A few weeks ago, a client asked me to give her a ballpark estimate of what she should expect to pay for a basic e-commerce website. She didn’t want anything fancy, just something reliable, secure, appealing, and functional, with which she could sell her husband’s custom-made fishing tackle. She and her husband saw an opportunity to expand his hobby into a home-based business, leveraging the power, reach, and potential of the World Wide Web.
Like many entrepreneurs who start a home based business, her budget was tight, and so my estimate of five or six thousand dollars or more for a custom ecommerce would consume most of it. (Yes, dear reader, I do know of alternatives, such as eBay’s ProStores – www.prostores.com – or StoresOnline – www.storesonline.com – neither of which require design nor development costs to implement. However, as frequent readers know, a custom developed website can be an asset – especially if you license it properly!). The remainder, she explained, would have to suffice until the business began to make money.
She saw no need to create a business plan assuming that the only costs incurred will be the upfront design and development of the website, the domain registration, and the monthly hosting. She had failed to budget for any other expenses – the classic trap of viewing e-business as something other than a “real” business with “real” recurring expenses. Perhaps it is because of the impersonal nature of e-business – transactions happen autonomously – which creates the illusion that once launched, the website can be ignored, and the only reminder of its continued functioning is the trip to the bank to deposit the sales receipts. This mentality is most evident in the increase in queries regarding crop shipping.
However, just like any business, there are costs to be incurred, regardless if they are paid in cash, or paid in time and effort. Consider the cost of security. Remaining vigilant by occasionally testing your order process, keeping your computers anti-virus definitions up-to-date, and remaining informed as to the latest scams, frauds, phishing, and other dangers all takes time. Another hidden cost is the time consumed in providing customer service. Coordinating returns, processing refunds, answer questions, and arranging special requests is an important part of the business, and good customer service can translate into repeat business. Considering the participatory nature of Web 2.0, it is important to remain active by participating and moderating the activity on your website. Interactivity, in the form of product reviews, forums, bulletin boards, and social networking sites all place demands on your time which is often not directly revenue generating, but important nonetheless.
As browsers and operating systems evolve, computer monitors get larger and cheaper, and the use of web-enabled devices, such as the Blackberry and iPhone, become increasingly common, the necessity of frequently reviewing your websites technical attributes cannot be overlooked. If, for instance, the majority of your customers visit your website using mobile devices, you must ensure that your website adapts to changes in technology so as to remain accessible, usable, and functional for your customers.
The reality is that your e-business needs to be found by your customers, but you are competing on a global scale for the important first page on Google, and getting found takes time and effort. What was once a positive reason to sell online – sell to a global marketplace – also means you are competing with businesses around the world. Arguably, the largest expense in time and money, after the design and development of the website, will be marketing to the search engines. Activities such as keyword research, content updates, blogging for business, submitting your site to the search engines, pay-per-click advertising, link building, and routinely reviewing traffic stats and activity using web analytics, necessitate time, effort, and commitment in order to ensure your site will be found by your customers.
This is why proper business planning is so important. Securing financing is a big part of the business plan – and often not even considered when starting an e-business. Keeping an eye on security, providing excellent customer service, participating in the community, staying current with advances in technology, and marketing your site to the search engines all require time and money. While it is possible to absorb this expenses temporarily, proper financing will sustain your business until it generates positive cash flow. Failing to plan, is planning to fail.