Thread: Why An Online Business Beats A Traditional Offline One

I wrote an article for my clients recently - I thought I would share it with you. Please feel free to comment/add to it

Probably one of the nicest things about owning an internet business is the freedom you get. My staff works from home, and I can contact them through Skype whenever I want. And, with the marvel that is mobile broadband, I’m free to work anywhere I choose – the whole world’s my office.

Recently, I’d taken a particular shine to the mochas served up at a nearby coffee republic. Everyday, I’d turn up with my laptop and set-up shop with my wonderfully warm, chocolatey mocha. Over the weeks, I’d struck up quite a friendship with the franchise owner, Ray – we’d talk about how cold it is (you do that when you’re British - moan about the cold, and then a few months later subsequently moan about the heat), about how mighty Man Utd are looking this year…and business. Now, pay attention to this closely if you happen to be someone who’s on the cusp of making a decision on choosing an online or offline business…

Speaking with the owner about business, he said with a sigh “It really needs to be a lot better. I’m not making any money. In Fact, I’m losing it hand over fist” – I asked him how much his coffee shop cost? He got into a Coffee Republic franchise – the franchise fee itself was knocking on the door of £25,000 (approx $37,000). Then there are huge costs such as machinery, infrastructure, staff, decoration, insurance, ludicrously expensive cappuccino machines….all in all, the set-up was around $200,000…then at the end of it, the most popular product sells at $4. When you invest that much into a business, it needs to bring in a LOT of business just to break even. This is exactly why so many offline businesses are collapsing…they are cost intensive businesses, often surviving on wafer thin margins – some even bridging their cash calls from one month to the next with loans. That’s the harsh reality of life in the bricks and mortar business world, and if you’re reading this as a total business newbie then please understand this…

“Online is the BEST place to start a business.”

In This Century, And This Turbulent Economic Environment Online Is The Only Place That’s Pine Fresh And Rat Free…

In the past, I’ve been involved in the rat race, and it wasn’t nice. A job certainly is one way of being involved in the rat race, but owning an offline bricks and mortar business isn’t far better. You still have a strict timetable. You still have no real freedom to speak of.

Online, it’s possible to get something set-up and started on a shoestring budget. Online, even if you don’t make a success of your first business venture (most don’t), you will not have lost your shirt. You will not be in the unenviable position of having a huge cash gobbling business that has you scrambling around to get one bridging loan after another – just to keep the creditors from your door. Because that month, you hardly sold a thing but the fixed cost bills still came in like clockwork.

Online, there are multiple ways of generating income – you can sell products, generate residual commissions, sell advertising space, do JV’s with any number of similar yet non-competing businesses and a thousand other things. Online, you can pick and choose your time and place of work. And, you can be in the wonderful position of owning a multitude of niche businesses, all contributing to your bottom line – and keep setting more and more up. All this while your neighbours, friends and family still slave away – rodent-like, in their jobs, or their offline businesses.

Because there’s only one thing that you need to remember about the rat race – even if you win, you’re still just a rat.

So, if you’re reading this as someone who’s deciding whether to go online or offline for their first business venture, the answer could not be more easy. Make it online.

One of my favorite things about running and on-line business is selling monthly recurring services. Instead of selling a $4 cup of coffee, I sell a $10 per month service to as many customers as I can. Also, like you said, the overhead is so much lower with an on-line biz.

The think i like most is the fact that there is no "physical" work involved. And, I don't have to see people to make deals in person, as I usually mope around without a shirt all day.

Exactly Vectro - $10 recurring is very powerful when the numbers add up. Even 1 new member a day means by the end of one month you have created $300 or so per month in residual income.

If I may ask, which residual services do you offer? I find hosting can be a good seller and right now I am also offering internet marketing services that have a residual element.

Originally Posted by drr

If I may ask, which residual services do you offer? I find hosting can be a good seller and right now I am also offering internet marketing services that have a residual element.

Sure. Besides hosting and PHP proxy hosting, I also offer encrypted SSH SOCKS proxy access. It's becoming kind of popular.

Originally Posted by drr

Everyday, I’d turn up with my laptop and set-up shop with my wonderfully warm, chocolatey mocha. Over the weeks, I’d struck up quite a friendship with the franchise owner, Ray – we’d talk about how cold it is (you do that when you’re British - moan about the cold, and then a few months later subsequently moan about the heat), about how mighty Man Utd are looking this year…and business. Now, pay attention to this closely if you happen to be someone who’s on the cusp of making a decision on choosing an online or offline business…

Speaking with the owner about business, he said with a sigh “It really needs to be a lot better. I’m not making any money. In Fact, I’m losing it hand over fist” – I asked him how much his coffee shop cost? He got into a Coffee Republic franchise – the franchise fee itself was knocking on the door of £25,000 (approx $37,000). Then there are huge costs such as machinery, infrastructure, staff, decoration, insurance, ludicrously expensive cappuccino machines….all in all, the set-up was around $200,000…then at the end of it, the most popular product sells at $4. When you invest that much into a business, it needs to bring in a LOT of business just to break even. This is exactly why so many offline businesses are collapsing…they are cost intensive businesses, often surviving on wafer thin margins – some even bridging their cash calls from one month to the next with loans. That’s the harsh reality of life in the bricks and mortar business world, and if you’re reading this as a total business newbie then please understand this…

Is this true? Does Ray exist or was he concocted for the purposes of the article?

If he does exist you might want to help Ray stay in business my offering him tips on how to use online services like Twitter etc. Offering promotions and suchlike could put his coffee house on the map, help his business, so you can still enjoy your chocolatey mochas, and not turn up one day to see a "closed" sign on the door. That would be sad.

It's true. Both Ray and what he paid for the franchise...and unfortunately his situation.

Thanks for the tip RE helping him, you're quite correct. I'm not convinced that traditional marketing techniques would help him as his business unlike most internet based ones is affected largely by geographical factors. I have alerted him to a number of local sites where his site was missing though, lets hope it gets a few extra coffee's a month.

Thanks all for your comments.

I really don't think an online business is better than a traditional one.

Okay, the startup financial side may be a bonus but theres so much more to a traditional business than that. For a start offline businesses generally make more money than online ones. There are also a hell of a lot more places offering help to startup businesses (that aren't solely online), financially and otherwise - e.g. grants from the government. Having an actual business address is always a plus (especially if it's situated somewhere good - e.g. near the center of a city - it shows your professional and can even sometimes open doors for you).

Then theres the main reason I'd like to own a traditional business - the people you'd meet. Generally online you don't "meet" that many people for real. Okay, so in a traditional business it'd depend on your business type, but generally you will meet lots more people and I love meeting new people (although I can't say I'm the best at speaking to people I don't know...which is a bit strange since I like meeting new people so much).

Then again, it all depends on what your into. No point in starting an online business if you want to start selling pies or something

Originally Posted by tsdesigns

Then theres the main reason I'd like to own a traditional business - the people you'd meet. Generally online you don't "meet" that many people for real. Okay, so in a traditional business it'd depend on your business type, but generally you will meet lots more people and I love meeting new people (although I can't say I'm the best at speaking to people I don't know...which is a bit strange since I like meeting new people so much)

I do both. I go to people's houses and fix their computers, or pick up their computers, fix them, and deliver them back. I also offer several different online services. I would like to turn the PC repair service into a brick and morter business in a retail office, but then there are the costs of rent/electricty/heat/Internet/accidentals/stuff I haven't thought of yet. I already have all of those things at home and they cost money, and my dedicated server doesn't cost as much as opening a store. It's especially hard when I see more stores in this area closing down than opening. That's a telling sign about the economy.

I meet a LOT of people and network like crazy for my local business. That is definitely a huge plus.

The reason behind it is that the mostly people are connected to each other online more rather than offline. They can share their ideas and thinking's with more person quickly online rather than offline. So that's why promoting the business online is getting more and more easier.

Hi drr:

You present a very weak argument at best, a well thought out business, will make you money at the local level, as well as on the "online" level, yes, there are more costs involved in actually opening a store front, but in the end, its all relative.

It is all about the "Idea" , the right idea, will succeed, no matter if the business is on or off line. Many businesses do not translate from the on to the off line side, for example, if you are passionate about cooking, and aspire to open a restaurant, guess what, you cant do that online! On the other hand, if you have a digital service to offer, the local level might not give you the exposure you desire.

So lets compare, first lets take one of the most successful "online" businesses, Lets say Google, yes they are "online" but I guarantee you that to run that kind of business, overhead is quite costly. Then, lets take one of the most successful "traditional" businesses, lets say "Walmart", yes, they also have a website, but I guarantee you that the bulk of their business is people walking into their thousands of stores.

In short, a great idea, will be profitable on the "real" world, as well as on the "online" world, and most likely will be a combination of both rather than one or the other.

That is just my opinion,

Thanks for all the comments everyone. Some really good points brought up.

I understand to an extent with the people above who staunchly defend offline business - after all there are millions of traditional bricks and mortar businesses out there that are well run and profitable. And yes, as pointed out, you can potentially meet more people with an offline business.

Perhaps it boils down to individual personalities and preferences.

Simply, in online business you can reach your audiences anywhere in the world with just a single click.