How NOT to Build a Successful Online Business

Darren Rowse of recently posted a case study of a blogger who decided to quit blogging after six months due to poor financial results: Blog Case Study – Is it time to Quit?

Darren’s post is a great read for anyone who runs an online business, not just for bloggers.

Interestingly, the points Darren raises in his post are similar to those from an article I wrote in 2002 called “Shareware Amateurs vs. Shareware Professionals.”

The blogging “mistakes” Darren notes are common to other online businesses.

Three of the most frequent mistakes I’ve seen include:

1. Thinking too short-term

The blogger that Darren mentions gave up after only six months. Many shareware developers give up when their first product isn’t a hit. I’ll tell you that if you can achieve financial success with a one-person, shoestring budget business in only six months, you’re probably superhuman. My first four shareware games were all relative flops — it wasn’t until my fifth release that I was able to produce enough income to live off.

When I think about the personal development business I’m building, six months is nothing. I’ve been at it for 10 months full-time now, and while I’ve made a reasonable dent in my long-term goals, this business is clearly still an infant. But to me that’s perfectly fine and well within my expectations. This business may be an infant, but it’s a healthy infant who will grow up big and strong.

Building a business is a lot like raising a child. It takes time and patience. If you’re going to start a business and you’re only willing to give it six months to prove itself, don’t start a business. That probably isn’t even enough time for a franchise. Would you throw out your child because it can’t fend for itself six months out of the womb?

I make most of my business decisions within a working time frame of 2-5 years… and for the big decisions with far-ranging consequences, I’m thinking 10-20 years out. This is just like the parent who starts saving for their child’s college education before the child can even read and write. If you want to start a real business and not just a hobby, think long-term.

2. Failure to optimize

An online business will have processes that get executed over and over. Some of these are human processes, but many are executed by technology, and in my opinion, it’s the technological processes that are the most important for an online business. Whenever someone loads up your home page in their web browser, that’s a process being executed. Reading a blog entry is a process. Clicking an ad is a process. Finding the site is a process.

Due to the sheer volume of processes an online business executes every day as well as their incredible interconnectedness, it isn’t hard to achieve tremendous performance gains through process optimization. A 10% improvement here, 15% there, 8% there, and pretty soon it begins to add up. As I’m sure some people will recognize, this was the basis of W.E. Deming’s work with the Japanese after WWII. If you can measure it, you can improve it.

If you generate income from Google Adsense, for example, there are plenty of web sites that provide practical optimization tips. Just do a Google search on “adsense optimization” and similar search terms, and you’ll find plenty. By gradually applying Adsense optimization tips easily found on the web, I was able to permanently increase this site’s CPM (i.e. revenue per 1000 page views) by 68%. However, by performing other optimizations (search engine optimization, marketing improvements, posting changes, site tweaks, etc.), I was able to increase this site’s daily Adsense revenue by about 500% in five months. Most of these changes took only minutes to implement, like adding RSS subscription buttons to the sidebar or changing the ad colors. If I’d never made these optimizations, it would mean permanently lower revenue, which would mean much slower growth for this business and more problems for me.

Optimization is generally one of the easiest ways to increase revenue for an online business. Even just one hour spent on intelligent optimization can generate enormous payoffs down the road.

3. Failure to market effectively

How many blogs receive dismal traffic because all the owner does is write posts?

I think that if you dare to be an entrepreneur, you need to learn marketing or have someone in your business who’s skilled at marketing. While you can outsource a lot of different business tasks, I don’t think the core marketing of your business should be one of them.

I never had any formal marketing education (my college degrees are in computer science and mathematics), but when I started my shareware business, I discovered I needed to learn marketing. In addition to reading marketing books and learning from others, I bought audio recordings of several marketing seminars. It took me a full 18 months to get through them (it was about 100 audio tapes total), but by the time I was done, I had a strong understanding of marketing and plenty of ideas for promoting my business.

Marketing doesn’t mean buying advertising, which is arguably the most expensive and least effective form of marketing. I haven’t spent a dime marketing this site, but I have done a lot of marketing work for it. Marketing is really just getting the word out. Don’t keep your site a secret — let as many people know about it as possible. Post comments liberally on other blogs, write articles and allow other sites to use them, swap links with bloggers in the same field, make search-engine friendly pages, and so on. If the content you produce is valuable, then you’re providing even more value by sharing it.

I think the most important realization I had about marketing was this — if you have a product or service you truly believe in, then you’re actually doing people a disservice but not telling them about it. Think about that. By NOT marketing, you’re depriving people of value.

If you aren’t eager to tell people about your site, perhaps it means you’re not offering something you believe in strongly enough. This simple idea contributed to my decision to retire from active shareware development and start this personal development site. I have no qualms about promoting this site because I believe in its value. I don’t feel embarrassed or apologetic when I tell people about it. If you’re providing real value, then your marketing is doing people a favor as opposed to asking for a favor. I wrote more about this philosophy in the article Marketing From Your Conscience.

I think a failure to do marketing for an online business is a form of self-sabotage. If you learn about a fantastic new web site, do you tell other people about it? Of course. Is your web site worth telling people about? If you don’t believe it is, you’re likely to avoid marketing it. Somehow you’ll just never seem to get around to doing any significant marketing work.

If you want to build a sustainable online business, focus most of your energies on providing value and on communicating that value. If you get those two things right (and it’s going to take longer than six months to make a real dent), you’ll be more driven to do everything else right.