Starting an Online Business Part One: Choosing What To Do

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Written by Brandon on December 13, 2007 – 2:02 am -

In the next few weeks I will consider the five business model types that are good general categories for starting an online business. I’ve ranked them in order from least risky meaning you could, in theory, make a living without investing much money, to most risky meaning that a significant amount of capital, time, and/or coordination would need to be invested. All business models can bring in a fair income, but in general, the more capital intensive the company the more wealth you can build for yourself. I will go into great depth in the future, but for now, let me just list the five models:

Media Company
Sales or Affiliate Marketing
Services
E-Commerce
Web Applications

Media Companies would be composed of such businesses as blogs, podcasts, video blogs, news agregators, and even things like how-to sites and fan sites. Their primary money making opportunities include:

Advertising
E-book Sales
Premium Content
Fan Sales
Affiliate Sales

My general feeling is that small media companies are not huge wealth creation vehicles themselves, but are best suited to create large audiences for future businesses. In other words, the media business builds your voice and your future businesses build your wealth.

Sales and Affiliate Marketing Businesses are things like e-malls, niche product shops, and online incentive shops where you give back savings to the customers or offer prizes for shopping. These businesses can be much more nebulous as well where you don’t even have a website and you wealth is made simply by creating effective Google ads to attract customers to a site. I will go into great detail in the future about how this model works, though.

Services are an awesome way to make your income online especially if you can find a particular skill that you can exploit. These services can be vastly diverse. One example of a service you might provide is logo design or graphic design services. If you have a good voice, you might provide announcement services. If you speak a foreign langiuage you might do translation services. The possibilities are endless. The essential rule is that anytime you or a friend or someone in a forum says why does’t anyone do (whatever), this is something that could be exploited as a service if properly marketed to the right people.

Real E-Commerce sites are where real money begins to flow into and out of your pocket. E-commerce again can take a multiplicity of forms and I hope in the future to identify untapped niches, but I will definitely focus future articles on affective marketing, curating your stock list, and building a loyal brand follow whatever products you decide to sell.

Finally, web applications are ventures that should not be approached without some knowledge of how to write a software specification, and who to have create the software per your specifications. If you do not know what a specification is, then stop right here. I will say that you DO NOT need to know how to program to create a great web applications. You just need to surround yourself with the people that do know how to program. Web applications as an example include things like Flickr, a site where you can upload and share your photos to things as simple as a really handy financial calculator. The key here is do you have an idea that would just be so damn useful that you’d want it desperately yourself. But making something useful does not mean you’ve made it user friendly. I will spend eons on this subject in future articles. We all know the reward of making really useful things, though. Once people find it, they will come back again and again. And they will tell alltheir friends.

That is my quick introduction to the five basic business models I will discuss for starting a business. Now, on to the meat!