The Importance of Having A Sound Business Model
A recent visit to a few websites made me think of putting up this message as a friendly reminder to my dear friends and esteemed colleagues in business.
First, take a look at a few websites that gone "out of business" just recently:
1. Faves.com
A visit to the site on 24th May 2011 shows that the website is no more in business (at the moment), and you're being redirected to http://blog.faves.com (which seems to be currently hosted on blogspot.com - a free service from Google), with some message like:
2. Mr.Wong Social Bookmarking Site
Read the message behind the lines:
3. Kirtsy
A visit to Kirtsy page, and you find only this message:
To me, there are a few reasons behind why we must have a sound business model SINCE DAY 1:
1. Business Concept
Most people made the mistake when it comes to the relationship between website, traffic, and money. I would rather have just a single page site selling ebook which makes money than a website with huge traffic that doesn't reward efficiently - i.e. bigger overhead and lower return on investment. That's why I recently put up an article about how to increase targeted web traffic at Best Business Challenge site. The equation is important:
Look around the brick and mortar world, most people make the same mistake with conventional business, thinking that by investing a lot of money to open a shop or outlet then people will come and buy their products or services, and 90% failed in the first 5 years for that.
My mindset is clear: I would rather sell something at $24 and make my cut of $10 rather than sell something at $200 and make that $20 profit, though $20 seems higher profit than $10, but the cost and time for it may not justify the risk-reward ratio I am looking for.
2. Predictable Success
How the business is going to make money since day 1, what is the market size and better, a prospect pool you already have on hand makes more sense for risk-reward calculation.
If you want to be rich, do what the rich is doing. As stated by Robert Kiyosaki when he explained why mutual funds are slow:
3. A Matter of Survival
How long can you sustain your overhead when you have 0 income for your business? 1 week? 2 months? Chances are you won't be able to make it long if your overhead or fixed expenses are high, and the business cash flow is under a tight condition.
When it comes to Automated Internet Business, I would prefer to start with the safest and easiest ways to make money online.
With Love, Respect, and Much Abundant Blessings Always,
How Tze
p/s: These example proves that while most people perceived software or internet business are "no cost" business, IT IS NOT! :)
First, take a look at a few websites that gone "out of business" just recently:
1. Faves.com
A visit to the site on 24th May 2011 shows that the website is no more in business (at the moment), and you're being redirected to http://blog.faves.com (which seems to be currently hosted on blogspot.com - a free service from Google), with some message like:
| Faves.com is now offline We pulled the plug on Faves.com today. I want to thank all of our users on this journey - I'm sorry we didn't end up with a viable business after 6 years working on this. We will be auctioning the domain name, faves.com shortly - I'll post here when we have details about the sale. |
2. Mr.Wong Social Bookmarking Site
Read the message behind the lines:
This – and our current page rank of 8 – makes Mister Wong popular with its users; but unfortunately also with lots of gatecrashers ... Automatic bots have registered a couple of thousand spam accounts in the past weeks alone, which led to a very high operating expense for our quality control team and our data base handling. Therefore from today on, mister-wong.com will only be free of charge to private users with "trusted" status. The "trusted" status will only be given to users who are not using their account for commercial purposes. |
3. Kirtsy
A visit to Kirtsy page, and you find only this message:
| A designer knows he has achieved perfection not when there is nothing more to add, but when there is nothing left to take away. ~ Antoine de Saint-Exupery |
Why A Sound Business Model
To me, there are a few reasons behind why we must have a sound business model SINCE DAY 1:
1. Business Concept
Most people made the mistake when it comes to the relationship between website, traffic, and money. I would rather have just a single page site selling ebook which makes money than a website with huge traffic that doesn't reward efficiently - i.e. bigger overhead and lower return on investment. That's why I recently put up an article about how to increase targeted web traffic at Best Business Challenge site. The equation is important:
Look around the brick and mortar world, most people make the same mistake with conventional business, thinking that by investing a lot of money to open a shop or outlet then people will come and buy their products or services, and 90% failed in the first 5 years for that.
My mindset is clear: I would rather sell something at $24 and make my cut of $10 rather than sell something at $200 and make that $20 profit, though $20 seems higher profit than $10, but the cost and time for it may not justify the risk-reward ratio I am looking for.
2. Predictable Success
How the business is going to make money since day 1, what is the market size and better, a prospect pool you already have on hand makes more sense for risk-reward calculation.
If you want to be rich, do what the rich is doing. As stated by Robert Kiyosaki when he explained why mutual funds are slow:
| the rich have already made their money "prior" to the public being even aware that the company exists. That means the rich often invest with much lower risk and with the potential of much higher returns. |
3. A Matter of Survival
How long can you sustain your overhead when you have 0 income for your business? 1 week? 2 months? Chances are you won't be able to make it long if your overhead or fixed expenses are high, and the business cash flow is under a tight condition.
When it comes to Automated Internet Business, I would prefer to start with the safest and easiest ways to make money online.
With Love, Respect, and Much Abundant Blessings Always,
How Tze
p/s: These example proves that while most people perceived software or internet business are "no cost" business, IT IS NOT! :)
