Make sure to join my private Facebook Group named "Online Capitalists". Join now!
The online business world is exploding!
As our lives move more and more online, businesses evolve so that they are able to serve their customers over the web.
So, should YOU participate in this massive shift?
I am a strong advocate of building online businesses, so my answer would be a definitive YES!
While performing my daily studying ritual though, I read an article that presented an opposite view.
I am very keen on reading contrarian perspectives because they challenge my own beliefs. It is a way of ensuring that I have not developed a huge “blind spot” that deters me from seeing reality.
The article came from Brian DeChesare who is the founder of Mergers & Inquisitions, a blog dedicated to careers in the finance industry.
Mergers & Inquisitions (M&I) is a very valuable online resource with numerous articles on finance, accounting, business, career and more.
As I have mentioned in the past, an entrepreneur needs to have a baseline understanding of finance and accounting, so I regularly read articles and case studies presented on the blog.
In one of his latest posts, aptly titled Should You Start an Online Business? No, Probably Not, Brian argues that building an online business is probably not a good option, and that you should steer clear from it.
It sounds super weird to claim that people should not start an online business as a guy who currently runs an online business, but Brian presents some points that in his view justify this belief.
In this post, I will deconstruct the majority of the arguments presented in that article, because I believe they are not accurate and can be quite misleading. At the same time, there are a few good points that will be mentioned and acknowledged.
I will be quoting parts of the original article, but it would be better if you read it in its entirety so that you have the overall picture.
Ready? Let’s do it!
Want to get my eBook "From Employee to Online Entrepreneur" as a nice PDF? Download it below!
“Unfortunately, it has one point in common with most careers in finance: Way too much hype.
Too many “gurus” like to present only the positive aspects of an online business: Working from the beach in Bali, surfing while taking client calls, and drinking piña coladas with mermaids.“
We start with a point that is actually true. This specific aspect of online ventures is greatly oversold.
With a few hours of work per week, you will be chilling at the beach, and at the same time passive income will be flowing to your bank accounts!
Building a business from the ground up and accumulating wealth is really hard. Online businesses are not the exception. They offer great flexibility, but in order to build something significant you will need to put in major effort.
You can build a company that is highly automated and can work without you, but it will require lots of years and huge amounts of work in order to accomplish it.
Let’s move on to the next point.
“Reason #1: It’s Probably Not Going to Work“
Hm? That does not apply only to online business. The majority of businesses fail, whether they are online or Brick and Mortar.
Actually, statistically speaking, every major thing in life comes with a huge possibility of failure. So, not sure how this is a valid point. Moving on.
“Since I started this site, many friends and acquaintances have been “inspired” to start online businesses as well.
But their track records are not too promising.
Here’s what happened to ten individuals who tried something similar:“
And then a list of various “failure” cases is provided.
Well, this is what I call “empirical evidence”, and it is pretty much worthless. You cannot trust data coming from examples like this because they are heavily skewed.
For example, I can also provide a list of people that have achieved success with their online businesses.
Because I am a successful online entrepreneur and I associate with other successful online entrepreneurs, thus my data will be heavily skewed.
At the same time, I obviously also know people who have timidly tried this whole “online thing” and have miserably failed. But the reason for this, is not that online businesses do not work, it is that their approach was weak.
The next point is one that reveals a slight misconception:
“Many factors explain these results, but the main one is that it’s incredibly difficult to find a good market.
A “good market” means:
- People are willing to pay relatively high prices: $300 to $1,000+. It’s much easier to sell one $500 product per day than 50 $10 e-books per day.
- The topic is specialized but not too specialized – 5,000 to 10,000 potential customers per year.”
It seems that Brian categorizes as online businesses those that focus on a specific niche and are based on selling some sort of informational product, whether that might be an online course or simply an e-book.
The truth is that this a tiny subset of online businesses. It involves owning, operating, and monetizing web properties. Actually, it seems that he is only referring to “niche websites”, which are a subcategory of the “web properties” category.
In reality, there are several online business models that one can follow. From building a SaaS product, to running an e-shop, to publishing novels in digital format, the options are endless.
Let’s proceed with the next point.
“Reason #2: You Need a Very Specific Personality Type to Sustain an Online Business“
Well that’s true. But again, this is not specific to online business, it applies to every career option!
What Brian seems to allude to here is that, in order to build an online business, you will need to be a more introvert type of person who can stay focused without distractions.
This is true in general, but at the same time lots of people have built online businesses without being hidden in their caves.
If all fails and you are super extrovert, you can always partner with someone who complements you. Most successful businesses are founded by 2 or 3 people after all.
Moving on, we encounter a very bizarre argument.
“Reason #3: You Get Almost No “Social Capital” from an Online Business
You’re interested in finance partially because people respect names like “Goldman Sachs” and “Morgan Stanley.“
But if you tell people you “run an online business,” you’ll get less respect than Martin Shkreli.
First, almost everyone will think that “online business” is a euphemism for porn.
Second, even if you explain that you are not a porn star, drug dealer, or child trafficker, people still won’t understand unless they hear a brand name.“
Say what?!? In 2017, people still are not aware that you can be the owner of an online business? Come on! Even in my home country which is way inferior technologically than the US, people have a rudimentary understanding of the concept of an online business.
Personally, I have never encountered such a negative reaction and have never heard of anyone have one. I admit that this is “empirical evidence” again, but how can you counter something like this?
The biggest misconception that people have regarding online businesses is about the money making potential of online businesses. They would never believe that such ventures could scale and help you generate millions in profits.
Now, if you are interested in getting “social capital” from your profession, then there are ways to do it. Raising your social status is very easy when you are successful financially.
Buy an exotic car and you are done with it. There will be no much to argue when you roll in a Ferrari.
Let’s hit the next one.
“Reason #4: There’s No Work/Life Separation
An online business lets you “work from anywhere in the world…
…but it’s more accurate to say that it requires you to work from anywhere in the world.“
Well, that is partially true. As I said, in the beginning, you will most definitely need to work every hour of the day.
But an online business is the easiest to be automated and the easiest to “escape from”. As you generate more revenue, you have the option to structure your business in a way that “frees” you from the day to day operations.
That assumes of course that you want to serve your customers 24/7, and you should, because that is one of the most major advantages of online ventures, and one major pillar of building a scalable, valuable business.
“If someone buys your e-book on Saturday night at 3 AM, and there’s a delivery problem, you will hear about it right away. Just check your inbox!“
Not again with the e-books! Alright, first of all, selling an “e-book” or any other “online course” should be just part of your total revenue. In my businesses, we have multiple revenue streams, and “e-books” are just a small portion of the overall income.
On the technical point now. Guess who else can handle a problem like that? Your tech guy!
So again, after your business scales a little, you may start hiring people to offload tasks to. Actually, that is the only way to get to the next level.
“Reason #6: No, You Can’t Outsource Your Way to a Complete Solution
It’s possible to hire staff to help with some of these problems; I’ve done it for roles like administrative support, coaching, and sales.
But the truth is, no one will EVER care about your business as much as you do.
So, please don’t be lured in by tales of $10 / hour workers in Romania who can solve everything for you.
You can’t outsource your core value proposition.
For many online businesses, that “core value” is content created by a specific author.“
I do not even know where to start with this.
First of all, this whole point is based on the assumption that your online business is at the same time a “personal brand” business, meaning that it is based on an individual’s personal brand.
Well, that kind of setup is common, yet it is a fraction of the total online businesses out there. In any case, let’s address this.
Granted, there is some merit in this point. If I hired people from Romania to write articles on Wealth Triumph, the end result would be ridiculous.
However, even if your online business is based on your personal brand, you can outsource the vast majority of the operations, even the actual content itself.
Do you believe that an established online entrepreneur like Neil Patel churns out a dozen articles per week and runs all his other businesses, all on his own? Come on!
Second, as I mentioned, building an online business on your personal brand is just one of the hundred approaches that you might take. The possibilities are endless, so if for any reason you are not comfortable tying yourself with the business, you can choose not to.
Finally, let’s briefly address this sentence from the quote above:
“You can’t outsource your core value proposition.“
Well, this is totally true. But again, it applies to all kinds of businesses, not just online.
Moving on, the misconceptions continue:
“Reason #7: There Are Limited Exit Opportunities
If you get tired of your online business, you face two big obstacles in finding exit opportunities:
- You won’t have a brand name on your resume.
- You won’t have transferable skills.”
What? Oh my, this is so way off, it is totally misguided.
First of all, online businesses provide perhaps the best exit opportunities. Especially at the time I am writing these lines, the market is very hot.
There are several liquid marketplaces for all tiers of businesses. Here are some examples on top of my head:
Even if your super-niche site generates less than $1,000 in monthly profit, you can sell it at a healthy multiple. Don’t believe me? Here are a couple of examples:
And if you hit it big with your online venture, you can cash out in the 7-digits area. Again, don’t take my word for it. Here are some real-life examples:
The exit opportunities abound and the reason is that the market for online businesses is global. You may find interested parties from all over the world. Now, try selling your brick and mortar bakery and let me know which one is easier.
Next, let’s address the “transferable skills” part. Well, if you ever try to build a business (not specifically online, but it applies to those too), you will find that your skillset is going to explode.
From marketing and sales, to keeping financial data and communicating your ideas via words, there are several skills that you are going to pick up.
All these provided of course that you are serious about becoming an entrepreneur and you are not fumbling around.
Regarding the interpersonal skills, you still have to develop those even if you are providing services via the internet. You still communicate with people, just via a different medium. The fundamental principles of human nature still apply.
Closing his article, Brian examines some cases where it makes sense to pursue an online business:
“If you are still obsessed with this idea anyway, get it up and running when you still have a full-time job.
You should certainly test the market and prove you can make money first, but it’s just as important to test the social side.“
This is something that I totally agree. But again, this should apply to every type of business, venture or project you would like to pursue.
Now, let’s examine the alternatives to online entrepreneurship here.
1) Becoming a salaried employee
This is one of the most popular choices that people out there make. The fact is that unless you are working in specific sectors, namely finance and computer engineering, and at the same time you are living in a city with solid demand for those (e.g. New York, Los Angeles, London etc.), then you most probably are going to struggle.
Modern life has become very expensive and a mediocre paycheck does not cut it. Don’t forget that salaried employees, even those with high compensation, face a ton of disadvantages, like ultra-high taxation.
Even the guys over at the Wall Street Playboys website, who were employed in the finance industry, advocate starting a business in order to advance in life.
2) Starting a Brick and Mortar (B&M) business
This is the approach that a lot of people have taken in the past, and still do. It is the traditional way of doing business, but it comes with a huge load of drawbacks.
A B&M business is usually more difficult to start and scale, and requires more upfront capital. On the contrary, an online business delivers tons of advantages, from easier setup and straightforward idea validation, to inherent scalability and faster wealth building.
If you are a starting entrepreneur, it make little sense to start a B&M business. The risk/reward ratio is not favorable.
By picking a scalable online business model and pouring major effort at it, you can definitely hit millions in revenue and profits after a few years.
So, should you start an online business? Yes, probably yes.