I know people who started investing in their online business without solid preparatory work and lost all their investments. Their business ideas were a complete flop from the beginning, but they got to know about that when it was too late.

To avoid such costly mistakes, before starting your online business challenge yourself by asking five essential questions:

Question 1. Can I outline my business idea on a sheet of paper?

When my clients ask me to draft a contract or to perform any other task, I almost always ask them to send me written instructions. Why? We, people, are masters of words. When we speak, we can easily say many things that can be inconsistent with each other or even contradict each other. But, when we have to put our words on paper or a PC’s screen, we can easily notice all inconsistencies and contradictions.

So, if you’re sure you have a solid business idea, put it down on paper. Provide as much information as possible. Give this paper to your best friend or other people you trust. Ask their opinion. This simple method will help you to test the viability of your idea and identify obvious weaknesses.

Question 2. Have I already decided how my online business will generate income?

If you are going to run an e-shop and sell goods, the way of earning money is straightforward and obvious.

But, if you want to provide, for instance, informational services or create an application for smartphones and tablets, then you will soon find out that the money-making process is not as straightforward as in the case of e-shops. If you do some research, you will soon notice that most of your potential competitors earn money by employing one or all of the following methods:

• Advertising Method. All content, products and services on your website are free of charge. However, companies and freelancers pay you to advertise them on your website. The more traffic your website attracts, the higher fees you can charge your clients.
• Subscription Method. All content, products and services are provided only to subscribers who pay you a monthly/quarterly/annual fee. Some websites even offer a lifetime subscription by paying a one-time fee.
• Fremium Method. According to this model, clients get access to a basic version of your product or service free of charge. Any additional and more sophisticated features are available for a fee.
• Selling Method. All content, products and services are provided free of charge. Money is earned by selling your products (e.g., branded cups, T-shirts, etc.) or offering services (e.g. SEO consulting, etc.).
• Hybrid Method. Money can be earned by simultaneously applying two or three methods. For example, as a Youtube channel owner, you can provide some content free of charge, some content only to subscribers and also make money advertising other businesses.

The most stable and viable is the hybrid method. Having two or more income sources, you are less vulnerable to ever-changing market conditions. The status quo will not last forever and one day you will have to reinvent your business to stay in the market.

Remember that before you start earning money, you will have to invest in them. Many entrepreneurs invest money received from banks. But, if you cannot get a bank loan, don’t worry. There are other sources to finance your business (crowdfunding, loans from family, etc.).

Question 3. Have I conducted market research?

Before you open your wallet, conduct market research by answering the following questions:

• Who are my potential customers?
• What are my customers’ shopping and buying habits?
• How large is my target market?
• How much are potential customers willing to pay?
• Who are my potential competitors?
• What are my potential competitors’ strengths and weaknesses?
• Etc.

If you google for a while, we will find a lot of information on how to conduct market research.

From my own experience, a very effective and powerful method is to ask questions in online forums or such pages as Quora or Reddit. My friend had an idea to design and manufacture a waterproof speaker, but he was not confident whether customers would want to buy it. He posted on several forums, received very positive feedback and decided that the market was hungry for this product.

Question 4. Am I ready to comply with legal business regulations?

The consumer and privacy protections of the European Union (EU) are the most complex and advanced. Freelancers and companies operating in the EU must comply with such regulations. Failure to comply can be extremely painful. Regulatory institutions can impose a fine of up to a few per cent on an annual worldwide turnover!

Personal Data Protection

The General Data Protection Regulation (GDPR) is the toughest privacy and security law in the world and the main reason website owners draft and publish “Cookies Policies”, “Privacy Policies”, etc.

Though it was drafted and passed by the European Union (EU), it imposes obligations onto organizations anywhere, so long as they target or collect data related to people in the EU. The GDPR imposes obligations onto organizations anywhere, so long as they target or collect data related to people in the EU. The regulation was put into effect on May 25, 2018. The GDPR will levy harsh fines against those who violate its privacy and security standards, with penalties reaching into the tens of millions of euros.

Before starting your business, you must be 100 per cent confident that your business will comply with the GDPR.

More on the GDPR you can find on gdpr.eu.

Consumer Rights

The European Union adopted a wide range of legal acts to ensure strong consumer protection. For example, the EU adopted the Electronic Commerce Directive.

The Directive establishes EU standard rules on a wide range of issues related to e-commerce. The Directive applies to the following online services: news services (such as news websites); sales (books, financial services, travel services, etc.); advertising; professional services (lawyers, doctors, real estate agents); entertainment services; basic intermediation services (internet communication, transmission and online information); free services paid for by advertising, sponsorship, etc. The Directive protects consumers by granting them certain rights. For example, there is a 14-day period for replacing the goods if they are not of the right shape, colour, size, etc. If the seller does not have a suitable replacement, the buyer can return the product within the 14-day period and get a refund.

You can find more on consumer protection on ec.europa.eu.

Question 5. Do I already know how to promote your online business?

Did you know that:

• More than 1.7 million merchants sell using the Shopify platform. 
• Amazon has 9.7 million sellers worldwide, of which 1.9 million are actively selling on the marketplace.

These numbers suggest that your business will succeed if only you develop a solid promotional strategy. I dare say that it is easy to launch a business but so difficult to promote it. Before starting to invest in your business project, you must have a blueprint of your marketing strategy.

The most popular channels to promote a business are:

• SEO (Search Engine Optimisation). In a nutshell, SEO is a collection of methods, ways and practices on how to get on the top of Google’s search results. If you succeed in that, your business will flourish.
• Digital advertising. The most popular channel of digital advertising is Google Adwords.
• Social advertising. You can do that for free (by launching your own channel and posting on it) or for a fee on Facebook, Instagram, Twitter, YouTube, etc.
• Public relations. Share information on your products, services, achievements, news, etc. on your website and through PR agencies.
• Press advertising. Depending on your target audience, ads in printed newspapers and magazines can be an effective way to promote your business.
• Direct marketing. A very effective method to reach potential buyers. However, you need to find out how to lawfully obtain clients’ addresses and how to target only those customers who might be interested in your products or services (in other words, you need good quality data).
• Advertising on TV and radio. It’s old school, but it still can work. Especially on local TV channels and radio stations where ads cost a lot less than on national channels and stations.

There are more ways how to promote your online business. Google for them, ask your friends, ask on forums. Try to think outside the box.

What is next if all the answers to the questions are YES?

You can go further and start thinking about registering a company, reserving domain names and so forth (related: How to Start a Small Online Business?).

If you have discovered that your idea couldn’t be converted into a prospering business, don’t give up! Look for new ideas. Read my article on how to come up with the best business idea.

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^{Images from Pixabay.}