Starting An Online Business – From The Perspective of An Internet Lawyer

Starting an online business is incredibly easy…until you have to do it. In an effort to provide some clarity to the process, I’ve put together this road map for an approach that is commonly used to launch successful online Starting an online businessbusinesses by people in the know.

Passion

Do you need passion to launch and run a successful online business? No, but it helps. Passion means many things in the context of a company. One is expertise. A person who is passionate about the business subject tends to be an expert in it as well. If you are an expert, you have a head start on being successful. An example can show why.

Let’s assume I am a rabid fan of archery equipment and my idea is to start a site selling it. I most likely know the ins and outs of all the archery equipment available and the latest news on product development. All of this information is incredibly important, particularly if I communicate it to the visitors of my site. Others who are interested in archery will recognize I am an expert and view my site as a resource for information, which is the road to success.

Now compare this situation to an archery site that is started by someone who doesn’t know much about the subject, but admires the profit margins. What is going to make this bland site any different than all the other boring sites on the web selling archery equipment? NOTHING! The only thing the site can compete on is pricing. Competing on price is not much of a business model.

Pick a niche you are passionate to maximize your potential for success. Doing so will make it easier to persevere through rough times.

Hard Facts

I know there is demand for my product/service online.

This statement is made time and again by people who start online businesses…and fail. To understand why, you just have to follow up with a single question:

What are you basing your belief on?

Let’s be clear – you don’t know jack about demand on the web. Neither do I. Unless you research the niche and develop hard numbers; you are spitting in the wind, and the blowback is going to be ugly.

There is a film you can rent off Netflix called Knocked Up. It is worth watching because it is hilarious, but it also contains a very accurate internet business story as a small subplot of the film.

The male characters in the movie live together in a house. They mostly drink beer and smoke illegal substances. Ah, but they have a business idea. They watch films looking for parts where actresses are nude. They then tape these sections. Their ultimate goal is to create a site with the clips and charge people to see them.

There is just one problem. Such a site already exists online. Instead of researching their idea, they just jumped in based on their belief people would pay to see such content. Their efforts proved to be a complete waste of time, although hilarious.

DO…NOT…MAKE…THIS…MISTAKE!

Fortunately, online research is free and easy to do. The first step is to figure out if there is demand for what you intend to offer. The best free method for doing this is was the Google keyword tool. Then Google decided to privatize the information for everyone but paid advertisers. You now need to open an Adwords account to get at the information. You can watch a tutorial video here:

Once you’ve applied the lessons of the video to your site, it should be clear if there are people looking for services or products in your niche. Assuming there is, let’s move to the next step.

Planning

Now it is time to focus on the business side of the game. Creating a business plan is a smart move. It will get you organized if nothing else. I’m not going to go into business plans, but there are two areas I want you to really focus on when preparing the plan – monetization and profitability.

Monetization refers to how you will make money off the site. With our archery site, monetization occurs through the sale of products. With this legal site, it occurs when I charge you an hourly fee for legal services. [Call me!] These examples are fairly obvious, but the same cannot be said for many websites. How EXACTLY are you going to monetize your site? If you cannot come up with a precise answer, you have a problem.

Assuming you can monetize the site, a second question still must be addressed. Can you make a profit? Do not guess or “think” you can make a profit. Crunch the numbers. How much traffic can you attract? How many visitors will convert into sales? What will the cost of those sales be? What will the profits be? There are famous stories of companies spending millions of dollars to develop sites for niches that have no chance in hell of ever producing enough revenue to justify the expense. Don’t make this mistake. Objectively run the numbers. If they don’t add up, look for an idea where the numbers do work out.

Protection

A certain percentage of businesses are going to fail. Sometimes the cause is incompetent management. Sometimes it is just bad luck. Many well run ventures went belly-up during the Great Recession for no other reason than demand dried up. While you can control competency, you can’t control luck or the world economy. You need to take steps to protect yourself. This protection comes in two forms – a business entity and liability insurance.

Forming a business entity is a no brainer for an online business. The two popular choices are the S-corporation and the limited liability company. Each creates a shield between the business and the personal assets of the owner. If a company successfully sues your business for $2 million and wins, a corporation or LLC will prevent your home, bank accounts, and investments from being wiped out. The value of that protection should be apparent.

Why buy liability insurance for a business entity? The insurance provides money for the defense of a lawsuit [attorney’s fees] and the payment of any settlement or judgment. While the business entity protects you from personal liability for the company debts, the insurance protects the business itself. This is also very much worth the expense of a policy.

Trademark Check

It may seem odd, but it is important to do a trademark search before naming your business. You want to avoid a situation where you pick a name that conflicts with a trademark already on file at the Patent & Trademark Office. If this occurs, you could be sued for trademark infringement at some point. You would ultimately have to change your business name and domain. Both steps could prove fatal for your business.

Domain

You can buy your domain at this point. Domains are so cheap that you can actually buy them as soon as you have a business idea. Once you really nail down the domain you desire, make sure to buy the common variations of it as well. For our archery site, we might go with:

Awesomearchery.com – main site
Awesomearchery.org
Awesomearchery.net
Awesomearchery.biz

Always put your main site on the “.com” domain. People automatically type in .com when the type a domain into their browser. You do not want to make it difficult for people to find you. If you use .net or .biz, you are doing exactly that.

Website Design

Now we come to the design of your site. Serious thought needs to be given to the type of site that will work best for the business. If a single person is going to be the front for the business, a blog such as this one might be the best option. On the other hand, a blog format would be terrible for our archery site since it is going to be focused on products. A smart move is to surf the web and look at other sites. Make lists of what you like and don’t like. Keep track of the domains so you can show the site designer when you are ready.

The next step is to higher a designer/programmer. The relationship should be reduced to a contract every single time. There are many reasons for this, but two stand out.

The first reason is pacing. Pacing refers to how long the project is going to take. Many site designers are…”artistic.” They tend to produce great looking sites, but at their own pace. More succinctly, they can take a very long time, which damages your business.

A contract solves this problem if milestones are included in it. Milestones are simply a schedule of events tied into a calendar. The designer is required to complete certain tasks by a certain date in each milestone. If the designer sticks to the schedule, they get paid a percentage of the total price at each milestone. If they don’t, they get penalized or you have the right to terminate them. This approach keeps the project on track and minimizes problems.

The second reason for insisting on a contract concerns intellectual property ownership. Under copyright law, the person who creates the work owns it. Since the designer is creating the website for your business, the designer owns it. This is true even though you are paying them.

A contact solves this problem if it contains language indicating the designer transfers all intellectual property rights to your business. The language needs to be detailed in a very specific way and it must be in writing. If these requirements are met, the transfer occurs and you are protected.

Site Documents

Any website needs legal documents published with it. Common documents include terms of use and privacy policies. Depending on the site, additional documents might include DMCA compliance steps, COPPA notices, linking policies, member conduct rules, earnings disclaimers and, well, it depends on the site. These policies are used to define the relationship between the user and the site, which is a good thing for the site. Launching a site without such site documents is inviting a lawsuit and probably more than one.

Recording Intellectual Property Rights

Once the site is launched, it will “be in commerce.” This means the name, slogan and logo for the site can be trademarked. Trademark infringement is common online, so filing for marks with the Patent & Trademark Office is a smart move.

Many lawyers argue copyrighting a site is also a must. This is not entirely true. A copyright is for a fixed work. This presents problems with a site. If a site changes frequently, a copyright application has to be filed for each change. For example, one could not copyright the wall page of your Facebook account because it changes with each post. If you have a site that has constantly revolving content, copyright becomes a real problem.

Content

“Content is king” is a common saying on the web. The statement is true, but what does it really mean? The answer is you need to publish content that has value. If your content is vague or says the same things as your competitors, it is useless. You need something that sets you apart. With this in mind, I suggest you read “Write Epic Shit“. Not withstanding the title, the message is dead on and something you should take to heart when creating content for your site.

I can’t emphasize the value of good content enough. Think about the things you read. If you pick up a financial magazine that suggests a hot financial tip that turns out to be nothing more than a suggestion you pump money into your 401k, are you going to subscribe? No. There is nothing unique or valuable being offered.

Now what if you pick up a financial magazine with a headline suggesting it can save you big bucks on your life insurance and it has an article that shows you how to that step by step? This is something new and valuable that you can use. Are you going to consider buying other copies of the magazine or subscribing? Yes, you are.

This second approach is what you want to aim for with the site. If consumers find value in the information on the site, they will return to it. How do you think Wikipedia became so big and popular?

Marketing

Once your site is up and running, you need to figure out how to get people to come visit it. Marketing is a subject that goes far beyond the scope of this article. Having said that, I can tell you how I approach it for this site.

I launched this site in June 2012 to replace an older site that was antiquated. My approach to marketing it is two pronged – paid listings and search engine optimization. I’m using Google Adwords for the paid marketing. The goal is to bring traffic to the site now until the “SEO” produces rankings that bring natural traffic in. As the rankings start to occur, I will phase out the paid advertising. The ultimate goal is to not pay for any traffic, which does wonders for the old bottom line.

Ah, but what about social media? I do have Facebook, Twitter, LinkedIn and Google Plus accounts. You can follow me by clicking the buttons at the top right corner of the site.

Do I have followers? Yes, but I don’t rely on any of these social media platforms as a lead generation tool. Why? Well, who is going to follow the ramblings of a lawyer? I like to think site owners will do so because they realize it is in their best interest to stay up on legal developments, but I’m not counting on it as a major part of my marketing. After all, I don’t follow my accountant online to learn the latest tax developments. [Don’t tell him!]

So, should you ignore social media? It depends on your site. Let’s go back to our archery example above. Social media would probably be an excellent marketing method for the site. We know from our research that there is a ton of demand and we also know there isn’t one huge site out there dominating the field. Since we have passion for archery, we could probably regularly publish archery items on Facebook, Twitter, and Google Plus that would attract a lot of followers. This would help establish our brand and make us “the” source for archery online. We could also announce flash sales for our social media followers from time to time as a way to thank them and drive sales.

The web is full of advice on marketing. Most of it is utter junk. Resources that are worth your time include SmartPassiveIncome.com and ThinkTraffic.com. The information they provide is oriented towards blogs, but will work with any site. I highly recommend SmartPassiveIncome.com in particular.

In Closing

There are many ways to create a successful online business. This article covers one approach, but you shouldn’t be a slave to it. This article is really more about emphasizing that you need a plan before you launch a site. If you develop one based on hard numbers, you stand a far better chance of making the big bucks than if you just wing it.

Feel free to let me know if you have any questions or comments.

Richard