Tuesday, April 3, 2007

When opportunity knocks, go for the door prize

posted by Andy Leff
I love door prizes. I win them everywhere I go. It's the only way I can see the symphony, enjoy a Stephen Starr restaurant, and get microdermabrasion without draining my wallet.

My latest door prize opportunity was at the Main Line Chamber of Commerce's “Web-based Business Discussion: Build Your Own Business” event. The night proved good things do come in small packages.

Though attendance was lower than at our last outing, the discussion was dead-on for its audience. Brian T. O'Connor, partner of Arkiv Music LLC, presented excellent, actionable advice on taking a good idea, and building it into a successful virtual company (podcast coming soon).

I say virtual because Brian and his 15 employees all work from their own homes with the help of e-mail and call-in numbers. They have no central office or warehouse -- truly a Web-based business.

Brian hit on a lot of key points during his 30-minute presentation (many of which we've discussed on our blog). Among the highlights:

  • Keep tight control over costs. Brian's business model included plenty of bootstrapping. Case in point: He and his partners did not take salaries for the first year Arkiv Music was around, so they could instead grow the business and invest in better equipment.

    He also said $90K servers and hosting companies are well and good for the Amazons of the world, but that there are plenty of cheaper, more efficient hardware options on the market for the little guys.

  • Personally finance your business. On this point, Brian and I couldn't be further apart. I did not agree with Brian's credit card vs. VC approach. Instead of seeking venture capital, he signed up for every credit card offer he received, and bankrolled the company that way. The result: massive debt. This is a huge risk, especially for an unproven product.

    Granted, he did it to avoid giving up company control to a VC firm -- a caveat many entrepreneurs don't realize when they recruit VC money. Many people will argue that every startup goes the VC route, so why worry? Well, if every startup jumped off a bridge, would you?

    Brian's correction: We definitely did not use credit cards to finance the operation of ArkivMusic. We were able to keep the operation running with the partners’ original investment, plus the revenue that began to come in pretty quickly from online sales.

    I did make a reference to “signing up for every credit card offer I received”, but that was me personally -- not the company. Since I had no income for a while, I did sign up for a lot of credit cards, just in case things didn’t go well with the company.

    And I did actually use a credit card to pay for my family’s health benefits one month. But other than that, I was able to stay away from credit card use in general (happily).

    Each business situation is unique. If you can fund it yourself, in ways that make fiscal sense, then you don't have to seek outside capital if you don’t need it. (OK, off my soapbox and back to Brian.)

  • Have clean, usable Web site design elements. The simple truth is, if visitors can’t understand what is going on, they will leave immediately. And it takes more than snazzy graphics.

    The key is integrating three crucial components of your site: your merchant bank account with your internal accounting system, your payment gateways to your site, and your shopping cart to your site. He also stressed the importance of understanding state tax laws where you do business.

  • Remember that e-commerce is safe.This scored big points in my book. The most common misperception among newly minted e-tailers is that identify theft is imminent and unavoidable. That's a load of hooey.

    The seven gajillion layers of security monitoring and encryption on reputable sites make e-commerce perfectly safe -- so much so, that the rare instance of fraud should not deter businesses from going online.

    To truly succeed today, all business -- small, medium, and large -- must have a Web presence. If they sit on the sidelines, Brian predicts they will go the same route as Tower Records.

  • Create a niche business. If you can offer a product, service, or new way to convey a message, then you will have greater success online. Brian's niche has been classical music since 1994. Now he boasts 350,000 online customers.

  • Hire the right people. Brian credits his hiring strategies for his success. He seeks out strong employees who worked for original online music pioneers like CDNow, people who understand his niche, or experts in growing an online business.

  • Embrace online advertising. Arkiv Music has slowly moved away from print ads to Google AdWords. Brian suggested everyone pursue an online ad strategy, as long as it makes sense for their business model.

I agree. There is no better way to hit your audience than online, thanks to the growing amount of time people spend online instead of watching TV or reading traditional print pubs.

For all of Brian's great advice, however, I was dumbfounded by the relative cluelessness of the audience. It never ceases to amaze me how little many business owners know about leveraging the Internet.

Once people found out Seun and I were bloggers (a.k.a. 'the young guys not wearing ties'), they bombarded us with questions about gaining traction online, promoting goods and services, and more. Most of them had never heard of blogs or social networking, much less understood them.

Luckily, I could help them out, and pointed them to IncPlace for more info. Oh, and in case you were wondering, I won the door prize. Media Theater of Performing Arts, here I come!

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