Risk factors in online business
Risk factors - if you don't know them, you have a problem. I am talking about an online business. Nearly every internet company today is dependent on a 3rd-party hosting company. Not only on their functionality, scalability and availability, but also a price. To pay it, you need to earn enough. That usually brings another great dependency - effective monetization over 3rd party solution - ad system, payment gateway, merchant of records service. You also need to count with concurrency and ideally be aware of existence of hidden rarely coming black swans. These are the things you did not expect and which can come in the worst possible time (Murphy's law, you know...).
People usually think, that the big players are unstoppable and that there are no risk factors for them. Whatever happens to them, they will survive. This may be true for modern, dynamically working companies compounded of many small, separately working units. The companies which are in nearly every type of business you look at. Like Google or Tencent. However, most companies are different. Due to their size, they have very low possibility to adapt to new conditions in this dynamic time full of changes. Do you remember Nokia? Deutsche Bank? Or the famous Japan companies? Where are they now?
Let's summarize 5 basic attributes you got to have in mind during building a functional online business, further as product. Product may be anything. Service, eshop, application or a game.
Monetization. Yeah, money in the first place. It has clear reason. You can be however excited about your new amazing product, however after some time you will come to a situation where a good existing monetization strategy will be the difference between selection to close or continue and succeed. Everything costs money. The better your project will be, the more money will it cost. Without a good business model, you will come to the situation when any grow will be extremely difficult. Costs for users acquisition and operation are not low.
Try to think about various types of monetization. Take the buzzword “Diversify” into your mind. One source of money coming from 1 channel is not optimal. Good business plan should compose of at least 2 main sources of income, ideally each of them should be sufficient enough for covering all costs.
- Verify clear interest about the product. Startup owners usually do a service for yourself and forget that they are not customers. Forget for your needs, instead, try find out needs of your potential customers (not family and friends) and develop your product with them. Creating a MVP (minimum valuable product) will give you option to get real and valuable feedback from customers and will help you to make your product better for a lower price. Or close it before you burn all the money.
- Team. There is a gold rule that there should be odd numbers of owners and 3 are too many. I do not think so. In my opinion, more owners in a product is beneficial. You never find an employee so excited to work on your product as any co-owner. And it really matters, because excitement and hard work is the only valuable thing your product has at the beginning. More owners will give you also bigger freedom to diversify important work and focus only at matters you are good in. If you hire new employee, accept only the ones who are better than you. If they are not, they will not work for you, but you will work for them. Learning, explaining, managing, all this is extremely time consuming, without any guarantee that your investment will be returned. Invest your time rather to building your product. Hiring an expensive professional may be sometimes cheaper than a cheap absolvent. The common place phrase that there is better to have 1% of functional profitable business is more than having 100% of unsuccessful company did not come out of thin air.
Technology, hosting and short simple address.
Do you need web, app, hybrid app, progressive web app or a combination of more for your business? Selection of the right type and technology may reduce your costs significantly.
The easier accessible you will make your product for your visitors, the more likely they will visit you. If we talk about web, take a note that a good web address is like a stable cornerstone of your house. Do you know, what was most valuable on McDonald at the start? Not the idea, but the name. Name in this case is analogy of the address. Your address must be easy to remember, ideally written the same way as it is pronounced.
The most important one - be 101% sure that the domain / rights belong under your company, and is not registered under any person in your team. This can save you gray hair in a few years later.
Related to hosting, always think about your needs. Instead of using another buzzword cloud, think again. If you still need cloud, take a cloud. But be ready that cloud is expensive.
- Do not force grow at any cost. It doesn’t matter how amazing your product is, or how fast you ship features. The market you’re in will determine most of your growth. There is better to have smaller profitable product than big widely used product in red numbers.
Filling these 5 points eliminates most of the potential risk factors. No dependence for a single source of income, low operation costs due to the selection of right technology, stable excited and experienced team and high trader's margins. With a bit of luck, you are getting a great recipe to build a successful profitable business. Your biggest problem will be only concurrency and undefined black swans.
For last 5 years we have been facing a big move of people from PCs to mobile devices. Maybe something like a modern migration of nations. This is trend we have to had in mind during creating our business strategy. Organic traffic from searching will have rather decreasing trend in the future because of Google's auto replies directly on results page in combination of small screen with limited number of organic results. For that reason, the future will be in brands.
Building a brand is extremely long and expensive route. The best way here is to build a product which is extremely interesting for media or in a trend. Otherwise, be ready to pay for big marketing campaigns. It may happen, that you will have higher bills than the biggest players you see everywhere in the media. On basis of their business, trust and size, they often run a Vendor marketing which reduces their cost noticeably.
In your mind, you can replace the word “brand” for “trust”. Value of your product is only a function of its trust. Therefore, trust is something you really need to track. Internet is a free medium and anyone can write anything they want about your brand. Including your concurrency.
Tracking trust in your product
Best index of trust in your product is growing number of customers / users using your product together with growing revenue from 1 user. However, this is just a result of previous actions - actions which could be done by 2 sides - by you, or your users. For tracking user actions, you should track mentions on the internet about words relevant to your product. You can use for it e.g. tool https://mention.com/en/.
Trust itself is a combination of many factors. Good previous experience either of you or someone around you, traceability of real people behind the product, real address of the company. Last but not least also availability and correct functionality of the product. Load should be fast, without blocking by any extension of 3rd party software.
Personally I have an experience with situation when my businesses were being blocked by most used antivirus software - Avast and AVG, belonging under Avast software corporation - due to false positive malware detection. Honestly, in such situation, your brand and trust may be by any size, but users will always believe their antivirus software. Instead of doing any action at your site, they will immediately escape. There is also very low probability, that someone with such alert about infection will visit your website to find a contact at you to inform you that your page is infected and blocked by his antivirus software. Therefore, I highly recommend to do regular tests for malware, including false positive. After all, brand is the most valuable today. Simplest check is via https://www.virustotal.com where you can check any of your page urls in 36 antivirus software just by one click. Unfortunately, the most used one - Avast / AVG, is missing there. So, install it to your PC to cover it. Although Avast’s web shield slows down loading pages on the internet dramatically (in my experience), it is worth it. Personally, I am not the type of person who would remember and wanted to do regular manual tests for virus threads anywhere, so I am thinking about creating a service which would do this automatically and inform me via SMS only in a case of a found problem. If you are the type of person like me, and would be interested in such service, you can subscribe for news in this matter by sending an email with subject “SUBSCRIBE MALWARE DETECTION” on email firstname.lastname@example.org.
If you are interested to read about my experience with the false positive detection on my websites, you can do so in article False positive malware detection from antivirus softwares which could have ruined my business. If you just deal with a potential infection, here's my walkthrough (will be written soon) how to verify, find and remove the malware from your website. If you need a quick help, you can try get in touch with me as well on email email@example.com. I understand the seriousness of the situation, and if I can, I will try to help. From my experience, I will probably reply sooner than the biggest antivirus companies with millions in revenue.