Increasingly, more people own or are growing their businesses online with varying degrees of success. It is important for internet entrepreneurs to be aware of the advantages and disadvantages of doing business online as this knowledge will empower them to make the right decisions and implement the correct strategies if they do go ahead and start a business on the internet. Below are the main advantages and disadvantages of running an online business.
Start-up costs are relatively cheaper than bricks and mortar businesses. Some business-in-a-box programs cost as little as $400, some even cheaper. If you are setting up your own website with your business plan you may only need to pay for a domain name and web hosting which would cost you less than $100. Even for the most expensive opportunities, they are still way cheaper than other businesses. The top scale start up costs for internet business could be $20k, which might seem expensive but when compared with businesses like the MacDonald’s franchise which cost over a quarter of a million dollars, then it puts things into better perspective. Operational costs and administrative expenses are also relatively lower than other businesses with little or no staff required. Many internet entrepreneurs work from home which means that expenses like lighting and heating and office expenses which would normally be incurred in an office block, are saved. Running a business online gives great flexibility. This is because the business can be run from anywhere. An entrepreneur could be on the beach on holiday with her family and still be running her business normally. This flexibility helps the entrepreneur does as she pleases with her time. She may decide to work between 12 midnight and 6 am if that is her most productive hours. Online businesses can reap the rewards of free and cheap advertising, through videos, article marketing and social marketing. Even with more expensive advertising options like pay per click, due to the number of Internet users, to potential to grow your business is very high especially if you can effectively drive traffic to your website.
Competition is high as increasingly people are becoming switched on to the advantages of running an online business and also more technology savvy and are growing their businesses. The number of people starting a business online is increasing at high levels and they are all competing for traffic which makes it harder to break through. The Internet is a very dynamic marketplace. Consumer tastes vary widely and change frequently. Therefore, by focusing on one business idea or income stream, the entrepreneur risks being left behind by new products and services as consumers chase the next best product or service. Even when the entrepreneur has a winning business model, competitors can easily copy it and therefore impact negatively on profits. Getting to grips with technology to sustain competitive advantage can be a limiting factor especially if the entrepreneur depends on himself and hires no staff. This disadvantage can be overcome by either outsourcing or employing staff full time or on contract basis. It may take time for the business to get off the ground as the entrepreneur builds his online presence and if the business is not run properly cash flow problems may hinder the success of the business. It is important that the marketing and other costs are very carefully budgeted for over a period to take into account the possibility that profits may take a while to materialise. Running an online business is empowering and can be profitable. A lot of these businesses fail because entrepreneurs are not mindful of the advantages and disadvantages and have not planned accordingly. While it is relatively easier and cheaper to start and grow an online business than a traditional bricks and mortar business, that advantage can also be an advantage as competitors enjoy the same benefits.