The E-Commerce Buzz

Do you remember when you had to have enough start up costs to cover a building, supplies, and merchandise? Well, now entrepreneurs can start an online business with very little cash. E-commerce has opened up a wide world of opportunities and ventures for making money. We will explore the pros and cons of e-commerce so you can decide if it is right for you.

The loss of the physical, "brick and mortar", store transforms the way an entrepreneur does business. First of all, the cost of a web based business typically costs less than a physical store, which translates into more profitability. Web based businesses have the ability to draw more traffic and require less employees. When it comes to target marketing the process is more precise because you are able to gather a vast amount of information about your customer. Your customer's interests, location, gender, etc. can assist you in sustaining them as customers and marketing to new ones. Advertising online is also more precise with online businesses. Since you know more about your customers you can create ads and pop-ups that pertain to them in places that they visit frequently. Another great advantage is the ease in the transfer of funds. When you use a company like PayPal it makes transferring funds instant and less expensive. Also, customer based financing may become possible because the customer pays you first and then you have the money to buy the product.

There are some cons to having an e-commerce site. First, there are always the issues with technology. Technology continues to become more and more friendly to the everyday individual. You do not have to be a big tech geek to set up a website and keep it maintained. There are many companies that offer website development and maintenance at fair costs. Even if you do not set up your own website I suggest you learn everything you possibly can about the operation and navigation of it. A successful entrepreneur always tries to learn about every aspect of their business; technology included. Another disadvantage of e-commerce is the loss of the tangible object. Your customer cannot see or feel the actual merchandise. The product may look a different size, color, or texture on the web then it does in person. This increases the likelihood of the item being sent back. The last con is the fact that the social aspect of shopping is lost. There is no physical interaction between your customer, other customers, and you. This can be remedied by having message boards, blogs, or an online community attached to your site. This will bring about connection amongst customers and their opinions about your products.

Online businesses are an amazing success and it is important that you get on board if you have not already. Your customer will never have to worry about your store being closed, waiting in line, parking, finding items, or feeling overwhelmed by the size of the store. It eliminates so much of what people hate about going to a physical store. Sometimes an entire business online is not feasible, but if that is the case then you should still have a website. The web will help you grow your business more quickly, because of higher visibility and access for your customers.

The Problem with "Goodwill"

Is there "goodwill" when it comes to buying a business? You might be wondering what in the world I am talking about. Well, let me explain. Goodwill is defined as a sustainable competitive advantage. You might wonder how one would be able to prove that goodwill exists in a venture. Sure everyone wants to claim that they have it, but few can prove it.

The first problem with "goodwill" is being able to figure out what the competitive advantage is exactly. If you are lucky enough to find it then how do you prove it and if you can prove it then how do you measure it. You have to find some way of measuring the value of this so-called "goodwill" before a price can be applied to it.

I personally do not doubt that some companies do have "goodwill." The existence of "goodwill" many times is contingent on the entrepreneurial team rather the the venture itself. It is important that the potential buyer of the venture keeps this in mind. The question is can the "goodwill" be transferred to the new ownership?

For example, lets say a coffeehouse located in a college town is owned by a young, popular twenty something year old. There really is nothing special about this coffeehouse. It has the typical lounge feel and mediocre coffee, but it is always packed with college students. Many of the customers know the owner and really like supporting one of their peers. This owner decides that they want to put the coffeehouse up for sale. The interested party understands that there is something that this coffeehouse has that the others do not. There is obviously a competitive advantage present in this venture. The coffeehouse sells for a more expensive price due to this "goodwill" factor. The new owner takes over the coffeehouse and continues to operate it exactly as it was before. However, the customers slowly become scarce. The reason for the lack of customers is due to the fact that the new owner is middle aged and is not interested in making friends with the clientele. This is an example of the fact that even if "goodwill" exists it may not be transferable.