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Types of Businesses to Start

How To Become A Dot.Com Millionaire

To say that the Internet has changed the way we do business is a gross understatement. The World Wide Web has created a platform for people around the world to communicate, interact and transact.

Greg Fisher

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With that a stream of new, previously inconceivable, business ideas has emerged and some entrepreneurs have made millions, if not billions, by harnessing the power of the Internet. But for every successful Internet entrepreneur there are hundreds of people who have pursued the allure of dot.com wealth and fame only to burn through all their start-up capital, run out of cash and have to close shop without ever getting their idea off the ground. Here’s how to get it right.

What is it that successful Internet entrepreneurs do to build a valuable business?

To answer this question I did in-depth research into seven online businesses (see the table on page 85) that survived the lean and challenging period after the dot.com boom and bust (2000 – 2004). All seven businesses were considered to be successful because they created significant wealth for the founding team. In examining these businesses, I focused specifically on the strategies, behaviours and perspectives that enabled this group of

Internet entrepreneurs to uncover innovative business ideas, build valuable enterprises and make the right strategic choices to realise that value. This article will outline some of the insights that emerged from this research.

I will first outline why the Web creates a new and different context for launching a business and to contrast this I will highlight what traditional business principles still apply.

I will identify three mechanisms for creating economic value in Web-based businesses and I will describe the practices employed by successful Web entrepreneurs to uncover ideas, launch new products and services, build the business and realise value from their investments.

Why the Internet is different

The Internet is an emerging technology that is still rapidly evolving and growing. It has only been accessible to a regular person (i.e. you and me) since the early 1990s, making it between 15 and 20 years old. This may seem like a long period of time but most comparable technologies (telephones, the fax machine and television) had not even reached critical mass after being available for 20 years, while the Internet has moved well beyond that in its short lifespan.

Because of the nature of the Internet as a tool that enables people to communicate, interact and transact and because of its rapid uptake by users, it creates a platform where business people suddenly have easy access to a very wide audience. This means entrepreneurs with niche product or service offerings can more easily find and transact with large numbers of people in a specialised audience.

For example, if you have a deep interest in Calvin and Hobbs comics, prior to the Internet your chance of finding a market to trade such comics would have been slim but with the Internet you can find, interact with and sell to other people who love Calvin and Hobbs. Chris Andersen called this concept of reaching a niche audience via the Internet Long Tail (see his book The Long Tail for more on this idea).

The Web is a flexible open technology. Anyone can learn to use and manipulate it for their purpose. The never-ending supply of HTML coders in India is testament to this. This means that the Internet can easily be used as a platform for business purposes; it does not require an unattainable skill or a huge sum of money to be able to use it. This makes the barriers to entry into a new business much lower than they may have been in the past.

Because the Web is inexpensive and easy to use and because it provides access to a wide range of potential customers and users, it creates a platform from which new creative business ideas and business models can be launched. It is a hot-bed for entrepreneurial activity. Initially this created irrational excitement among investors and business people, giving rise to the dot.com boom and bust. But since then a number of entrepreneurs have taken a more pragmatic and profitable view of the potential of the Web for creating new business opportunities.

Related: Online Business Idea Guide

What remains the same?

The dot.com bust in the early 2000s introduced an element of reality to the way people viewed the potential of the Web. It demonstrated that in spite of all the promise and hype around the Web, certain traditional business principles still apply. Whether you are operating the most innovative, cutting edge Web company or a mundane tyre manufacturer with no Web presence you still need to:

  1. Create something that appeals to a particular customer base
  2. Generate more revenue than cost over time

The businesses that survived the dot.com bust were the ones that had established a paying customer base and were at least breaking even or close to breaking even. Avoid falling into the trap of seeing the Web as a magical land in which all traditional business principles fall by the wayside.

The Web often puts increased pressure on entrepreneurs and business owners because people who use the Web want more, for less (and they often expect to get stuff for free). This creates new and often challenging economic relationships between revenue, cost, volume and profit for Web-based entrepreneurs. Those that succeed understand that in the medium-term they need to make a profit to survive.

What Constitutes Value On The Web?

When the Web was first proposed as a business platform, there were many discussions and debates about how one creates value by doing business on the Web. Because so much is made available for free on the Internet people often grapple with the idea that if you give away everything on your website, where does the value come from. Over time it has emerged that value on the Internet is created in one of three ways:

  1. Sell stuff. Firstly you can sell something via the Web. It could be a product (e.g. digitised music, rare books, specialised software) or a service (e.g. storing and printing photographs, copy editing or accounting services). In addition, the Web creates a useful platform for selling information (e.g. Hoovers, Gartner and Trendwatching.com) or selling marketing opportunities. Marketing opportunities come in the form of advertising space (e.g. a banner advert on Yahoo.com) or sales leads (e.g. TripAdvisor.com providing information to travel agents about people who are interested in buying a holiday package to a particular destination). Selling via the Web, whether it is products, services, information or advertising opportunities, is the best way to create a sustainable independent business over time. It is the application of traditional business practices using a new platform.
  2. Create innovative technology. The second way to create money on the Web is to create a piece of technology that can do something that very few others can. Because the technology underlying the Web is rapidly evolving and changing, there are always new opportunities to do things that others have not done in the past (e.g. create the technology to upload and watch video via the Internet with relatively low bandwidth as the YouTube founders did. YouTube was sold 18 months later to Google for $1,6 billion.). This is a more risky approach and the entrepreneur is too often dependent on selling the company or the technology to a third party to realise value from the investment.
  3. Establish a massive user base. The third way to create value on the Web is to establish a large user base on your website. The logic goes that if you get many users, over time you can generate value by selling premium products or services to them (e.g. Craigslist, the mostly free classifieds site, charging for property listings in certain premium areas) or by selling advertising space on the site. Even if your company is struggling to generate revenue from your large user base, there is a strong chance that an established company will want to buy the business to access your user base (e.g. Yahoo buying Flickr, the online photo sharing site or Microsoft offering to buy Facebook to get access to all Facebook users). Adopting this as a strategy is highly risky. The number of websites that create a user base the size of Craigslist, Facebook or Flikr is very small yet if you get it right the payoffs can be big.

Many successful Web-based businesses employ a combination of two or even all three of these value creation mechanisms to establish a strong competitive advantage. For example, Google uses its proprietary search algorithm (#2) to generate a large user base that they monetise through advertising (#3). They also sell goods and services to their large user base via their Google Apps website (#1).

The value that arises from each of these three mechanisms can be recognised in one of two ways. Either the business is sold to a larger organisation for a premium (at which point the entrepreneur usually becomes very wealthy) or the business operates in the medium term as an independent profit generating operation. The table opposite describes the outcomes for the seven Internet ventures that were examined as part of this study.

Strategies, Behaviours & Perspectives Employed By Successful Web Entrepreneurs

To get an understanding of the specific practices that underlie success for entrepreneurs building Web-based ventures I created rich and detailed case studies from multiple data sources for each business. The following four themes emerged. These ideas are not necessarily easy to implement but they appeared to be strongly related to the entrepreneurs’ successes.

Related: Ways to Come Up With a Business Idea

Uncovering ideas: Start as a User

In all seven cases the entrepreneurs founding the business could be described as users first and entrepreneurs second. They had a specific need for a product or service that they thought could be effectively delivered via the Web so they created a solution to meet that need and in so doing realised they had uncovered an opportunity for a new business. For example, Joshua Schachter, describes how he uncovered the idea for del.icio.us as follows:

“There was no point at which I said, ‘I’m inventing this wonderful new thing.’ I just sort of realised that I had evolved my own filing system, and it worked for me. I’d used it for a long time before del.icio.us even showed up. This was the codification of that practice. I eventually put del.icio.us on a server and opened it up to other people, and it began to spread by word of mouth.” Building a business on the Web is riddled with uncertainty and ambiguity.

Because of the rapid changes in technology and business models new opportunities are emerging all the time. But it is difficult to tell the real opportunities from the distracting sideshows when there is so much uncertainty and ambiguity in the market.

Being a user brings entrepreneurs much closer to the problem. It enables them to develop solutions that fit with what they want and need and therefore with what the market wants and needs. In a confusing market this is critical and in this context, it appears that there is significant value in developing a business around something that you know well and need for yourself. You may develop it for yourself as a side project and launch it as a business later.

Getting traction – Forge a following

In six of the seven cases examined, the entrepreneurs established an online community of followers attached to the business. These were not just communities of customers. They were communities of passionate disciples who monitored and followed intricate details about the business on a blog published (in most cases) by the founder. In some cases the founder had been publishing a blog before they started a business and they reported on the business as they moved through the entrepreneurial process. In other cases they began publishing a blog as an inexpensive marketing strategy for their new venture.

But in all cases they put effort into their blog, created a reader base and that reader base later served as resources for the venture with respect to (1) getting new ideas – the reader base would share ideas for new products, services or features; (2) testing concepts – the entrepreneur could test a new concept and/or tool with the reader base before developing it further or launching it to the public at large and (3) viral marketing – certain members of the reader base would forward links to blog posts or to the company’s website to everyone in their email address book and thereby create a flurry of word of mouth advertising. The entrepreneurs had to play their part in this deal, they were diligent in publishing their blog and they often gave stuff away to their reader base. A small price to pay for a substantial return.

Staying relevant – Tinker, experiment and adapt

Online businesses are invariably being built in a fluid and changing environment. From the case studies it emerged that in such an environment, flexibility is a virtue and goals may actually work against you. None of the entrepreneurs examined got locked into specific time orientated goals. In many contexts goals are very powerful for driving success but in the online entrepreneurial environment, goals may actually hurt you. Research has shown that one of the primary reasons that goals are valuable is because they narrow your focus and cause you to lock in on a specific outcome.

This works well where it is clear what the outcome should be, but in an uncertain, ambiguous environment, the outcome may not be clear and in such circumstances it seems that being flexible and adaptable about where you are going and how you will get there may actually help you to make the most of the situation. Therefore, instead of goal-oriented behaviour, the entrepreneurs in these case studies showed signs of tinkering, experimentation and adaptation and they allowed their goals to emerge and change as they went through this experimental learning process.

Recognising value – Time the exit

The final item that is key in this context is “when to get out?” Five of the seven entrepreneurs examined in this study realised significant monetary value from their efforts when they sold the business. This highlights that timing was critical to their success. Being scientific about when to sell a business is very difficult but being aware that it may be beneficial to sell the business at the right time is important.

Most sales of successful online businesses are to larger corporations with related business interests. They buy the venture to access and use the technology developed in the company or to access the user base of the website.
As an entrepreneur it is important to be conscious of the fact that there may come a time in your business’s life cycle where a viable option would be to sell the business.

This will be prompted (1) from the outside in – you will start getting enquiries about whether you might be interested in a deal or (2) from the inside out – you will start to feel like your return on effort is diminishing and running the company has begun to feel more like work than play. Either of these is a sign that it might be worth selling.

That said, two of the seven entrepreneurs in my study were still running the business at the time I interviewed them and they were having a blast doing it so your ideal outcome may be sustainable, profitable, ongoing business. Whatever you desire in your entrepreneurial endeavours, the Internet is an exciting and challenging, high opportunity, high risk, high return place to do it.

Greg Fisher, PhD, is an Assistant Professor in the Management & Entrepreneurship Department at the Kelley School of Business, Indiana University. He teaches courses on Strategy, Entrepreneurship, and Turnaround Management. He has a PhD in Strategy and Entrepreneurship from the Foster School of Business at the University of Washington in Seattle and an MBA from the Gordon Institute of Business Science (GIBS). He is also a visiting lecturer at GIBS.

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Ideas To Start Your Own Business In Signage And Printing

The event is taking place from 13-15 September at Gallagher Convention Centre.

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According to Lynette Nicholson, Research Manager at Old Mutual, ‘a growing number of people in working metropolitan households – particularly in the middle to upper income brackets – are finding ways to supplement their incomes by having more than one job’. This is based on research findings of the 2017 Old Mutual Savings and Investment Monitor.

The signage and printing industry offers opportunities for small start-ups or those looking to grow their businesses with minimal investment. These opportunities will be showcased at the upcoming Sign Africa and FESPA Africa expo, which is co-located with Africa Print and Africa LED.

The event is taking place from 13-15 September at Gallagher Convention Centre.

Entry level screen printing solutions

Screen printing on T-shirts and other promotional items is a simple and cost-effective business solution. It is also a way to open opportunities in new market segments. Applications include overalls, shopping bags, promotional, corporate and safety wear, wood, vinyl, paper, plastics, metals, flat substrates like clipboards, binders, notebooks, mouse pads, coasters, business cards, stickers and corrugated signs or posters.

Related: 3 Tips For Starting A Company In An Unfamiliar Industry

‘A minimal investment of R10,000 or less can get you started with a one colour table top unit. This comes with a screen a squeegee and inks as well as cleaning materials, photo-emulsion and cleaning chemicals. A heat press can be used to cure the inks. These vary in price, starting at R4,500 for a 380x380mm unit,’ said Dov Meyers, Sales Director at Chemosol.

‘For all newcomers into the printing world this is where you need to start because there are endless possibilities when it comes to screen printing,’ he added.

Depending on the size of your equipment, you can set up in a small space such as a room in a house or garage. Hall one at the FESPA Africa and Sign Africa expo is dedicated to textile printing, with exhibitors showcasing inks, screen printing equipment, garment decorating equipment, heat presses, cap presses, digital printers, consumables and more.

Mugs and promotional gifts

The heat presses, sublimation printers, crystal and glass decorating systems, inks consumables, sandblasting systems and equipment that will be exhibited at the event will enable visitors to enter into the Signage and Novelty and Corporate gifting market.

Sublimation systems allow you to print on T-Shirts, caps, ceramic plates and tiles, mugs, mouse pads, paper memo cubes, jigsaw puzzles, lettering, kit bags, jeans, takkies, belts, sweatbands, plaques, mirrors, coated metals and other miscellaneous fabrics and material.

Vehicle Wrapping

Vehicle wrapping is a popular medium to ‘drive’ brand awareness, and with the great volume of cars on the road and high congestion rates, it can be a very effective marketing tool for commercial vehicles.

Vehicle wrapping’s return on investment is high. Richard Wood, National Retail Solution Manager at transit media specialist Graffiti, said that the main reason for the high demand for vehicle branding is how cost effective vehicle advertising can be for brands.

‘The channel means that a business can use its assets as mobile billboards, which eliminates the monthly media fees associated with other out-of-home platforms.’

Related: 9 Answers You Need About Yourself Before Starting Your Own Business

Various companies will be doing vehicle wrapping demonstrations on their stands, showing off the capabilities of vinyl.

Of course, these business opportunities require training and some research. Luckily industry experts will be available at the Sign Africa and FESPA Africa expo to answer visitors’ questions. For more information about the event, and to register online, please visit: www.signafricaexpo.com/entrepreneur

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Types of Businesses to Start

How To Be A Social Entrepreneur

If you’re ready to launch a business, but want to make a real social impact too, the social entrepreneurship model might be right for you. Here’s how to get started.

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A social enterprise is an organisation that serves a social and/or environmental purpose, generates income from business activities and reinvests its profits back into driving its mission.

Examples include African Schools of Excellence (provide world-class schools to poor communities at a low cost); Hands of Honour (upcycles waste and provide employment for former drug addicts and ex-convicts); and my own social enterprise, Nkazimulo Applied Sciences (helps young people become scientists regardless of their background).

Some people say most of the profits should be reinvested into the mission, but others say a worker is worth their wages. 

Doing business differently

Social entrepreneurship is a different way of doing business. Previously, few people cared about whether a company did good or not. Today, food outlets that serve healthy eating options are growing their market share because consumers now care about their health.

Related: Eva Longoria And Social Entrepreneurship

Farming responsibly opens the growing market that cares about the environment. More people care about the quality of education South African children have access to and support the efforts in this area. This is where social entrepreneurs can make a real, sustainable difference.

The entity can take any legal form, from a non-profit organisation, to a private company, a trust, or adopt a hybrid structure. Each has its pros and cons. Social enterprises take attributes from commercial entities.

They generate income from business activities. They also take attributes from non-profit organisations and government departments by tackling challenges previously addressed by these organisations, such as poverty, inequality, poor education and unemployment.

They run more efficiently, and are more accountable and transparent than public sector organisations. They are less dependent on external funding than non-profit organisations and charities. Worldwide, there is not enough grant funding for all the non-profit organisations looking for it.

Sustainable social models

An important element of successful social entrepreneurship is social impact monitoring and evaluation. The enterprise must constantly improve on delivering its mission and communicating the results of the impact to all its stakeholders.

Measuring impact may seem difficult. How can you tell a child became a doctor because they had access to lab facilities they previously had no access to? Maybe they were influenced by another factor. There are several tools to help a social enterprise focus its activities on outputs that will lead to the intended outcome which can then be measured.

These outputs become inputs that form a series of outcomes that, together, achieve the intended overall impact and become indicators the enterprise measures. Instead of measuring the number of learners who become doctors, the measure is the number of learners with access to lab facilities where none existed before. This is better than looking at the number of lab facilities provided, which is an input.

See the bigger picture, collaborate and achieve collective impact

These tools are called Logic Models. Demonstration of impact communicates why an enterprise should be supported by stakeholders. The use of Logic Models envisions the bigger picture and identifies other players to collaborate with to achieve collective impact.

Thompson Reuters Foundation reported that South Africa comes third in Africa after Egypt and Nigeria as the best place to be a social entrepreneur. This is very encouraging and is much needed in not only boosting the economy but addressing social and environmental issues.

Related: Busi Skenjana’s Two Core Rules Of Entrepreneurship

IN ACTION: Using a logic model to prove your impact

logic-model

A logic model is a visual representation of how day to day activities of an organisation relate to their overall mission or long-term goal. The model is key in deciding what to measure for impact evaluation.

It has six components:

  1. The current situation: The problem being solved.
  2. Inputs: Resources used to address the problem.
  3. Outputs: Activities and services delivered by the enterprise.
  4. What outcomes will come about because of the inputs?
  5. External factors, or circumstances in the environment that influence the problem but which the enterprise has no control over.
  6. Assumptions that are conditions needed for the success of the programme.

logic-model

Getting started

Involve all stakeholders in drawing up a logic model. The different perspectives help draw a complete picture. Impact measurement indicators are then based on these inputs and outcomes.

Adding value

Logic models link inputs, outputs and outcomes and ensure that the correct indicators are monitored and measured as an enterprise achieves its mission.

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Types of Businesses to Start

Selling Online: Be On The Right Side Of The Law With Your Ecommerce Start-Up

With ecommerce in South Africa growing at an exceptional pace, and the expected triple figure percentage surge of mobile spend predicted for 2018, it is more important than ever to ensure your online terms are in order.

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E-commerce is at an all-time high across the globe. Selling products online is no longer only reserved for large retailers. With a variety of ecommerce platforms available, it’s never been easier for start-ups and small businesses to enter this competitive sector.

That said, many entrepreneurs are unaware of how important it is to have the necessary terms and conditions visible throughout their online store.

With ecommerce in South Africa growing at an exceptional pace, and the expected triple figure percentage surge of mobile spend predicted for 2018, it is more important than ever to ensure your online terms are in order.

What are online terms and conditions?

Online terms and conditions set out your agreement with your customers and users. They can range from simple, standard terms for ‘browse only’ websites, to complex e-commerce arrangements regulating the relationship between the buyers and sellers.

Online terms should essentially set out the rules that you and your users will follow and the terms when a purchase or transaction is being made. It should limit your liability if your product or service fails, explain each parties’ rights and cover what to do if any conflict arises.

Related: 5 Ecommerce Myths That Are Sabotaging People’s Businesses

The terms which should not be neglected are browser terms, privacy terms and commercial/ transactional terms. Each one of these deal with specific aspects of your app or website’s use. It includes, for example, limitation of liability, intellectual property rights, the collection of personal information, payment methods, dispute resolution and each parties’ rights.

Here’s a quick guide to each of these and why they are important:

Browser terms:

Browser terms apply to anyone “surfing” your website before you have a customer relationship with them, i.e. before the “browser” decides to make a purchase. It protects your business by setting out rules for the use of the website and making it clear that you have no responsibilities to the user.

The most important things to cover:

  • users to acknowledge that you don’t owe them any responsibilities
  • users are to respect your website and intellectual property
  • users don’t yet have any rights to any of your services or products
  • you own all intellectual property
  • website content is copyright protected and that the user only has a right to view it on your website.

In summary, the browser terms set out the “dos” and “don’ts” in relation to using your website and exist to limit your potential liability to users.

Related: 5 Basics To Success When Starting An Ecommerce Business

Commercial/ transactional terms:

Commercial or transactional terms are by far the most important terms to have in place. It serves as the contract between you and the user, once they become a customer, i.e. make an online purchase or an order for services through your app or website. It is the binding contract upon which your start-up earns revenue from selling products or delivering services.

Revenue is the lifeblood of a business, so you should give careful attention to the commercial terms to ensure that the essential features, including those that are unique to your product or service, are commercially accurate.

The important aspects that these terms should include are:

  • a general explanation of the service or product being offered through the app or website
  • payment methods, fees and any associated costs i.e. delivery fees
  • user/ customer account or profile requirements
  • duration and renewal terms
  • the applicability of promotional codes and vouchers
  • any unique sale terms that would apply to the products or services
  • the terms applicable to returns
  • limitation of liability provisions
  • any warranties made by the parties
  • any other disclosures that are required to be made in terms of the Electronic Communications and Transactions Act 25 of 2002.

Privacy terms:

The goal of privacy terms is to create your right to collect and use certain information about the users for specific purposes.

Personal information is often collected through cookies as well as when browsers become commercial or transactional users of your website or app. Users do so by creating an account or by integrating their social media accounts with the website or app. You need to explain the rights of the users regarding the information being collected, how it will be stored and the purposes for which it will be used.

The Protection of Personal Information Act 4 of 2013 (“POPI”) sets conditions for the lawful processing of personal information and privacy terms assist you to comply with the legal requirements.

Privacy terms usually include the following important aspects:

  • the use of cookies to collect certain information
  • the purposes for the processing of the personal information
  • the sharing of personal information by the website owner with certain select third parties
  • the storage of personal information, including the security measures taken and whether cross-border storage will occur and
  • the user’s rights in relation to his/ her personal information and the recourse that he/ she has.

Related: 4 Methods For Building A Successful Ecommerce Brand

In closing, online terms are there to protect you and your business. Although it doesn’t mean you won’t ever be sued, it will ensure that you are prepared and protected against unlimited damages. Furthermore, make it your priority to be proactive and mitigate any claims that may arise against you.

So, if you don’t have online terms on your website or app, make sure you are compliant and put them online as a matter of urgency. If they are in place, review them regularly and make sure you’re covered on all fronts.

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