You’ve been working feverishly on your site for months; staring at a computer until your eyes bled in order to refine your online business. One morning you wake to your inbox full of orders or commission notices. Finally, success!
After a while of this success, you start to think about what you’ll do with this new found wealth and the dreaming begins.
It’s a wonderful feeling to be able to not only dream but to discover that these things are truly possible to achieve.
.. but…
The reality of online business
The web giveth and the web taketh away; especially if you’re relying on organic search (free search listings). The traffic may continue at that level for years, but it may also literally dry up over night. Small online businesses that don’t have a bricks and mortar store get on average 2/3 of their traffic from organic search listings. Could your business survive such a loss?
Survival strategies
Running a successful site or online store based on search engine traffic is a white knuckle ride. If you’ve suddenly achieved search engine success and are raking it in, I advise to save as much of that cash as you can and continue working like mad for a while.
Create a nest egg equivalent to at least 3 months of living expenses and loan repayments before you start spending too much of it on other goodies, and especially before you quit your day job – 6 months is even better.
During this saving phase, try to implement strategies to make your site more “sticky”; to encourage your visitors and customers to keep frequenting your site. Newsletter, blog, forum, competitions; these are all good options – particularly newsletters or a blog.
Keep close tabs on your industry, don’t let what the cash can buy you cloud your thoughts too much. You need to think about what you’ll do should the free traffic suddenly dry up. Approach your cash management as if tomorrow your business will disappear.
Rainy day revenue streams
If you generate revenue through affiliate programs and you’re offered a choice of large one-time commissions or residual options, if the company is solid; go for the residual commission option – this revenue may be what keeps food on the table if things go pear-shaped and buy you a little breathing space.
An accountant once told me; “you won’t get rich selling products, sell services”. This advice was imparted at a time before the Internet really took hold in Australia and before “soft goods” became commonplace. He was correct though – selling hard goods is a hard game – inventory to maintain (unless you’re drop shipping), handling costs, tight profit margins. Those sorts of conditions also require a lot of staff and huge amounts of advertising as the money is made on volume; unless of course you have a unique product or are addressing an underserviced niche market.
Software, information products and services are definitely a good way to go; so if you deal only with hard goods, consider branching into some sort of subscription services as a way of generating an ongoing flow of income.
Debt, saving and investment
While things are good, still try to keep capital investment down if possible and certainly don’t become over-committed credit-wise. That rainy day revenue saving could serve you very well, both psychologically and materially if should you suddenly hit the skids. How frustrating would it be to run yourself clean out of cash during a slow period when maybe all you needed was to be able to hang in there for one more month?
By the same token, don’t be too tight when it comes to reinvesting back into your business – growth is a good buffer against hard times. Determine a safe percentage of revenue to reinvest that still sees your bank balance grow and then stick to it.
Entrepreneurial spirit vs. safe play
I’ve been making a living online now for over 8 years and the web has been very generous to me – but I still have a “day” job – which is also online. It’s my way of creating a buffer; a safety zone. Often I wonder if I had jumped away from the job at particular points if I would have been able to pretty much retire by now. I’m not complaining about my income, I’ve been very fortunate; but there’s nothing like a family and mortgage to throw a bit of cold reasoning water on an entrepreneurial spirit that can sometimes get a little heated 
. And perhaps that’s not a bad thing.
No doubt you’ll come across rags to riches stories, and they do certainly occur – but the rags to riches to rags scenarios and the rags to even older rags occurrences are far more frequent.
Chasing your dreams is great, throwing everything on the roll of a dice can be exhilarating – but always consider what you can lose by doing so. It’s the old gamblers saying of “don’t bet what you can’t afford to lose”.
Get rich slow… and keep it .
