Cover story – Web attracts small business
Setting goals, having a plan are priorities
By: McGregor McCance
Small business-Engine of the traditional U.S. economy-is becoming more of a force in the new Internet economy.
The past 12 months have seen a surge in small business Internet use, and explosive 150 percent increase, says the Kelsey Group (www.kelseygroup.com), a consulting and research firm. Its results came from a survey of 600 businesses with fewer than 100 employees.
And with more businesses reporting gains in revenue, productivity and exposure through e-commerce and e-business efforts, more small-business owners are considering their Internet options.
“I know in our industry and most other industries the Internet is going to have a major impact. If we’re not there on the cutting edge, we risk going out of business in the future,” said Chuck McCabe, founder and president of Richmond-based Peoples Income Tax (www.peoplestax.com).
Peoples opened in 1987 as a tax preparation and small-business accounting service. It quickly became a proponent in the IRS’ electronic filing program.
By 1996, the fast-growing company had established an income tax school and developed its first Web site. Today, Peoples Income Tax has several divisions, including Peoples Financial Services, which among other things operates an online supply store that markets 30,000 items to the company’s tax preparation clients and small businesses.
McCabe compares the Internet’s significance as a business tool to the arrival of the personal computer on the small business level. “It will create tremendous opportunity to reach more people,” McCabe said. “We are now serving people via the Internet in Europe, Asia and other parts of our country.”
When a customer moves away, it no longer means his business must go away as well.
All this Web integration at Peoples did not happen overnight or by luck. Rather, McCabe said, it has happened after in-depth research and advance planning.
“ You can spend a lot of money developing a Web site and not get any return on it if you don’t really have a good strategic plan as to what your goals are and how you’re going to achieve them.” Establish a roadmap
McCabe’s advise to plan out an e-commerce or e-business strategy is vital, experts say.
A small business has several options for moving part or all of a business to the Internet. It can use a basic service such as Yahoo! (www.yahoo.com) to establish a Web e-commerce site. It can choose more flexible and sophisticated packages such as Microsoft Site Server. Or it can hire an Internet services firm to develop a comprehensive online effort.
In any of these choices or combinations, however, the first step involves planning and goal setting. If that sounds as if you’re starting your small business from the ground up a second time, it should.
Becoming involved in e-commerce is just as complicated and unpredictable in many ways, just as expensive at times and just as risky as opening a shop downtown or in a suburban strip mall.
Bart Nasta, a vice president with Xperts Inc. of Richmond (www.xperts.com), compares the strategy to climbing a mountain. The climber must be in good condition, prepare well and launch his effort at the right time. The venture includes stopping at intermediate goals-base camps for the mountaineer-with the summit ultimately a question mark.
“You almost have to be prepared that you can’t map out every footstep. It is a journey,” he said.
Launch the journey with a simple question: “Why am I doing this?”
Is the goal to increase revenue? Reduce costs? Get ahead of our keep pace with competitors? What problem are you trying to solve?
“The Internet is effectively giving you a different distribution channel, “ Nasta said.
That channel may be for products or services consumers purchase or items needed by suppliers, vendors or other business partners.
What’s the advantage?
Brian Browning has another question important for the early strategy-development phase: “What am I adding or providing to this transaction that makes it unique or better than buying it from my competitor?”
Browning is in charge of the “emerging enterprises” group at the Richmond office of iXL Inc. (www.ixl.com), an Internet services and development company. iXl works primarily with large companies, but Browning’s department specializes in small company Internet strategies.
Though relatively young, the Web is quickly filling up with e-commerce companies in major and minor industry and retail categories. Still, Browning said small businesses typically offering niche products and services have promising opportunities online.
If a company makes toys, it’ll face serious obstacles to establishing an effective e-commerce presence, he said. If the company makes special, hand-made wooden toys, it has a better chance of occupying an available niche.
“Content is still king” Browning said. “The bottom line is you have to have something that is compelling.
How to define cheap?
With the kind of online migration the Kelsey Group documents, it isn’t surprising that companies are multiplying with you in mind. Their e-business is to help get your e-business going.
And some claim to do the job for free-or at least for no cost or low cost to establish your company in a minimal fashion on the Web.
Yahoo!, the famous Web portal site, offers a small business service.
Freemerchant.com does as well, and has been widely acclaimed in reviews of such services conducted by online magazines and news services.
The “budget” offers may be quick and relatively simple, but they have limitations. The interface, or appearance, of your free site likely will mirror one in a basic set of templates provided by the service. Customizing that interface may be difficult, if not impossible.
An essential element of any e-commerce site is the ability to process credit card transactions online in a secure environment. Budget services typically offer this, but often charge a fee for the “ shopping cart” service that may increase as the number of online orders increases.
Room for expansion is another consideration. If you expect the online effort to blossom, a free service may or may not provide an answer.
“The word in the industry is scalability,” Nasta said. “If you’re looking to start an e-commerce site and you want to make five grand a month, you don’t need to worry about it. But if you really want to grow a business you do need to worry about it.”
CraftArt.com is a Richmond company that exists solely on the Internet. Its products include handmade crafts of artists from around the world.
The company “went live” on the Web in October 1998, using a software package called iCat Commerce Publisher to develop its Web site. Project manager Carmen Vasquez handled most of the site development and upkeep using iCat-a full-time duty.
But the iCat package CraftArt uses is being discontinued. The company recently evaluated new e-commerce packages before settling on Microsoft Site Server.
It reached that decision first by establishing what CraftArt wanted in an e-commerce package. In-house flexibility was at the top of the list.
“We want to have complete control over the look and feel,” Vasquez said. “It requires a lot of programming. That’s the downside of it, and where it gets kind of expensive.”
The CraftArt site, however, has a distinctive, uncluttered appearance. Its custom gift selection feature and search capabilities add to the individuality and helped convince a panel of independent judges to name CraftArt.com “Best in E-commerce” in the 1999 Metro Business Monthly Small Business Web Site Contest.
“Our site would not look like this on Yahoo!” Vasquez said.
Whom to choose
At Peoples Income Tax, Chuck McCabe has developed a series of partnerships to develop and advance online initiatives. McCabe in some cases obtains services by sharing profits.
“We came to realize we were going to have to go outside to get a professional to help us,” he said. “Either you but the technology or you strike an alliance with a technology partner.”
McCabe recommends that a small business interview a handful of potential partners or development companies before selecting one. Get a list of their client sites and spend some time navigating those sites for ease of use and see how they match up with the developer’s claims.
“A lot of times, what we saw was not at all what was presented to us,” he said.
IXL’s Browning again recommends an audit of your needs and expectations before figuring out what developer or developers can best offer a solution. Selling goods online or working with online or working with other businesses online involves marketing, distribution and much more.
“Maybe come up with the top three things you want your site to do and go find companies that do them all well, “ he suggested.
Small-business owners also must consider the costs of having an e-commerce site on the Internet 24 hours a day. Depending on the scope of your effort and how much hardware is needed, it can cost from $15 to $5,000 a month to have a company “host” your site.
“It is bewildering,” said Xperts Inc.’s Nasta. “ You have to approach it as you approach any thing else. Ask for references. Ask for technology rates. In some of them, you’re looking at a tradeoff between off-the-shelf [products] versus custom [development].”
Really worth it?
The Internet isn’t for everybody, and it’s not for every small business. But for thousands of modestly sized companies, there’s no more effective or faster way to boost competitiveness.
The Kelsey Group/Constant’s Local Commerce Monitor survey showed that 81 percent of all small businesses now have a PC. OF those with Internet access, 70 percent are using it to contact suppliers and 44 percent us the Internet to make purchases.
“It does open new markets to small business, “ Browning said. “ You really can look every bit as good as a Fortune 500 company and nobody has to know the difference.”