Business Information for Entrepreneurs by an Entrepreneur

Dear Buzz,

“I own a successful offline retail business. I see so many people moving online, especially selling information products. Should I consider doing that?”

Josiah

Dear Josiah,

Thanks for the question. I'm glad to hear that your offline business is successful. There are many people moving to online models of business — which isn't news to anyone, of course. But what's interesting is how often I see businesses move away from their core offerings when they go online. Someone might sell tractors offline but go online and sell e-books or some other digital product. Why is that? Is it because everyone else is selling that online, too? It is because of the high profit margin potential? 

Whatever it is, let me encourage you to stick to your core offering. If you're selling products, sell those products online. Set up an eBay store, create your own website, do whatever. But, before you jump in and start selling digital products, make sure that those digital products support your core offering.”

I have a secret that I'm telling the world: I'm fascinated by house flippers. They are the folks who buy a home that's a little (or a lot) run down, fix it up, and resell it for a (substantial) profit.

I'm so fascinated by these hammer-swinging entrepreneurs that I could be considered an almost loyal viewer of the many house flipping shows on television. It's interesting to me to compare the professionals in the show Flip This House to the amateurs in Property Ladder.

The professionals are very careful, plan everything out, and price the product according to the market. Of the shows I've seen of Flip This House, the professionals always seem to earn an impressive profit.

On the other hand, the amateurs in Property Ladder take twice as long by doing the work themselves (to save money from hiring a sub-contractor), make poor choices in decorating, and price the house much too high. Then they end up sitting on the house for some time and paying the carrying costs. It makes for much more entertaining television.

It's an interesting lesson in one of the oldest vices of humankind: greed. In an effort to do things the cheapest way possible AND to get the highest resale dollar out of the home, they make poor decisions that end up costing them too much.

I'm fairly blatant on this blog and on MoreBusiness.com about not being the low cost provider (that is: competing on price by shaving your profit margin razor thin). But let me also suggest that being the high cost provider (by inflating your profit margin) — without the right strategy — may not be good for your business.

In a recent blog I talked about viral video and the benefits to a business. This interesting piece of news came to my attention recently and I thought it was only fair to post the other side of the equation.

Here's an example of Viral Video gone wrong.

Lonelygirl15 was a vlog (a video blog) of a teenage girl posted on YouTube. It gained quite a following as she interacted with life and recorded her thoughts for all to see. Recently, though, after months of success, she was exposed as being someone other than what she claimed.

She wasn't a teenage girl sharing her life with others; she was an aspiring actress on a set. After the “fraud” was exposed, there seemed to be a lot of spin from the creators of the vlog over its purpose.

At the end of the day, it seems that the viewing public still prefers to know if they're watching fact or fiction BEFORE they start watching. And it also suggests that a little scrutiny from the market is the ultimate arbitrator of the success or failure of a venture.

If you do think about viral video, be sure to think through your plan very carefully.