Starting an Online Business All-in-One For Dummies book cover

Starting an Online Business All-in-One For Dummies

By: Shannon Belew and Joel Elad Published: 03-31-2020

The tools you need to follow your dream of starting and running an online business! 

With the right knowledge and resources, you can take action to start the online business you’ve been dreaming of.  This comprehensive guide provides tips and tricks for turning your dream into a reality. 

The sixth edition of Starting an Online Business: All-in-One For Dummieswill teach you the basics and beyond. It will prepare you to set up your business website, offer your products in an online store, and keep accurate books. The authors help you navigate the primary legal, accounting, and security challenges related to running an online business.

  • Fund your business for success and future growth 
  • Use SEO strategically to drive traffic to a well-designed site
  • Market your business effectively as an entrepreneur
  • Stand out, build customer relationships, and sell on social media
  • Keep up with ecommerce trends to stay a step ahead

With some guidance, you can find your market niche, create a business plan, and decide on a revenue model. Then, it’s time to set up shop! Starting an Online Business can help bring your dream of an online business to life and guide you on the road to success.

Articles From Starting an Online Business All-in-One For Dummies

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Starting an Online Business All-in-One For Dummies Cheat Sheet

Cheat Sheet / Updated 02-18-2022

Starting an online business or growing an existing e-commerce business doesn’t have to be hard. Lots of resources are available to help you do everything from creating content for your website to building a long list of loyal customers. Being a savvy online entrepreneur also means learning to use social media to promote your business. Try these suggestions and quick tips for launching your website and engaging your customers.

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Establish Website Goals and Conversions for Your Online Business

Article / Updated 03-31-2020

With so many different website pages and options for what and when (or where) a visitor first sees on your site, it’s critical to help define the path you want visitors to take through the website for your online business. Just as you want a profitability plan for your site, you need to map out and control, or heavily influence, how traffic flows through the pages of your website. Ultimately, you want that traffic flow or “visitor pathway” to result with an action — making a purchase, requesting a quote, watching a video, downloading a white paper, registering for a webinar … the list of actions is nearly endless and totally dependent upon what you want your visitor to do. In the past (and we mean years ago, when businesses first started getting online), websites had a very simple structure. There were usually three to five main sections of a site (Homepage, About Us, Products, Services, Contact Us) with few total pages — usually less than a dozen. Today, websites, especially e-commerce sites, can have hundreds of pages, or more. There are also lots of different ways people can find or enter your site — directly (by typing your domain name in a web browser), through a link in social media, by responding to an online ad from Google Ads, in response to a call to action in a video on YouTube, or through organic search (because they’re searching for information or products and your site shows up in search results). Not to mention, new visitors can start their experiences with your site from your home page or from any other page in your website (this is considered a landing page because visitors “land” on it first). Let’s start by defining exactly what we mean by website goals and conversions. A “goal” is an end result you want to achieve, and it must be specific and measurable. You might have a goal to increase traffic to a particular product page on your website by 20 percent over the previous 30 days and have a bounce rate (whether or not visitors immediately leave or bounce off that page) of 40 percent or less. A “conversion” is the completion of an action, such as clicking a call-to-action button or actually buying a product. We sometimes talk about conversion rates to determine how successful an online offer is on a particular page. One way to calculate the rate is by dividing the number of clicks on a call-to-action button by the number of visitors on the page over a certain period of time. A Buy Now button on a product page may have a 2 percent conversion rate, for example. Before you can map out how you want traffic to flow through your website, you need to define the goals and conversion points for each page of your website. And all these decisions are critical to successful website design! Obviously, you cannot physically control what actions website visitors take and which pages they view, or in which order. However, knowing the goal of a specific page helps you determine which calls to action you need on the page, and further helps you determine what type of content you need on that page. The figure shows an example of a visitor pathway based on goals and conversions. Use the information from the profitability plan you create to determine what type of conversions you need on each page. This ensures you are directing visitors to click on offers that help generate the highest possible revenue for your online business. Each page of your website should have a goal associated with it. What is the purpose of the page? What do you want visitors to do when they are on that page? Where do you want visitors to go next? For example, the goal may be for visitors to read information about a common problem they may be having and learn more (which could be measurable by the bounce rate and time spent on the page). The conversion point may be to click a link within the text to a product or service page that solves the common problem they just read about; or it might be to watch a video for more detailed information. Knowing the goal for each page also helps you determine the most appropriate conversion points on the page. (Yes, you can have more than one conversion point!) Once you have goals, conversions, and visitor flow mapped out, you have a good starting point to determine your site’s structure.

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How to Choose an Identity for Your Online Business

Article / Updated 03-31-2020

In the offline world, the mantra of success for business is “Location, location, location!” It’s not much different for your online business. Rather than use a numerical address on a building, though, you now use a virtual address or domain name. Usually, your online address includes your company’s name or initials or some other derivation. Whereas your traditional business address was once listed in the Yellow Pages, your online address is now listed with search engines. As you might guess, securing the best possible domain name is an important piece of your overall online strategy. The name you select can provide an indication of what your company does, give a hint of your brand personality, and potentially influence how easily customers can find you. Let’s start with the basics. A URL, or Uniform Resource Locator, represents the unique address for each page on a website or document posted online. Your website might be made up of several web pages, each with a unique URL. Before you start creating web pages, your first order of business is to determine your domain name, or the part of the URL that specifically identifies the name of your website. We break down a typical URL in this figure. You no longer have to enter the entire URL (as shown) to get to a website. You can omit both the http:// and www. when entering the site URL in your browser. Although your website usually has only one domain name, it has more than one URL. The URL for the home page, or entrance page, of your site often looks the same as your domain name. Every page of your site, however, has a unique URL, such as myveryfirstwebsite.com: The home page myveryfirstwebsite.com/index.html: Also, the home page (the same as omitting the index.html portion of the URL) myveryfirstwebsite.com/services.html: The web page that contains information about the services you offer As an online business, it’s beneficial to get a valid SSL Certificate. This ensures your website is secure and that data is properly encrypted when a visitor’s web browser is communicating with your site. In this case, the URL will contain https, which translates to Hyper Text Transfer Protocol Secure. In addition, there is also a small icon of a lock that shows up next to the URL in the web browser’s address bar. Visitors can click the security icon to see details about your website, like the example shown here. Approach your domain name carefully You can take one of several opposing approaches when you select your domain name: You have an existing business or have already named your start-up. If that’s the case, you usually should match (as closely as possible) your company’s name to the domain name. Using your existing business name is simple, straightforward, and often quite effective. It’s possible that your exact name is not available, in which case you have to use some form of the name or add descriptors to the name. You want to gain traffic by matching popular search phrases. This was once considered an effective domain naming strategy because it served as a shortcut for directing organic (or free) search traffic to your website. Referred to as an Exact Match Domain (EMD), this is a domain name that’s a duplicate of an exact phrase that lots of people use to search for a product or a service. For example, if you sell running gear for women, you might use the domain name bestrunningshoesforwomen.com because you know a lot of people type in “best running shoes for women” when searching for that product. With your domain name matching this exact phrase, your site will show up higher in search engine results because it is the best match for that search query. Due to the popularity of EMD, it’s often difficult to find a domain that’s not already in use. Other popular phrases for EMD are available for sale, but they’re typically very expensive. But if you find an available EMD that works for your business, it can be helpful in gaining traffic. However, Google consistently updates its search engine algorithms (how search results are determined). It has since determined that some EMDs are “spammy” and don’t always have the best quality content, despite the domain name (in other words, Google realized some people were trying to scam the system to get more traffic, even if the actual sites weren’t completely relevant to the search phrase). You can still try the EMD strategy to gain some boost in traffic, but if Google determines the content on your page isn’t top quality or truly an exact match of the search phrase, this domain naming strategy might not pay off at all (and could instead hurt your rankings). The success of your online company benefits from the domain name itself. Maybe you’re starting an Internet company that sells e-books (electronic, downloadable information) telling readers how to start a business. In that case, your legal company name might be irrelevant. A more important consideration is to find a domain that clearly indicates your type of business or the customers you’re targeting. In this scenario, your company name might be John Smith dba JS Enterprises. A more effective domain name for your business, however, might be bizstartuptips411.com because it tells visitors exactly what you do. This approach is different from EMDs in that you may use one or more keywords, or specific search terms, in your domain name, but you do not try to exactly replicate a phrase someone might use in search, such as “helpful business tips for startups.” Optimize your domain name for better results How much does your URL matter when it comes to search engine optimization (SEO)? This topic is always hotly debated by SEO experts. Most agree that your URL once had a big impact on a website’s search engine ranking position. But Google is constantly adjusting the algorithms it uses to rank websites in search — and that means the weight it gives to a URL in search results has changed, and may likely change again! A factor that always seems important is having HTTPS in the URL to verify that the site is secure. The value of using keywords in the URL and the length of the URL may vary in the future. We recommend that you take SEO strategy into account when picking a primary domain name and the URL naming structure for your subpages (pages other than the home page) but don’t get too wrapped up in determining the perfect searchable URL. Instead, also consider what makes sense in a URL to your customers. No matter what approach you take to choosing your online business name, consider the following list of common denominators in determining the best possible domain for you. A good domain name should generally have these characteristics: Easy to spell: As anyone who depends on a computer’s spell checker can testify, the average person doesn’t do well in a spelling bee. That’s why we’re firm believers in avoiding hard-to-spell words in your domain name. Although BriansBodaciousRibs.com seems harmless enough, it’s fairly easy to flub. Why not try www.briansgoodribs.com or www.goodeating.com? The easier your domain name is to spell, the more likely customers are to find you without a hassle. (And, when they do find you, the more likely they’ll be in the mood to buy some of your bodacious eats!) Simple to remember: Your domain name doesn’t have to be catchy or trendy to work. Simplicity goes a long way in our crowded, overhyped world. Relatively short: A shorter name is easier for customers to remember than a longer one, and shorter URLs often have some benefit in search engine rankings. Consider the (fictitious) law firm Brewer, Mackey, Youngstein, Yale, and Associates. Its URL might be www.BrewerMackeyYoungsteinYaleandAssociates.com Wow! That name takes a while to type, not to mention that you have to spell everybody’s name correctly. Instead, consider the name www.BrewerandAssociates.com. See the difference? Contains important keywords: This characteristic is generally important for two reasons: Using descriptive words in the domain clearly says what you do and is helpful to your customers. Using relevant words that frequently show up in search engines is potentially beneficial to your site’s rankings, but don’t try to stuff too many keywords in there. One or two is plenty! The law firm used in the preceding example can easily use keywords, or words that might be easily associated with the type of business, to create one of these domain combinations: www.legalfirmforhire.com www.breweryounglawyers.com www.attorneysbmyy.com Intuitive to customers: You want a domain name to provide, ideally, a sense of who you are and an indication of the type of products or services you’re selling. You don’t need a literal translation, such as isellbooks.com—depending on your business, that approach could be detrimental to sales. What if you’re selling to a highly targeted or specialized market (such as teenagers or radical sports fans)? A straightforward domain name is labeled as boring and undermines the image of your company, whereas an edgy or more creative name can win customers. For example, a bookseller specializing in romance novels might use a domain name such as www.romancingthepages.com or www.steamyreads.com. The point is that your customer base, whoever it consists of, should be responsive to your domain name. In the examples we use, you notice that the domain names usually end with .com, but that domain extension isn’t your only option. Today, you can choose from a long list of specialized domain extensions that reflect your type of business (an LLC, for example), type of organization (such as a non-profit), or even your specific industry (like technology or auto dealerships). This is an alternative way to get a name that is already taken, but it may not significantly help with search engine rankings.

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Must-Have Equipment for Starting an Online Business

Article / Updated 03-31-2020

Starting an online business is more affordable than ever. You no longer have to invest several thousand dollars in big, clunky pieces of equipment because both the size and the price of these items have dropped tremendously. For example, cloud-based offerings are readily available, which provide access to web-based products and services at low monthly (or annual) rates. Typically, you don’t sign a contract, so you have the flexibility to drop or change services. In addition, free and low-cost applications (apps) for mobile devices such as smartphones and tablets can replace some standard office equipment or services. All this serves as further testament to the power of the Internet, and how easy and affordable it is to start an online business. Make form follow function Rather than think about your office equipment in terms of a collection of cartridges and cords, think of each piece in terms of the function it provides. You need access to some key functions (equipment) to run a business. This list describes the functions most businesses need access to most often: Printing: Although most of your correspondence can be conducted online, you still need to print invoices, offline marketing materials, and hard copies (printouts) of items for your files. You can choose from different types of free-standing or desktop printers with various capabilities. Printers can range from $20 to $250. You can eliminate the need for printing invoices entirely by using low-cost online services such as Zoho or PaySimple, that let you invoice customers and manage and collect payments entirely online. Rather than compare only printer functions, be sure to also compare ink cartridge requirements before you buy a printer. An ink cartridge is often almost as expensive as the printer itself; a $50 printer can require a $30 ink cartridge, for example. Be sure to find out whether the printer requires a particular brand of cartridge and how much the cartridges for that printer cost. Faxing: The use and legal acceptance of electronic signatures has decreased dependency on faxes. But some industries and businesses still require a fax. Rather than purchase a separate fax machine, consider signing up for a web-based fax service and receive faxes as attachments to your email. Services such as eFax and MyFax offer complete fax solutions for as little as $10 to $17 a month. A business phone system with unified communications features, can also handle your fax needs entirely through your phone system. When comparing online fax services, make sure that you can send and receive faxes from your iPhone, Android, or other smart device. Also be aware of fees charged for overages of incoming and outgoing pages, fees for additional users, and limits on storage time frames and volume for faxes sent or received. Copying: Having access to a small copier can be a good investment for your office. When you shop for a copier, decide which features you need: Do you want color printing, or is black-and-white print suitable? Will you use a duplexing feature, which prints both the front and back of the page? Is collating (automatically stacking and binding papers as they print) a big deal? Also look for copiers that Add large amounts of paper to trays at one time so that you’re not continually refilling them Have a quick warm-up time (the time it takes the equipment to prepare to print) so that you can start copying quickly Are suitable for small to mid-size print job volumes Scanning: A scanner enables you to scan images or documents into your computer for manipulation or storage or to send as files or faxes to others. This piece of equipment isn’t as much of a requirement as it once was for many types of businesses, but is still particularly useful when you frequently work with photos and other images. Most scanners come with custom software you must install. (Or try the Windows Scanner and Camera Wizard, in the Windows Control Panel.) If you need a scanner for only documents or for limited use of image scanning, consider downloading a scanner app for your mobile phone. Apps are available for the iPhone, iPad, and Android smart devices and provide the capability to scan documents or images and then email, fax, or print directly from your phone. You can also share scanned files to Dropbox, Google Drive, or Evernote. (Use this method to track business receipts, too.) Try DocuScan, Scanner Pro, or Tiny Scanner Pro. The apps range in price from $2 to $8. Or you can get a less robust version of a scanner app for free. Mobile communications: Cellphones have gone from being nice-to-have to being a must-have. Specifically, you need a smartphone that’s capable of accessing various applications for maximum efficiency, whether or not you’re in your office. You might even require a tablet (such as an iPad), too. These devices are important tools to help you manage your online business. Moreover, online consumers are researching and purchasing products and services directly from mobile devices, so you need to be able to test functionality and accessibility of your website from those devices. Not to mention, one of the benefits of having an online business is that you aren’t necessarily hemmed into a certain geographic location; a smart device helps you stay mobile and work from anywhere. Business communications: Today, you have several options for using a phone in your business. For example, some business owners opt to go without a landline (traditional phone line) and use only a cellular (or mobile) phone. Others save money by sharing a residential line with both their home and business. (This option can be tricky and can come across as unprofessional.) You may consider opting for VoIP (Voice over Internet Protocol), an IP-based option that allows you to share data and voice over a single line. Web-based options, such as Google Voice, Skype, and WebRTC applications, also allow you to make calls over your computer. Most cable companies are offering to bundle your Internet service and voice service. Going this route is often much less expensive than using traditional phone lines and can provide a wider range of functionality. Traditional business phone system vendors also offer cloud-based versions so that you get advanced features without the cost or hassle of managing a complex system. At the end of the day, know that you have lots of options when it comes to how you communicate with your customers. Digital photography: You might not be used to including a camera in the category of business tools. Yet, in building and maintaining an online business, a digital camera and a video camera might be a requirement, especially if you have an eBay store or any other online retail type of store. Cameras are increasingly important with the growing use of social media as a marketing tool. Sharing pictures on social networks such as Pinterest or Instagram or uploading videos to YouTube, for example, is almost a necessity. At the very least, you need a camera to take product pictures that you can upload to your site. (Some smartphones may be suitable for taking video or pictures to share on social media, but a better quality camera is preferable for high-resolution product pictures for use on your website.) Shredding: Considering the rise in identity theft, disposing of documents that contain sensitive information — such as billing statements with account numbers or credit card numbers — is more important than ever. Shredding these documents is an easy way to protect your business — and cuts down on storage. A small, portable shredder can be purchased for less than $50; a shredder designed to handle large volumes of paper may cost several hundred dollars or more. It may be worth the extra expense to get a shredder that’s hefty enough to dispose of credit cards. Data thieves consider both items to be valuable finds. Alternatively, consider using a mobile shredding service, such as Shred-it, for particularly large amounts of documents. Before destroying all your documents, be mindful of any business records that the IRS requires you to keep for tax purposes. Consult a tax advisor if you’re not certain about how long you should keep some business records. If you can’t afford to purchase all your equipment right away, locate a small-business service center close to your office. These centers offer fax, printing, binding, and other services at competitive prices. You can find these service centers in copy stores, such as FedEx Office, or in retail office-supply stores, such as Staples. If you rent a shared office space, or coworking space, these business tools and services are often included as part of the monthly rent. Revving up with a powerful computer One important piece of equipment for your new online business is a computer. It’s the heart and soul of your office because all your valuable data resides on it and you use it to communicate with folks in all kinds of ways. How do you know whether your existing computer makes the grade now that you’re an online entrepreneur? Should you upgrade or buy new? If you buy a new one, how can you be sure that you’re investing your dollars wisely? And most importantly, should you buy a PC or a Mac? Although those questions are tricky, they have simple answers. Jumping into the upgrade-versus-purchase debate Overall, the cost of purchasing a basic PC computer is outrageously low. You probably receive promotions advertising new desktop computers for $299 — or less. By the time you calculate your time or pay somebody else’s labor fee and buy parts, can you truly upgrade an existing computer for that price? Not so fast. You have to compare apples to apples by looking at more than just the price tag. Compare capabilities. That off-the-shelf computer for $299 may be a bare-bones, stripped-down model — probably no more powerful than that old machine you used for the past couple of years. Sure, the new one might work a bit faster; to get comparable features, though, you most likely have to add memory, hardware, and other applications to truly address your needs. By the time you upgrade your new computer, you may have sufficiently passed its original $300 off-the-shelf price threshold to make you reconsider buying new. Whether or not it’s truly a bargain depends on the functionality and power you need. If you have the skills and the comfort level to take apart your computer, add components, and then put Humpty Dumpty together again, upgrading can be a cheap and relatively easy solution. Taking the plunge: Buying new You might be more comfortable buying a computer with all its parts already assembled. You can still design a custom computer by choosing the options you want and letting a computer retailer customize it for you. Or you can purchase an off-the-shelf machine that’s already loaded and ready to go. How do you decide which computer is right for you? The simplest way to approach this decision is by backing into it. Follow these general guidelines: 1. Decide how you will use the computer. You’re running a business with it, of course. Be specific about which type of activities you’re using it for, such as accounting, word processing, keeping a database of customer records, or storing digital photos of your products. 2. Identify the specific software applications you’re using for each of those activities, such as QuickBooks, Microsoft Word, Microsoft Access, or Photoshop. Each of these applications recommends system requirements, including available memory and processor speed. 3. Match and compare the requirements in Step 2 to the computer you’re considering purchasing. Look closely at not only the computer’s processor but also the hardware and features that come with the computer, including these items: Hard drive space Operating system (Windows, Mac, Linux/Unix) Memory capacity (RAM) Networking card (preferably wireless-ready) USB (2.0 or 3.0 compatibility) Monitor (with the option for a flat screen) Keyboard and mouse (wireless, to avoid clutter on your desktop) External speakers Installed software 4. Compare the support service and warranties. Does the manufacturer or retailer offer customer support? Be sure to find out whether this service is included in the cost of your purchase, and whether it limits the amount of support you can receive before a fee kicks in. Find out exactly what is covered under the warranty and for how long. You might have to purchase an extended warranty to cover some computer parts. Keep in mind that some manufacturers require you to ship back your hardware versus sending a repairperson to your location. Before making a purchase, determine whether on-site support is important to you. What about a Mac? Computer users are always debating which personal computer is better for business owners: a PC or a Mac (Macintosh). The PC is usually associated with an operating system (OS) that runs Microsoft Windows; the Mac OS was created by Apple. For a long time, PCs seemed to be the preferred appliance for businesses, and Macs were favored by graphic artists. Today, either is acceptable for business use. With software compatibility for the Mac expanding, and Apple’s explosive growth from the popularity of the iPhone and the iPad, business folks seem less reticent to use a Mac. We don’t want to get into a debate of which is better — that’s for you to decide. But we do want to make you aware that you have options when purchasing a desktop computer.

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How to Create a Workspace Floor Plan

Article / Updated 03-31-2020

When you're starting an online business, you might work from a cramped bedroom in your modest home or in a spacious high-rise office complex. Either way, maximizing your workspace can be an important step toward obtaining true efficiency in your online business. Follow these steps to create a floor plan for your office space: Make a list of how you will use your space. Ask yourself these questions: Do I need a desk? If so, how much desk space do I need? What about a standing desk? They’re good for posture and they provide storage space beneath, which is often in short supply in smaller startup offices. Will I store paperwork and files in a central filing system or use some other method? Do I need storage space for inventory? Do I have a dedicated space for packing and shipping products? Will customers visit my office? Do I need working space for employees? Make a list of all your office furniture, equipment, and accessories (including office supplies and other items that should be stored but remain accessible). If you’re sharing the space with others, make sure that you account for their belongings too. Or, if your office performs double duty as a bedroom or dining room, include on your list the non-work-related furniture that will remain in the room while you work. This is important at tax time when you want to take advantage of a home office deduction. The IRS wants to know exactly what percentage of your home is used exclusively for business purposes. On a sheet of paper, sketch out the dimensions of the room with lines that represent your walls, and then draw all your furniture and large office equipment in position within those walls. Rather than literally draw your furniture, you can draw different shapes and label them to help plan the placement of furniture, equipment, and designated work areas. Arrange the furniture and office equipment in a way that best meets your needs, based on the list you created in Step 1. This arrangement should be based on function. After your room has been put on paper, based on how you want it to function, you can put the measurements to the test to confirm your furniture and equipment fit. This level of detail may seem like overkill, but it’s particularly important if you plan to lease office space (in which case, the less you need, the lower your overhead). When you arrange your furniture, address storage needs for your office supplies. If you don’t have designated architectural space (such as a closet or built-in bookshelves), you’ll have to bring in storage (for example, file cabinets, baskets, and removable shelving). Measure all pieces of furniture and major equipment. Using the room dimensions listed on your paper, compare measurements to see whether everything fits. If you run out of room, keep trying different arrangements until you find a floor plan that fits both your needs and your measurements. Instead of working from a cramped home office all the time or leasing expensive office space, consider a shared coworking space, such as Regus or WeWork. Often found in larger cities (but quickly spreading to cities of all sizes), coworking spaces have open office areas designed for technology start-ups and other small businesses. These low-cost and flexible alternatives include standard needs, such as meeting spaces and Internet connectivity, and also boast extras, such as access to networking events with peers and investors, and are usually available on an as-needed basis.

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How to Turn an Idea into a Viable Internet Business

Article / Updated 03-31-2020

Every successful business begins with that first idea, and the Internet has continued to make it easier than ever to launch a successful business. Maybe you have several unique concepts to choose from or are firmly set on a single one. Either way, how do you decide whether you should quit your day job and focus on your brilliant idea for starting an online business? You have to pick apart the idea, observe closely, and determine whether it merits a full-time (or part-time) business. One question often asked is whether or not the idea has to be original. Innovative, never-before-broached ideas for an online business certainly exist. But being the first to have and implement an original idea is not a guarantee for success. Likewise, there may be exceptional opportunities for updating or modifying an existing business to an online format. Consider that Netflix became an online streaming version of bricks-and-mortar video rental stores. The video rental concept was not new, but Netflix took video rental online and eventually became part of the reason for the demise of the leading offline video rental giant, Blockbuster. Ultimately, your concept for the business, whether it’s a new idea or a twist on an existing idea, must be well thought out to increase your probability for success. Here are three methods you can use to decide whether your idea has potential. Use informal research to verify your idea The best place to begin gathering information is from sources closest to you. Be prepared to receive varying opinions — both positive and negative. Use this input as a general gauge of whether to continue reaching out to the next source of information. You and your idea are in the center, surrounded by three rings from which to collect input, as shown. If the ring closest to you provides mostly positive input, proceed to the next ring. Ring 1 consists of your friends, family, and coworkers. Ask them these questions: Have you ever heard of this type of product or service? Would you buy this product or service? Do you think it’s a good idea? What challenges do you think I will encounter? What are the benefits? Can you envision me selling this product or service? Why or why not? In Ring 2, seek input from industry professionals, investors, other entrepreneurs, and organizations that offer support to small businesses. Ask questions similar to those listed for Ring 1. Because of the experience of the people in Ring 2, you should give more weight to their responses. Small-business support resources include the following: Small Business Administration (SBA): The SBA, a government-sponsored organization, helps small-business owners with loans, paperwork navigation, free seminars, and other services. Small Business Development Center (SBDC): The SBDC is a partnership between the SBA and universities. Together, they provide support, mentoring, training, and educational services to both new and established small businesses. SBDCs are available through local branches, often located in a partnering university or Chamber of Commerce. Chamber of Commerce: From small towns to large cities, all local chambers help owners develop their small businesses. SCORE: This network of retired executives matches small-business owners with business-exec retirees who volunteer their time to help small businesses develop and prosper. In Ring 3 are your potential customers. Ask them these questions: Would you use this product or service? Have you used something similar? How much would you be willing to pay? How often would you use it? Where would you normally go to buy this product or service? Would you order it over the Internet? If you find that you’re receiving a majority of positive feedback from sources in all three rings, you can consider your idea worthwhile. Or at least you have enough validation to continue to the next phase of your evaluation process. Later, you may want to return to this list of friends and customers and ask them to “beta” test, or try out an early version of your product or service before it is fully available to the general public. Apply a SWOT analysis to your business idea Another popular method for determining the pros and cons of an idea is referred to as SWOT analysis. (SWOT is short for strengths, weaknesses, opportunities, and threats.) Companies use it for several reasons, including as a decision-making tool for product development. The simple process also lends itself to a more thorough investigation of your business idea. This section covers how you can put your idea to the SWOT test! Create your own SWOT chart by following these steps: 1. On paper, draw a cross (or a box divided in half both horizontally and vertically) to create four quadrants, and label them as shown. After you draw and label the chart, you can begin to fill in the details. 2. In each quadrant, write down the factors that influence or contribute to each of your four SWOT categories. Strengths and weaknesses are considered internal factors that control or specifically contribute (good or bad) to the business concept. Opportunities and threats are external factors that are influenced to some extent by the environment or are otherwise outside of your control. 3. Analyze the information you filled in. Ask yourself the following questions to start developing your SWOT analysis: Strengths What advantages does the product or service offer? Do I have expertise in this business or industry? Can I get a patent to protect the idea? Weaknesses How much does developing the product cost? Is getting suppliers difficult? Am I learning a new industry from the ground up? Opportunities Does my idea take advantage of a new technology? Is my product or service in demand? Have changes in policies or regulations made my idea necessary? Threats Does my product or service have established competitors? Do my competitors sell the product or service for less than I can? Will changes in technology make my product obsolete? Use the feedback you receive from your informal research (during the Three Rings exercise) as factors in your SWOT quadrants. Combining other people’s opinions with your own provides a more comprehensive — and useful — SWOT analysis. 4. After you fill in the categories of your first SWOT analysis, take a look at which quadrants contain the most factors or the most significant factors. The listed strengths and opportunities indicate the advantage you might have in the marketplace. If you’re lucky, they outweigh your weaknesses and challenges. Perhaps you can now see what you must do to offset those disadvantages if you really want your idea to work. Whatever the outcome of your analysis, you should have a better feel for the value of your business idea after viewing the completed SWOT analysis. Create a feasibility study to validate an idea After your idea gains a nod of approval from friends and family and the SWOT analysis indicates that your product has merit, your idea must jump through one more hoop for complete validation. A feasibility study is a somewhat formal, written process that helps you determine whether your idea is realistic. The goal of the study is to provide you with final proof that your business concept is viable. A feasibility study answers these basic questions: Will the product or service work? How much will it cost to start? Can your idea make you money? Is the business concept really worth your time and energy? A feasibility study kicks your analysis up a notch. It relies on in-depth research to provide more detailed answers to questions in five primary areas: Your product and service What is the product or service? How will my customers use it? Where or how will my customers buy it? How is it designed, and how is it delivered to my customers? Am I testing to ensure that my product works correctly? (Describe these tests in detail.) Your experience (including your management team’s experience) Who is my management team? What experience do I (and my employees) have? What are my specific skills and credentials? Which skills am I missing, or in which areas am I weak? How much time can I devote to my business? The market in which you’re competing What is the demand for my product? Who are my customers? (What is the target market?) How big is the market I’m selling to? What is the status of the market? Is it growing or stagnant? Where and how can I reach those customers? Your competition Who are my primary and secondary competitors? (Describe each of your competitors in detail.) How do my competitors market their products or services? What makes me different from or better than my competitors? Is my product easy to copy? How can I prevent copycats? Your costs How much does it cost to make my product or produce my service? What other business costs do I have? How much money do I need to start? Do I have access to funding? When will I make a profit? Now you know how much information you have to gather in your feasibility study. As you answer all these questions, make sure that you back up those answers with detailed research. Then write your results in a one-page summary that discusses what you discovered. Your summary should answer all of the questions in each category and provide proof of whether you have a viable idea. After the validation process is complete, you can turn your attention to the next piece of the business success puzzle: potential customers.

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