Internet usage and more importantly for e-business, broadband, is on a steady growth pattern worldwide. In 2005 more than one billion people were online worldwide. There were more than 250 billion searches and total online sales of over 170 billion, (Forrester). It will only continue to grow. It’s not going away. So how do you ensure that you get a ‘piece of the pie’?

As a point of interest, I set out to try and establish what common factors exist within internet business failures. Too much advice exists on what you ‘should do’, not what you ‘shouldn’t do’. The starting point of this journey, as with many I take, was some mind numbing research. What was to be a simple afternoon of writing turned into a sort of ‘mini-quest’ that has lasted into it’s 3rd day now.
The first and most important part of this was, “What is the internet business failure rate?”. For the sake of this article I am using an average of found statements at ‘ 65% in the 1st 18months and 90% in the 1st five years. It is higher than brick and mortar failure rates, but it is much more feasible time, energy and financially to start up an internet business.

While I found many a reference from the present and the past, no ‘hard numbers’ were to be found, at least not without subscribing for some pricey whitepapers. I wasn’t THAT interested for the sake of this article. There are spotty numbers in various countries on business failure rates and ICANN info on new domains registered. Pulling it together is another thing. It does seem they are on the rise, as is registration. So inexperience and overzealousness would be a major factor as well.

Causes of Web Business Failure

I sat down with Tanya Crawford, President of Verve Developments an international web design and development firm with nearly 10 year experience and have clientele in more than 10 countries worldwide. Over a frosty mug of fine Canadian beer I started to dig for some clues to what makes an internet business fail. My hope is to shed more light on the pitfalls and obstacles that await new web-entrepreneurs (web-prenuers?)

• Rush to market; “Easily number one on the list. No brainer” spouted my patio guest. “Clients that are in a hurry to get online, cut corners and inevitably the quality of the end product offering, also tend to be the first Out of the Market altogether”. I am certainly a believer in this one. You only get one chance to make a first impression right? The web can even have adverse side effects, some bad publicity on the internet can linger in forums and other places that are indexed by search engines. Bad publicity can stick with you. There is a delicate balance between lingering to market and rushing. Both have their pitfall

• Ignorance of technologies and procedures; It seems a little knowledge truly can be dangerous. Many potential web-entrepreneurs jump into an internet business with little research, “We’ve had ecommerce clients that thought we would supply the products and everything”, quipped Ms Crawford, “I guess they’ve watched one to many infomercial and thought ‘it must be that easy’”.
  As a business consultant from the good old ‘brick and mortar’ days, it would be unheard of to start a business without the proper due diligence. The affordability and access to an internet business makes it much less a risk, but considering the staggering number of competitors in the ‘global’ marketplace, every advantage should be taken.

• Lack of budget; sure, starting an internet business is no where near as costly, most of the time, compared to a brick and mortar, but one should be realistic. Don’t get over extended or have delusions of grandeur, “Many times doomed start ups have an owner or worse, owners, that try to do too much. They spread an already thin budget out with services and features that could be added later”. It is important to be strategic in your spending. There are many departments competing for that buck. From technology (websites, servers) to customer service and marketing, it has to last. Budget wisely.

• Sticky fingers; this one is a classic. The old adage, ‘Too many chefs’ comes to mind, “Many times website owners don’t know when to delegate, and when they do, they fail to allow staff or contractors the room to do their jobs. It seems like separation anxiety kicks in. They don’t know when to let go”. I couldn’t imagine hiring a lawyer for my death penalty case and then telling him how to do his job. Growth is going to depend on those around you. Strategic alliances and solid hiring practices are essential. Often these are ‘ego’ or insecurity issues that one must face.

Some simple advice

If you're not taking maximum advantage of web/information technology to market your product or services, it’s time you did. When it comes to sales activities, using information technology is an affordable way to reach and educate prospective clients easily. You can potentially attract larger numbers of prospects for fewer dollars than with many more traditional methods of marketing and advertising.

If you have not looked into migrating processes online, it’s time you did. There are even more advantages should you fully utilize server space for online document storage, communications and contact tracking, customer service and so much more. Your ‘online’ activities should not be relegated to ‘presence’ and ecommerce alone.

So there you have it. A little reverse engineering on internet business success, by avoiding some paths to failure we may just get a little closer to success.