The field of entrepreneurship is widely represented on the Internet through small and large companies that perform their entire operations, or a large portion of them, online. Starting an online business requires many of the same techniques to create a working business model, but online businesses also offer some key differences that can make them better, or worse, than traditional forms of doing business.
Types
There are many different types of online businesses, some of which imitate physical business operations and others that could only exist online. Retail businesses are common, selling all types of goods. Other online businesses deal in information, providing reports or reference material digitally. Auction sites offer another form of online business, hosting sales posted by individuals and nontraditional retailers who sell their merchandise to the highest bidder. Web-based services, including banking services and websites that sell advertising but are available to all Internet users, make up a large portion of online commerce.
Function
Online businesses share some functions with traditional business. These include raising capital to fund operations, marketing products and advertising to potential customers, managing inventory in a physical environment, such as a warehouse and paying income taxes to federal and local governments. Online businesses may also provide warranty service or customer support. However, they may not need to maintain a physical place of business; some online business operate out of the owner's home or a single office, with customer interaction taking place entirely online or over the phone.
Benefits
Starting an online business can have significant advantages over starting a physical business. In the case of a retail business, there's no need to lease a space for the store or hire a sales staff. Instead you can sell directly online and ship items to customers from a centralized facility. Any type of online business can benefit from the large number of potential customers, with the full network of Internet users able to see your business instead of being restricted to those in your neighborhood or local region.
Drawbacks
Promoting an online business can be difficult, especially with so many small and large companies vying for attention online. This makes it difficult to stand out from the crowd and grow your business in the face of competition. Customers may also prefer the traditional shopping experience, especially with certain types of merchandise. As an online business you may have trouble developing relationships with customers who you and your staff never interact with directly. This may hurt loyalty or make customers who are more comfortable with an in-person purchase less likely to patronize your business.
Considerations
Just what your business offers can go a long way toward determining whether doing business online is likely to work out financially. If overhead costs are high in your industry or retail space is expensive in your location, an online business may solve these basic problems. Other types of business are less suited for a fully-virtual sales experience. For example, car dealerships may offer information on their websites but still need to maintain a physical location for customers to take test drives and interact with vehicles before committing to such a large purchase.
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