With more dot-coms becoming dot-bombs every week, who in their right mind would start a Web-based business now?
Chicago businessman Jay Goltz, for one. In March, Goltz established FramerSelect (www.framerselect.com), a Web site where consumers can find experienced picture framers in their area and also learn what is involved in professional picture framing.
The shaky Internet economy didn’t faze him. Success on the Web, Goltz said, depends on the same business fundamentals that lead to success elsewhere.
“I’ve watched people start dot-coms who have absolutely no business experience,” he said. “They’d blow their wad on one Super Bowl ad. You can’t conduct an Internet business in a vacuum. It’s part of the business world.”
Those who follow the fortunes of the dot-com world echo Goltz’s philosophy. They also say that while it’s still a good time to start a Web-based business, you may have to fund the business yourself or appeal to family and friends for start-up cash. Venture capitalists aren’t as easy to impress as they used to be.
“Investors want a rational business plan now. They want you to show that you can generate profits,” said Anthony Paoni, professor of e-commerce and technology at Northwestern University’s Kellogg Graduate School of Management.
Paoni advises new dot-coms to aim for break-even cash flow in about 18 months. Subsequent profits can then be invested in making the business grow.
In the wake of the recent dot-com meltdowns, Internet economy analysts are still sorting out which revenue models make sense on the Web and which ones tend to flop. Most agree that dot-coms that rely solely on income from banner ads are probably destined for the flop category.
There are, however, exceptions. Greg Holden, the Chicago-based author of “Starting an Online Business for Dummies” (IDG Books), said that advertising and sponsorships can provide a decent revenue stream for Web sites devoted to a hobby or sport, if these sites generate enough traffic. The key to bringing visitors back to these sites is to keep the content fresh.
“You have to be patient and willing to put lots of effort into constant maintenance and upkeep for the site,” Holden said.
More than hot air
Three years ago Steger resident Mark A. Cramer developed such a site. A longtime devotee of the sport of hot-air ballooning, Cramer approached the North American Balloon Association about creating and managing a Web site for them. They agreed and he established Eballoon.com.
In addition to general information about the sport, Eballoon.com posts the results of ballooning competitions throughout North America, often just 15 minutes after the event ends.
Cramer already owned a company called MePage.com, which provided the start-up capital for the ballooning site. In return for offering exclusive coverage of association events, Cramer’s company keeps a percentage of revenues generated from Eballoon.com. Those revenues have come from advertising that appears on the balloons. This year Cramer began soliciting ads for the site as well, a move that he expects will help Eballoon.com turn a profit for the first time.
Among the thriving dot-com models that don’t depend on advertising are sites that serve as a broker by helping people find products or services from various sources. Whether you specialize in out-of-print books or personalized travel advice, you’ll have an edge if what you’re offering isn’t readily available from other Web sites.
Goltz’s FramerSelect falls into this category. There is no charge to consumers who log on to the site to find a picture framer, but the frame shops pay $120 per month to be listed on the site (if they fulfill certain criteria confirming that they provide quality service).
The economic downturn hasn’t changed one aspect of launching a dot-com: Even the best business model won’t survive if the Web site is poorly designed.
If you’re starting a dot-com from scratch, you can hire individuals as designers and programmers, or go with a Web development firm that will take care of the process from initial design and content to post-launch support.
Fees for graphic designers and programmers who specialize in dot-coms range from less than $5,000 to more than $100,000, depending on the site’s complexity. Before hiring anyone, look at Web sites they’ve developed that have the same level of functionality you’re seeking and that are in an industry similar to yours. Also, ask to speak to a few of their clients.
Educate yourself on the process of building a Web site. You not only will make better decisions, but you also may be able to handle some of the tasks yourself.
According to Andre Scott, president of Texture Digital Media, a Web development firm in Chicago that specializes in working with small to medium-size businesses: “If you know how to do front-end HTML [the language of Web site developers], you can go to a firm and ask how much it will save you if you do the front end–basically the layout–and they take care of the back end.”
He suggests checking out Webmonkey (www.hotwired.lycos.com/webmonkey/) to get started on HTML education.
Setting up Web basics
You may be able to be your own Web developer if your site doesn’t require a database or a sophisticated design and you’re comfortable tinkering with new software. The bare essentials that you’ll need are a PC with at least 96 megabytes of RAM, an Internet connection (preferably via DSL or cable modem service if either is available in your area), a scanner or digital camera so you can include digital image, and image-editing and Web-page creation software.
If you decide to go the home-grown route, consulting a Web developer along the way could save you money in the long run.
“About 85 percent of your resources will be spent on technology,” said Eballoon’s Cramer. “You have to spend money upfront to make sure the message you’re trying to get across is actually being seen.”
And avoid purchasing costly equipment. According to Dawn Larsen, a professor at Chicago’s Columbia College who coordinates the school’s New Media Management program, “on eBay you’ll see Internet servers and routers and other equipment from dot-coms that went out of business. Don’t buy that equipment, at least at the beginning. Outsource to another company to host your site. Don’t make those big capital investments.”
Hosting services have the servers to keep your site online and can take care of your other Web site management needs. Monthly fees range from $10 to $300.
