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The New Frontier of Profits

Written By: Rob Spiegel

I recently participated as a judge for Inc. magazine’s Web site competition.
I expected the experience to demonstrate just how sophisticated Web sites
have become among the small businesses that make up Inc.’s readership. I
didn’t see the level of quality I expected, but I was even more encouraged by
what I actually found, a wide-ranging display of sites that were selling
everything from exotic soaps to electronic parts. And they were doing it
profitably. Raw entrepreneurial energy oozed through these sites as they
experimented with serving new customers.

The segment of the overall contest I was assigned to was ROI, the new lexicon
for return on investment. ROI has become rallying cry of ecommerce as it
tries to get off the defensive and back up on its feet. Not surprisingly,
it’s a new category this year. Up until the cyber-crash of 2000, Internet
companies were blissfully free of the dirty need to produce a return on cash
invested. The small business audience of Inc. magazine never had this
peculiar luxury.

The dot com boom was a high-flying gamble by high-moneyed players. Venture
capitalists and large enterprises put up the stake, and the young dot commers
were either new to business or young upstarts flooding in from the investment
and technology communities, both of which are nestled in the padded nest of
major corporations. ROI was the least of their concerns. The dream was very
big, and when you dream really, really big, mundane thoughts of profits are
typically left for the next generation of managers

The chronically under-funded small business community was late to the
Internet world. The owners of small companies live on a razor thin edge, and
if the blade slips, it cuts into personal income. One small blunder can cut
very deep, setting the owner back years. For small company owners, attention
is just as dear a commodity as capital. Take your eye off the ball for just a
moment and your customers start scattering in all directions.

Small business owners were late to the Internet game for two clear reasons.
The customer wasn’t demanding an Internet presence and the ROI was difficult
to see. No matter how far-thinking the owner may be, how can he or she
justify venturing into an area where customers are not waiting? In the
Internet world, executives used the imagery of hockey great Wayne Gretzky who
clamed he didn’t skate to the puck, he skated to where the puck was going to
be.

This is great theory, but for the small business owner, anticipating where
the customer is going to be is not sufficient. The small entrepreneur has to
hit the customer exactly on target every time. So the small business mantra
concerning the Internet was, “If you can’t connect with a sale immediately,
stick to the sales you can make.”

Now, amid the rubble that once was the Internet gold rush, small companies
are entering and finding some success. Perhaps a portion of the company’s
customer base has made it known they are willing to buy online, or perhaps
the cost of entry, in both capital and management attention, is now low
enough to take the risk. Whatever the reason, small companies are moving
slowly, cautiously and successfully to ecommerce.

The sites I visited for judging defined themselves in ROI. Either they were
Web extensions of existing companies or they were Web-only start-ups. For
existing companies, the site had to deliver new, profitable customers. For
the Web-only companies, the site had to simply show a profit. Some of the
sites were bare-bones mall shops, while others were fully-integrated arms of
a flourishing enterprise.

They all had one thing in common; they were built of the tough strands of
small business muscle and bone. There is nothing more honest in business than
a trend that delivers results for small entrepreneurs. The Inc. contestants
may show a new door the opens the Internet as a legitimate, profitable
channel for new markets and, surprise – surprise, additional profits.

About the Author

Rob Spiegel is the author of Net Strategy (Dearborn) and the upcoming
Shoestring Entrepreneur’s Guide to Internet Start-ups (St. Martin’s Press).
You can reach Rob at spiegelrob@aol.com

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