Going online may not be
best for every small business
By Sue Kovach • Bankrate.com

Want to start a fight in the e-commerce Bar and Grill?

Proclaim you're a small business owner, then add, "And I'm better off NOT being on the Web."

That idea horrifies people such as Eric Schmitt, an analyst at Forrester Research Inc. in Cambridge, Mass. For any business, even a local pizza shop, a Web presence is as important as phone service and flush toilets, he says.

"It will become more important as we move toward 24-hour Internet in our homes," he says. "Like electricity or water, it will be our information utility. People will go online to find new restaurants and look at menus."

Taking the opposite side is Ryan Walker, president of sharkBYTES, an e-commerce consulting and Web development company in Cincinnati. If your business is local, he says, being on the Web becomes just another way to get the word out, not a business strategy.

"For most mom-and-pop operations, there's no reason to waste the money on the Web," he says. "The return on the investment isn't worth it for the corner ice cream store or sub shop."

Showing the flag
There's wide agreement that beyond a certain level, a business ought to have a presence on the Web.

If your business has regional, national or international potential, then it's urgent to get online, Walker says. "Every day you delay, you're one more day behind your competitors."

But the Web doesn't distribute its rewards evenly to small business owners. The size of a business, the nature of its product and the demographics of its customers can all make a difference in whether money for a Web site is well spent or down the dot-commode.

Budget restraints
SharkBYTES has worked with a number of small "dot-com startups" -- businesses that will rely on the Internet for their revenue. Says Walker: "These are people with an idea and $50,000 to $100,000 to get started in e-commerce."

Small businesses don't need to commit that kind of cash to get on the Web, though. A minimal e-commerce site can cost from a few hundred dollars a month to a few thousand.

"For a couple hundred bucks a month, you can credit card-enable your site, and it's really cheap to operate," says John Robb, president of Gomez Advisers Inc., which provides consumer ratings and reviews of e-commerce companies. "If your business is very focused and niched, you could potentially do very well on the Web."

Inexpensive e-commerce options
Anyone can open a cyber storefront at Yahoo, for example, for as little $100 a month, utilizing their transaction system and site creation software, which takes only minutes to build a store.

It's part of a new trend in small business, which is to join forces on the Web to create a larger, more powerful presence, says Forrester's David Cooperstein, director for consumer e-commerce research.

"I call them small business ecosystems," he says. "They may be geography-based, like city directories, while others are created by trade organizations or private investors."

Internet service providers are also packaging the capability, says Schmitt, making going online an attractive proposition for small businesses that don't have the time, money or expertise to put up the most whiz-bang site.

"The answer for small business is to look for a service provider to give a solution and not derail the day-to-day business by hiring a $70,000-per-year Web guru," he says.

Little more than a brochure
At the lowest end, a business owner can simply set up a "brochure site" that lists the enterprise's address, its products and phone number.

That's when spending time and money on the Internet becomes questionable to Walker. "At that minimal level, they're not even doing e-commerce," he says. "They're running a classified ad somewhere in cyberspace. They might get a client or two, but to me, it's off the map of actually doing something. The money would be better spent promoting the business in some other way."

Limited resources can also mean getting creative, such as utilizing e-mail to reach customers.

"There's tremendous value in having the e-mail addresses of your best customers," says Forrester's Schmitt. "e-mailing them once a month with special promotions is a less expensive alternative than catalogs."

'Net crowd lessens net profit
Expansion of your small business to the Web is one thing, but if you're looking to become a major e-contender, think again. It's probably too late to become the next Amazon.com without millions of dollars in major venture capital, says Ryan Walker.

So a key question to answer is whether there's already a major player on the Internet selling your type of product. "If you sell flowers, you're probably too late to make a dent in the online market. You're ultimately going up against the FTDs, who spend a million bucks a month to have their own button on AOL," Walker says.

Small businesses also need to consider their market's Web-savviness in deciding whether to pour resources into it.

Tony Novak, a registered financial Adviser, learned this the hard way. Two years ago, he started a Web site to sell medical savings accounts. It failed. Then he converted www.medsave.com into a site for interim medical insurance -- and it's doing fabulously.

The age of his clients made the difference, he says.

"Twenty-somethings are comfortable buying insurance on the Internet," Novak says. "Older folks, the candidates for medical savings accounts, aren't."

Think before you spend
Robb has a simple rule of thumb regarding budgets: "If the initial investment to make a minimally enabled Web site is more than you think it should be, then don't do it."

If your decision is to go on the Web, be aware that the more focused your business, the easier you'll be to find online and the greater your chances of success, says Robb of Gomez Advisers.

"It's a tough, highly competitive world on the 'Net," he says. "Lots of businesses make it online, but more don't. The smallest, most focused businesses will tend to fare best."

Sue Kovach is a freelance writer based in Florida

-- Posted: Sept. 16, 1999