20 replies to this topic

[Cris D.]

I realise that there's more to life than the big buck, however, any business (or individual) needs to earn more than it spends to survive (or prosper). When hosting a web site
expenses
may include:
hosting subscription charges,
domain name registration,
extra hosting bandwidth useage charges,
time spent coding,
maintainence and
support.

Income
may include:
site sales,
commissions,
advertising,
and/ or affiliate programs.

At the end of the day, for a site to be successful financially, the income needs to be greater than the expenses.

1) Is there any expenses that I have not mentioned that you have come accross that have had an impact on the bottom line that I had not considered above?

2) Is there any sources of income that I have not mentioned above that a web site can generate?

3) Does anyone have any success stories that will point anyone to effective cash generation techniques that take into consideration the balancing act between income and expenses. i.e. what proven techniques do you use that generate income which exceedes your expenses for your etomite site?

I realise that when it comes to money, many baulk, get offended, or get suspicious...however, just remember, money is just a stored value... and the difference between what you able to provide (and what people are willing to pay for it), compared to what you choose to spend on products to generate that income will determine your net gain (or loss). It's maths, not emotion...

So, what are the best expenses that you have chosen that have generated more income for your web site than they have cost?

[Ralph]

Good topic to bring up, Cris, and well worth discussing here...

You left out online payment transaction fees, which cannot be passed along to buyers... These can really chip away at the bottom line and are quite often forgotten when developing a business model...

Another aspect of online ventures, or any venture for that matter, is legal fees... These fees may cover such things as licensing, drafting of other legal paperwork, research, and, unfortunately, litigation...

I'm sure that someone is going to compile some semi-accurate statistics one of these days in an effort to convey what percentage of online ventures actually turn out to be profitable... Such statistics would be far from accurate due to the internationalization of online commerce and the vast number of unofficial online stores, not to mention eBay and other online e-commerce sites...

[Dean]

If it's a store, there's merchant fees (even PayPal charge for using their service if you are a business)

[jon]

A big expense is broadly described as Cost of Sales. It varies based on what exactly you are selling, but it is a huge issue that is so easily overlooked for anything I can think of that you might sell on your site. Here are some of the things that immediately come to my mind:
- cost of shipping to you from the manufacturer or wholesaler;
- cost of shipping from you to the customer, including packaging, labour to wrap, and whatever you pay in postage, UPS, etc. Don't forget any pickup fee levied by a courier, or your time and vehicle costs to drop the item off to the courier
- returns (who pays for shipping each way?)
- insurance or your own allowance for loss caused by damage/disappearance in transit
- customers who don't pay; don't forget that paying up front with a credit card or PayPal can still mean a "chargeback" if the customer complains
- phone line and long distance charges for calls to and from customers; e-mail isn't for every situation

Accounting and Taxes are also issues. In Canada, $2000 a year to start for an Accountant doing taxes and financial statements and other forms required to keep a corporation up and running.

Software Costs: for Open Source, contributions to the project, be they labour or money or advertising space on the site; for proprietary products, there are initial, subscription and/or upgrade costs.

Marketing: lots of things here, some applicable, some not, depending on the individual situation. Some are straight labour, but others may require fancy colour presentations, courier fees to get stuff to people, etc.
- pitching the concept to the backer of the project (if it is not you, or if you are doing the site for someone else)
- selling advertising on the site takes time and probably some expenses (presentations, etc., as above)
- promoting and/or advertising the site so that people actually come to your site

Edited by jon, 16 August 2008 - 02:47 PM.

[darren]

I haven't seen Graphic Design as a cost in this discussion yet..a good design costs money but contributes to the value and effectiveness of the website.

Cris, are you asking only about sites that sell a product online? because many don't... yet are still necessary, and sometimes these are the hardest to 'sell' the cost to the customer.

Lets look at nissanusa . com: substantial expenses went into building the site, hundreds of features, some unique, some industry standard stuff, and thousands of hours sit in front of you. but you can't 'buy' a car from that site. (i dont think anyway )

If you were car shopping and checked online for nissan, and didn't find anything (sales support materials, pricing, 'build your car' configurator etc.) you might go looking for a toyota instead of a nissan, and nissan would have lost a sale. I'm pretty sure Nissan can't (acurately) tell you how many customers it gets from its web presence but you can bet the Marketing Dept. thinks its a big deal to keep the site up to date and cutting edge.

The majority of the sites i do exist strictly to support an income/transaction that occurs offline. Therefore there are only 'costs' associated with the site, and no 'income', if you were to look at it from a balance sheet approach as you are. Good Question.

[jon]

A few more expenses came to mind. They all occur when you cross the line from non-profit to for-profit, whether or not you actually make any money. Again, from a Canadian perspective, which has a lot of similarities to the U.S. and somewhat less to other countries.

Business License - a requirement in both communities I've lived in around here. $150 a year where I am now.

Business Rates for lots of things, most notably telephone line. While it may be a choice for some other things, land line telephone service is one where you risk losing your telephone service for life if you don't "fess up" and pay the business line rate.

Banks are the same. You cannot cash a cheque payable to your business name, without a separate business account. With much higher fees than a personal account. And they won't sell you the cheap personal cheques. "Not allowed to", they say, and sell you expensive business cheques.

Some "free" software cannot be used on a computer used for any for-profit purpose, without buying a fee-based license. Something as simple as ExactAudioCopy, for example.

If you retail, you are well advised to join the Better Business Bureau. Haven't checked for years, but it was $200/year "way back when".

Insurance - Commercial General Liability, I think it is called. Plus, as soon as you start doing for-profit work, your homeowners policy may not cover whatever you use for your business, especially computer equipment. Even if you owned it prior to "starting your business". So, you have to buy a business insurance policy.

There are also specific insurance types required for specific types of business. In the mid- to late 1990s, I had to get Y2K insurance, in case any of the contract programming work I was doing for my clients, or the software I was supporting, was found to have Y2K problems, either before or after January 1, 2000.

I spent nearly 20 years with my own business, both full-time and moonlighting. The costs really add up. Especially labour lost doing all sorts of admin.

Edited by jon, 15 August 2008 - 09:13 PM.

[Cris D.]

Thanks for the heads-up about the costs, but that's only 1/2 the story. Often costs become a focus of a business (especially when the are unexpected). Many operators get very good at identifying and paying for costs without spending as much (or more) time on generating income. Even better, what about setting up passive income so you have the time to administrate your business without effecting the bottom line?- good in theory. Although looking at all the possible expenses is good for cash flow planning and business protection (legals, insurance etc), unless you have the cash to pay for these, it is a moot point. So I think we've covered the "nasties", what about the good stuff?

I refer back to my first post...

2) Is there any sources of income that I have not mentioned above that a web site can generate?

3) Does anyone have any success stories that will point anyone to effective cash generation techniques that take into consideration the balancing act between income and expenses. i.e. what proven techniques do you use that generate income which exceedes your expenses for your etomite site?

My idea that I am callenging here is: that a web site can generate income from advertising if it is relevant (there are tools to assist with this), but it needs traffic (SEO, AdWords etc), so providing things at your site that make people want to "stay and play" is essential- make it interactive and personal to the user (hence php, MySQL and Etomite). Then provide a product that can be delivered next to free (electronic downloads- no shipping, handling, stock inventory etc) which is created and administrated by the individual (songs, information, videos, cards, e-books, images etc etc), set up an automated cash flow system that takes payment, verifies the payment (IPN & SSL) and looks after the delivery (download). And also provide additional links to affiliate programs that the audience may find useful. This example would be generating income from sales (if you add your own products too), commissions, advertising, and affiliate programs - what have I missed income wise? I also know that having the idea alone is not enough, it needs to be followed through and persevered with and supported (someting MOST people don't do well). This is why I have no problem sharing - I'm not scared someone will "take the idea" because I realise how much work it takes, the idea alone is not enough.

I have googled, researched and read a LOT on this, this is not my starting point. The reason I posed this question here is because it is often very hard to tell opinion, facts and statistics and lies apart and I am trying to get a realistic view of what is possible (I have a funny feeling that not all affiliate programs are on the up-and-up). Perhaps I have posted in the wrong place (a free CMS!?!) maybe I should have posted it at Microsoft (no offence intended) - they are in tune with how to generate income, like 'em or hate 'em. However, there are a number of very experienced community members who frequent this forum whose opinions I do trust and am seeking information or opinions from such trusted sources on ethical ways to generate income that I may have missed.

O.K. Mini novel finished: The End.

[Dean]

There are many ways to generate income, the only issue is that yeah it may generate income, but Google will probably penalize you for it. As for adsense... most people have adblockers installed.

[Ralph]

One aspect of an online venture is whether you are looking for the trickle effect where purchases are relatively small or whether you are going for big ticket items... Just about every possible idea has been tested... Remember the whole dot com craze...??? People didn't leave much to the imagination during that time period...I'm sure there must be at least one un-tried idea left, however... I've been looking for one for a very long time myself...

[jon]

Although looking at all the possible expenses is good for cash flow planning and business protection (legals, insurance etc), unless you have the cash to pay for these, it is a moot point.

Unless you have a death wish, I think you've got it backwards. Not having the cash to protect your business doesn't magically eliminate the risks.

That is why I emphasized the importance of preparing for the moment that you: "cross the line from non-profit to for-profit, whether or not you actually make any money". For example, to use what I suspect is an out of date example: the moment you first answer your telephone with your company name, or advertise with your phone number (even without a company name), you run the risk of the telephone company finding out about it, and giving you a choice of having your residential phone service cancelled for life, or converting your phone line to a business line, at 2 1/2 times the monthly fee.

Likewise, a more expensive example would be getting sued before you have generated enough cash from your business to buy liability insurance.

[Cris D.]

I take your point. I don't have a death wish, I just know it's possible to make money without spending money. I have also learnt the hard way that just because you buy the insurance, register the name, protect the brands, and do everything the way a government-employed "business coach" would have you do them does not necessarily mean you will make a cent. I also know that every personality handles business differently according to their attitude to risk and research.

I think the key is to be informed and make rational decisions that are within your risk v.s. reward strategy.

If I could also use an analogy: If you like sailing... some wouldn't consider the journey until the wind was NNE, 15 knots, full rations, GPS, liferaft, and satellite phone and never actually launch. Yet others would sett off in a dinghy with a 6 pack of beer and a doughnut and no ores..lauched prematurely... What everyone considers "suitable preparation" is a personal thing and I am aware that there is "best practice" and a minimum of preparation (ie life jackets) that the average joe would observe. Although the journey's risks can be reduced, no amount of preparation will remove them, least of all life insurance. I think we may have different risk V reward stategies jon- not better or worse, just different.

[jon]

I just know it's possible to make money without spending money.

While I freely admit that Canadians are reputed to be the most overinsured people on the planet, and I do certainly agree that overburdening a business up front with expenses is a great way to fail, I still believe that it is nothing short of foolhardy to not think about the risks before proceeding. If you then decide that nothing needs to be done, fine.

To put it another way, for some business ventures, you really do have to spend money before it is safe to attempt to make money. A taxi driver must have liability insurance before he picks up his first fare; in most countries, he would be considered criminally negligent if an accident occurred (before he'd made enough money to afford the insurance). A little closer to "home", if you allowed the downloading of material from a country where it was legal, to one where it was not, you would want to know, before you started your business, whether you could be extradited to the other country to face charges.

So, I guess what I'm really trying to say is "ignorance of the law is not an excuse for breaking the law". The issue isn't about spending money, but making sure you know what you need to know upfront, before embarking on any business venture.

I think we may have different risk V reward stategies jon- not better or worse, just different.

While that is true, in Business, each country has its accepted standards, often referred to as Business Ethics; crossing that line could arguably be considered "worse".

[Cris D.]

you would want to know, before you started your business, whether you could be extradited to the other country to face charges

Can you give an example of someone who has had this happen to them and what they were doing to warrant it? If I was considering setting up a child p'rn site I might be worried, but seriously... can you say "talking it up"? Now if you were only able to answer my first post "What have you managed to do to make money from a web site?" I'd be more interested in that than inflated fears of the great "What if..." If you havn't managed to do it, don't want to share or don't know how, that's fine. Do you realise that you have listed 18 expenses and no income methods at all? I'm not intersted in the "preparation" pep talk anymore and don't appreciate the suggestion that I'm not behaving ethically when you don't know me, my project, or my business plan from a donkey's back side. Ethics, honesty and integrity are my greatest values that I live by every day and I didn't ask for, and don't need a forum to act as my conscience- I have one of my own thanks jon (or should I call you jimmney cricket?). OK This is getting silly. I withdraw my question...unless anyone else reads this post and has actually made money from a web site and is willing to share thier successful stragegies for producing income. Otherwise I'll just stick the sales, affilliates, advertising and commissions. Oh- and subscriptions. There's another method I could use.

[Ralph]

Let's calm things down and get back on topic here, folks... With all of the differences in legalities between countries, and even states and provinces, debating such business related aspects is beyond the scope of this thread... Web based businesses can be as simple or complex as we choose to make them...

[Dean]

For earning money, I think you've covered all the bases... It is really hard to make money online nowadays - with so many sites offering similar things as others... we helped promote the internet, but in doing so have caused it's demise... but that's for another day.

[mikef]

... It is really hard to make money online nowadays - with so many sites offering similar things as others...

yeah .. look at all the sites selling art/photography ... and we're just about to launch another one

[jon]

Two concepts for money-making web sites that have been working for people I know:

(1) work with one or more owners of copyright material, and become their exclusive distributor and retailer. The person I know slightly who did this, added a sales site for these CDs to his own web site, which had already gained popularity in the same niche where the CD sets would be of interest. His site already sold his personal services in that same field, and offered tons of free advice, which is what attracted visitors to his site.

The key to his success, from what I could see, was also gaining the right to actively defend the copyright holder's copyright. He registered with eBay as representative of the copyright holder, searched eBay at least once a day for anyone selling copies of the same material (making sure NOT to block sales of used copyright material), and had it removed by eBay.

(2) Google ads on popular information sites. Those I know of locally who get enough traffic to make money focused not on finding a topic that would be unique worldwide, but on a popular topic with a local connection. For example, there may be lots of generic Hiking sites, but probably not one on Hiking in your local area.

The site that comes to mind was set up initially as a citizen-based think tank for local improvement. Google ads pay expenses and some labour by its owner. In this case, the key to success was delegating authority. The site's forum is, by far, its most popular feature. Rather than the owner becoming moderator, he got volunteers from the forum's initial membership to moderate on a section by section basis.

[Cris D.]

Thanks... I guess success in this area will be the same as every area:
Providing a product or service that others are willing to pay for that costs less to provide than you charge to provide it and having the financial literacy to be able to monitor and modify as required. Using creative problem-solving by combining existing ideas and connected in new ways and a marketing strategy to build a client base that has room for growth and encourages repeat custom. Brands and business protected for longevity. Persistence and perseverance and motivation applied to overcome dificulties and patience applied as the plans unfold. A little luck - which will actually be a result of mental preparation which allows an opportunity to be recognised in a snowstorm of thoughts and images. The ability to use 1% of effort from hundreds (or thousands) of people instead of trying to use 110% of your own. Knowing when to work, rest and play, remembering what is really important and continuing to learn, live, love and leave a legacy so when your gone, you can look back from your death bed and say with conviction - it was worth it.

Doesn't sound too hard.