Harder to make money online than brick and mortar?

[luke]

This is a question I have to any successful entrepreneurs out there...

Is it harder to start an online business than a brick and mortar business? The reason I'm asking, is that I know in theory an online business scales better (because it is inherently a business system), but it seems much harder to market and know/understand your customer because if they don't like what they see they just click away.

It is my perception that a brick and mortar business can make money quicker (people drive by) and you can get to know your target customer quicker.

Just a question/concern i've had for some time. I'm on web business #3, and it seems like an uphill battle, while friends with physical businesses are doing 6 figures already.

 

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[Pete799p]

I would say it depends largely on your skill set and available resources.

B&M businesses cost more and require much large comitments of capital and risk. In general they also have more overhead to cover until you reach profitability. However, because of higher barriers to entry and additional factors like location your product/ ideas do not always have to be the best. I know a few restaurants that have okay food but a great location or things like convinence stores that really rely on location.

Internet businesses are generally much cheaper to start and have lower overhead so they can be profitable quickly. Generaly they scale faster as well. But because of the lower barriers to entry there can be alot of competition so what you are doing has to be good.

At the end of the day it is more about your idea, your skills, and your resources. If you are good with programming or computer stuff then an internet business will most likely be your best bet but if you are a great chef then B&M is general the way to go. I say generally because plenty of tech related businesses are very B&M and there are alot of chefs selling product over the internet.

 

[luke]

Thanks

Good info, I'm a computer guy, but I guess I'm learning the marketing aspect... the hard way.

 

[philippa01]

Good info, I'm a computer guy, but I guess I'm learning the marketing aspect... the hard way.

We all learn it the hard way because there is no shortcut to success, whether you're in B&M businesses or trying to establish an online business. Good Luck

 

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[ptiz]

I disagree. A brick and mortar is good, it will likely have a more linear growth pattern. I think that a good online business will have an exponential growth pattern, provided you are giving your customers quality and value. You have the potential to reach BILLIONS of people with an online business, rather than thousands in a brick and mortar. You do the math.

This is a question I have to any successful entrepreneurs out there...

Is it harder to start an online business than a brick and mortar business? The reason I'm asking, is that I know in theory an online business scales better (because it is inherently a business system), but it seems much harder to market and know/understand your customer because if they don't like what they see they just click away.

It is my perception that a brick and mortar business can make money quicker (people drive by) and you can get to know your target customer quicker.

Just a question/concern i've had for some time. I'm on web business #3, and it seems like an uphill battle, while friends with physical businesses are doing 6 figures already.

 

[Sky]

Depends on the business. Funny, cause I see the internet guys differently from my brick and mortar set-up. The huge difference is scalability. I guess that whole grass is greener thing is true...

 

[CPisHere]

I agree with Pete - it comes down to your skill set.

For me, my skill set is much more suited to B&M, which is why I opened a physical retail store. I plan to grow the business to 10 non-franchised stores in 10 years with revenue > $4M. I have the knowledge and capability to do that, as I'm in the black (profitable) after 3 months in my first location.

Now, the expenses to run a B&M retailer are obviously much higher, but the Gross Margins are typically a bit better as well. Still, an online business will almost always have lower costs to run the business and can scale quicker.

BUT, that's only if you know how to do SEO, website design, etc.

To succeed with a physical B&M location requires a much different skill set.

My personal plan is to build the physical locations up to the point where I can afford to hire others to set up a very good online store, then sell both online and in the physical locations, which IMO - is the ultimate success, because you get revenue from both sides, which can help each other scale.

From what I've seen, you typically make aweful margins with drop-shipping, at least until you hit a very high revenue #. Therefor, to me it makes the most sense to have physical locations so that you can do your own warehousing. Then as your revenue gets higher, you can better negotiate for reasonable drop-shipping margins.

 

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[Pete799p]

I disagree. A brick and mortar is good, it will likely have a more linear growth pattern. I think that a good online business will have an exponential growth pattern, provided you are giving your customers quality and value. You have the potential to reach BILLIONS of people with an online business, rather than thousands in a brick and mortar. You do the math.

Brick and mortar can be linear or exponential depending on how it is set up. As you open more stores and get more revenue you can open even more stores. Another way is to franchise which uses OPM and their time as well to scale your business. Essentially you are selling your B&M system. Another way is to develop management systems that you can move across industry lines. This would allow you to develop or purchase businesses that might not be related to your existing business but are profitable. I know a guy who started with restaurants and now has a stone quarry in his portfolio. Think Branson/Virgin on a small scale.

 

[BeachBoy]

For fastlane, online ismuch better.

But simply to "make money", it's much easier B&M, you can "simply" get a franchise that works and get almost guaranteed revenue and as soon as you open the doors. But it's not fastlane it's more of a job qhere you are your own boss.

B&M you need a business plan and you need to get loans for the often hefty franchise buy. Online you need.. close to nothing.

 

[biophase]

Just a question/concern i've had for some time. I'm on web business #3, and it seems like an uphill battle, while friends with physical businesses are doing 6 figures already.

I have a question. Are you putting in as many hours as your brick and mortar friends? I bet that they work many many more hours than you do per day or week.

With online you can easily sit back and you think you are working, but are you physically working on your business from 10am-9pm, 7 days a week, like they are?

Because if you did, you should be making alot more than you are unless your industry is just a poor one.

I do know someone who did online and went B&M and started killing it. However, the difference was that online you sat at home and worked whenever you felt like it. With B&M he's putting in work all day, every day.

 

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[theBiz]

i think people who have service businesses and use the internet to acquire massive leads are in a very good position. If done properly its almost like direct response ads on television. Businesses like debt relief seem smart because you still have to have experience, usually a physical office, and employees which are huge barriers to entry once compared to:

A) most people wont work that hard to align all of those things
b) its takes more time than most people want to put in/hiring employees, not overpaying them
c) it takes more capital than most overly saturated markets that take $50 to get into in some e-businesses

I also believe these types of businesses can exploit cheap labor very well, such as overseas freelancers acting as affiliates for your traffic/leads on a pay only basis, they can not compete, an e-store maybe they have a shot, but not in something as i mentioned above, so their only option will be to make a small percentage of your sales and be happy with it.

Remember one day all of this online business will be a completely different game. Websites like major networking platforms, lead gen, and so fourth are going to be an out of box solution, anyone will be able to do anything cheap.

I think online service based businesses with offline competitive advantages will start coming back into play. Online businesses are for sure great but as many have mentioned or most others forget to include is COMPETITION. If there was no competition money would be very, very easy to make online.


The problem is when someone searches "widget" in google and your paying $1 to make .10c (considering your conversion rates and such) the second someone comes in and bids $1.10 your going to have a problem.

SEO, i dont know. I understand it works and is massively powerful, but who knows how long that will be around, or better yet, once the determining factors the #1 placement change...

 

[Vigilante]

My brick and mortar ventures were incapable of running without me. When I realized I would never be able to extract myself from the day to day (and thus... like a bricklayer... if I was not there it would not work) I closed the brick and mortar.

Time is my most valuable commodity. Build a model that can run WITHOUT you. Brick and mortar requires too much human interaction, not enough outsourcing, and not enough automation.

 

[CPisHere]

B&M doesn't have to require long hours or direct day to day interaction. My store has only been 4 months, and my wife has already been able to cut back to less than 40 hours/week.

 

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[Pete799p]

But simply to "make money", it's much easier B&M, you can "simply" get a franchise that works and get almost guaranteed revenue and as soon as you open the doors. But it's not fastlane it's more of a job qhere you are your own boss.

I was more refering to starting your own franchisor that sells to franchisees. However, I disagree that you are buying yourself a job. Some franchises that is the case especially if the system isn't that good or the location is bad but I know a few guys who have built up franchise empires using management. I played golf with a guy who started with 1 Dunkin Donuts and finished with over 20+ and there is a guy I met recently who is doing the same with Jimmi Johns I believe that currently has 22 and is working on opening a few more. But the rediculouse networth requirements kind of suck and the franchise rules are a real ball ache.

 

[Vigilante]

Parsons... Didn't you say that you are not drawing anything out of the store?

 

[biophase]

B&M doesn't have to require long hours or direct day to day interaction. My store has only been 4 months, and my wife has already been able to cut back to less than 40 hours/week.

That is what I mean, 40 hours a week is lot for an online work from home business. If I consistently put in 40 good hours a week I'd be online monster.

I was putting about 6 hours a week in mine before I decided to expand. Now I put in 20-25 a week. After xmas i'm on virtual vacation basically until September.

 

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[CPisHere]

Parsons... Didn't you say that you are not drawing anything out of the store?

As of last month we are now in the black and able to take disbursements.

 

[CPisHere]

That is what I mean, 40 hours a week is lot for an online work from home business. If I consistently put in 40 good hours a week I'd be online monster.

I was putting about 6 hours a week in mine before I decided to expand. Now I put in 20-25 a week. After xmas i'm on virtual vacation basically until September.

i only know a small handful of Internet entrepreneurs, but they all put in quite a bit of hours - of course a lot of it is easy work but work none the less.

Six hours a week must've been pretty nice, but I believe it is doable with a B&M business as well - eventually.

 

[Kung Fu Steve]

That is what I mean, 40 hours a week is lot for an online work from home business. If I consistently put in 40 good hours a week I'd be online monster.

I was putting about 6 hours a week in mine before I decided to expand. Now I put in 20-25 a week. After xmas i'm on virtual vacation basically until September.

You know you are my hero, right? :hl:

 

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[biophase]

i only know a small handful of Internet entrepreneurs, but they all put in quite a bit of hours - of course a lot of it is easy work but work none the less.

Six hours a week must've been pretty nice, but I believe it is doable with a B&M business as well - eventually.

What kind of business are the internet entrepreneurs in? Is it online retail?

Here's the difference between B&M and online as I see it. You need multiple employees to help people shop, look around, answer questions and check out. You have more expenses like electric, heat, AC and maintenance of showroom.

Even at my office we have people popping in because they see our address and think we are a B&M. When those people show up, we can either kick them out or help them out. These people take up alot of our time, probably about 20 minutes minimum. During that time, your employee cannot answer emails, pack orders or do anything.

Basically right now, it's a fairly simple process. Orders come in, pack order, ship order, done. During the downtime, answer emails, phone calls, manage inventory, do some SEO. When I was doing this from home it was about 1 hour a day to make decent 5 figures (Of course, this is after all the initial work of building the site, SEO, etc...)

 

[biophase]

You know you are my hero, right? :hl:

Yes I do... LOL

But really if you think about putting in 40 hours a week. That is a long time sitting in front of a computer, 8 hours a day. How much SEO could you do? How many satelite sites could you build?

I used to think about a schedule like this but I could never do it.

First imagine that you could fill all orders and customer service from 8am-12pm. So you have 1pm-5pm everyday.

Monday - SEO day
Build links
Post on Forums, Comment on Blogs, Social Bookmark
Write articles, Blog posts for your site (not for article sites)

Tuesday - Social Networking
Work on Facebook Page
Send out Tweets
Post on Forums

Wednesday - Content Day
Take new pictures of products
Write new product descriptions

Thursday - Video Day
Make new videos of products
Post on Youtube

Friday - Idea Day
Brainstorm new ideas
Research new products

If you could follow this through, your site would be a monster in your niche in a few months. Unfortunately, I couldn't do this. I'm just too lazy.