to find out how many people are searching for the keywords related to your products and hence how many visitors you can expect once you start your SEO (Search Engine Optimization).
• Ask your core customers: This in my view is one of the best ways. Your core customers who are loyal to you also match the profile of your ideal target prospects. If they feel going online for services is not a problem then chances are your core prospects might also feel the same. But if your core customers do shoot it down, don’t abandon the idea, they just might be behind the curve a bit and might join the bandwagon once you launch the site.
• Send out sample surveys: Get your hands on an email list of your industry and send out a sample survey (tagged with a small gift for taking the survey) and ask the relevant questions. You might be surprised by the response. Make sure you leave room in your survey to accept ideas and pain points.

All the research and surveys and planning and strategy cannot replace the real thing. Weigh the risks and costs, enter softly at first, test the waters and slowly build up your online services. Discard what does not work and retain and enhance which does.

Some common sense and a reality check will be more effective than the latest technologies or brilliant idea.

Cheers,
Ron