How To Create An Online Business

Posted on 15. Feb, 2010 by admin in Training

A business online works the same as an offline direct mail company. The process is the same, but the expenses are extremely different.

I come from the old school. I used direct mail to run my home business. This was before the internet became so popular.

Lessons From “Old School” Direct Mail Marketing

I got started in 2003 with my first home business. At the time, my upline taught me various offline marketing strategies to market my business. This required you to spend some of you my own money before I ever saw an order come through. Here is what a typical small campaign looked like using today’s prices.

Product Information booklet

Marketing campaign: 1,000 postcards to entrepreneurs

List rental: $60
Design: $100
Printing: $100
Postage: $520

___________________

Total Cost: $780

Before selling a copy of your booklet, you had to handover $780. If your campaign received a normal direct mail response of 1% (sometimes less), you sold 10 booklets.

Your marketing cost per sale was $78 (780 marketing cost/10 customers). If you priced your booklet at $50, you lost money on your first order.

$50 price tag
-$1 cost to produce
- $2 postage to send the booklet
-$78 marketing

________________

-$31 Total loss per order

Using direct mail often ended up being expensive. The only way to make money was by offering the customers back-end products.

Back-end products are items that you sell to your current customers. by eliminating the upfront marketing costs, your profit margin was higher. The lifetime value of a customer became extremely important to the company’s success.

The only way to stay profitable was to spend money on marketing to gain new customer and then market back-end products to them.

For instance, if a customer bought a $50 booklet from your postcard campaign, you lost $31. If that same customer bought a second information booklet for $50.00, your profit was $46.47.

This is how you do the math:

$50 order
-$1 product cost
-$0.01 printing second postcard in the series
-$.52 postcard postage
-$2 postage to send the booklet

___________________________

$46.47 Total profit per order

Isn’t It Cheaper To Place Classified Ads?

Well, let’s see. Because the classified section in my local newspaper was too expensive, I would place my ads in smaller newspapers around the country. My ads regularly brought in 2-5 leads per ad.

Leads from the newspapers ad section weren’t sales. They were people who raised their hand to show that they were interested in more information about the product. They would call or send an email request.

Generally, people who requested more information were at least mildly interested in the product. This “warm market” would convert from request to purchase about 10% of the time; meaning 1 out of 10 information requests would turn into a sale.

To be effective, the classified ad had to run for about 5 days to build up enough response to turn into sales.

Looking at the math:

Product: Information booklet

Campaign: Classified Ads

Newspaper insertion: $40 per day X 5 days= $200

Total cost per month: $200

A good week would generate about 25 leads, which turned into 12.5 sales; we’ll just say 13 sales.

3 leads X $50 = $150 total sales.

In this case, each customer cost 66.67 (200 ad costs / 3 customers). Then this happens:

$50.00 order
-$1.00 product cost
-66.67 advertising
-$2.00 postage to send the booklet

______________________________

-19.67 Total per order

It cost $19.67 per customer to first order from a classified.

So, both methods lost money on the first sale. Classified advertising lost less money, but gained fewer customer to make end sales. Direct mail lost more money upfront, but gained more customers and increased the number of back and sales.

Overall, direct mail made more money because of back end sales.

Building Business online:

The cost of setting up a business online is next to nothing. For about $10.00 you can have a domain, and maybe hosting for less than 100, depending on who you use for your domain registration. There are a number of places to go for domain registration. NameCheap, HostGator, or GoDaddy, just to name a few.

Theoretically, anyone can make money online. The barriers to running a business cost very little due to the internet.

If we go back to the original example, the $50 information booklet online compared to the costs incurred when the books were offered offline.

$50.00 order
$00.00 product cost – offered as a PDF file
$00.00 advertising – use free advertising and joint ventures
$00.00 delivery cost – offered as a download

________________________

$50.00 Total profit

There is no comparison. You are profiting from your very first sale! And your business grows by leaps and bounds when you add back-end products.

You don’t even have to pack up any products and run them out to the post office. It is all done on autopilot for you.

The people who are making money online understand this concept. These individuals who are still struggling, do not understand the concept.

The biggest roadblock to doing business online is people’s mindset and misconceptions. They’ve heard it is easy to make money on the internet. The know it is possible because they have heard the many success stories. They bought ebooks and signed up for lots of programs, yet their back accounts are still empty.

What is the solution?

Mindset ==> Education ==> Action

The first thing that needs to be done is to change people’s mindset. Doing business on the internet is very profitable, but only if you run it like a business.

Think about this. You are sitting in your living room and you are trying to decide how to make money. You decide that you have only two options. You could start your own company or you could become a brain surgeon. Both options offer very high income potentials.

If you decide to go the brain surgeon route, you have many years of study ahead of you and a mountain of costs before you even have the chance to make your first dollar as a surgeon.

And this is where the problem occurs for many people.

When they decide to open an internet business, they fire up their computer, get online and feel like they should be able to instantly open a business and start making money from day 1. No time for training themselves on even the basic principle. No plans made. Just jump ahead first into the abyss.

Then you wonder why so many people fail!

If people looked at their online business as seriously as they took their 9-5 job, or their offline business, they would more than like be a success story.

For people who are seriously considering opening a business online, the first step should be an education in business and marketing. I am not talking about the three year MBA program, but a online training system that will teach you all of the step-by-step ways to start, run, market, and most importantly, profit from your advertising:

This is the place to start your training:

http://www.ConquerTheInternetMarketing.com