How to Start a Web Business - The Business Model
As a web business, you’re not too different from any other business. You need cash and you need to make more cash. How much cash do you need? Probably at least enough until you have your first product. Here is some basic analysis and advice from Ryan Carson.
The problem with your first product is that it takes time to make money. And cash flow is a dire need when first starting. Listen to Jason Fried or read more from Ryan Carson. You need more cash if you’re going to stay afloat. Nothing brings a sense of reality faster than an empty bank account when you have mortgages, bills, and other debt/liabilities to pay. So you’ll probably want to do things on the side, like free lance consulting, as your product begins to grow a customer base. You may consider outside funding such as venture capital or angel investors. But you might think twice after reading two articles from 37Signals: Entrepreneurs and VC Squeeze.
Focusing on things that bring in more cash will extend your business’ longevity. The real question is, “Will my product make money?” Currently, there are two popular models for web applications:
- Charge for your service.
- Sell ads, sign up for affiliate programs, and ask for donations.
Charging for your service might seem scary in an age when so many useful services are free such as search engines, news sites, and email. According to 37Signals, this is the easiest way to earn cash. Their thinking is that as long as you provide something of value, your users are willing to pay. If you don’t charge for your service, you have to rely on lots of Internet traffic. This takes time, and probably too much time. Either way, you have to provide something of value. Why not start getting money right away by charging for your service? On the other hand, in 12 months, blogger Steve Pavlina has been succesful by not charging. Decide which one works for you. As a web business, in just a few months, you’ll know if you have something valuable.
on May 18th, 2006 at 4:10 pm
[…] If you don’t want to quit your day job or can’t because you need cash flow, you can still start a web company by doing it on the side. You might think of your day as two workdays: 8 hours for your day job and 8 hours for your business. That may seem like a lot of hours, but hey, no one said it’d be easy! […]
on August 17th, 2006 at 12:07 am
[…] A few months ago, I wrote about business models for web software. 37Signals recently posted their own article and thoughts on the subject, explaining which model they would choose and why. They also had a follow up blurb: […]