If you pay any
attention to the stock market, then you can also note that the past
several months have been extremely hard on companies with big dreams
and no profits. Stocks with high flying prices but no real profits
quickly dropped in April by up to 60% or more.
In other words,
the investment community is waking up to the fact that the Internet
needs to be treated just like any other business. Large ad budgets
and millions of visitors do not equal a successful web business.
a successful web business...
I am pretty
sure that your own web site does better than most of the major companies
on the web. You aren't losing 100 million dollars a year, are you?
Well, if you aren't losing millions, you are more profitable than
95% of the major dotcoms currently out there.
As a matter
of fact, in the above articles, one of the top CEOs was quoted as
saying, "Profit? Are you kidding?"
I have had to
earn a profit from day one in my own little web business. My web
sites have become successful without financial backing, a large
advertising budget, or dozens of staff members.
You can build
a successful and profitable web business in just a few months if
you follow the successful business models.
Here are a few
of the lessons that we as small businesses can learn from the recent
collapse of these web sites.
Compete With Wal-Mart.
One of the biggest
mistakes many of these companies are making is that they are trying
to have the lowest price on low margin items.
They are not
leaving themselves any money for profit. They are trying to run
their sites, pay their staff, ship products, and grow a business
while earning only 5% on the products they sell.
are now even trying to sell at their cost so they can have the lowest
prices. It doesn't do you any good to sell to millions of customers
if you lose money on every single one of them (especially if you
don't have a plan to earn profits on the backend either).
sites are selling products such as pet supplies, toys, consumer
electronics, and the like. There is a store on every block and thousands
of them on the web selling these exact same products. So, they are
trying to sell on price without having enough profits built in to
pay the bottom line.
Look at sites
which have become profitable...both large and small. Large companies
such as Yahoo and Ebay invented new business models and do not compete
Ebay doesn't make any claim or effort to have the lowest listing
fees for your auction. What they have done is create the largest
auction house in the world and have become a household word. Plus,
they have received much more word-of-mouth advertising than they
could have ever purchased on overpriced advertising.
Many of the
most successful home based entrepreneurshave succeeded through creating
their own information products such as books, ebooks, audios, videos,
etc. These have large mark-ups since people are paying for information
and not the packaging it comes in.
No matter whether
you are selling information or a hard product, you need to make
sure that you have the necessary profit margins built into your
web site selling system. Don't just try to compete on price. Develop
a Unique Selling Position of having the best tech support, highest
quality products, or most up-to-date information.
Waste Money on Ineffective Advertising.
The second mistake
that these companies are making is that they are wasting millions
of dollars on advertising with no way of testing or tracking the
The going rate
for a commercial during the Superbowl this year was $2 million per
30-second spot. If you watched it, I am sure that you noticed that
most of the airtime was being taken up by Internet newcomers...A
few of which we are now watching quickly run out of money.
They never tested
their ads before they ran them on the most expensive TV ad time
available. They had no idea whether the ads would work or not. It
is simply a gamble, which many of them lost.
You should be
testing the results of every ad even if you only spent $10. As a
small business, you can't afford to spend one penny on ineffective
Test two different
ads in a newsletter. Test different newsletters. Test banners. Test
places you can use to advertise your banner.
The key to spending
money on advertising is to test many different avenues as cheaply
as possible. Then, roll out your campaign when you find something
that is successful. If a banner ad produces $200 in profit for every
$100 spent, then it will often produce $2,000 for $1,000 and $20,000
for $10,000 spent.
in advertising is testing the different processes until you find
the working solution. Once you find advertising that works, run
Many of these
large companies don't do any testing of their advertising. They
can't tell you where their sales are coming from or even if their
$1 million a day in advertising is even producing any of the results
(or if they are getting all of their sales by word-of-mouth).
Even if you
spend several hours a week marketing your site and don't spend a
single penny on advertising, you should still be testing your response.
You need to know how you can spend your time most appropriately.
Do the search
engines produce traffic for you? How about submitting articles to
ezines and web sites? Maybe press releases are bringing in your
traffic. If you are testing your methods, you will know which portions
of your time are most effective.
3. You Must
Plan and Adapt.
Some of the
CEOs of these major corporations have publicly announced that they
have no idea when or if their sites will become profitable.
You can't afford
to make this mistake. You should have a written business plan for
your business including sales, advertising, expenditures, and profits.
Do you know
what your competition is doing? Have they come out with better prices
or a more unique position for their business than you? If so, then
you need to study them and adapt. Find ways that you can show your
uniqueness in the marketplace again and exert dominance over the
In my own business,
we are just been reviewing the past two years and have noticed that
the best use of my time (in profits) is in creating new information
products. Whenever I dropped my attention and starting working on
other types of projects, our income would suffer. So, by keeping
track of my time and income, I am going to be able to focus more
time into the most profitable area of my business.
If you don't
keep track of what is going on and be willing to adapt, you are
going to find that the future online will become increasingly hard.
There are two sides to having a worldwide marketplace. The good
side is that you have worldwide customer base. The bad side is that
you have worldwide competition.
How do you plan
to profit and adapt in this new world economy?
Web Design provides marketing consulting, web development,
and Internet business services to small and medium sized businesses.
They have been developing income-producing online properties since
1998. Contact the development team at: www.skyvaultwebdesign.com.
Free Report Reveals Secrets of Their Successful Marketing Strategy: