Marketing and Design Psychology

A look inside the dirty world of marketing, design, technology, sales, and psychology.

So...You Want to Start an Online Business?

Kyle Applegate - Friday, April 05, 2013
The web is big.  Real big.  And just to give you an idea of how big it really is, here are some numbers:

1. As of December 2012, there were 634 million websites.
2. There are nearly 7 billion people in the world. 


Simple math would dictate that nearly 10% of the world's population owns a website. 

However, there are only 2.4 billion active internet users worldwide.  With that said, we can make an assumption that of the 2.4 billion internet users, nearly 26% have their own website.

--Group Activity--

Go take a walk to your local coffee shop.  Get a coffee and let this thought sink-in as you wait in line patiently for your single-origin organic latte; one out of every four people waiting to be served their coffee, probably has a website.  That's right. That dude who is standing uncomfortably close behind you in line has his own website. There is a lot of competition out there for you if you want to start your own online business. 


So, do you really want to start that web business you've been dreaming about?  Do you have the money, time, content, concept, and internet know-how to stand above the 633,999,999 other websites out there in the world?

I assume that you may not. 


Not having the money, time, content, concept, and internet know-how does not mean that you can't experience the sheer joy of website management that millions of others experience daily.  Seeing photos of your kitten 'mittens' on tumblr reblogged, or the warming of your heart when Aunt Ida comments on how impressed she is that you have finally taken the time to publicly denounce the use of chemical cleaners on your stay-at-home-mom wordpress blog.  Even the exhilaration of getting a few likes on your shared post about your new paleo / crossfit youtube channel is right at your fingertips.

These benefits of website ownership can be instantaneous, and usually with very little cost. 

But Wait! you don't want just a blog of kitten photos, you want an online business. 

And that is definitely not free.

Owning an online business requires a lot of money, time, content, concept, and internet know-how...even a little bit of luck. 


"If you build it, he will come" - Field of Dreams, 1989
"If you build it, nobody will actually see it. And if they do, they probably won't buy from you" - The internet

There is no guarantee that your business will succeed online. In fact, most business fail within the first 12 months of operations.  Usually, these failures are due to underfunding. Eventually the costs of owning your online business outweighs the benefits of the few sales that you might get online. 
Truth be told, the internet is a very strange place, and plenty of people are making a lot of money online.  Often for no real quantifiable reason.  Some people put thousands of dollars in marketing, hire the best designers, and get absolutely zero results.  Others can put up a site in 10 minutes and make millions.  And that's the appeal of the internet -- there really are no rules (except for the few dozen the FTC has).

So what do you need to get your online business started, and what are the costs?  Note:  This is for an e-commerce business that sells physical goods.   There are plenty of other ways to make money online, which I will explain in another article.

Let's pretend that you want to start a t-shirt company online.

Here are your most basic needs to get started:

1. A bank account to handle direct deposits.
Cost: Usually a bank minimum of $300+ to waive your monthly fee

2. An address (your home or office). 
Cost: Assuming your rent is $1,500 and you require 1/3 of your space to operate: $500 a month  ($8,210 a year)

3. Credit Card (bank card with visa, mastercard, etc..OK)
Cost: Up to 22% interest on purchases.  For this exercise, we'll say $0 for ownership
  
4.  A Social Security number / Tax ID number. 
Cost: Free for the social.  The tax ID number is issued to legal entities such as an LLC, S-Corp, C-corp.  It is very wise to operate under a different legal entity while conducting business online. This will protect you from lawsuits when your product fails to meet your clients expectations. It will fail - because someone will say so.  About $300 for the incorporation fees.  Usually an $800 tax minimum for the first year in business. First year: $1100 plus taxes on future sales.

5. A place to sell your items online.   This includes: A) a domain name: $10 a year,  B) an e-commerce platform. as low as $9.99 a month, can reach as high as $10,000+ a month.  You can find a great solution for $40 - $480/yr, C) web hosting: if this is not in the package listed above, add another $10 per month for hosting - $120 / yr.,  D)  Design fees:  If you do not find a template that you wish to use, you start racking up the costs at at least $65 an hour for a good designer. This range can be from $99 - $30,000.  Try to keep it under $1,000.
 
6. A place to physically store your items. 
Cost: See #2. If not get a public storage locker for $99 a month,  $1200 annually. 
 
7. Someone to manufacture your product.
Cost: Depends on your product.  Even if you make your own product their is a cost.  If you were to make 100 items, what would that cost you? Example: T-shirts @ $6 per unit is $600 per 100.
 
8. A wholesale license -- if you are not the one to make the products, or you need to buy supplies. 
Cost: Free.  Just pay your taxes, or else you will be fined.

9. A payment gateway to handle the credit card transactions.  Think paypal or authorize.net.   
Cost: $30 a month plus a transaction rate of 2-3% of each transaction. About $300 per $10,000.

Your total minimum costs for the year:  $12,780.

Wow. That is a lot. Especially if you use the scenario of selling T-shirts for $10 with your cost at $6. That is only a $4000 gross profit. You still have to deduct the other operating costs and yearly taxes which lands you in the red by about $8,000.  Not to mention that all of the sensitive and personal information you've been protecting your whole life is required to operate an online business. 


This is because an online business is a real business, and it must be treated as such.
Fortunately, you can write most of these expenses off at the end of the tax year.  And to be fair, you're already paying rent so we can take off $8210 for rent, the $1200 for storage, and assuming you're willing to risk it and not pay for the incorporation costs, let's subtract another $1100.

$10,510 is now eliminated from our costs, and you have now made money online ($2,200/year $183/month).  

Go write up your bio on tech crunch, tell everyone you're an online entrepreneur --  you've made it -- we're all very proud of you. 

HOLD UP. $183 a month. Is it worth it? Are you over it yet? Don't be discouraged.  This is a very realistic scenario (actually most people lose money online), however, this does not have to be your scenario.

It is hard work to make it online, but it is hard work that pays off. So don't give up just yet. You have to be realistic and reasonable in your approach, but remember; anything is possible.  I have watched clients of mine become millionaires within just a few years of starting their online businesses. That doesn't mean that you will get these same results; but it is possible.  My millionaire clients we're intelligent in their approach. They scrutinized every cost, continuously improved their product line, and tested their messaging rigorously until it resonated with their audience.  These clients also let technology do most of the work, and initiated life-cycle email marketing campaigns, automated referral promotions, and developed their sites on world-class e-commerce technology.

The days of building out huge e-commerce sites for tens of thousands of dollars are still here -- and will be for a long time.  Fortunately for you, the wheel is not being reinvented every time someone needs an e-commerce site.

There are many reputable platforms that provide low-cost solutions to serve your needs.  many designers and developers have code or designs that they can re-purpose to keep your costs down

(In fact, you should be asking your designer / developer for this in your first meeting: Do you have any code or design files that you can reuse to keep me on budget?).  


Do not be distracted by technology.

Teach yourself as much as you can, but learn to rely on talented designers and reputable developers that have years of experience building out e-commerce sites.  Eliminate erroneous costs, and find an e-commerce solution that you can either self-manage without any coding knowledge required, or be willing to pay a designer. 

The key to building a successful online business is by leveraging quality services with robust and inexpensive technology so that you can focus on what you do best; building your brand, developing relationships, and making a great product.

If your product does not meet the requirements of etsy.com (vintage, handmade crafts, or supplies), or your brand exceeds the needs of e-bay or craigslist; your'e going to need to build out an online store. Here are a few options of e-commerce platforms available today (there are thousands to choose from, these are some of the most popular). 

What we will examine in this comparison of e-commerce platforms

1. Ease of use 
2. Price per month (middle tier package price - usually the basics are so restricted with features it is not worth discussing) 
3. Custom design costs 
4. Key features (CRM, CMS, Email marketing, analytics, wholesale, promotional codes) 
5. Resources and community.

Note: I will give nothing a 5 star rating for ease-of-use. My assumption is that this user can operate Microsoft word, but does not know any coding; HTML, CSS, or other).  The user is also managing their own site by adding products and descriptions without assistance.

E-COMMERCE PLATFORMS:


Shopify
Ease of use: 3.5 / 5 - pretty damn easy.  Still requires HTML and CSS skills to make updates to themes
Price Per Month: $59 per month
Custom Design Costs: Pretty nice templates to start. May need a designers modification - around $800
Key Features: 2500 products, 5 gig storage, discount code, most themes mobile friendly
CMS/Blogging: Yes
CRM: Creates limited customer records, groups
EMAIL: No.  Easy setup with mailchimp for an additional cost of 30 per month
Overall: A good starting point.  You will run into some trouble with growth.



A Simple Circle / Business Catalyst
Ease of use:
4.5 / 5  
Price Per Month: $38 per month
Custom Design Costs: $99+
Key Features: unlimited products, insane customer database, email marketing, analytics, wholesale pricing
CMS/Blogging: Yes
CRM: Yes
EMAIL: Yes.
Overall: One of the best.


Big Commerce
Ease of use: 3.75 / 5   
Price Per Month: $79 per month
Custom Design Costs: Pretty nice templates to start. May need a designers modification - around $800
Key Features: 1000 products, 800 MB storage, discount code, most themes mobile friendly
Overall: Relies heavily on upgrades and packages.  I really like where they are going. Limited in terms of shipping and fulfillment. 


Magento GO
Ease of use: 2.5 / 5 - easy.  
Price Per Month: $65 per month
Custom Design Costs: Pretty nice templates to start. May need designers and developers modification - can exceed $10,000
Key Features: 1000 products, 500 MB storage, discount code
Overall: Magento is great. Really flexible and you can buy upgrades from a community of developers on xtento.com.  Ideal for larger companies or those who really know how to code. 
Volusion
Ease of use:
4 / 5 - easy. 
Price Per Month: $65 per month
Custom Design Costs: Pretty nice templates to start. Custom packages offered via volusion starting at 1,995 up to 8,995
Key Features: 1000 products, discount code, most themes mobile friendly
CMS/Blogging: Yes - on this package and above
CRM: Yes - on this package and above
EMAIL: Yes - on this package and above
Overall: I've had a great experience with Volusion.  Some clients have difficulty with product management, but overall it is pretty easy to use, and enough flexibility with the templates.
Wordpress site with ecommerce plugin.
Ease of use: 2/ 5
- easy to setup, nightmare to make big changes and customization. 
Price Per Month: 0-$50
Custom Design Costs: inexpensive with great designs.  Some free templates, most at $10.
Key Features: Easy to install themes. From there, you're on your own.
Overall: Avoid.

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I highly recommend using my company A Simple Circle with Adobe Business Catalyst as an e-commerce platform.  The reason being is that we are small team of designers, developers, brand strategist and entrepreneurs that operate our own businesses daily.  The fears, costs, and concerns of building out your own site is something that we all have gone through and understand.  Our recommended platform of Adobe Business Catalyst is something that you can build out a business quickly and easily on, while still being able to scale for long-term growth. 

A simple Circle will build out sites on any platform, refer you to our current clients so you can talk to them candidly about our services, and find the right solution for your budget. A Simple Circle also offers out-of-the-box templates for free with Adobe Business Catalyst subscriptions (these require you to update). Design packages start at $99 and with the basic e-commerce hosting package at $38 a month, you can be up and running for under $200 in less than a few days.  The reason I say days instead of minutes (which is the actual time it takes to setup a FREE 30 day trial account), is that you will still need to update your domain name (DNS), add site content, a payment gateway, and test the site before you go live.  

My next recommendation would be trying out shopify.com.  It is not best for longterm growth and wholesale accounts, but if you want to get up and running quickly and inexpensively, Shopify is the place to go. 


So what are your next steps to building out an online business?



1. Make sure this is what you really want to do.  It can be a lot of time and money to get started. 

2. Search online and see who your competition is with the keywords that your users will be searching in Google, Bing, and Yahoo.  How do you think you will fit in? What is your competitive edge against the competition?

3. Set a realistic budget on what you are willing to spend to make your online business successful.  Times that by five. Can you afford it?

4. Remember why people buy online in the first placeLow prices, Free shipping, Saves time, wide Range of products, Easy to compare prices and get information on related products.  Does your sales strategy support these? if your product doesn't sell offline, why do you think it would sell online?

5. Buy your domain name.  Use www.bignamesearch.com and use the keyword apple for 10% off. There is a yearly cost to register your domain name and this completely independent of the charges for hosting, and email and e-commerce platforms.

6. Choose an e-commerce package that works for you. Need help?

email me to setup a free 30 minute consultation.  It is possible that I can find YOU a free solution, and I am more than willing to point you IN THE RIGHT DIRECTION.
7. Signup to PayPal, authorize.net, or other payment gateways so that you can start processing credit cards.  This will take about 3-4 days to setup. Make sure that your e-commerce platform easily integrates with your payment gateway.

If it sounds too good to be true, that's because it usually is. That doesn't mean that you can't run a successful online business.  Be creative and prepare to make adjustments as you grow.  Remember: Content and credibility creates conversions and customers. 

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I provide private design, sales, and marketing consultation services via phone, skype, and google hangout at $150/hr.  On-site and large group consultation services start at $350 per hour*.

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A percentage of ticket sales may apply at certain events and seminars.



How to Be Wrong, and Always Be Right.

Kyle Applegate - Tuesday, April 02, 2013

Fail and Fail often.

Having launched hundreds of websites in my life, one thing is certain;  I have no idea what works.  Of course, you wouldn't expect anyone who makes a living developing online businesses to admit that -- but that is the truth.  Nobody knows exactly what is going to work.  The internet has proven to be a great medium where your business can fail miserably.  We often think to ourselves that we can replicate previous online business models, and cash in like all the other internet entrepreneur legends.

Truth be told, I love it when I fail.  Failure is the tactic in which I find out what works best.

You should be failing as much as possible.

Of course when I say failing, I really mean testing.  We should be testing everything that we do with the goal of optimizing our products, to provide a better service to our customers.   As a business owner, your primary goal should be failing on a very small scale, with as little risk as possible.

Testing and optimizing your product is the essence of great marketing. 

Market research falls into one of two classifications; problem-identification research, or problem-solving research.  From there we go into subcategory market research types like buyer decision research processes, brand association research,  ad tracking, price-elasticity testing, distribution channel audits, etc…

Despite all the methods and types of testing, we're going to start thinking like smart business people and dumb-down our questions to only the important stuff: 

The Big Four

1. Am I making money?
2. Where is my money coming from?
3. How can I make more money?
4. How should I use my money?

Your user interface, technology, branding, and messaging are all critical to your success.  However, what matters most is that your business makes money.  Testing is the way to do exactly that -- make more money!  By continuously testing and analyzing your results you will understand how your audience is reacting to your content, and correct it accordingly to drive more sales.

Steps to Testing

Here are the components of testing intelligently:

1. Build a system designed to capture behavioral data and other business metrics.
2. Define what questions you have.
3. Know who you are asking.
4. Identify and mitigate risk.
5. Ask.
6. Analyze data & draw conclusions.
7. Adjust accordingly.
8. Repeat.


Types of Questions to Ask:

I'm going to categorize the types of questions you should ask as the following:
1. The basics  2.The Optimizers and 3. The Drivers.

1. The Basics

The Basics are questions you should be asking, and metrics you should watch everyday:

How many people visit your site?,  How many people are on your Facebook Business Page?,  How much content do push out a month?, How many subscribers do you have for your email list?,  What are your online sales? How many clicks did that banner get? etc..

2. The Optimizers

The Optimizers are questions that you should be asking to help discover trends, and make the most of your efforts.  These are a little more in-depth, but can still be implemented by yourself, with many FREE online solutions available.

What days of the week are you generating the most sales?  Are people more likely to click on an orange button, or a red button?  What time of day are people most engaged on Facebook?, What type of posts solicit the most engaged reaction?

These questions are absolutely critical and are now becoming the industry standard for every online business.

3. The Drivers

There are higher level questions that should not only drive your business decisions, but define your business.  These questions are more related to human emotions, and become far more difficult to quantify:

What will the needs of my audience be five years from now?  Can we become more efficient in delivering value to our clients? Why do people buy from our competition and not us?

The questions of why people buy, and how you can motivate people to buy your product are easily answered by simply asking them.  Questionnaires that are promoted with incentives are a low cost solution to engage audiences, and get information.  I do caution that we must be always careful to not trust what everyone says, but what everyone actually does.

This concludes part one.  Part two includes information on the metrics that matter, types of testing, and systems to test with.

If you have any questions, email me, or talk with me on Facebook!. Best of luck!