I have an entrepreneurial spirit. Always have. Always will. I love to come up with ideas for businesses, and some have materialized, while others, gladly, have not. Although I’m still kicking myself for not pursuing the idea I came up with for a container store 20 years ago–can anyone say The Container Store? My latest endeavor was Nicole Jane Home–an online home decor and gift store that I built and operated for four years.
I poured my heart and soul into the business and I thought I was going to take Canada by storm. At the time, there was very little available online here and it was so hard to get things shipped across the border from the States (still is really).
Imagine opening your online business the very same month the world economy takes a nose dive. That’s exactly what I did in October 2008. There were a lot of sleepless nights, and nail biting. The learning curve was steep and fast. Surprisingly, I exceeded my sales goals in the first year, but, it came at a huge cost. When the smoke cleared, I realized that I had nowhere near the cash flow necessary to really take off. I had to look for a more effective, less expensive way to promote the business, and to find smarter ways to manage my inventory levels.
Promotions were my biggest hurdle. I’ve got one word for advertising: HIDEOUSLY EXPENSIVE!!! It wasn’t until I jumped blindly into the world of social media that I was able to build the business in Canada (Contrary to my business plan, the States turned out to be my biggest customer base, until the second wave of the recession hit that is.). Over the next three years, I devoted a huge amount of time and energy to mastering blogging, tweeting, Facebooking, and pinning. My marketing communications background came in very handy. Slowly I watched my Canadian sales start to climb as I interacted with more and more people. It really does pay off, IF you do it the right way.
Even with all that work and dedication, my business never came close to reaching its full potential. There is a mile-long list of things I could have done differently. I was wearing 10 different hats doing everything; I didn’t have enough cash flow; I wasn’t participating in my family life as much as they needed me; my parents both became afflicted with Alzheimer’s disease and required a lot of caregiving; etc etc etc…shit happens. So I came to terms with the fact that I needed to close the business and sell the website, which is what I’m doing right now. I look at my business as a huge success in terms of the things I’ve learned, the people I’ve met, the opportunities is presented to me, and the life lessons I discovered. I’m even developing a social media consulting business for start-ups and small businesses based on all the expertise I’ve gained.
The reason I’m writing this post is to help the people who are coming up behind me, and asking for my advice on starting their own businesses, particularly online. I get asked at least a couple of times each week for my opinion or input about business ideas and strategies, and I truly love helping people with their plans. I give my honest opinion and what I hope is helpful direction. It’s only my opinion though, so if you’re reading this and it’s just not resonating, don’t let that stop you. Keep pursuing your dreams.
If you’re thinking about starting an online business consider these 10 things very carefully. This may sound brutal, but if you aren’t realistic, you could make some costly mistakes:
1. Are you ready to devote most of your time, day and night to this business (weekends too, baby)? Expect to do everything yourself. Your expenses will skyrocket with employees. Do you know what your sales need to be in order to hire employees?
2. Is this a hobby or a career? If it’s a hobby, consider something less expensive and time-consuming. An online business is NOT a perfect answer for stay-at-home moms who want to balance familly life and work life. Something always suffers. Believe me.
3. Are you committed to developing a thorough business plan (we’re talking multiple pages, including statistics to back up your plan)?
4. Do you have at least three times as much money as you think you need to run the business for the first year (not kidding)?
5. Do you have another source of income to cover your food, shelter, insurance, transportation, healthcare, etc.? Typically, businesses run on a loss for the first three years. If you have a spouse, partner, are they truly committed to sharing the burden financially and emotionally?
6. Free shipping is a nice thought, but can you afford it? I know that a lot of retailers offer it, but unless you’re an Amazon or Zappos, with gigantic sales volumes, you’ll be eating quite a bit of your profit margin on shipping.
7. Are you planning on shipping across the border? If you’re shipping from Canada to the States, be prepared to lose quite a bit of your profit, because customers in the States are used to much cheaper shipping. I used the postal system, and the U.S. rates are way lower, so my shipping charge didn’t come close to covering the actual cost. And don’t forget that you’ll be covering 100% of the return shipping if there’s a problem or defect, which does happen.
8. Is your website secure enough? The level of security required for a website e-commerce system is quite serious. It’s one thing if you have an Etsy store. It’s a completely different matter if you have an e-commerce website with a high traffic volume. It needs to be able to withstand attacks from outside systems (happened to me and could have shut me down for weeks if not for the quality of the team than ran the technical end of things). It needs to be secure, with gateways that protect customers’ credit cards and information. It needs to have multiple platforms for payment. It needs to be super easy for customers to navigate and process orders through. Don’t just jump at the first website company you see–do your homework and be realistic about how much it’s actually going to cost. I chuckle when people say to me, “Oh, you must have it way easier running an online business, because you don’t have the lease fees to worry about.” Couldn’t be farther from the truth.
9. If your inventory doesn’t sell right away, are you going to be able to afford to turn it over with fresh stock? You’ll need to stay up to speed with your competitors. Unless you’re manufacturing your own products, there are two main buying show periods: January and August, but your inventory will need to be updated at least four times a year: January (for spring), May (for summer), August (for fall), and November (for Christmas). Can you sustain that, even if a lot of it doesn’t sell?
10. Did you know there’s a big difference between a Canadian customer and a U.S. customer? It’s true. In Canada, we’re a lot slower to trust a retailer, especially online. It takes a long time for us to make a purchasing decision and quite often we’ll visit a website multiple times before actually committing to what’s in our baskets. U.S. customers have embraced online shopping in a big way and appreciate the convenience (and fun) of shopping on their computers. I’m not at all suggesting that my U.S. customers were willing to risk anything, they still expected my business to be attractive, efficient, secure and cost competitive. You have to work really hard to get your customers, and even harder to keep them, but it takes a little more with Canadian consumers, eh!
11. Bonus Question: What’s your exit strategy if the business closes? If you don’t have one. Don’t open the business. You need to know what you would do to liquidate leftover stock. What about your business partners and any accumulated assets, debts, etc.
My biggest piece of advice? Start small and learn your way up the ladder. Watch…you’re probably some Bill Gates type, who is about to launch into the stratosphere with some amazing product. If that’s the case, don’t forget the wee little people like me–I just want a swimming pool, please.
If this hasn’t scared the pants off you, and you still think you’ve got what it takes, you’ve got to listen to your own instincts. Some of the most successful businesses have happened even in the face of serious naysaying. I wish only the best for you and hope you achieve your dream. I’m rooting for you.