Starting an online business requires some planning. An entrepreneur needs to gauge demand, understand how SEO and digital ads work and know how to acquire customers cost-efficiently. If the formula works, the business can scale rapidly. As stated in the “Enabling Digital Entrepreneurs” report by World Bank Group, “many digital entrepreneurs are ‘born global’ and have the ability to grow and scale across borders very quickly.”
Online spending has skyrocketed in recent years, and continued growth is likely as people continue to stay home, which "creates huge opportunities for internet stores,” says Mathieu Jang in an interview. He’s the co-founder of Affiliate Institute, a Las Vegas-based digital marketing training firm that helps members grow revenue online.
Jang created a 12-week accelerator program that optimizes students’ affiliate-marketing practices. Aside from the technical aspects of ecommerce, he says it’s critical to have the proper mindset and remove notions of a personal limitation: “The world doesn’t happen to successful marketers. Top performers happen to the world.”
In the U.S., ecommerce now represents 16 percent of all retail sales, according to the Commerce Department. And Amazon.com accounts for more than one-third of ecommerce. Thus, a small business can potentially reach a massive audience. However, there are pitfalls to avoid.
Related: 3 Things You Need to Know Before Starting a Delivery Service Business1. Not understanding your target customer
You can burn plenty of cash by running ineffective ads. Bad marketing campaigns increase the cost of acquiring a customer, which is a crucial metric for a digital venture. There’s much noise on social and the web, which can confuse how novices approach campaigns. You need to truly understand the target audience in order to optimize ads. That means being effective with location, interests, design, calls to action and other factors that increase conversions and lower customer-acquisition costs.
The sales volume for merchandise is huge. For example, the online market for apparel, footwear and accessories will hit $4 trillion this year. Shopping on the web has also increased demand for online services like SEO, website building, graphic design and advertising. A high level of understanding means you’ve properly identified a niche. By knowing who’ll buy and who won’t, you can optimize a website’s content based on that niche, putting you in a better position to create the appropriate landing pages, newsletters, brochures and social posts to attract relevant traffic. When you publish better content, you’ll improve inbound marketing metrics, as well as increase user engagement.
Owners of physical storefronts had it easier because a target consumer was often someone who lived nearby or an adjacent town, but online obviously has no geographic boundaries. It helps to create a digital persona of who you’re targeting. What does your ideal shopper look and behave like? What style of clothing or shoes are they seeking? Which features matter most? You may be able to find profiling tools on social platforms that help to create target profiles. A business owner cannot successfully carve out a niche without identifying their customers.2. Working as a lone wolf
It helps greatly to already possess knowledge of online practices like SEO, ads, ecommerce, email campaigns and social media best practices, but there can be frustrating blind spots. You may be good at running Facebook ads but flounder at writing landing pages. Or you may have high open rates on email campaigns but suffer low purchase conversions. Scott Smith, the founder of 7 Figure Surfer, said in a recent phone call, “During my six years working online, I often had to figure it out myself. I started from scratch and spent thousands of dollars in the process.”
Smith overcame these hurdles by getting a few mentors who showed solutions, as well as provided encouragement. A seasoned veteran can quickly teach entrepreneurs what works and what doesn’t, saving them headaches, time and money. It’s a good idea to attend conferences, meet-ups and networking events to exchange contact info with gurus. Leveraging other people’s expertise (in areas where you are weak) boosts the efficacy of campaigns. When setting up an ecommerce venture, small tweaks can pay big dividends.3. Not outsourcing or using automation tools
Outsourcing enables business owners to cost-effectively tap the skills of independent contractors, streamlining the business because they’re better at specific tasks than you are. Virtual assistants free up time so you can focus on acquiring customers and providing after-purchase support. Hiring a video producer to create a popular TikTok video is a more effective use of time and budget than doing it yourself.
Or use a tool that’s saving business owners time. Neuro.net, the automation tool, acts as the outsourced call center for retail customers to get support from virtual agents in even complex conversations. And according to the company, it simulates human emotions so well that 99 percent of people don’t know they’re talking to a robot agent. Now that’s a bold claim for an automation tool, but data-processing company Powerry clearly believes it, given their recent $5.3 million dollar investment in Neuro.net. Nevertheless, it’s an affordable option for business owners who can’t quite afford full-time customer-support agents at their current growth stage.Related: Strapped for Cash? Three Modern Ways To Take Out A Small Business Loan.
It’s extremely important that business owners spend their limited time on activities that are crucial for success. Non-essential tasks should be delegated to others. An online business can reach global audiences and scale rapidly. Know your target audience, network with experts in a similar niche and build a team infrastructure that can scale your venture.
Starting a Digital Business? Here Are Common Pitfalls to Avoid
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Older Entrepreneurs Should Embrace Working From Home
Antonio’s, my kids’ favorite pizza-by-the-slice joint, will be fine. The rest of downtown Amherst, Mass., where I live — I’m not so sure.
Antonio’s is (or was, before March) perpetually swarming with high school and college students, local adults, and the occasional out-of-towner. It’s a hub of the Pleasant Street district, which is, by my count, home to three cafes, three bubble tea shops, more than 40 bars and restaurants, a century-old stationery store, five hair salons, two bookstores, one toy store, five boutiques, one movie theater, and a florist. Maybe Pleasant Street isn’t quite as hip as Williamsburg, Brooklyn, but it’s a great place to meet friends, browse or get ice cream. The large majority of the businesses are owned by women and members of minority groups, according to the Amherst Business Improvement District, and have fewer than 10 employees.
What will be left of that vibrant downtown when we emerge from the coronavirus crisis?
Eventually, the overall economy will recover, more or less. People will need to buy things and pay for services. But the coronavirus will radically reshape Main Streets across the country, accelerating changes long in the making — chain stores will replace mom-and-pop businesses, some storefronts will remain vacant, and cash that once went into local hands will be redirected to Amazon and Walmart. (Amazon chief executive Jeff Bezos owns The Washington Post.) The pandemic will reinforce and exacerbate what were already the two key economic trends of our lifetime: consolidation and inequality.
For decades, large businesses have been taking market share from small businesses, and the corporations at the top of the pyramid have been consolidating into ever-bigger megacorporations. In the 1980s, half of retail shopping took place in independent stores; today, it is less than one-quarter. From 2002 to 2017, Home Depot and Lowes almost doubled their joint share of the home-improvement retail market, from 42 to 81 percent. Even before the coronavirus struck, in 43 metropolitan areas more than half of all groceries were bought at Walmart. Those trends will be amplified: Many small businesses and weaker corporations won’t have enough capital to outlast the pandemic, and their customers will be claimed by a handful of winners with the cash and technological infrastructure necessary to survive and prosper in the new environment.
For independent businesses, it’s all about cash right now. In Amherst, 3 out of 4 businesses have already had to stop operations or at least cut back. Across the country, the number of people working as business owners fell by more than 20 percent from February to April, and the picture has only become grimmer since. Yelp reports that 140,000 business on its site closed between March 1 and June 15, with 40 percent of the closures permanent. Today, fully 18 percent of small businesses — defined as those with fewer than 500 employees — in lodging and food services expect never to return to their pre-pandemic level of operations.
And while the economy seems to be improving, recovery is a long way off — perhaps further than it seemed a month ago, as coronavirus cases climb. There’s simply no avoiding a severe recession caused by the widespread shutdown of the economy and prolonged by the diminished purchasing power of tens of millions of people whose expanded unemployment benefits will probably run out before they return to work. (They’re due to expire July 31, and Congress is fighting over what new relief to offer.) The Congressional Budget Office doesn’t expect total economic output to return to its pre-pandemic level until the second half of 2022.
What’s more, even as the economy picks up, social distancing, masks, sanitizing, etc. — all necessary to prevent fresh outbreaks — will severely limit retail and restaurant capacity and deter some customers from bothering to come out. Until there’s a vaccine (and perhaps even after that), brick-and-mortar retailers will need to develop processes for managing traffic flow and minimizing human contact, and self-checkout will become a competitive advantage. When they do eat out, hungry families are more likely to use drive-through lanes or curbside pickup after ordering online. Competing in this environment requires scale, technology and cash: scale to justify major new investments, technology to build new systems and processes (such as online-to-curbside order fulfillment), and cash to pay for it all. Most mom-and-pop businesses don’t have those resources.
Main Streets will therefore grow blander and more corporate, and a swath of storefronts will go dark permanently. That’s because the coronavirus has turbocharged the long-standing shift to online shopping. According to an analysis of transaction data by Adobe, U.S. shoppers spent 50 percent more online in April and May than usual. Amazon — which already had about 40 percent of the online retail market — was the biggest beneficiary, but Walmart, Target and Best Buy all doubled or almost doubled their Internet sales. The move online was driven first by shutdown orders but is likely to stick, at least among some consumers, as an acquired habit, further increasing corporate concentration because the e-commerce sector is dominated by so few players. Even large companies that lagged in moving business online, or had weak balance sheets, will have a hard time surviving — witness the recent bankruptcies of J. Crew, J.C. Penney and Nieman Marcus.
Entertainment is concentrating, too, shifting from movie theaters, concert halls and stadiums to video streamed to TVs, computers, tablets and phones. While sectors such as movie distribution were already highly concentrated, online video is even more so, dominated by a handful of tech companies (Google, Netflix, Amazon, Disney and Apple) and piped into your house by monopolist Internet service providers. At the peak of the shutdowns in April, consumption of streaming entertainment increased by 81 percent, according to Nielsen.
Concentration will also grow as the strongest companies buy up weaker ones that nonetheless have valuable brands and other assets — just as JPMorgan Chase, the least shaky of the major banks, absorbed Bear Stearns and Washington Mutual during the 2008 financial crisis and emerged as the largest bank in the country. Or weaker companies will be taken over by private-equity firms flush with cash, hunting for bargains. A decade ago, these firms scooped up hundreds of thousands of houses at rock-bottom prices. This time, they will take over struggling companies and commercial real estate properties and either strip them for cash — cutting back on long-term investments to pay themselves special dividends — or sell them at huge profits when the economy recovers.
All of these changes will profoundly affect the distribution of resources among business owners, managers and workers. The winners will mostly be executives of large corporations, partners at private-equity firms and investors in both — in short, the very rich. Businesses that serve the wealthy will be fine: In a world of increasing sameness, variety will be a luxury. Hermès could probably double its prices and sell by appointment only. Investment bankers can pay exorbitant amounts to eat at independent Michelin three-star restaurants with appropriately distanced tables.
In contrast, working-class and lower-skilled workers will experience lasting economic harm. Many people who lose their jobs during recessions suffer permanently reduced income — earning about 20 percent less, on average, than if they had not been laid off. They may never find jobs in their old occupations, since companies learn to make do with fewer workers after downturns. Indeed, after the 2008 financial crisis, many people never returned to the labor market. They dropped out: While the unemployment rate had fallen to historic lows by 2019, the share of the population age 20 to 64 that was working or looking for a job was still more than a percentage point below its 2008 peak — a difference representing more than 2 million people.
What jobs remain will largely be offered by large corporations adept at squeezing productivity out of lower-skilled workforces. Amazon, renowned for its brutally efficient warehouses, has already announced 125,000 new permanent jobs. Over time, more and more people will work for a handful of large, non-unionized firms that see employees as an infinitely renewable resource: interchangeable inputs to be replaced from the reserve army of the jobless if they become too demanding or get sick with covid-19.
None of this should be a surprise. Increasing inequality is the fundamental economic fact of our age. Since the late 1970s, the income share of the top 1 percent of earners has risen from 11 percent to more than 20 percent of national income. Those gains have been almost exactly balanced by losses among the bottom 50 percent. There are many reasons for this trend, including corporate concentration, the private-equity boom and technology, which both displaces lower-skilled workers and enriches a highly skilled elite. But the coronavirus amplifies the importance of all of them. The pandemic could compress decades of economic change into a matter of years.
All this will further hollow out what was once known as the American Dream. In our national mythology, the road to success involves working hard, saving money, getting a loan from the community bank and starting a small business — a path open to anyone, of any background, from anywhere in the world.
In truth, entrepreneurship has been in a slow decline for decades. The rate of new business formation by people in their prime working years fell by half from 1978 to 2009 and has remained flat since. Still, starting a business remains an important enabler of upward mobility. I have seen it happen in Amherst: Half of the downtown restaurants are owned by nonnative English speakers, according to the business development association.
Last week, I walked down Pleasant Street and talked to the owners of seven small businesses. No one was ready to admit defeat; I started a company myself, so I’m familiar with the stubborn optimism of the entrepreneur. But fear and uncertainty were common. “Everything is going to change,” said Amy Benson, the owner of Zanna, a clothing boutique. “If there’s a second wave and no financial aid,” said Dawn Eichhorn, the owner of Hair East, “then I’ll have to think about closing.”
In contrast to the old egalitarian model, however flawed, the post-coronavirus American Dream will be accessible only to children of the fortunate: Get an elite education, work for Google or Goldman Sachs, and start a technology company or become a partner at a private-equity firm.
We were already heading this way. The virus is bringing us there faster.
The economic fallout of the coronavirus has hit small businesses hard. As of June, one in five had closed temporarily or permanently. Those that are surviving have one thing in common: they are pivoting.
To get perspective from the trenches, I recently connected with Gusto COO Lexi Reese to learn more about the inspiring pivots she's seen and what other small business owners can learn from them.
Gusto serves 100,000 small businesses across the country, so Reese has a front-row seat to the extraordinary leadership it takes to make these pivots work.
The stories also feel personal to her. "I've pivoted many times throughout my career, shifting from documentary filmmaking in Nicaragua to working in the sex crimes unit of the Manhattan DA's office to working with small businesses at Amex, Google and now Gusto," she told me. "One question drove all these changes: how can I do the right thing for those I want to support?"3 lessons from small business owners
Reese says that while that same question drove small business leaders to make creative pivots before this crisis, now they're just trying to make it through each day and keep employees on payroll.
"Now more than ever," she says, "we can learn from small business leaders who have navigated this upheaval about how to do so with creativity, agility and a focus on community."1. Flex unique superpowers
The SnapBar, which provides custom photo booth rentals and selfie stations, saw three months of revenue disappear within a week when coronavirus hit Seattle. While reeling from the fallout, owner Sam Eitzen knew that thousands of local businesses were suffering, and decided that he wouldn't leave them behind.
First, Sam and his co-founders cut their salaries by 50%. Then, he spearheaded an all-night brainstorm to find a new way to leverage the company's superpowers: a creative team, developer talent, shipping materials and strong corporate connections.
The result, launched in four days, is Keep Your City Smiling. The SnapBar now manages the sale and shipment of gift boxes packed with art, candles, coffee and treats from local small businesses, many of which were struggling to sell products once stores closed. With this model, The SnapBar is giving customers a way to shop locally when they can't leave home.
"Sam and the SnapBar team are proving that creative thinking can pay off--in this case, using their superpowers to lift up their peers and bolster the business for the months ahead," said Reese. It's working: the gift boxes have helped other small businesses earn $500,000 in revenue.2. Follow your customers
Karla Lockett was working as a QA engineer in 2008 when she teamed up with her daughter to create skincare line Love Lurra. By 2020, business was booming, with 70% of their revenue coming from farmers' market sales where customers could see, touch, and test their products.
Amid shelter-in-place orders, Karla's direct customer contact disappeared overnight. Without missing a beat, she went all-in on her website and social media, investing in high-quality photography and seeking out customer reviews to recreate the in-person experience. Her quick pivot is paying off: Love Lurra's online sales are stronger than ever.
What pushes Karla forward is her commitment to inspiring and supporting other Black entrepreneurs. She hopes her story is proof that no matter your background, starting and running your own business is possible.3. Forge creative partnerships
In 2011, Lenore Estrada started Three Babes Bakeshop in San Francisco, which went on to gain national recognition. When the coronavirus hit, she found herself laying off most of her staff. Now, they're selling frozen pies and leading virtual baking lessons to keep the business running.
Lenore knew the San Francisco hospitality industry was struggling. Small businesses desperately needed predictable revenue while awaiting government support. Lenore turned to her network and, within weeks, launched the SF New Deal.
Her longtime friend, Twitch CEO Emmett Shear, donated $1 million to get the nonprofit running. Lenore built a model to create predictable revenue: paying restaurants to cook and deliver food to the city's most vulnerable populations. SF New Deal has now distributed more than 389,000 meals while supporting 86 restaurants.
Reese notes that while "most small business owners don't have someone in their network with $1 million to give, there's still much to learn from Lenore's approach. She identified what her community needed and turned to her network for a partner."
Lenore's efforts support the community's most food-insecure people while fortifying her business and the local hospitality industry.
Recovering from this crisis will require more of these scary but essential pivots. "Everyone from small business leaders to policymakers can take inspiration from these stories," says Reese. "Surviving this crisis and thriving beyond it will require identifying our superpowers and finding ways to better serve our communities."
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.