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Experts urge Americans to start online businesses

By Nkoyo Iyamba | Posted - Nov 29th, 2010 @ 5:00am



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SALT LAKE CITY -- In the midst of what some describe as a shaky economy, analysts report online sales for the Thanksgiving holiday rose 33 percent. It's only going to get better for online businesses, and not just during the holidays.

Experts are now urging Americans to start their own online business.

"With the economy in kind of a slump and many people being laid off, there's a great need for people to find work," explains Alan Hall, managing director of the Utah-based Mercato Partners. "So your online solution is an excellent one."

Analysts are seeing e-commerce trending upwards.


Online business is growing at 11 percent, which is many times more than what you find at a brick-and-mortar establishment.

–Alan Hall


"As we look at what's happening in retail, people sell from a store front, the growth of that has been around 2.5 percent each year," explains Hall. "Online business is growing at 11 percent, which is many times more than what you find at a brick-and-mortar establishment."

As a venture capitalist, Hall invests in Utah businesses. He says some Utahns like the simple logistics of starting an online business.

"Indeed you have to set up a website. You have to go through seven different steps to get your business up and running online," explains Hall. "But it doesn't take generally a lot of money and it's one that you can in some cases learn as you go."

Utahns are starting online businesses in different aspects of commerce.

"I'm seeing businesses that pop up out here in Utah that have to do with selling products that people make themselves or that they have been able to acquire overseas -- some types of foreign products," says Hall. "Or they may find a distributor who's looking for more people to go online and help them sell their product."

Hall warns, however, that an online business isn't some magic bullet for success. In fact, he says most businesses fail before they get to their fifth year of business operation.

"An online business is no different than any other kind of a business," explains Hall. "You have to follow basic business principles to be successful."

Some of those basic principles, according to Hall, include:

  • Understanding your customer "extremely well and then being able to deliver a product to them at the right price," says Hall. "That they will buy it and then recognizing also that they'll probably buy from competitors. That's the biggest one."

  • Know what it will take to manage your business. "People have never engaged in business and don't realize the fundamentals of it," says Hall. "Management of how you run something is a big issue."

  • Getting the capital or funds to get started and maintain the business. "Generally speaking, you go to your family, your friends," says Hall. "Sometimes mortgage your home, use your savings and do whatever you can to get enough money to survive and grow the business at the same time."

  • Establishing credibility. "Everyone seems to have a site and trying to sell things," says Hall. "But will people believe that you're real, that you're honest, that you'll take care of them?"

Meanwhile, there are products that just don't work using an e-commerce model. "But that doesn't mean you can't use online to market and promote your product," explains Hall. "They may not be able to come and buy your product online but at least they're made aware of the product."

One of the major pitfalls of not carefully structuring and consulting with experts before you start an online business has to do with getting people to know your business exists.

"It has to do with marketing and selling your product. It takes a lot of time and attention to reach out to the people who might be your customers," explains Hall. "It's probably the thing that makes a business successful. It's also the one that if not done right means a failure as well."

Another pitfall surrounds the logistics of your business.

"You have to have a system that's going to work. It means you're going to have to put the time and energy into having a payment system. You have to able to ship. You have to be able to deliver. You have to be able to support it," explains Hall.

"People who don't understand how to do those basic business fundamentals" ultimately will fail.

Before you get started, there are places online that can help you get started just by typing in key words.

"There are websites that help people build websites. They help them with the ability to put together a payment plan on their system," explains Hall. "There are companies in Utah that help with the ‘fulfillment' or distribution or shipping of your product."

Hall also refers to companies that specialize in SEO techniques or search engine optimization, online tools used to help expand your web presence.

"You'll find there are companies that will, for a fee, help you build that online presence," says Hall.

Hall also recommends reaching out to the Utah Small Business Administration for further guidance and support. Overall, analysts say even during these precarious times, starting an online business has proved fruitful as no other sector is growing at such a rapid pace.

E-mail: niyamba@ksl.com

Nkoyo Iyamba

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