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:
- Create something that appeals to a particular customer base
- 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:
- 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.
- 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.
- 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.
A Step-By-Step Guide To Selling Consulting Services
Do people often ask for your professional advice? It’s time to start charging for your consulting sessions.
Ever since I launched my YouTube channel where I talk about different strategies regarding B2B selling and inbound marketing, I’ve gotten a lot of requests from my audience to hop on a call with them and help them out.
This is how I got started offering consulting services to different companies and entrepreneurs. Based on what I’ve learned, here’s how to structure these consulting calls so you can start selling them on your own.
I usually use a pretty simple email whenever I’m asked a detailed question that requires a decent amount of my time.
This email includes the price for the consulting call, which can vary, but generally starts at $300. Usually, that email is enough to get viewers to buy in.
You want to price your consulting services in a way that it makes you want to work for that amount (even if you’re not in the mood). By charging a certain amount for the consulting call, you make sure that you’re adding value and the other person is also taking your notes more seriously.
For those who are just getting into coaching and consulting, the best way to start is to assume that the person on the other end is going to get good information out of your session.
People usually join a coaching session either because they have a burning problem or they are so close to a solution that only few words are enough to solve it for them.
In some cases, people paying for a consulting session already have an idea or solution to a specific problem, but they want to have your ideas or expertise.
It is important to remember that the person won’t reach out to you for coaching if she didn’t like something about what you’re doing.
To get this meeting on the calendar, I use a tool called Calendly. There are a bunch of alternatives out there, but Calendly is a pretty popular solution.
The tool is free, but I use a version that charges about $10-$15 a month and plugs directly into my Google calendar. There are a lot of similar tools out there that you can choose from if you don’t like Calendly.
I recently discovered and started using Google Wallet. It is a free tool from Google and its pretty similar to Venmo. It allows you to input your credit card info and the amount billed is directly transferred to your account on the same day.
I’ve previously also used Venmo and Paypal, and as a company (Experiment 27) we used Chargebee for a while. With Chargebee, we had a problem where it would mess up our revenue numbers and our churn rate.
A lot of these coaching sessions are one- or two-time purchases for a very small amount of money compared to our main service offerings, so it would mess up our purchase rates.
Setting up a Google Wallet account is pretty simple and it also provides invoices. The last coaching session I did, an invoice was paid within two hours.
It is important to know whether the person purchasing a coaching session is getting value out of it.
I picked up this idea from someone with whom I used to do a bunch of coaching sessions who runs his coaching session using Google docs.
He opens up a blank Google doc at the start of a coaching session and adds notes there. Using that model, my clients and I go over different goals and questions by writing them in a Google doc and I also assign homework.
Here’s an example of a document like that.
And because all of it was done in a Google doc, everyone has easy access to it. At the end of each coaching session, I think it’s necessary to have a homework assignment that would set up the attendees on something to work for the next week.
Bonus: Should your consulting landing page have short or long copy?
There’s been a long debate among the copywriting community about whether short copy or long copy is the best. Some say that you need long landing pages outlining data point after data point in order to make someone take action and buy your services.
But, there’s another group of copywriters who believe that the short copy is more effective because of its to-the-point approach and easier click and buy operation. There are always two sides to all advice, but for us, short copy didn’t work.
Our coaching funnel normally consists of our clients watching a YouTube video and then booking a consulting call directly.
The clients would usually find the consulting page and would be welcomed by the headline, “Want me to help you double, triple or maybe even quadruple your revenue for the next quarter?”
Our landing page was converting about two clients a week who wanted consulting services on how to improve their agency business.Being a fan of testing, I thought we could do better.
My favorite coaching page of all time is one that is literally a picture of the coach’s face along with a description that says “Did you know Neville takes on four different private consulting clients?” along with one paragraph of copy and a “buy now” button – that’s it.
So, we wrote a version of our consulting page based on Neville’s, but we saw our conversions drop from where they were before down to almost zero. We had just one conversion for the entire month that we had this landing page.
Since this approach clearly wasn’t working for us, we changed back to our previous landing page. We kept a few items from the other approach.
For example, we changed the pricing section and began offering consulting packages. Having packages on the copy page increased the revenue dramatically.
The other thing that this experiment taught us is that we needed a more intense email drip to sell people on coaching. We rewrote our email sequence, which is now a five-day drip in which we basically hard sell people on coaching as they sign up for any of our lead magnets on our YouTube channel.
Even though the short copy approach wasn’t right for us, we did gain some valuable insights from the experiment.
This article was originally posted here on Entrepreneur.com.
Want To Start A School? Your Guide To The Education Sector
The education sector continues to show remarkable growth and opportunity as the private sector fulfils the increasing need for quality education in South Africa.
“The education sector is interesting as it’s one of the few sectors in South Africa showing very strong fundamental growth, almost independent of general economic growth,” says Rory Ord, head of unlisted investments at 27four Investment Managers.
“Education is highly demanded across all sectors of South African society, and this ties into a global trend of increasingly educated populations.”
Demand creates an opportunity for the private sector
There are two major themes in education that make it interesting from an investment perspective.
“First, it’s clear that government cannot meet the demand for the different levels of education required by South Africans, and neither can it meet the standards required on a very large scale,” says Rory.
He adds that beyond the top performing government schools and universities, the population using these services want better education and many are willing and able to pay for it. This has created an opportunity for the private sector, which has experienced huge growth in private schools, to the benefit of companies like Curro and ADvTECH.
“Both companies have grown strongly in recent years, with Curro achieving higher percentage growth off a lower base. Curro has been highly valued by investors who have been willing to pay for the expected growth. ADvTECH is a bit more mature as a business, but has still delivered growth of 20%+, and on a much lower earnings multiple. Private education is still a small percentage of the whole, so expect more growth, but it does take time to deliver this growth in large numbers,” advises Rory.
The investment opportunity of education technology
“The second theme,” Rory says, “is how technology can increase the penetration of quality education. In essence, the way education is delivered has not changed with the advent of technology, but there are many areas where change is possible.
“The best example of this in South Africa is GetSmarter, which partners with global brand universities to provide high quality online short courses. Founded in Cape Town, this business was acquired by 2U, a US based company doing similar things in 2017, for R1,4 billion.
“Technology also promises more focused learning by tracking the progress of each student and adapting to make sure no child is left behind. We expect plenty of disruption and change in this part of the market.”
Related: How GetSmarter Got Smarter
What’s next for education?
In the unlisted space, Milpark Business School was bought out by private equity buyers several years ago and has recently been purchased by Stadio, Curro’s tertiary education spinout and Brimstone Investment Company. A third theme is consolidation. Scale is important in education and established players with capital are likely to continue purchasing smaller players to achieve this.
What the education sector looks like today
The education sector is divided into three separate investment and business opportunities, namely: High income schools, low income schools and franchises. Before investing in any of these sectors you’ll need to understand them.
Low income schools
Low-fee or independent schools are growing at a rapid rate in South Africa. In its 2015 report, Low-Fee Private Schools: International Experience and South African Realities, the Centre for Development and Enterprise (CDE), reports that low-fee private schools that charge annual school fees of less than R12 000, are educating an estimated 250 000 learners. The schools fill in the education gap left by insufficient or dysfunctional public schools in disadvantaged communities.
“The private education sector is not well researched or understood,” says Jane Hofmeyr, policy and advocacy director at the CDE. “But there is considerable potential with new players, local and international, coming into the market, looking for opportunities in South Africa and Africa.”
The growth in the independent school industry emanates from for-profit and not-for-profit chains of private schools at all fee levels. The main source of income for low-fee independnt schools is school fees, government subsidies and donations.
Investors in this sector face a number of challenges. A convoluted regulatory environment can impede the establishment of new schools. You’ll also face high compliance costs, and more accountability with severe sanctions for non-compliance. Further challenges are acquiring affordable premises, high teacher turnover and late or non-payment of school fees.
High income schools
ADvTECH, a listed private education provider, reported a 22% rise in revenue to R2 billion for the first half of 2017. Operating profits grew by 28% to R344 million, while earnings climbed 6% to 38,6 cents per share, and a dividend of 15 cents per share was declared. ADvTECH’s schools division comprises 90 schools across 47 campuses under the following brands: Abbots College, ADvTECH Academies, Centurus Colleges, Crawford Schools, Junior Colleges, Maravest Group and Trinityhouse.
There are also challenges in this sector: “The difficult economic climate and unsettled socio-political environment had a more significant effect on enrolment numbers than had been anticipated. We have seen a consistent rise in the number of families emigrating and this trend had a negative effect on enrolled numbers as we lose students in grades where it is difficult to replace,” says ADvTECH. “In addition, we have seen an increase in withdrawals and exclusions as a result of financial pressures. Therefore, while actual new enrolments have been in line with expectations, net student numbers have been adversely affected by these two negative influences.”
These factors, along with costs of investments in greenfield projects and school expansions, are constraining profits.
Education franchises continue to grow and spread across South Africa, fulfilling parent’s needs to invest in their children’s early learning and critical skills development through enjoyable, educational programmes.
BIG DEALS IN THE EDUCATION SPACE IN 2017
SOLD FOR R1,4 BILLION
2U, a Nasdaq-listed technology education business acquired Cape Town start-up GetSmarter for R1,4 billion. GetSmarter was founded by brothers Sam and Rob Paddock. The education business focuses on developing online short courses in partnership with higher education institutions, including Cambridge University, Harvard University, the Massachusetts Institute of Technology and the Universities of Cape Town, Witwatersrand and Stellenbosch (Business School).
Both companies focus on delivering “high-quality, high-touch digital higher education from world-class colleges and universities,” said 2U in a statement.
Milpark Business School
SOLD FOR R320 MILLION
Milpark Business School was sold to Stadio, in partnership with Brimstone, for R320 million. Brimstone will pay R96 million for a 30% stake, and Stadio will pay R224 million for a 70% stake in Milpark Business School. Stadio, which falls under the Curro umbrella, says this acquisition is just the beginning; it intends to acquire several additional programmes, including degrees, higher certificated and diplomas.
Yusuf Karadia sold Mancosa to UK private equity firm Actis, two decades after he launched the distance learning school to teach South Africans business skills. Mancosa is now a part of Actis’s expanding African higher education portfolio. Since 2014, it has spent R3.65 billion investing in educational institutes across the continent.
CURRENT OPPORTUNITIES IN THE MARKET
- Investment: R700 000 to R900 000
- Contact: +27 (0)11 958 2910
- Visit: www.aplusstudents.co.za
- Investment: R200 000 to R300 000
- Contact: +27 (0)82 785 7763/ +27 (0)21 939 6344
- Visit: www.minds.co.za
Innovatus FET College
- Investment: R700 000 to R1 million
- Contact: +27 (0)32 541 0045/6
- Visit: innovatus.co.za
- Investment: R100 000 to R200 000
- Contact: +27 (0)31 903 5352
- Visit: www.kipmcgrath.co.za/franchise-opportunities
Kumon Education South Africa
- Investment: R50 000 to R100 000
- Contact: 0800 002 775
- Visit: www.kumon.co.za
MiniChess South Africa
- Minimum investment: R55 000
- Contact: +27 (0)12 347 6464
- Visit: www.minichess.co.za
- Minimum investment: R150 000
- Contact: +27 (0)11 792 4679/ +27 (0)82 853 6479
- Visit: www.sherpakids.co.za/franchise-opportunity
- Investment: R350 000
- Contact: +27 (0)87 287 4038/ +27 (0)82 442 6267
- Visit: www.younge.co.za
10 Business Ideas Ready To Launch!
Where do you find a good business idea? Right here. Here you’ll find several innovative business ideas that are ripe for plucking.
Where do you find a brilliant business idea?
It’s not as hard as it may seem at first. In fact, the idea is arguably not all that important. There’s a reason investors talk about backing the jockey and not the horse: It’s often not about the idea, but the execution.
A great entrepreneur can turn even a mediocre idea into a success; all that’s needed is a USP and great customer service.
That said, some ideas are undoubtedly better than others. And some businesses are easier to get off the ground. In the following pages you’ll find a curated list of business ideas that have reached a point where they’re just waiting to be exploited.
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