Article Contributed by Experienced-People
The dot com bust proved convincingly that business models involving a lot of gloss and very little prospect of consistent and growing profit find themselves on the scrap heap – and rightly so. However, in the years that followed, some internet businesses made it so big they forever changed how people buy products and how they live their lives. From Amazon’s colossal grip on the world of books, to Paypal’s hugely successful online payment system, to YouTube’s massive user base, many Internet businesses have innovated their way to fame and success. However, the big Internet Business Success Story isn’t any of those. Some of those leviathans have profit more in their imagination than in their bank.
The Facts and Figures
That the Internet population is growing by the day is not in doubt. From 2000-2008 the number of people online skyrocketed by 342%.1 Not only are more people online but users are spending more time on the ‘net, accessing more goods and services there, integrating their offline world with “social networks” and moving their spending online too. In 2008, nearly 900 million people bought something online and that number is growing at the rate of 40%2. The US accounts for less than 16% of global internet users, yet in the US alone people will spend over $160,000,000,000 online in the recession hit 2009.
The bulk of that money is not, as one would imagine, going to a few large companies that straddle internet commerce. For every dollar the Google behemoth makes from the Adsense ads seen on so many websites, a large chunk goes to the owners of those sites. In the first quarter of 2009 Google paid out $410 million every month to these small businesses3. For every £1 eBay makes in commission on goods sold, the “small” eBay retailer pockets up to £10 in profit. The top 1000 eBay sellers generated revenue of £785,000,000 in 2008, with an average turnover of £440,0004.
The Opportunities
Businesses like eBay and Google account for only a small fraction of the business transacted online. The big story is the millions of small businesses – from firms developing applications for Facebook to companies creating and providing electronic delivery goods like software and ebooks, to businesses supplying consultancy services to SMEs, multinationals and governments. There are huge opportunities, there are successful businesses showing amazingly healthy growth, and there’s a business in this sector to suit every taste and budget. They include
– small, low cost, work from home, part-time businesses making just a few hundred dollars a month
– information websites that have steady revenue from contextual ad programmes such as Adsense. (It’s like income from copyrights and patents – no active management required)
– “drop ship” retailers of everything from candles to yachts but without a warehouse, logistics or customer service
– domain businesses consisting of nothing more than a collection of domains earning steady income from “domain parking”
– franchises without the employees, premises, bureaucracy or tedious hours
and
– traditional businesses selling high street goods and services but conducting the advertising, selling, order processing etc., entirely online giving them a significant competitive advantage over older, more established players
Why Now?
Clinton Lee, author of 101 Ways to Make Money Online, has been involved in online businesses for the best part of the last decade. In his words, “I’ve moved from buying and developing B&Ms (Bricks and Mortar) to buying Internet businesses partly because they are so much better value. The P/Es are a lot more attractive. It’s not uncommon for a quality website to sell for less than a year’s EBITDA. There are real bargains to be had. Yet, these businesses are higher growth, more flexible, more scalable and better able to adapt to changing market conditions.”
The lack of geographical restriction when choosing a business makes for phenomenal amount of choice. Most can be run from anywhere, even if the owner decides to emigrate. The ownership of online business and their cash flow can be directed outside a home country making them ideal tax planning vehicles. Internet businesses are easier to grow than local businesses, can grow much further, can employ talent anywhere in the world and tap into the larger global market.
So why are do online businesses sell for what would be considered bargain basement prices elsewhere?
Traditional valuation principles still apply. It’s still about quantifying future Profit and Risk. The values exist …but the buyers don’t.
There is still a mind-set among buyers that associates Internet businesses with new-fangled, high risk or requiring specialist technical skills to own/manage. Nothing could be further from the truth. While no Internet business can boast the 50 year history that some cafes, hotels or pubs take pride in, many have been generating substantial and growing profits for several years. With staff to do the technical work, long-term contracts in place with blue chip companies, solid business plans and motivated management teams, many of these businesses have everything that excites buyers.
Except the Marketplace
There’s another price dampener: the lack of a proper forum for the buying and selling of these businesses. Apart from particularly large businesses, Internet concerns are unlikely to catch the attention of the right audience when listed in a general business-for-sale publication. A typical website owner wishing to sell needs to contact owners of similar sites or post threads on webmaster community boards – hardly the best places to find savvy business investors.
What’s very evident in these website-for-sale threads is the average sellers’ obvious inexperience with selling businesses. Their pitch is targeted squarely at their audience of webmasters and usually refers to Page Rank, DMOZ listings, site design and backend, how high the PPC is etc.. but rarely a proper analysis of the profits, cash flow or projections. Presenting a proper financial case is a turn-off for that specific audience. The experienced business buyer would ask the right questions to get at the figures.
The new Daltonsbusiness sector devoted to Internet businesses should bring these business opportunities to a wider audience and expose business buyers to a largely untapped sector.
Isn’t it time you considered buying an Internet business?
Author: Pamela Swift
Almost everyone associates the telemarketing industry with outbound call centers. You know, the gigantic room full of people with headsets on, “cold calling” customers to make sales, generate leads, or collect information for surveys. There’s another kind of telemarketing, though- think customer service 1-800 numbers, customer help desks, or order processing over the phone. Inbound telemarketing is becoming a popular way to outsource processes that businesses might not have the staff capacity to handle. Here are a few ways you can use inbound telemarketing to benefit your business:
Order Processing
Inbound call centers can take customer orders over the phone and even process sales when customers pay with credit cards. Any business with time restrictions, such as those whose employees only work during business hours, can take advantage of this extended availability- the more you’re available to customers, the more sales you’ll make. You can also use inbound call centers for order processing for their language capabilities. While you might not have the resources to hire sales representatives that speak Spanish, Japanese, or Tagalog, an inbound call center does- this allows you to reach and communicate with more potential customers in a language they’re comfortable speaking.
24/7 Customer Service
If your employees can’t be available for customers at all hours of the day, inbound telemarketing offers a solution. Many businesses assign a 1-800 number to a telemarketing firm for in order to give customers around the clock access. Businesses like banks, hotels, and insurance companies that need to provide constant access use inbound telemarketing companies to fill the gaps when their own employees aren’t available to answer questions, fix billing errors, or file claim reports. If your company could benefit from offering 24/7 support to customers, telemarketing is an option you should consider.
Helpdesk and Customer Support
If you sell a technical product, such as software, it can be a good idea to use dedicated telephone service representatives- telemarketing company employees trained by your business that only answer calls on behalf of your company- rather than employing a full-time helpdesk employee as a member of your own staff. You can also reach more customers- telemarketing companies keep longer hours, employ representatives with different language capabilities, and are able to stay open to customers in different time zones more easily.
Lead Generation and Appointment Setting
Inbound telemarketing is often used for lead generation and appointment setting. You can direct sales leads to call the telemarketing company directly to set up a sales appointment, or gather sales lead information when customers place calls for more information about your products or services.
Inbound call centers can be used for several purposes in addition to those mentioned above. Inbound call centers can assist with promotional contests (such as radio call-ins) can help collect survey or donation information, or for any other service you can think of that might benefit your business. It’s always a good idea to speak with at least a few different companies before making a decision about which company to choose.
Here’s a tough question: What’s the one thing nearly all business owners consistently overpay for?
The answer is pretty surprising: Postage costs. Stamps, shipping charges, even the time it takes to go to the post office can all add up, costing thousands of dollars or more each year, depending on the volume of mail you ship. Most business owners don’t know exactly how much it costs to mail a particular parcel- so they end up “over stamping” and overpaying- often by quite a bit. Postal stores and shipping providers have overhead costs to meet, too- you pay for these when you’re charged to ship an item.
You can avoid overpayment- and create big savings- by using a postage meter. A postage machine, or digital mailing system, can calculate postage costs precisely, so you’ll never overpay, and can be used in-office, saving you trips to have packages shipped from other providers. Here’s a quick guide to using a postage meter:
How meters work
Postage meters are leased, and work similarly to a parking meter. You “fill up” by making a payment, and postage charges are drawn against your balance. Most meters allow you to “refill” when necessary, and some calculate monthly charges and send a bill- similar to paying for electricity costs. In addition to paying the postage charges, you’ll also need to lease the equipment. You can choose machines with advance features (scales, document feeders) or a simple stamp machine that just prints postage stamps on your outgoing mail.
Features
Mailing machine equipment can be very simple (a stamp machine) or very complex- some machines fold, collate, stamp, and stack bulk mailings containing several different printed pages. If your business sends large bulk mailings, you could benefit from such a machine. Machines can also be fitted with equipment to ship packages- you’ll weigh the parcel and arrange for the pickup online in a few simple steps. No matter which features you need, you can take advantage of cost savings- with a postage meter, shipping costs can be calculated down to the penny for each mailing, so you’ll never overpay.
Costs and billing
Equipment leasing costs can range from less than $20 a month to hundreds for sophisticated equipment designed to handle large volume mailings. You’ll pay for the postage machine equipment (the meter) as one bill, and pay postal charges according to current rates. Some meters only allow you to “pre-pay” postage charges, while other companies allow you to “pay as you go,” where you receive a bill for both postage and meter use costs at the end of a specified period of time. Pay-as-you-go options usually carry additional charges or fees.
You’ll generally sign a lease contract that specifies your terms of use for the meter. Longer term lease contracts can be significantly less expensive- if you’re willing to commit to a longer period of time using the equipment, you’ll get a better monthly rate. You can also choose to purchase a maintenance or service contract that covers repairs or part replacements over the life of the machine.
Article Contributed by Donna Abernathy
Howard Brodsky set out to conquer the carpet world. Dan Bleier just wanted to save his family-owned business. But both cherished their independent status in a retail chain, “big box” business world. Now, each realizes success through a purchasing cooperative.
The pair spent almost eight months reviewing different business models, disqualifying one after another. Then they looked at cooperatives. Brodsky and Bleier are founders of two of the estimated 300 purchasing cooperatives in the United States—a sector which serves roughly 50,000 independent business owner-members.
“The co-op was the ultimate choice to bring (buying) scale to local ownership while honoring their differences and valuing their independence. It also allowed us to leverage our efforts to serve their best interests,” says Brodsky, chairman and co-CEO of CCA Global Partners. “By comparison, other business structures didn’t endure.”
Entrepreneurs across the American business landscape—from furniture dealers to funeral service providers—are using co-op power to level the playing field between family-owned enterprises and mega-retailers.
Purchasing co-op owner-members are joining together to increase the competitiveness of their independently owned businesses. By pooling their buying power to acquire inventory and services, they lower operating costs, better respond to competition, and improve their businesses’ overall performance.
Conquering the world
By virtually every business standard, CCA has more than endured. It has exploded. Starting with 13 members, the cooperative has grown to 650 owners who operate 3,600 independent stores around the world. The company reported sales exceeding $10 billion last year and has never experienced an unprofitable quarter in its 24 years of existence.
Sales have jumped 325 percent in the past eight years.
“If you give a smart entrepreneur the best tools, he can outplay the big guys. He needs to buy better, brand better, have the best training, best hiring and best marketing,” he adds. Today’s CCA members engage in the flooring, mortgage banking, lighting and bicycling industries. Considered together, CCA’s flooring affiliates represent the largest group of retailers in the world.
Competing effectively
Reading about the success of co-ops like CCA inspired Bleier, who needed to find a way for his family-owned Able Distributors to effectively compete with “the big boys like Home Depot.” He reversed the negative trend by becoming a founding member of Blue Hawk Cooperative in 2005, a Phoenix, Ariz.-based co-op with 200 members—mostly family-owned companies—that own 871 distribution locations in 50 states.
Like typical purchasing co-ops, Blue Hawk offers its members centralized, cost-saving buying plus warehousing, marketing, merchandising and financial reporting—services that give members like Bleier the ability to compete in the marketplace. But competing is not enough, says Lance Rantala, the co-op’s chief executive officer.
“Our plan is to have each Blue Hawk member-owner grow their combined market share by 10 percent,” he says, explaining how partnerships with manufacturers and contractors help build a healthy and profitable business environment for all participants.
Blue Hawk members like the control they enjoy as owners. The co-op business model provides a welcome contrast to buying groups—a common inventory procurement option for independent HVACR distributors—which the members neither own nor govern.
Furniture First’s membership is by invitation only. Prospective members of the Harrisburg, Pa. headquartered co-op undergo an intense evaluation process, complete a 16-page application that includes a detailed credit history. Hartman believes the rigorous process is necessary to determine which retailers will make the best members.
Beyond Buying
Though collective buying of goods and services is at the core of every
Purchasing cooperative, today’s member-owners want— and need—more to succeed. Their co-ops are obliging by offering industry-specific support to enhance almost every facet of business management.
From the beginning, CCA has provided its member-owners with “a better level” of services, marketing, training and merchandising. The co-op offers an extensive selection of online training courses for the employees of member stores. To date, employees have completed almost 300,000 courses.
Blue Hawk members benefit from “extras” such as improved marketing channels, public relations, lobbying efforts, educational and training programs, networking opportunities, sharing business best practices and technology support.
Across the purchasing co-op universe, many consider peer-to-peer networking a bonus of membership. Most co-ops hold membership conferences annually, giving members opportunities for face-to-face discussions, and provide online networking tools to help members share ideas and information.
Surviving Tough Times
Small business is risky business these days. A distressed national economy is not favorable for smaller enterprises, which account for about 99 percent of the country’s business. “It’s the worst I’ve ever seen it,” Furniture First’s Hartman says about the rising costs and shrinking profits for independent businesses.
Though they can’t deliver miracles, purchasing cooperatives can provide relief to beleaguered small businesses—sometimes in unexpected ways. For instance, a new movement that brings together retailers by common location rather than business sector is gaining steam.
Knowing firsthand the power of purchasing cooperatives, CCA’s Brodsky believes these independent business owners are learning one of the most important realities of co-op life: There is strength in numbers. “In troubled times, you don’t want to be alone. That’s the worst,” he says. “Join a co-op because it gives you all the support and tools to compete.”
Sidebar: How to Start a Purchasing Coop
Whether they sell homebuilding supplies or hamburgers, savvy independent business owners are finding that working cooperatively is the key to surviving and thriving. Rosemary Mahoney, chief executive officer and cooperative developer for Lovingston, Va.-based MainStreet Cooperative Group, offers these start-up tips to entrepreneurs interested in cooperative development:
1. Find friends. Every cooperative begins with a group of like-minded people. Determine if the perceived threat or opportunity you have identified is shared by other independents. Work to form a core of organizers who are respected by other independent business owners as well as vendors. Not getting the right members at the start is a mistake that can lead to failure.
2. Explore the options. Before making plans to organize your own purchasing cooperative, determine whether any other cooperatives are already serving your sector. If so, can you join that cooperative?
3. Crunch the numbers. Estimate the total amount of your sector’s business volume that is handled by independents. Is this amount of volume significant to your suppliers? Do your suppliers need independent businesses in the sector? The ability to convince vendors to support a start-up cooperative is essential to its success. You must be able to prove that your co-op can deliver a significant amount of volume and bring value to the vendor.
4. Do your homework. Find one or two cooperatives in similar industries and talk with their management and some members to learn more about how cooperatives work. You’ll be surprised at how many cooperators are willing to talk to those seeking more information.
5. Lay a strong foundation. If you decide to go forward in establishing a purchasing cooperative, be sure to work with an attorney who understands this business model. Also, raise enough capital to hire a chief executive officer who is both an industry expert and well respected by vendors and potential members. Trying to self-manage a co-op is a mistake. Most entrepreneurs are too busy running their own business to successfully and simultaneously manage the day-to-day operations of a co-op.
About the Author
Donna Abernathy writes for the National Cooperative Business Association (NCBA)
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BIZNESS! Newsletter Issue 85
SmartSwipe Safe Online Shopping
Now you can swipe your credit card at your home or office computer just like you would in a store! SmartSwipe is the new, smarter, more secure way to shop online. Plug it into your computer’s USB port, go shopping to your favourite online stores, and swipe your credit card – it’s that simple……
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