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17 Mistakes to Avoid When Starting an Online Business

For people who have an entrepreneurial mindset, there is incredible potential to use the Internet to create a successful business. Online businesses offer unique benefits, such as:

  • the ability to start the company with low or no overheads;
  • a faster timeline than most brick and mortar businesses; and
  • the chance to expand its reach beyond one location.

Research shows that almost 70% of Americans shop online, and U.S. business-to-consumer e-commerce revenue from 2006 to 2013 was over $700 billion dollars. However, with these benefits and opportunities can come unique pitfalls. This article lists 17 mistakes to avoid when starting an online business.

Taking Too Much Time to Launch

In business, timing is everything. When you first realize there is an excellent business opportunity online, it is normal to research the market, the competition, the process, and the aspects of creating an online business. Research and evaluation are great, but spending too much time researching may mean you miss your window to launch.

It is important to realize that the longer you delay your launch, the longer you will wait for your business to make money. Business experts say that this mistake occurs because business owners wait until their idea can be executed perfectly, when actually, “good will do.” A long timeline to launch, even if done out of concerns of getting it right, may increase your chances of being beaten by a competitor.

Don’t let yourself fall into analysis paralysis, where you can actually stall yourself in overthinking or worrying about perfection, or you may miss your window.

Starting a Business You Aren't Passionate About

Sometimes people start an online business not only to make money, but because they are passionate about their product or service. Starting a business requires your dedication and commitment, even when profits aren’t high, and you need to stay invested. You may find there is more competition than you anticipate and becoming profitable will be harder than you think. If you don't have enthusiasm for the business you choose, then the learning and sales process will seem like homework and the business will stall because it will be harder to put effort into the business. For example, if you are selling plumbing parts online but don't really care about the products, it will show in your customer service, quality control, and many other areas.

To be profitable, start an online business you are passionate about. You need to know everything about the product or service you are selling. The more you enjoy your business, the more successful it will be.

Expecting to Make a Quick Buck in Little Time

Businesses—both brick and mortar and online businesses—aren’t always profitable in the first year. Some online business owners may think that because they have lower overheads than a traditional business, they will make profits in less time. Several popular books promise riches and four-hour workweeks through the world of e-commerce, but stories like this convince people that they can strike it rich immediately on the Internet. Building an online business is no less difficult than it is in “the real world,” and takes energy, time, effort, and planning. Even Amazon wasn’t immune to the loss of profit in the first year, and despite being in business since 1994 and with over $1 billion in sales by 1999, the website didn’t make a profit until 2003.

Don't make the mistake of thinking it is easy and fast to make money on the Internet. Take time to make the business the best it can be. Thorough planning will go a long way when starting an online business. Be prepared to work hard.

Failing to Prepare

Once you have committed to starting an online business, you still need a business plan that outlines the following information:

  • Background information
  • Confidentiality
  • Products and services
  • Industry status
  • Marketing analysis
  • Production and quality assurance strategies
  • Financial projections
  • Executive summary

Although many aspects of your business will evolve over time, if you don't start with a good outline, you can get lost pretty quickly. Having a business plan makes it easier to pitch to investors (should you seek capital) since they will have a blueprint on how you expect to use the funds.

Writing the business plan will help you identify potential issues and come up with a timeline for your goals. Read our article 'Anatomy of a Business Plan: 15 Tips for Writing a Plan That Leads to Success' for advice on creating a solid business plan.


Offering a Solution to a Non-Existent Problem, and Not Pivoting When You Identify It

One of the most common reasons why online businesses fail is that they offer a product or service that doesn't really solve any significant problem. It may seem like a good idea at the time, but after some evaluation you may find that the problem you solved is not perceived to be a problem by your potential customers. You may then discover that you can take a new direction for the growth of the business to better satisfy customer needs. This business move is called a pivot, and it has been accomplished by a number of famous businesses, including PayPal. PayPal began as a company that shared payments across Personal Digital Assistants (PDAs), such as a PalmPilot, but shifted into a more global online payment system.

If your business is built around selling something that doesn't solve a problem, but seems like it might be “cool,” that is a red flag. Be prepared to change direction if you feel your business warrants it.

Dismissing Negative Feedback

When launching a new online business, it is tempting to listen to your fans and ignore your critics. It is good to have confidence, but dismissing negative feedback or criticism as “haters” is a mistake. It may sound strange, but there can be benefits to negative feedback:

  • You can understand your customers better
  • You can tweak your product
  • You can develop top-notch customer service

Consumers use online feedback in a surprising way; 88% of consumers put as much trust in online reviews as they do personal recommendations. By addressing negative feedback, you demonstrate you care about the customers’ experience with your service or product, and want to improve that experience.

Use negative feedback to become a better business. Let your customers know you welcome any kind of feedback, and give them enough avenues to do so, for example surveys or a rating system.

Not Being Unique Enough

Many businesses are not different enough to get any traction in their chosen area. If you and your competitors are all doing the same thing, then odds are there are too many of you in the same business. As a result, your target audience may think that you and your competitors are identical, and will make their business decisions based on their time or budget availability. In an article on Moz, digital marketing expert Trenton Greener put it like this:

“We unconsciously and naturally seek out the normal, and if we want to be different—truly different in a way that creates an advantage—we have to work for it.”

You need to consider what you can offer to the market.

  • How are you different than other businesses offering your product or service?
  • What is your USP?

For example, how are companies like Zappos and Warby Parker any different than other online businesses that sell shoes and glasses? Warby Parker lets customers try their glasses for free, while Zappos offers free shipping both to and from the consumer.

If your answer is simply “we do it better,” then you will need to go back to the drawing board, because your target audience won’t see why they should choose you. Making your business unique in some way will encourage consumers to buy your product or service, and keep coming back for more.

Not Defining Your Target Audience

Who is your ideal customer? The answer may be “everyone,” but that is not true. Not every business is going to fill the need of every consumer, and that is okay. The object is to find who can best use your online business, and see how you can meet their needs. By not defining your target audience, you miss the opportunity to find ways to market directly to them. Your online business will perform better against larger companies if you find a way to target a niche audience.

Identify your niche so you can understand how you will function in the market and how to target your efforts. Remember to include your target audience in your business plan, especially if you are going to seek investors.

Giving Up before You Start

Entrepreneurship is risky and hard, but that doesn't mean you aren't meant to start an online business. Fear of failure can derail you, so be prepared to hit a few bumps in the road. It is natural to feel like you are not ready to start your business. Consider this: Michelle Zatlyn, co-founder of CloudFlare, a web performance and security company, told Fast Company that it took three years for her to feel like founding CloudFlare was the “right choice.”

Don't talk yourself out of starting a business or give up on your ideas too soon. Surround yourself with like-minded business owners and friends who will offer you feedback, support, and encouragement when you feel like giving up.

Forgetting about Discipline

There are many reasons why being your own boss is a great way to work. While it is true that you can work in your pajamas, take the afternoon off to play golf, and sleep until noon, that doesn't mean you won't need personal discipline. As your own boss, you will have to learn how to manage yourself. In order to be productive and efficient, you may find that you need to dress like you are going to the office, or put in four hours of work after hours to make up for that game of golf. Remember the Pareto Principle, the business rule that says 20% of your time makes up 80% of your sales. If you aren’t working on a consistent schedule, then aren't giving yourself the opportunity for success.

Create a schedule that is right for you and stick to it. The more disciplined you are with your time, the more effort you will put into your business to help it succeed.

Ignoring the Legal Stuff

Some online businesses may skimp on the legal issues regarding their practices. Every step of your business may require an applicable legal document. For instance, if you are looking into what type of corporation you want to file, you can’t skip the incorporation process, which is a common mistake made by small businesses. If you want to form a LLC, then you will need an LLC operating agreement.

Other legal mistakes an online business may make can include failing to outline what duties a company partner will have, and what rights to the business they may own. You can circumvent future misunderstandings over these issues by using a partnership agreement. Another legal issue some online businesses may face is loan payoff terms. A promissory note will let you define how much the loan is for and the conditions of its payoff, even if borrowing from friends or family. Don't make the mistake of thinking that since your partners or lenders are your friends or family, you don't need formal documentation.

To find out what legal documents you might need, read our article 'Top 9 Legal Documents You Need to Start Your Business.'

Ignoring the Competition

Those with experience in traditional brick and mortar businesses may be surprised to discover there is actually more competition online. The same thing that may have attracted you to the Internet—fewer barriers to entry—also draws other people. Anyone can start a business, which means you will have competitors. You need to study your competition in order to understand how you can beat them.

  • What are they doing wrong?
  • What are they not doing at all?
  • Are their prices too high?
  • Are their products the same quality as yours?

Once you identify your competitors' strengths and weaknesses, it helps you understand how to serve your customers better. Focus on what you can do differently to better satisfy the needs of your customers.

Choosing a Niche That Is Too Narrow

The Internet allows you to discover a niche market and tailor your online business to a highly specific subset of people who are interested in that niche. However, there are downsides to niche marketing. If your niche is too narrow, you won't have enough customers, so it is up to you to target the correct market. Many online businesses fail because they are built around an obscure idea the owner is passionate about and they assume there are enough people who feel similarly to create a successful business. It is important to consider the demand for the product or service you are selling online, and you need to research your niche.

Google has invaluable tools to ensure your niche is large enough to sustain a business. Use them! Visit forums, check trends with Google Insights for Search, and use the Google Keyword Tool to find out how many people are searching for certain keywords.

Too Much Keyword Stuffing

There is a lot of bad information on the Internet that encourages online businesses to front-load their websites with keywords. This stems from the early days of search engine optimization (SEO), when it was easy to manipulate search rankings by using as many keywords as possible on the webpage. Things have evolved significantly since the early days of search analytics and companies are no longer rewarded for random keyword stuffing. Now quality content is king. Whether you are a blogger trying to make it as a business or are just wanting to draw more traffic to a site that sells actual products, your content should strive to be helpful, informative, and fun.

People respond well to content that is written for a human audience rather than for a search engine. If SEO is not your forte, consider using an SEO company to boost the visibility of your website.

Not Optimizing Your Website

Many first-time online business owners don't optimize their websites for consumers, which costs them sales. Consumers want a website to load fast—47% of consumers expect a website to load in two seconds or less. If your website is too slow to load, no matter how good your service or product may be, your customers will click away. Your business website also needs a call to action (CTA) on every page. A CTA is a message to the consumer to take action immediately, such as “Call now” or “Find out more.” If your website doesn't include a CTA, you will miss opportunities for a sale.

The mere existence of your website doesn't mean you have a great business, you have to make sure it drives your business and entices customers to answer the CTA. Consult with a web designer and IT specialist to ensure your website meets your conversion goals.

Forgetting about Your Subscribers or Email List

Every online marketer recommends you start an email list the day you launch your business. Many people ignore this advice, and those who follow it soon forget they even have an email list of people who want updates on your business. Email marketing is powerful and it works; statistics show that $1 spent on marketing equals an average return of $44.25, which means that your subscribers are your best customers.

Market to your subscribers with update emails, special offers, and other content that will inspire conversions.

Becoming Too Isolated

It is easy to spend all of your time online when you are building and running an online business. However, too much time alone can be isolating and this deprives you of support and new ideas. Don't forget to network both online and offline with other people who have chosen self-employment.

Attend conferences and meet-ups, join a mastermind group, have discussions online, and consider if you should hire a coach or mentor.

Conclusion

The Internet has created unprecedented opportunities for individuals to start their own businesses. If you have an idea for a business, go for it by launching your website and immersing yourself in best practices. Get to know your competitors, research your industry, and create a business plan that gives you a roadmap to sustained growth. Keep in mind that learning what not to do is just as important as knowing what to do. By avoiding the 17 mistakes outlined above, you will give your business the best chance of success.

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