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Evaluating your dotcom idea - avoiding the dot bombs
21st May 2010

EvalueEvery week i am approached by youngsters (and sometimes not so young-sters) asking to evaluate their dotcom idea for development and promotion costs. Being in the business I dutifully provide the cost estimates and whatever advice I can throw in. Without exception all of them have one thing in common - they all think their idea is Unique, Innovative and Sure to Work - "all it needs is a good website and little bit of marketing sprinkle and of we go."

As someone who has seen tons of dotcoms come and go I thought I would quickly outline some of the most common pitfalls I've seen. Mind you I do not intend to discourage anyone, I just want  them to be aware

Pitfall #1 - Believing that a 'twist' in a old concept equals  new concept.

It goes like this - "There are many so-and-so in the market but my idea is to do it differently. They are doing it this way but we shall do it another way." The pitfall in this approach is that your 'twist' or 'differentiating factor' might not be enough of a long term competitive advatage especially against embedded competitors with tried and tested processes.

Pitfall #2 - Starting a dotcom with none or negligible real world infrastructure.

A good idea is just that - a good idea, an ethereal thing. It needs to be translated into reality, both virtual and actual. Most people who come to me with dotcom ideas grossly understimate the on-the-ground requirements that thier little (or not so little) venture will require. A good website is a must but so is a back office, staff, accounts, customer support, legal and all the other requirements for a good business. A dotcom business gives the illusion of being self contained in the website but the reality is that it takes more, a lot more.

Pitfall #3 - Dotcoms eat money for breakfast, lunch and dinner. Do you have enough to feed it.

A very common and deadly misconception is that a dotcom can be started on a shoestring and is much less expensive than a real world business. Thats complete nonsense. When asked how they intend to fund the venture, most people are quite fuzzy with the source of funding. Its either their own money or friends and family, or even a rich uncle. But when the dotcom eats through the money they are quickly in trouble and run from pillar to post trying to raise money. Sadly due to their haphazard financial planning at the beggining its very difficult to get funded at a later stage.

Pitfall #4 - A dotcom business is still a business. Normal business rules apply.

It amazes me how many people who would never be able to run a real world business think they can run an online one. Its as if in thier minds the rules for running a dotcom are somehow different or suspended. In an online business cashflow, sales, receivables, human resources, capital and business processes are just as important as in a normal business. Maybe even more so.

Pitfall #5 - Trying to create something from nothing.

What has an office executive got in common with a florist? Nothing. Yet it does not stop the executive from starting an online florist shop or a sales person from trying to sell chocolates online. Lines which could never be crossed in the real world are easily stepped over in the online one. But industry experience does count and sooner or later the executive or office employee will not be able to handle the rigors of specific business they chose. Each  professsion has certain tricks, idiosyncrasies and challenges. In my experience the dotcoms that succeed the best are usually extensions of a brick and mortar business with some years running it in the real world.

Overall, before starting a dotcom or online business you need to get a 'Serious Reality Check.' Throw out airy-fairy assumptions. Crunch the numbers. Account for real world costs and issues.

In future posts we shall look at the different aspects to starting and running an online business.

Cheers,
Ron

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