Background information on small businesses on the Web

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Could you make money starting my own small business on the Web? It might sound too risky, but thousands are taking the risk with mixed results. Some businesses are small home-based businesses with limited budgets, while others are million-dollar corporations with large budgets. How do businesses establish themselves on the Web?

Beware of initial expenses that could be overwhelming to some small businesses. According to Working Woman, experts recommend having enough start-up money depending on the company. A home page can be made on a personal computer with a modem for $200 with free shareware or on some word-processing programs such as Microsost Word. Storage space on a local Internet service provider can be rented for a monthly fee ranging from $35 to $200 depending on the service. Consultants also can be hired to "create, publicize and maintain their sites." Companies can post their sites on commercial services such as CompuServe.

CompuServe negotiates prices and terms at the headquarters in Columbus, Ohio. CIS (CompuServe Information Service) charges a base rate of $50,000 a year plus 2 percent of sales for a spot in the electronic mall. Merchants are encouraged to buy ads in CompuServe magazine where they get credit allowances. Prodigy charges from $10,000 to $15,000 a year.

Just as money is needed to start a business online, money can be saved on overhead. Typical office expenses such as rent and supplies are free. Money also can be saved by the decreased cost of sending promotional materials through electronic mail. Companies must be prepared for many orders, and it is becoming more difficult to be noticed on the Web. Registering with search engines increases exposure and hits. Search engines ask site owners to register their addresses and list keywords for free.

If there are no Web-savvy employees at your small business, there are companies that design and maintain the site or provide a helping hand. Companies such as Virtual Spin, help small- to mid-size businesses design Web sites. Virtual Spin only provides tools for companies to make their own sites. The sites are designed primarily for companies who want to put their catalogs online.

A "Cartalog" is a template used to advertise products and prices. The system includes a secure online ordering system that accepts credit cards of the merchant's choice and checks account numbers, purchase orders and cash-on-delivery requests. The fee for the service is $49 a month or $599 a year that includes free technical support.

According to a Working Woman article, more than one thousand businesses each month set up pages on the Web. In August 1996, a Nielsen survey found 24 million adults have surfed the Web in the past three months. Only 2.5 million people have bought products on the Web since 1994.

Jim Ellsworth, a senior computer marketer at Oak Ridge Research, surveyed 462 businesses in 1995. He found 80 percent were "making or at least saving money from their Internet operations." The most successful, he found, were small retailers, wholesalers and service companies.

A Georgia Tech survey in October 1995 found only 11 of percent users go online to shop; about 79 percent just browse. The same formula for success in regular businesses also holds true for Internet-based businesses: Offer good merchandise. Two locations where businesses can post sites are commercial online services and the Web.

The advantage of posting a site on commercial online services is that it provides a "secure, centrally monitored space within a neat structure. The threat of credit card fraud is minimized, since the proprietary software on these services is technically sophisticated and the company you keep is usually classy," said Sarah and Herb Heller, who run a chain of virtual gourmet shops on CompuServe and Prodigy.

"Consumers also know that they are shopping in a secure environment," said the Hellers, who prefer using Prodigy. "We have longtime customers on Prodigy who buy from us 10 times a year and who have spent several thousand dollars. That's a lot of food!"

In June 1996, 1,100 Web-based businesses, or 31 percent, said they were profitable, according to a survey by ActivMedia market researchers. About 28 percent said they would be profitable within 12 to 24 months.

Business Week interviewed 35 Web site operators of profitable sites. "These companies haven't invented unique types of businesses ... For one, instead of plowing huge sums into their sites, most are operating on tiny budgets. That has forced them to focus on how to reach and serve their customers, rather than, say, pumping money into fancy graphics that look good in management meetings but wind up slowing down Web sites and turning off customers. Across the board, successful Web merchants have created virtual communities. Above all, the successful Web trail blazers share the ability to adapt and scrap what's not working and improvise a new business plan on the fly."

According to David Lidsky, there are some sites that are useful for beginning a small business including The American Express Small Business Exchange, the Smart Business Supersite and the U.S. Business Advisor site. The American Express Small Business Exchange (www.americanexpress.com/smallbusiness) provides access to small-business advisers for free advice. The site also has tools on how to seek finaning and a small business plan. The Smart Business Supersite (www.smartbiz.com) has information with Uniform Resource Locators for topics including employment procedures and accounting. Perhaps the most useful site is the federal government's U.S. Business Advisor site (www.business.gov). The site has links to Frequently Asked Questions about taxes, social security, workplace safety, W-2 forms, postal forms and Small Business Administration loan applications.

Successful small businesses on the Web

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