1 E-Business In Business Preparation Is Everything

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E-BusinessE-Business

In Business Preparation In Business Preparation Is EverythingIs Everything

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OverviewOverview

IntroductionIntroduction Making the right business choicesMaking the right business choices Laying the groundwork for our Laying the groundwork for our

online businessonline business Our online biz’s financesOur online biz’s finances Planning our sitePlanning our site

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IntroductionIntroduction As of June 2005, the U.S. Census Bureau of the As of June 2005, the U.S. Census Bureau of the

Department of Commerce announced that the Department of Commerce announced that the estimate of U.S. retail estimate of U.S. retail e-commerce salese-commerce sales for the for the first first quarter of 2005quarter of 2005 was was $19.8 billion$19.8 billion, an increase of , an increase of 6.4% from the fourth quarter of 2004. (traditional 6.4% from the fourth quarter of 2004. (traditional retail sales grew only 1.5% for the same period)retail sales grew only 1.5% for the same period)

Internetnews.com estimated that in 2005 alone Internetnews.com estimated that in 2005 alone more than 202.1 million new personal computers more than 202.1 million new personal computers will be sold. In 2004, 187 million personal computers will be sold. In 2004, 187 million personal computers were sold. Many of these computers will ultimately were sold. Many of these computers will ultimately be connected to the Internet, with users eager to be connected to the Internet, with users eager to surf and shop online.surf and shop online.

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IntroductionIntroduction Furthermore, sales of Smartphone devices Furthermore, sales of Smartphone devices

(wireless devices capable of surfing the (wireless devices capable of surfing the Internet) also continued to surge in 2005. Internet) also continued to surge in 2005. Latest figures show that more than 10 million Latest figures show that more than 10 million smart mobile devices were shipped during smart mobile devices were shipped during the first quarter of 2005. the first quarter of 2005.

With so many new online shoppers, you are With so many new online shoppers, you are probably wondering what they are actually probably wondering what they are actually buying online these days. According to ClickZ buying online these days. According to ClickZ and NetRatings, in Feb. 2005, the top 15 and NetRatings, in Feb. 2005, the top 15 online retail categories were:online retail categories were:

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IntroductionIntroduction1. Computer 1. Computer hardwarehardware

6. Child/baby 6. Child/baby care productscare products

11. Computer 11. Computer softwaresoftware

2. Event and 2. Event and movie ticketsmovie tickets

7. Sporting 7. Sporting goods, and goods, and outdoor activity outdoor activity items items

12. Jewelry and 12. Jewelry and watcheswatches

3. Automotive3. Automotive 8. Home and 8. Home and garden suppliesgarden supplies

13. Health, 13. Health, wellness and wellness and beauty suppliesbeauty supplies

4. Office supplies4. Office supplies 9. Shoes and 9. Shoes and athletic footwearathletic footwear

14. Clothing and 14. Clothing and accessoriesaccessories

5. Consumer 5. Consumer electronicselectronics

10. Flowers, 10. Flowers, greetings, and greetings, and specialty giftsspecialty gifts

15. Toys, games, 15. Toys, games, and hobby and hobby suppliessupplies

Table 1. Top 15 online retail categories (in Feb. 2005)Table 1. Top 15 online retail categories (in Feb. 2005)

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IntroductionIntroduction As a soon-to-be online business operator, it is As a soon-to-be online business operator, it is

important for us to realize that we will be important for us to realize that we will be facing a lot of competition in cyberspace. facing a lot of competition in cyberspace. However, there is still an incredible However, there is still an incredible opportunity to earn profits, especially if the opportunity to earn profits, especially if the online business offers something that’s new, online business offers something that’s new, uniqueunique, and not readily available at your local , and not readily available at your local mass-market retailer or superstore.mass-market retailer or superstore.

We will soon discover that our best chance for We will soon discover that our best chance for success is to success is to target a very specific market target a very specific market nicheniche with our online business. with our online business.

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IntroductionIntroduction After all, when we launch an online business, After all, when we launch an online business,

we will be competing with traditional retailers we will be competing with traditional retailers such as Wal-Mart and the stores at the local such as Wal-Mart and the stores at the local mall, plus all the other well-established online mall, plus all the other well-established online retailers.retailers.

Finding items or services to sell online that Finding items or services to sell online that are are unique, customized, one-of-a-kind, hand-unique, customized, one-of-a-kind, hand-crafted, collectiblecrafted, collectible and/or that target a and/or that target a market niche may seem like a challenge at market niche may seem like a challenge at first, but we will find that this type of product first, but we will find that this type of product offers the best profit potential in cyberspace. offers the best profit potential in cyberspace.

Of course, some businesses also continue to Of course, some businesses also continue to make money selling books, CDs, and make money selling books, CDs, and consumer electronics, for example, but they consumer electronics, for example, but they face a much higher level of competition.face a much higher level of competition.

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Making the right business choicesMaking the right business choices The prices of computers continue to drop rapidly, The prices of computers continue to drop rapidly,

while with each new generation of microprocessor while with each new generation of microprocessor chips, their technological capabilities have chips, their technological capabilities have improved dramatically. improved dramatically.

Thus the equipment needed to operate an online-Thus the equipment needed to operate an online-based business is minimal – far more affordable based business is minimal – far more affordable than ever before.than ever before.

In fact, In fact, we can launch an online business with little we can launch an online business with little more than a basic PCmore than a basic PC that’s connected to the that’s connected to the Internet, a great idea and a product or service to Internet, a great idea and a product or service to sell.sell.

Inexpensive PC’s are available from mail-order Inexpensive PC’s are available from mail-order companies, like Dell and Gateway, as well as from companies, like Dell and Gateway, as well as from retail superstores. We will retail superstores. We will definitely want to invest definitely want to invest in a high-speed Internet connectionin a high-speed Internet connection however. however.

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Making the right business choicesMaking the right business choices Nowadays, virtually anyone with an idea for an Nowadays, virtually anyone with an idea for an

online business, an inexpensive computer, access online business, an inexpensive computer, access to the WWW, and the tools for creating a website to the WWW, and the tools for creating a website can launch their own business venture in can launch their own business venture in cyberspace with a relative ease. cyberspace with a relative ease.

The e-commerce industry is truly open to The e-commerce industry is truly open to everyone. However, just because it’s available everyone. However, just because it’s available there is there is no guarantee that the new online venture no guarantee that the new online venture will make us richwill make us rich, no matter how good our idea is. , no matter how good our idea is. Out of hundreds or even thousands of online Out of hundreds or even thousands of online businesses launched each month, only a handful businesses launched each month, only a handful will ever become profitable. An even smaller will ever become profitable. An even smaller number will make their founders wealthy.number will make their founders wealthy.

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Making the right business choicesMaking the right business choices The good news is that starting an online business The good news is that starting an online business

typically involves far less risk thantypically involves far less risk than opening a opening a retail store or traditional mail-order businessretail store or traditional mail-order business. .

There are no hard-and-fast rules about what There are no hard-and-fast rules about what works and why. works and why.

Just having a good business idea isn’t enough. Just having a good business idea isn’t enough. Likewise, having a professional-looking website Likewise, having a professional-looking website but a poor business idea isn’t going to work but a poor business idea isn’t going to work either. either.

For an online business to be successful, every For an online business to be successful, every aspect of the business has to be well thought out aspect of the business has to be well thought out and designed for a specific purpose – to reach the and designed for a specific purpose – to reach the target audience with information, products, and target audience with information, products, and services that they want and need, plus that they services that they want and need, plus that they can’t easily find elsewhere. can’t easily find elsewhere.

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Making the right business choicesMaking the right business choices

Since the Internet has become popular, Since the Internet has become popular, virtually everything we could possibly virtually everything we could possibly imagine has been bought and sold over imagine has been bought and sold over the Internet. the Internet.

eBay.com is the worlds’ most popular eBay.com is the worlds’ most popular online auction site and a major success online auction site and a major success story in the e-commerce industry. story in the e-commerce industry. We can We can use eBay to test our online business ideause eBay to test our online business idea and help determine whether there’s a and help determine whether there’s a market for what we intend to sell. market for what we intend to sell.

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Making the right business choicesMaking the right business choices In the remaining lectures we will discuss In the remaining lectures we will discuss

the process of launching our own online the process of launching our own online business, from the initial concept stages to business, from the initial concept stages to the actual development of the web site, the actual development of the web site, it’s ongoing maintenance, and the it’s ongoing maintenance, and the promotion of the site once it goes online.promotion of the site once it goes online.

Establishing a Establishing a successful online businesssuccessful online business will will require much of the same effortsrequire much of the same efforts and and resources resources asas starting starting a traditional a traditional businessbusiness..

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Making the right business choicesMaking the right business choices We will need to develop a well-thought-out We will need to develop a well-thought-out

business plan, invest time, make some type of business plan, invest time, make some type of financial commitment, and do research about our financial commitment, and do research about our product, target market, and the viability of our product, target market, and the viability of our overall business idea.overall business idea.

Once we come up with what we consider to be a Once we come up with what we consider to be a brilliant online-based business idea, we need to brilliant online-based business idea, we need to do some more research regarding who our do some more research regarding who our potential competition will be. potential competition will be.

Also, most importantly, understand our target Also, most importantly, understand our target audience and what needs or desires our business audience and what needs or desires our business will be fulfilling, or what problems our will be fulfilling, or what problems our products/services will be solving. products/services will be solving.

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Making the right business choicesMaking the right business choices Some definitions:Some definitions:

• Online businessOnline business – any type of business venture – any type of business venture being launched on the Internetbeing launched on the Internet

• E-Commerce siteE-Commerce site – a website designed to – a website designed to accept orders for products or servicesaccept orders for products or services

• Shopping cartShopping cart – is the part of the website which – is the part of the website which contains the order form and is used to process contains the order form and is used to process orders along with credit-card, check, or PayPal orders along with credit-card, check, or PayPal payments. payments.

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Making the right business choicesMaking the right business choices The primary reasons people fail when they The primary reasons people fail when they

launch an online business include the launch an online business include the following:following:• Lack of planningLack of planning• Trying to sell a product or service people have Trying to sell a product or service people have

no interest in buyingno interest in buying• Poor (unprofessional-looking) website designPoor (unprofessional-looking) website design• Inferior customer service or technical supportInferior customer service or technical support• Ineffective advertising, marketing, or Ineffective advertising, marketing, or

promotionpromotion• Insufficient financial resources for the type of Insufficient financial resources for the type of

business being launchedbusiness being launched• Following a poorly though-out business planFollowing a poorly though-out business plan

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Making the right business choicesMaking the right business choices If we already have If we already have an existing businessan existing business, ,

having an online presence would provide a having an online presence would provide a way to expand the customer base. It will way to expand the customer base. It will allow to offer potential customers allow to offer potential customers information about products or services, information about products or services, improve customer service (reduce related improve customer service (reduce related costs), make it easier to place orders any costs), make it easier to place orders any time, and reach people that wouldn’t time, and reach people that wouldn’t ordinary be reached.ordinary be reached.

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Laying the groundwork for our online Laying the groundwork for our online businessbusiness

Starting a small business online requires Starting a small business online requires the following steps:the following steps:

• Come up with an awesome business ideaCome up with an awesome business idea• Develop a detailed business plan and Develop a detailed business plan and

marketing campaignmarketing campaign• Perform the necessary researchPerform the necessary research• Raise the required start-up capitalRaise the required start-up capital• Seek out free or low-cost guidance, especially Seek out free or low-cost guidance, especially

if we lack business or computer experienceif we lack business or computer experience

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Before investing our time and money in our idea, Before investing our time and money in our idea, we need to create a detailed we need to create a detailed business planbusiness plan, which , which specifically defines our business and its goals, specifically defines our business and its goals, and includes a balance sheet and cash-flow and includes a balance sheet and cash-flow analysis.analysis.

Upon creating a business plan, doing extensive Upon creating a business plan, doing extensive research, and analyzing the demand for the research, and analyzing the demand for the products / services the business will offer, we products / services the business will offer, we should be able to accurately should be able to accurately project start-up project start-up costs, operating costs, revenues, and profitscosts, operating costs, revenues, and profits..

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If we do not have a financial background, we If we do not have a financial background, we should consider hiring an accountant, should consider hiring an accountant, bookkeeper, or someone with expertise to help us bookkeeper, or someone with expertise to help us create a financial model in advance, and set up create a financial model in advance, and set up the financial aspects of the business. Right from the financial aspects of the business. Right from the start, the start, we need to have an adequate we need to have an adequate accounting and recordkeeping system in placeaccounting and recordkeeping system in place..

Also, we will need to find investors or take out Also, we will need to find investors or take out business loans in order to business loans in order to generate the start-up generate the start-up capital we requirecapital we require. Potential investors and . Potential investors and financial institutions will look carefully at our financial institutions will look carefully at our business plan, projected financial statements, business plan, projected financial statements, and how much of our own funds we are investing and how much of our own funds we are investing in the business. in the business.

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Therefore, creating a well-though-out Therefore, creating a well-though-out business plan is an important first step for business plan is an important first step for any business owner. any business owner.

As we mentioned, a CPA, financial planner, As we mentioned, a CPA, financial planner, accountant, or professional book-keeper accountant, or professional book-keeper will also be able to assist us with the will also be able to assist us with the financial aspects of the business plan.financial aspects of the business plan.

Another option, the Small Business Another option, the Small Business Administration’s website offers several Administration’s website offers several free downloadable software tools designed free downloadable software tools designed to help creating a business plan at: to help creating a business plan at: http://www.sba.gov/smallbusinessplanner/index.htmlhttp://www.sba.gov/smallbusinessplanner/index.html

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We can also take advantage of the free resources We can also take advantage of the free resources available to small-business owners from the available to small-business owners from the Service Corps of Retired Executives (SCORE).Service Corps of Retired Executives (SCORE).

SCORE is a division of the Small Business SCORE is a division of the Small Business Administration dedicated to aiding in the Administration dedicated to aiding in the formation, growth, and success of small formation, growth, and success of small businesses nationwide. It is a nonprofit businesses nationwide. It is a nonprofit association comprised of more than 12,400 association comprised of more than 12,400 volunteer business counselors offering general volunteer business counselors offering general business advice and helping entrepreneurs create business advice and helping entrepreneurs create and write detailed business plans. and write detailed business plans.

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Our Online Biz’s FinancesOur Online Biz’s Finances One of the biggest expenses associated with One of the biggest expenses associated with

operating a small business involves hiring operating a small business involves hiring employees.employees.

Hiring freelance consultants or workers such as Hiring freelance consultants or workers such as Web programmers, graphic artists, writers, Web programmers, graphic artists, writers, photographers, or marketing people can become photographers, or marketing people can become costly, even no benefits are offered. These costs costly, even no benefits are offered. These costs should be factored in the operating budget and should be factored in the operating budget and monitored carefully.monitored carefully.

For tax and legal reasons, we will need to decide For tax and legal reasons, we will need to decide what form our business will take. Generally, all what form our business will take. Generally, all businesses fall into one of these broad categories: businesses fall into one of these broad categories: sole proprietorship, partnership, corporation, S sole proprietorship, partnership, corporation, S corporation, or limited liability company (LLC). corporation, or limited liability company (LLC).

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Our choice of business form will affect our Our choice of business form will affect our exposure to personal liability, how we exposure to personal liability, how we draws profits and pay taxes, our ability to draws profits and pay taxes, our ability to raise capital, and how the business is run.raise capital, and how the business is run.

To learn more about how incorporating To learn more about how incorporating can benefit us financially and legally, the can benefit us financially and legally, the best strategy is to seek the guidance of a best strategy is to seek the guidance of a lawyer. lawyer.

Our Online Biz’s FinancesOur Online Biz’s Finances

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In order to be competitive in cyberspace, In order to be competitive in cyberspace, our business our business must be able to accept credit must be able to accept credit cardscards. To do this, we will need to set up a . To do this, we will need to set up a merchant account – through a bank, merchant account – through a bank, financial institution, or independent financial institution, or independent service organization. service organization.

This has become a highly competitive This has become a highly competitive industry, so it is important to carefully industry, so it is important to carefully research the services being offered and research the services being offered and shop around for the best rates. shop around for the best rates.


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In relation to financing our business, most In relation to financing our business, most people don’t personally possess all the people don’t personally possess all the resources needed to get a business up and resources needed to get a business up and running. running.

However, as a business owner, we will However, as a business owner, we will need to need to invest some of our own moneyinvest some of our own money. . That would help prove our commitment to That would help prove our commitment to potential investors or other sources of potential investors or other sources of financing. financing.


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Sources of outside financingSources of outside financing include the include the following:following:

• BanksBanks• Credit-card companies (like American Express Credit-card companies (like American Express

Small Business)Small Business)• Loans from relatives or friendsLoans from relatives or friends• Private investorsPrivate investors• The Small Business Administration (SBA)The Small Business Administration (SBA)


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Before we begin creating our own web site, we Before we begin creating our own web site, we need to spend considerable amount of time need to spend considerable amount of time surfing the Web looking for ideassurfing the Web looking for ideas. Next, . Next, determine what features we like and how to determine what features we like and how to incorporate them into our site.incorporate them into our site.

We need to We need to avoidavoid the temptation of the temptation of overloading overloading our website with flashy animated graphicsour website with flashy animated graphics, audio , audio clips, and video clips, as we do not want to clips, and video clips, as we do not want to overwhelm our visitors.overwhelm our visitors.

We must also carefully evaluate and We must also carefully evaluate and determine determine the exact purpose of our sitethe exact purpose of our site and who it is and who it is targeting.targeting.

Planning our sitePlanning our site

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One of the first things a visitor will notice is how One of the first things a visitor will notice is how well it is laid out, and well it is laid out, and how intuitive it is to how intuitive it is to navigate throughnavigate through..

We We don’t necessarily need to be a programmerdon’t necessarily need to be a programmer to to create an online store or website. General-create an online store or website. General-purpose software, as well as turnkey website purpose software, as well as turnkey website design services are commercially available.design services are commercially available.

Finally, as we begin creating our site, we need to Finally, as we begin creating our site, we need to be careful that the content we add does be careful that the content we add does not not violateviolate any individual’s or company’s any individual’s or company’s copyrights copyrights or trademarksor trademarks. .

Planning our sitePlanning our site

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1 E-Business In Business Preparation Is Everything