Strategy & Planning

Expanding to Online Business

Expanding to Online Business

How can taking your business to the Web help expand your market? What do you need to know about taking the next step to cyberspace?

By Heather Huntingtion


Web sites have become an accepted form of transacting business. So how do you know when it is time to bring your business online? Can a Web site really help your company grow? “There’s a myriad of reasons why you’d want to start an online business to supplement your current brick-and-mortar business,” says John Barry, CEO of Initech Solutions Inc., a consulting services firm in Chicago. “The primary one is adding an additional revenue stream. You don’t need to rent another location. You don’t need to stock additional inventory. You become omnipresent as opposed to geographically restricted to your storefront(s).”

The Benefits of Cyberspace
Not only can you do online business anywhere, but anytime as well. “Your business always exists, whether someone is searching at 3 a.m. on a Wednesday or 7 p.m. on a Sunday,” says Andrew Lovasz, associate director of search marketing for Enlighten, an interactive professional services firm based out of Ann Arbor, Mich.

Not to mention the low overhead. “You don’t have to pay employees to keep it open. You don’t have to heat the place, turn the lights on—all the stuff you have to do for a traditional show room or other consumer-oriented store,” Lovasz adds.

Nicholas Mistry, president of GameDNA, a game server and Web hosting company in Reading, Mass., agrees. “In a lot of ways it’s about minimizing costs,” he says.

The benefits don’t end there. “For most purchases, people like to research first, so the Internet is a key source for information as well as making the sale,” Lovasz says. Plus, it gives you ultimate tracking ability for your marketing to allow better supply chain management. “You know exactly that you bought an ad on Yahoo!, someone clicked through to your ad and bought three things on your site. On the Web, you can track that and reinvest that money in near real time.” To gain this ability, look for companies that market tracking software to medium and small businesses.

In addition, you can branch out into the online marketplace without initially investing to increase your stock. Wait until an order comes in before constructing your product. “Dell doesn’t actually have inventory sitting around,” explains Lovasz. “For computers, they don’t have someone around waiting to go buy them. They build the computer when they get the order.”

Breaking into the Web
So how do you bring your business online? First, you should come up with an online business plan. “We’re no longer in the heady days of the ’90s, where anything could be placed on the Web and (wrongly) expected to gather profits,” Barry cautions. “The best approach to the Web is similar to the cost/benefit analysis of opening a new store in a separate geographic location. You have to account for your fixed costs, such as initial Web site development, and variable costs, such as a Webmaster.” Webmasters carry out a variety of functions including design, maintenance and development of a Web site. Web site development costs range anywhere from hourly charges of $35 per hour of work to a total cost in the thousands of dollars for an extensive project. Also consider who is your target market, what you want out of your Web site, and how much traffic you anticipate getting. Look for a bump in traffic after any type of promotional push that directs people toward the Web site, such as an e-newsletter or direct mail. Remember also to do a competitive analysis of like firms on the Web. Visit competitors’ Web sites and take note of what appeals to you and what does not work.

Next, decide if you want to take care of the details yourself or hire someone to set up your e-commerce. “There are companies dedicated to doing this for you,” Lovasz says. And while it might be cheaper to do it yourself, hiring a company “saves time, especially if you’re not particularly Web-savvy,” says Mistry, who recommends getting word-of-mouth recommendations from friends and vendors, and researching e-commerce solutions providers online. If preferable, you can modify your searches to include solutions providers in your area.

Web Site DIY
To set up your Web site yourself, start by securing a domain name, which you can do through Web sites such as NetworkSolutions, GoDaddy, and eNom. “That’s the equivalent of buying property in the real world,” Lovasz says. “You want to make it short, sweet, related to your business, and easy for users to find.” Don’t be afraid to use acronyms or use .net or other new domains.

Next, you’ll need to design the Web site. Companies such as Trellian offer free site building software, and you can purchase Web site templates to modify on your own from TemplateMonster. Or you can buy a copy of Microsoft FrontPage®. “They make it as simple as building a Word® document,” says Lovasz. Some templates cost as little as $30.

If this seems daunting, there are plenty of Web design companies out there that can build your Web site for you. If you want to keep your budget down, consider hiring a local college student (check computer science departments, career centers, or co-op offices) or look for listings for independent Web designers on Craigslist or Yahoo!.

Once that’s done, you’ll need a Web host provider. Mistry, whose company offers Web hosting, also recommends WebHostingTalk as a good resource.

If you are planning on selling items online and your Web host does not offer e-commerce solutions (shopping cart software, etc.), you need to make sure you have a pay-processing engine to handle the financial transactions. Pay processing engines may charge a percentage—about 2 to 3 percent—per transaction. “The online standard [for small businesses] is PayPal®,” Lovasz says, but there are other options such as MIVA and osCommerce. “Most of the larger businesses accept MasterCard, etc.—anything you would swipe through a credit card machine.”

Since your Web clients will be remote, you’ll need to set your shipper, such as UPS, to deliver your product, and integrate them with your shopping cart software so your customers can get active price quotes.

You’ll also need something to help you keep track of your transactions such as an Excel spreadsheet or a content management system that allows you to post updates to your Web site and databases.

Finally, once your Web site is up and running, you’ll need to get people to it. “The best way is to use interactive marketing,” Lovasz says. “The first thing you want to do is make sure your site can be found by search engines naturally to maximize the traffic from your site being found.” The best way a small business can do that is newsletter ads, banner ads, which are imbedded into a Web page, and text link ads. Or, you just pay the bid price for a high listing. Also, he recommends considering paid ads—the first three you see on the right of the screen when you go to Yahoo!, for example.