The claims of FFA sites are some of the most hyper-inflated on the internet: “Retire in 6 months!”, “Bring thousands of visitors to your website!”, “Turn water into wine!”  (Okay, I made that last one up.)  I’m here to tell you that advertising on FFA sites and even owning one yourself is pretty much a phenomenal waste of time.

What is FFA advertising?

FFA stands for Free For All.  Basically, an FFA site allows you to advertise your online business for free.  Sounds good, right?  Well, read on.

Why is advertising on FFA sites a waste of time?

Unfortunately your ad is one of hundreds on a website purely devoted to advertising.  When is the last time you visited an FFA site to thoughtfully read all the ads and choose something to buy?  Probably never.  The same maxim holds true for the rest of humanity.  Even if people did visit FFA sites and read the ads, yours is usually removed after about an hour to make room for the next batch.  Even if you are foolish enough to pay for premium placement, the chance of anyone seeing your ad and actually visiting your site is nil.

What if I actually own the FFA site?  Can I make money then?

Probably not.  The point of owning an FFA site is to collect email addresses or “leads”.  Everyone who posts a free ad needs to provide you with their email address.  However, most people submitting to FFA sites now use an automated system and/or second email account so they can instantly delete all the spam email that comes from the hundreds of FFA sites they’ve posted their ads on.  So most of the “leads” you collect will be worthless.

Can I earn commission by signing other people up for FFA sites?

This is the newest dimension of FFA advertising.  If you think you will make money this way, I have some Tahitian Noni Juice I want to sell you.

There are legitimate ways to advertise cheaply or for free online.  Some banner ad exchanges, classified sites, and inexpensive Pay-Per-Click services will bring traffic to your website.  But unfortuantely FFA sites won’t.

internet marketing, online business

Did you know that China will soon be the #1 English-speaking country in the world?  Or that the top 10 in-demand jobs in the US did not exist in 2004?  How about the fact that it took radio 38 years to reach an audience of 50 million and TV 13 years, but the Internet required only 4 years, iPods 3 years, while Facebook reached 50 million people in 2 years?  (Check out the YouTube video Did You Know? at  http://www.youtube.com/watch?v=cL9Wu2kWwSY for these and other facts about the crazy world we’re living in.)

How is this relevant to your online business?

The world is changing at an exponential rate, and e-commerce is one of the most swiftly adjusting industries.  If you can’t keep up with changes in customer demands and marketing techniques, your online business will fall by the wayside.

How can your online business adapt to changes?

1. Don’t pay for services, pay for training

Many e-business owners are tempted to hire SEO companies and marketers to promote their business online.  The problem is, if you don’t know anything about online marketing and SEO, how do you know you’re getting your money’s worth?  How will you know if you’re getting results at all?  And how long will you have to keep paying these people for?  Instead of hiring someone to do the work for you, find someone who will train you on how to improve your SEO and market your online business through venues like social media.  This will save you money in the long run, and the information you learn may alter your entire plan for your online business.

If you do hire a service, make sure you communicate clear goals and expectations to the company, and carefully monitor their results (for instance, know what keywords they are optimizing your website for, check how your site is rising on the search engine response pages, and confirm that your traffic and conversion numbers are improving).

2. Don’t be afraid to experiment

Try using a foreign supplier, try branching into social media marketing.  Maybe your venture won’t be a success, but you’ll never know until you give it a shot.  Just remember not to leverage yourself too much in risky ventures: it’s okay to try ordering $500 worth of bowling shoes from a Chinese supplier, but don’t risk your entire $8000 savings.

3. Look for new opportunities, not just tried-and-true techniques

E-commerce is a trend-oriented industry.  If you jump on the bandwagon of an established success, you’ll probably be too late to reap any real reward.  Entering a saturated market or advertising on a tired venue isn’t useful to your online business – if you’re only just now thinking of selling iPods on eBay or marketing your business on MySpace, you’re a little late.  Instead, look for fledling products and venues.  Not every new auction site or every new trendy product is going to take off, but if you get in on the ground floor in a few different areas, you have a good chance of riding the crest of the wave instead of chasing after a dying trend.

4. Don’t forget classic business techniques

The emphasis of this article is adapting to change and jumping on fresh opporutnities, but don’t forget business fundamentals.  I ordered a fruit bouquet today off the Edible Arrangements site, but I didn’t find it through Facebook or a texting campaign or a blog article.  They hooked me with a tried-and-true marketing campaign that’s been popular since the 1050’s: a simple TV ad.  Don’t forget that t-shirts, car decals, flyers, yellowpages ads, and business cards are still effective promotional tools.

online business

How much capital does a person need to start an online business?  $100?  $10,000?  Obviously the answer is different for everybody, depending on your business goals and how many things you’re able to do on your own, but there are some common expenses that almost everyone has to shell out for.  There are cheaper and more expensive ways of setting up almost every aspect of your online business, but make no mistake, a business is an investment and it’s going to cost you something.  It might take you a couple of months to see a return on that investment, so don’t start an online business because you lost your job and you need to make rent or you want to buy a birthday present for your girlfriend next week.

What if I don’t have very much in savings?

It’s okay if you don’t have thousands of dollars stashed under your mattress.  You can look for less expensive options when setting up your online business, or you can seek additional funding from partners, bank loans, and lines of credit.

What are the costs of starting an online business?

The 8 main costs of starting an online business are as follows:

1. Education

Before you can start an online business you need to learn how to formulate business and marketing plans, how to choose a product, how to find suppliers, how to pick your venue, how to set up an effective website, how to market that website, and so on and so forth.  Perhaps your education will cost you no more than a library card.  Maybe you’ll get most of your information online, from a friend, or from a database.  Or maybe you’re a person who needs step-by-step encouragement and instruction and the best option for you is to hire a coaching service.

Learning how to operate an online business can cost you anywhere from $50 for a few good books to $5000 for a full-time coach.

2. Seller’s Permit and Tax ID Number (EIN)

It’s best to get your Seller’s Permit and Tax ID Number (EIN) as soon as possible.  You can get your Seller’s Permit either through one of the many companies offering their services online, or by downloading the form from your state Revenue Agency.  Your Tax ID Number can be obtained by applying online at the IRS website (you receive your number immediately and can download and print your confirmation notice).

Fees vary state by state, but it shouldn’t cost you more than $80 for the Reseller’s Permit, even if you use a service, and the EIN is free.

3. Finding suppliers

You can try finding suppliers online, but as anyone who has ever typed “golf club dropshippers” into a Google search can attest, you will have to wade through some 38, 700 results, 99% of which will be queries, middlemen, scams, foreign suppliers, and directories.  A second option is to attend tradeshows and other events to meet suppliers.  A third option is pay for access to a quality database.  The Wholesale Match database  offers affordable monthly and annual memberships, a Research Team to do the work for you, free educational materials, and a 100% money-back guarantee (probalby the only money-back guarantee you’ll find for an online service).

Finding suppliers will cost you approximately $200-500 for access to a database, or around $1500 for entrance fees, airfare, and hotel accommodation to attend a couple of tradeshows.

4. Products

You can handle your product sourcing in two main ways: by dropshipping or purchasing from a wholesaler.  If you decide to dropship, you won’t have to spend hardly any money upfront for your products.  There may be a small fee to set up an account with a dropshipper, but even this is uncommon.  When purchasing from a wholesaler, by contrast, you will probably have to make a large initial order.  (Subsequent orders may be much smaller).

The cost of purchasing products from a dropshipper is generally $0 upfront.  If you purchase from a wholesaler, your initial order may be anywhere from $50-$2000.  $100-$300 is most common. (Many wholesalers allow you to open a line of credit so you don’t actually have to pay any money upfront.)

5. EBay fees

Posting items on eBay occasions paying fees, whether or not your product sells.  Depending on the reserve price you set, posting a single item on eBay will cost you between $0.10 and $4.00 (adding extra photos, videos, etc. is extra).  You will also be charged a percentage of your final sale value, but that’s only if you make a sale, so that fee is really an operating cost, not a set up cost.  There are other auction sites you can use like Bonanzle which do not charge a fee unless your item sells, which is nice for e-commerce newbies, but these sites don’t always see the same traffic eBay does.  You should probably try selling on a few different auction sites and see what works best for you.

The cost of posting items on eBay is at least $0.10-$4.00 for one, or $1.00-$40.00 for your first ten.

6. Setting up a website

If you’re proficient at web design, setting up a site will cost you practically nothing.  Even if you’re not particularly computer-savvy, there are thousands of customizable templates you can use for your website (many are available free through hosting services).

If you do want to hire a professional, web-design will cost you between $500 for a student to $3000 for a seasoned pro.  You will also have to pay about $5-50 a month for web hosting, and between $10-100 to register your domain name.

7. Marketing

Once you have your website set up, you’re going to have to do something to bring in visitors.  The most common way to market a website is through Pay-Per-Click Advertising (PPC).  PPC can cost anywhere from $0.10-$1.00 per visitor – basically you bid for certain keywords, and whenever someone types that keyword into a search, your ad pops up at the top or side of the search engine response page.  PPC is nice because you can set a certain budget, say $300, and once that amount is exhausted your ad will disappear.

Of course there are many other ways of advertising your online business including banner ads and press releases.  You can even find free ways of promoting your business, such as contacting your local newspaper for a write-up, sticking an ad decal on your car, or participating in an advertising exchange.  But for now, let’s assume that PPC will be your main marketing method.

PPC will probably cost you around $200-500 per month for the first few months (once you start receiving organic traffic, you can cut down on your PPC ads).

8. SEO

SEO is Search Engine Optimization.  As mentioned above, the ultimate goal is to receive “organic” or “natural” traffic to your website.  This means that visitors naturally to your site due to your high placement in the search engine response pages (SERPs), recommendations and inbound links on other websites, and word of mouth.  SEO helps with your placement on the SERPS.  You build SEO mainly through keywords, quality content, inbound links, well-designed web pages, directory submissions, and deep submission.  SEO is something that needs to be done constantly and it can be quite complicated and time-consuming.  You can practice SEO yourself, but you may also want to hire a service to review the efficacy of your SEO or hire someone to do some of the work for you.

SEO can cost you nothing but your time, or can run you around $100 for a review, or $1000 + to pay somebody to help you out.

online business, pricing and profits

Lately I’ve been receiving a lot of questions about LLCs, corporations, and partnerships.  People are confused about which ownership structure is best for their online business.  Is it really necessary to make your business “official”?  What are the differences between the various structures?  What will happen if you don’t choose an ownership structure?

Overview of Common Ownership Structures:

Sole Proprietorship:

This is a one-person business not registered with the state.  You are not required to register, file papers, or acquire documents.  Basically, if you do nothing your online business with automatically be a sole proprietorship.  In a sole proprietorship the business and owner are one and the same – you report your business income and losses on your personal tax return, which may or may not be a good thing for you.  The negative to sole proprietorship is that you are personally responsible for business-related obligations like debts or settlements if you’re sued.

Partnership:

A partnership is like a sole proprietorship in the sense that you don’t file papers or documents.  However, if you are entering into a partnership you would be wise to have some kind of contract since each partner is personally responsible for the entire amount of any business debt or claims.  You’d also have a hard time recovering any resources your partner might make off with in the middle of the night if there was no contract in place.

Remeber, nobody enters into a partnership with someone they think is dishonest, yet people are ripped off by their business partners all the time.  Even if your partner is your own mother, don’t leave the door open to misunderstandings and future legal issues.

Limited Partnership:

Limited Partnerships are complicated and difficult to arrange (not to mention expensive), so this probably will not be the best avenue for your average online business entrepreneur.  Basically, one person or company (the general partner) creates the business and receives investments from the limited partner(s).  The general partner runs the day-to-day operations of the company and is responsible for all business debts.  The limited partner has minimal input but also is not responsible for business debts or claims.  Profit can be split in a variety of ways.

LLC:

An LLC (Limited Liability Company) is one of the more popular options for people starting an online business (it’s certainly the option I receive the most questions about.)  An LLC combines aspects of partnerships and corporations: its owners have limited liability for the company’s debts and obligations like shareholders in a corporation, but its income and losses are passed through to the owners like in a partnership.   It is much less formal and more flexible than a typical corporation.

The benefits include separating your assets so you’re protected in case your business gets sued.  It also provides some tax breaks – you are only required to pay taxes on your earnings once instead of paying both corporate and individual taxes.

The downside of an LLC versus a corporation is if a member of the LLC dies, leaves, or goes bankrupt, the LLC is usually dissolved.  You might consider making your online business an LLC if you want to reap the tax benefits (this would be important if you expect your earnings for the year to be quite high).

To set up an LLC, you need to file Articles of Organization with you state (usually through the Secretary of State).  You can hire an attorney to do this, or you can do it yourself (there are numerous do-it-yourself kits to help with this).  When I have legal/business/accounting work, I like to do it myself, then hire a lawyer or CPA to check it over.  That way I only have to pay for a little of their time, but I can be sure everything is correct before I file it, saving time and money in the long run.

Corporation:

A corporation is similar to an LLC: it is an entity that exists separate from the business owner, shielding owners and shareholders from company debt and obligations.  To set one up, you must complete articles of incorporation, file them with the proper state authority, and pay the requisite fees.  Unlike an LLC, if an owner dies or sells his interest, a corporation continues to exit until it is formally dissolves.  A corporation can also issue stock, which helps attract outside investors.

A C corporation is a standard business corporation, while an S corporation has greater strictures but allows you to avoid double taxation.  An S corporation is usually the choice of small business owners and entrepreneurs who want the legal protection of a corporation, but want to be taxed as sole proprietors or partners.  The strictures such as “no more than 75 stockholders” and “only one class of stock can be issued” are not a problem for your average small-business owner.  All stockholders/partners have to be US citizens or permanent residents, however.

Which Should Your Average Online Business-Owner Choose?

Generally, I’d say it’s not necessary to set up your online business as a Corporation or LLC unless you’re planning on amassing a mountain of debt or getting sued.  If down the road your online business vastly expands, you can change it’s ownership structure then.  I would recommend seeing a lawyer if you’re entering into a partnership, however, as an undefined partnership leaves you open to a host of financial difficulties.  You might want to speak to a CPA or attorney in any case before making a decision about ownership structure.

online business

According to a recent survey by Netcraft, there are more than 182 million websites on the world wide web.  Of that 182 million, how many are retail sites?  A LOT.  So how can you make your online business stand out from those thousands, even millions of other websites?

Develop a strong “point of difference” for your online business

“Point of difference” is a term for the outcome of product differentiation.  Business economists see product differentiation as an important strategy for businesses everywhere.  The modern man (or woman) is innundated with countless advertisements and product choices every day: products that stand out due to a strong point of difference are better noticed by consumers.  Furthermore, a clear and distinct brand image helps foster customer loyalty.

Your point of difference could be something quirky, catchy, or trendy, but I believe differentiation is most successful if it fills a need in the market that is not already being met.

How can you find market needs that are not being met?

1. Study the online community

By participating in message board discussions and reading blog posts, you can determine whether emo guys are interested in a “man makeup” website, or what products your average scrapbooker is hankering for.

2. Examine your own needs

Countless successful buisnesses have been formed by people who were trying to solve a need in their own lives – like the mompreneurs who create the perfect maternity pants or the hot new toddler toy.  Take your basic business model, say “online sheet music store”, and ask yourself, what do I wish the average music store would offer that it doesn’t?  What would make me visit a particular sheet music store over another?

Remember, when formulating your business model don’t say “It’s going to be just like Zazzle” or “It’ll be like CoffeeGeek”.  If your site is just like a bigger, better established website then you won’t be able to compete.  Use your point of difference to stand out from the crowd.

internet marketing, online business

With eBooks growing in popularity, you may wonder if there’s some way you can make money off an eBook.  In fact, there are two simple ways you can capitalize on eBooks.

1. Sell An EBook To Hobbyists

If you’re operating a website dropshipping jewelry-making supplies, fishing rods, chess sets, cake baking supplies, snorkling masks, anything hobby-related, you could write and sell a how-to manual: “How To Decorate Birthday Cakes”, or “5 Easy Steps To Becoming A Chess Champion”, for instance.  Selling your eBook on your website accomplishes two things: first, it brings in additional income, and second, it can attract traffic to your site.  Even if your product isn’t really hobby-related, say a website of motivational products, you can still write an eBook, like “10 Days To A Happier You”.  If you’re creative, you can write an eBook related to almost any kind of website.

2. Give An EBook Away For Free

An eBook can also be beneficial to your website even if you’re giving it away for free.  One of the biggest problems websites have is conversion: turning traffic into customers.  Not everybody who visits your website is going to buy anything.  The more people you can get to buy, or at least come back a second time, the more profitable your Pay-Per-Click Ads and other promotions become.

One way to secure repeat visits is to gather email addresses.  If you offer a free eBook on a popular topic, you can obtain your visitor’s email address in order to send it to them.  Then later you can email them a coupon or notification of a sale on your website to encourage them to return (obviously you don’t want to be obnoxious or spammy about this).  In this way, you can create a connection with your visitors so they don’t stop at your site once and never return.  If the person is impressed with your free eBook, they will almost definitely come back to your webiste, particularly if you have other educational articles and valuable content to attract them.

internet marketing, online business

People are always trying to avoid getting their Reseller’s Permit and Tax ID Number.  They’ll send Research Requests asking for suppliers who don’t require it, or will only sell on eBay and never open their own website because they don’t want to register their online business.  Avoiding getting your Reseller’s Permit and Tax ID Number isn’t doing yourself any favors.  In fact, it’s a real detriment to your business.  Getting the proper documentation should be the first step in starting your online business – you should do it immediately, not try to avoid it.

What is a Reseller’s Permit?

A Resller’s Permit or Resale License is required if you sell or lease personal or tangible property: you need a Resellers Permit if you are a retailer or wholesaler of taxable items or services.  The point of the Reseller’s Permit is to avoid paying sales tax on items you are going to resell (you don’t want to be charged taxes twice on the same item).  Reseller’s licenses vary state to state: you can either apply for one through the many, many companies offering their services online (for a fee), or you can download the form from your state revenue agency website.

What is a Tax ID Number?

A Federal Tax ID Number or “Employer Identification Number (EIN)” is a number assigned to your business by the IRS.  Any business offering products or services that are taxed in any way needs to get this number.  To get yours, simply apply online at the IRS website.  It’s very simple; in fact, you receive your number immediately and can download and print your confirmation notice.  If you have any questions or concerns about Tax ID numbers, contact your nearest IRS Field office or call the IRS Business and Specialty Tax Hotline (800-829-4933).

3 Reasons Why You Need Your Reseller’s Permit and Tax ID Number:

1. Legitimate dropshippers and wholesalers require them.

If you want to work with a quality supplier, you need to provide them with your Reseller’s Permit and/or Tax ID Number.  Suppliers who don’t ask for these are probably middlemen, not legitimate wholesalers or dropshippers.  Thus, asking to work with a supplier who doesn’t require the proper documentation is basically asking to work with a middleman.

2. Setting up your business properly allows you to take advantage of tax breaks.

Small business owners get a ton of tax breaks.  I don’t know why anyone who’s not selling designer marijuana would operate their online business “under the radar”, disqualifying themselves from all the government bursaries and benefits according to small businesses.  As a business owner operating out of your own home, your phone, internet, and even a portion of your rent could qualify as write-offs, not to mention all the other expenses that come along with starting a new business.

3. You could be subject to fines and other penalties if you fail to register your business properly.

You can’t legally sell property without a Reseller’s Permit, and you’ll probably have to file your taxes fraudulently at the end of the year without your Tax ID Number.  It’s a lot easier to set this stuff up in the first place than to scramble to get it later when an immediate need arises.

home based business, online business

Repeat business is the lifeblood of most companies.  In my last post, I talked about how the 80/20 rule states that 20% of customers will provide 80% of your sales, and thus 80% of the profits of your online business.  How can you obtain brand-loyal  customers, the crucial 20% or “heavy users”?

Gaining loyal customers is usually a result of three steps:

1. Making a connection

2. Providing value

3. Establishing trust.

Today I’m going to focus on the first factor: making a connection.

A connection isn’t made simply because a customer comes on your website and purchases a product.  Rather, they connect and become brand-loyal when something about the experience goes above and beyond their expectations and emotionally or psychologically influences them.

The most recent company I made a connection to was an online t-shirt retailer called Threadless.  Threadless did a number of things absolutely perfect in order to snare me: first, I saw their ad on Facebook.  The enticing promise of “All Shirts on Sale $10!” and a great example photo prompted me to click the link, something I’ve never done before on Facebook.  Once on the website, I was captivated by their humorous and unusual t-shirt designs, all of which were indeed on sale for $10 as promised.  The design of the website was attractive and easy to navigate, and a number of dropdown menus were cleverly labeled to direct me to areas of the website I wouldn’t have searched out on my own: like the “fantasy” and “nerdy” sections.  Once I made my order, the products arrived promptly and were of high quality.

Now, all these elements of Threadless’ online business were very well done.  But how did the site really make a connection with me?  Something small and simple – the t-shirts were modeled by other customers.  When you buy a shirt off threadless.com, you can take a picture of yourself wearing it and they’ll post it on the site.  People have gotten quite creative with this : a werewolf t-shirt modeled by a girl being chased down the street by a vampire, for instance.  This simple marketing technique made it obvious that Threadless likes to interact with their customers – it’s not a faceless corporation, but rather a company run by real people with a sense of humor who actually like their customers.

The thing you can really learn from Threadless is that they did EVERYTHING right – if the website had been annoying to navigate, if the order was screwed up, if the shirts were lousy quality, I wouldn’t have passed the address on to friends, or even gone back again.  You can’t just carry quality products or just offer a friendly newsletter – you need to hit on all cylinders to secure brand loyalty from your customers.

Customer Service, online business

The 80/20 rule was first postulated by the Italian economist Vilfredo Pareto, who in 1906 noticed that 80% of the land in Italy was owned by 20% of the population.  This rule was applied to business by Joseph Juran who believed that 80% of a company’s sales tend to come from 20% of its clients, a group of brand-loyal customers who marketing guru Philip Kotler termed “heavy users”.  Many economists believe that the 80/20 rule effects most aspects of business – 20% of your advertisements will bring in 80% of your traffic, 20% of your products will account for 80% of your sales, and so forth.

How can you use the 80/20 Rule to help your online business?

The key point is to figure out which products and advertisements make up that crucial 20%.  If you can determine which products and advertisements bring in the best results, you can focus your efforts and resources most effectively.  So how can you isolate that crucial 20%?

1.Website Statistics

One of the best ways to zoom in on your most successful marketing campaigns is by monitoring your website statistics.  Determine which Pay-Per-Click ads and which promotions are really working for you.  There’s no point dumping money into a keyword or banner ad that doesn’t bring results.

2.Sales Statistics

You need to rigorously monitor your sales to see which products are getting the most interest.  You can then reorganize your product pages so your big sellers get the most exposure, and alter your advertisements to optimize your keywords for those products.

What about the crucial 20% of customers?

The 80/20 rule doesn’t mean that you should try to find your best customers and treat them better than everybody else.  ALL customers should be treated in such a way as to never lose repeat business.  However, you might want to institute promotions that cater to repeat customers, like free shipping on their second order, or a coupon for 20% off including in their packing materials.

internet marketing, online business

Marketing and advertising are huge parts of online business.  Unlike a brick-and-mortar establishment where you get customers walking in off the street, nearly everyone who finds your website has to be directed there in some way, whether from your search engine ranking, pay-per-click advertising, a banner ad, or word of mouth.  Today I’m going to talk about some oft-neglected ways to promote your online business.

1.Free Classifieds

There are a ton of online classified ads where you can advertise your business and products/services for free.  Craigslist is one of the biggest and most widespread.

2.Newspaper Coverage

Call your local newspaper and ask if they would like to do a business or human interest piece on your online business.  If you are running some kind of charitable event or interesting promotion, they will be more likely to find you newsworthy.

3.Car Decals and T-Shirts

Your business may operate online, but you can advertise in the real world.  Consider putting a sign in your car window or handing out t-shirts advertising your website address.

4. Trade Advertising

Find a non-competing complimentary business and ask if they would like to trade banner ads.  For instance, if you are running a teddy bear website, trade banners with a china doll website.  If you are operating a kichenware business, find someone who sells home decor.

5.Use Your Networks

Starbucks once ran a campaign where they offered a free iced cappuccino to employees and their family members.  They had to shut the offer down when the emailed coupons spread like wildfire all over the country.  Try sending a  coupon or special offer to friends and family, and ask them to pass it along to everyone they know.  You’d be amazed how wide your network can spread, and how much traffic this could bring to your business if the offer is desirable or interesting enough.

internet marketing, online business