The decision of whether to get into a traditional offline business, a modern online business, or some combination of the two, is one of the most important decisions you can make. Each has pros and cons that should be considered.
Whatever kind of business you get into, however, there are three factors which should always be a priority:
- It should be personally satisfying
- It should be profitable
- Ideally, it should not put you at risk of being imprisoned
If you can only meet one of the three criteria above, there's a good chance you are making a wrong decision. People who make poor decisions do not typically do well in business. If you can satisfy all of the criteria, this means you have an actual chance of succeeding. Off the three criteria, the first is the most important, because if you don't sincerely love what you do, that will be reflected in your results.
Now it's time to take a look at some of the differences and similarities between online and offline business, so you can decide if running an online business is the best option for you.
Some businesses simply don't work as online businesses
All businesses should advertise online and have an online presence, but only some can actually work as online businesses. Any kind of business that requires you to be physically present in a particular geographic location at particular times on a regular basis is not suitable to be operated as a purely online business.
On the other hand, there is almost nothing that can be done as an online business that could not just as easily be done offline. The advantage of being online is that you can greatly extend your market, reaching a global audience of billions.
Some businesses work a lot better as online businesses
If your business sells really big ticket items like airplanes, boats, or industrial machinery, you can expect to make a lot more sales online than you ever could if you simply relied on people walking through the door of your offline sales office. The available market of people wanting to buy such things is comparatively small and widely dispersed. Advertising your products online means you can reach this market more easily and effectively.
Offline business usually operate on fixed hours
With a few exceptions like 7-eleven, the offline business world tends to trade only on certain days at specific times. Potential customers who want anything from your business outside of those times have to be patient and wait for your business to open, or they have to make the choice to shop online instead.
Online business are always open
When you run an online business, everything is always available 24 hours per day and up to 366 days per year. The upside of this is you have a lot more opportunity to make sales. The downside is your customers expect you to be always available to help with their problems, so you don't get to have time off unless you hire somebody to handle all that stuff for you. This requires considerable resources, so the smaller your business is, the less likely it is that you're going to get to enjoy lengthy and relaxing vacations.
People have far more trust with offline businesses
When customers buy from offline businesses, they usually don't need to worry about being scammed, and they have a really good opportunity to thoroughly inspect merchandise before paying for it. In the world of offline business, you don't normally have to worry about losing sales because customers don't trust you, and you don't normally have to do anything to convince them they should trust you.
Trust is a major factor in online business
Customers at purely online businesses are largely in the dark about who they're dealing with, and consequently they are often more reluctant to be a first time customer with an unfamiliar business. To be fair, there are thousands of scam sites out there, and people do get cheated every day by dodgy online merchants.
Serious online businesses do need to invest something into establishing trust with customers in a way that offline businesses don't normally need to worry about.
The things customers are concerned about are mainly:
- They can't normally see and inspect physical merchandise before purchasing
- They can't be sure that your business really exists
- They can't be certain that their transaction will be processed accurately
- They can't be certain that you won't charge additional items to them
- They don't know if you will honor a money back guarantee
- They can't be totally sure that what you are offering will suit their needs
These are not things they usually need to worry about when buying offline. You can help gain their trust by:
- Displaying your company registration information
- Providing full contact details, including an actual street address
- Displaying any endorsements you may have from government or industrial authorities
- Displaying photos and information about the business owner and key personnel
- Hosting an open forum or at least a FaceBook page where customers can interact with you
- Providing the opportunity to use third-party payment processing such as PayPal, Neteller, and Skrill.
Offline businesses require substantial initial investment
Operating from fixed physical locations (or mobile, in the case of ice cream truck drivers), most offline businesses must pay high costs for premises, utilities, and even parking. The offline business, if it sells goods, will have to maintain a physical inventory, and keep it stocked.
Online businesses are less expensive to establish and operate
Because purely online businesses are location independent, there is no expense for premises, utilities, or parking. They don't necessarily need to maintain physical inventory. In general, an online business is a lot less expensive in terms of input costs, which means there is potential for higher ROI in the long term.
Offline businesses need to constantly worry about crime
Everything from shoplifting to after hours vandalism are threats to offline businesses, and they also need to have expensive insurance to cover the costs of property damage, burglary, public liability, etc.
Online businesses usually only need to worry about being maliciously targeted
Security is a really important aspect of running an online business, but physical harm to your business is not possible without a physical location. Your main threat is being hacked, and there are plenty of ways you can help to protect yourself from that (which is the topic for another article), and you certainly don't need to insure for as many things as an offline business does.
Offline businesses are solid and dependable, but have limited reach. Online businesses have potentially massive reach, but they involve a typically higher level of risk due to the greater competition. The comparatively low cost of online business makes it an attractive option for start-ups. Overall, online business is much simpler and less expensive, and you'll have a lot less to lose with an online business that fails compared with running the same business as an offline venture.
header image courtesy of Léa Poisson