Advantages and Disadvantages of Online Businesses

More and more people own or are growing their online businesses with varying degrees of success. It is important for Internet entrepreneurs to be aware of the advantages and disadvantages of doing business online, as this knowledge will empower them to make the right decisions and implement the right strategies if they go ahead and start an Internet business. Below are the main advantages and disadvantages of running an online business.

 Advantages

Start-up costs are relatively cheaper than traditional businesses. Some business programs in a box are as low as $400, some even cheaper. If you’re setting up your own website with their business plan, you may only need to pay for a domain name and web hosting that would cost you less than $100. Even for the most expensive opportunities, they’re still much cheaper than other companies. Upper scale start up costs for internet business could be $20k which may sound expensive but compared to businesses like franchising MacDonald’s which cost over a quarter of a million dollars then It puts things in a better perspective. Operating costs and administrative expenses are also relatively lower than in other companies that require little or no staff. Many Internet entrepreneurs work from home, which means they save on expenses such as lighting and heating and office expenses that would normally be incurred in an office block. Running an online business provides great flexibility. This is because the business can be run from anywhere. An entrepreneur could be on vacation at the beach with her family and continue to run her business as normal. This flexibility helps the employer to do as he pleases with her time. You may decide to work between 12 midnight and 6 am if that is your most productive time. Online businesses can reap the rewards of free and cheap advertising, through video, article marketing, and social marketing. Even with more expensive advertising options like pay per click, due to the number of internet users, the potential to grow your business is very high, especially if you can effectively drive traffic to your website.

Disadvantages

Competition is high as more and more people are connecting to the advantages of running a business online and are also more tech savvy and growing their businesses. The number of people starting an online business is rising to high levels and everyone is competing for traffic making it more difficult to break through. The Internet is a very dynamic market. Consumer tastes vary widely and change frequently. Thus, by focusing on a business idea or income stream, the entrepreneur risks being left behind by new products and services as consumers search for the next best product or service. Even when the entrepreneur has a winning business model, competitors can easily copy it and therefore negatively impact profits. Getting familiar with technology to maintain competitive advantage can be a limiting factor, especially if the entrepreneur is self-reliant and does not hire staff. This disadvantage can be overcome by outsourcing or employing full-time or contract staff. It can take time for the business to get off the ground as the entrepreneur builds their online presence and if the business is not run properly, cash flow problems can hinder the success of the business. It is important that marketing and other costs are carefully budgeted for over a period to account for the possibility that gains may take time to materialise. Running an online business is empowering and can be profitable. Many of these businesses fail because the entrepreneurs are not aware of the advantages and disadvantages and have not planned accordingly. While it’s relatively easier and cheaper to start and grow an online business than a traditional brick-and-mortar business, that advantage can also be an advantage as competitors enjoy the same benefits.