Starting an E-Business on a Shoestring
Step 4. Assess Your Needs and Resources

Starting your business on a shoestring takes discipline -- the discipline to tether your dreams to realities. Let them soar, yes. But make sure they are firmly grounded to the earth. Many Dot-Com companies have lacked the patience and fortitude to start small and grow. They wanted it all now, and many of them are now paying the price.

Planning your business is some of the hardest work you'll do, and in this article I'll only skim over the surface. You can find much more detail in my series Developing an Internet Marketing Plan. http://wilsonweb.com/wmt5/issue73.htm But let's consider certain aspects of this process.

Establish Phased Objectives

If you're starting from scratch, you probably have a dream of where you'd like to be someday. But unless you have unlimited resources, you'll have to phase your objectives. Here's an example for an online shop specializing in tall ship models:

Phase 1. Store set-up. Set up online store, obtain merchant account, locate drop-shippers, and go online with name TallShipShop.com (available as of this writing).

Phase 2. Marketing. Develop a very targeted campaign to get listed in search engines, and obtain reciprocal links with complementary sites. Become an active part of three e-mail discussion groups on modeling and tall ships. Establish e-mail newsletter for visitors and customers.

Phase 3. Advertising. Experiment with paid advertising, both online and in targeted magazines. Determine conversion rate in your online store and calculate the cost of customer acquisition for each form of paid advertising.

Phase 4. Customer Service. Stock in-house inventory of best-selling model kits so you can ship quickly. Develop customer service with real-time help and order tracking. Implement after site begins to turn a small profit with which to pay for some inventory.

Phase 5. Gear up for Christmas season. Develop affiliate program with hand-picked sites with links on complementary pages of their sites.

Your phased plan may look entirely different. The point is to make sure you don't try to do everything at once, but that you have a plan to develop the essentials of your site and marketing plan.

You'll want to prepare a rough budget for each phase, but make a detailed list of the items you'll need in Phase 1, and the amount it will cost you to reach your Phase 1 objectives before you can expect any revenue. With this sort of plan you can hope for some revenue in Phase 2 to fund Phase 3. And enough in Phase 3 to fund Phase 4, etc.

Consider Your People Resources

Of all your business resources, people are most important for they will form the team you need to succeed. For some of you, the main people resource may be you -- especially if you are multi-talented. If not, you'll need to find others who can help you. Perhaps it's you and your spouse, a true "Mom and Pop" store. Don't laugh. There have been many, many successful mom and pop stores and businesses. The partnership begun with marriage now extends to a venture to help earn a living. Since it is, hopefully, a stable relationship, it will provide stability to your business as well.

Some will join forces with a friend or two or three. Since there may be little or no money involved, you might be tempted to make the relationship very informal. I recommend that you write out clearly, agree upon, and sign a memo of understanding detailing: (1) the responsibilities of each person involved, (2) what investment they are bringing to the task, (3) how profits will be shared after expenses are paid, and (4) what happens when a person leaves the business -- how much, if anything, does he take with him. When you get a little money you'll want to formalize this with the help of an attorney. Many small businesses fail because the partners don't have a clear agreement. Clear written agreements form the basis of good business relationships. You can find a lot of help at the Inc.com website http://www.inc.com and Nolo Press books on small business. http://www.nolo.com/product/books/

An alternative to partnering with others is outsourcing to independent contractors. Besides saving a lot of hassle from employment taxes and forms, outsourcing allows you a lot more flexibility when your business needs to change, expand, or contract. One source of virtual contractors can be found at the eWork Exchange. http://ework.com/exchange.cfm

Examine Your Bartering Resources

Since you're starting on a shoestring, don't forget that bartering and swapping goods and services is an important way you can leverage your own skills. You help others with your skills and resources; they help you with theirs. I've found this an important avenue for bootstrapping a business. Just make sure that the person really has the skills you need, and that you have a clear written agreement with clear expectations. Consider the e-TradingPost.com http://www.e-tradingpost.com/ and companies mentioned in a Fortune Small Business article. http://www.fsb.com/fortunesb/articles/0,2227,790,00.html

Inventory Your Equipment Resources

Make a list of the equipment and services you need for your online business. By definition, you'll need a computer, a web server, and the list continues. I suggest a list of Phase 1 "must have" items, with less vital items planned for later. Then determine the costs of your Phase 1 list. Consider purchasing used equipment, borrowing a scanner from your brother-in-law until you can purchase your own, swapping for services, and bartering. The nice thing about an online business is that you don't need to impress anyone's ego but your own, so your office can be pretty basic for now. Consider starting in space you already have, such as a garage, basement, or extra bedroom. Hewlett-Packard was famously begun in a garage in Palo Alto. Follow a legend. As the business grows you'll be able to -- and forced to -- move the business to its own space.

Assess Your Financial Resources

Consider your financial resources now in comparison with your needs. You have tremendous advantages not seeking venture capital or large bank loans. Realize that credit card purchases that aren't paid off every month are VERY expensive bank loans. Instead look to savings, to part-time jobs that can provide for a basic investment. Consider pooling financial resources with friends, partners, or co-founders of your company, but make sure you are crystal clear in writing about the arrangements. Consider relatives, your great aunt Samantha who has always liked you. Perhaps she'll loan you some of the money you need and feel very good about helping you. But I encourage you strongly: don't mortgage your home in order to finance your bootstrap business. New businesses ARE risky, even when they're well planned. Only invest what you can afford to lose if the business's success doesn't meet your expectations.

Plan to Reinvest in Your Business

Finally, plan to take at least some of your early profits and reinvest them in the business, especially in marketing, since marketing provides the lifeblood of your business via new customers.

As you consider your absolute start-up needs and assess your resources -- especially your hidden ones -- you may well find that you're not that far away from beginning your business.