The internet is a powerful platform and it has created lots of amazing new opportunities. One of the biggest opportunities is the ability to build an online business that makes money while you sleep. However, building a successful online business is not as simple as people like to believe.
An online business is just as much work starting out as a traditional business; it’s no 4 hour week. It’s blood, sweat and tears. But from my experience working with clients launching their own projects, I’ve seen some patterns emerge that hopefully make sure your idea pays off.
Online business isn’t just limited to bloggers or generating some money on the side as a hobby. Businesses of all sizes can adopt these ideas to diversify, provide real value to customers and break into new markets.
Options for types of online businesses
So what type of online business can you start? Here’s a diagram to identify the pros and cons of some common types.
Where it all starts
Sitting around at the pub or having that glass of wine after dinner is the perfect breeding ground for crazy ideas. I know I have them and I’ve heard my share of other peoples.
Business ideas are great and there are loads of ideas flying around these days with the success stories of startups like instagram cashing in for $1 billion in 2012. I’m constantly dreaming up business ideas that I wish would take off like that and I know a lot of people are. While a $1 billion dollar payout might be a dream, even earning a little money on the side from a business that runs itself automatically would be amazing and it’s definitely possible.
But the problem with ideas is outlined by Thomas Edison
Genius is one percent inspiration, ninety-nine percent perspiration.
Ideas are great to have but it’s only 1% of what you need to do to make something successful. A lot of people stop here and move to the next exciting idea that could be the instant success they are looking for.
If a man has good corn or wood, or boards, or pigs, to sell, or can make better chairs or knives, crucibles or church organs, than anybody else, you will find a broad hard-beaten road to his house, though it be in the woods.
— Ralph Waldo Emerson
Of the people that get past this hurdle, a lot of people have the mindset of “If you build it they will come” but the days of building a better mouse trap and people wearing a path to your house are over. I came across a stat recently where it stated there are approximately 417 websites per person. This is a huge amount of information overload and a challenging environment to push a new idea out into and get a response.
The common approach
The major flaw I see in new projects is launching before they have an audience and expecting their product to take off and become overnight successes.
This is a common story I see:
After launching, they get a bit of initial traction and are excited by the new idea finally coming to life. But after a couple weeks, the traffic is only trickling in and their excitement is fading. With falling enthusiasm for the project, they find they aren’t motivated anymore to invest more time because they aren’t seeing the results they expected.
If you look at the path of a lot of startups, the path usually involves a startup incubator and focusing on building a product or service, launching fast, adding new features incrementally and changing focus when things aren’t working. Very much a product first approach.
While this approach appeals to how people generally approach business, there is an alternative way that could achieve better results..
Paul Graham has calculated the failure rate of startups going through the most high profile startup incubator, Y Combinator, as 94%. While it’s a very black and white (fail or not) number, it is very striking. If you’re more generous and take into account successfully running and funded startups, the success figure is more like 35-45% , but you still need to get into Y Combinator first, which has an acceptance rate of 3%. That’s tough.
So what’s the alternative?
The alternative is to be market first. Identify the people you want to build an audience of and then build a business around their wants and needs. If you are solving a genuine problem for that market then they will gladly purchase or use your products and/or services.
- Forbes contributor, Brad Svrluga compares starting a market first business with finding your dream girl. When looking for a partner we identify our dream girl in our head and then we go out and find her.
Contrary to this there are some big names who have a strong view against this approach. Steve Jobs famously said: “A lot of times, people don’t know what they want until you show it to them.” and Henry Ford said “If I had asked people what they wanted, they would have said faster horses.”
While they sounds like they don’t support this approach, I interpret it as – while people might know know what they want, it’s your job to understand your audience’s needs and aspirations and provide them with a solution that adds value. Both Steve Jobs and Henry Ford did this.
What you can do now to start your journey
Start a blog, start talking about a subject you are interested in and find a market. Learn about the market you are building and learn what their needs or aspirations are. Then source, produce, resell or advertise solutions for your market and make money. It’s no overnight success. It takes time and effort but if you see any successful online business you can trace it back to a simple process like this.
Have you launched an online business? I’d love to hear about it.