The Advantages and Disadvantages of an Online Business

Interested in starting an online business? 

If yes, it’s important to know the advantages and disadvantages of an online business. 

It’s a great opportunity especially when you look at the numbers such that 1.79 billion different people have bought something online last year but you need to know what you’re getting into.

The majority of people that tend to dabble in online businesses quit within a year.

To prevent this from happening, I’ll share with you the full picture so you can make an informed decision.

What are the advantages of starting an online business? 

1. Online businesses can stay open 24/7

Have you ever needed something from a store and the moment you arrive at the store it just closed? 

I hate when that happens. 

This isn’t the case with online businesses. A big advantage of having an online business is that it doesn’t need opening hours. 

The website of the business is operational 24/7 so if you want to order a product, course, etc at 3 in the morning you can do that without problems.

The best thing about it is that you as the owner don’t need to be there or even awake. I have had multiple times that I woke up to multiple sales because my website was still operational while I was sleeping.

2. Online businesses are easier to scale

This isn’t always the case but in most cases, since you aren’t dealing with selling products on location it’s easier to scale. There are also a lot of online businesses that don’t sell physical products which means they’re never out of stock. 

The barber that I used to frequent a few years ago tried to expand their business because the number of customers kept growing thanks to word-of-mouth marketing. 

They tried to scale the business but it was a large endeavor that took a lot of money and time.

They bought the place next door and tore down the wall in between, they had to invest in more chairs, and maintenance costs went through the roof.

Most online businesses have to worry about these things when they scale up.

You just set up the buying process in such a way that the website visitors get funneled to your offers in an effective way.

 The only thing you need to worry about after setting up the funnel is getting people to land on your page which can be done semi-passively with SEO or paid advertising.

Does this apply to every online business? No, but for +80% this is the case.

3. No need for a physical location

Most physical businesses will require you to have a location for multiple reasons such as storing products and receiving customers. This comes with a lot of responsibilities that online businesses don’t have to deal with.

As the owner of an online business, you don’t have to pay rent and maintenance costs for the location. If you don’t have the budget for a physical location it’s going to be hard to start an offline business. 

4. Online businesses often have lower start-up costs

Online businesses are in most cases cheaper to start than physical businesses. We have already discussed that you don’t need a physical location but in a lot of situations, you don’t even need to invest in creating a product. 

A great example of that is affiliate marketing where instead of selling your products or services you just refer people to businesses that do in exchange for a commission. 

You don’t need to store, test, and create products which can be a process that takes years. In most cases, the only thing you need is a working computer and a connection to the internet.

The financial risk of starting an online business is significantly lower than that of a physical business.

5. The collection of data is more effective

The technology you have today can record every action a visitor takes on a website. You can see through which page they landed on your website, you can see on what links they clicked, how long they stayed, and what made them leave your website. 

You can do this with physical businesses as well up till a certain point but it’d take a lot more time, and effort, and it’d be less precise.

An example of that is heatmaps. A heatmap showcases the concentration of clicks in specific areas of your website. Based on the concentration clicks the color of the area will be different.

You can instantly see how people move on your website and see if there are specific patterns that you use to influence the behavior of the visitors to your website.

That’s a lot of valuable information you can gather with the help of relatively cheap marketing/sales software. 

6. Online businesses Reach is further

For most physical businesses, their reach is their immediate environment.

This isn’t the case for online businesses. You can purposely target your immediate environment with local SEO and social media but you can also target other countries. 

This is also one of the reasons that online businesses can generate money 24/7. People on the other side of the world might be looking at the offers on your website while you’re sleeping.

I live in the Netherlands but this website is mostly geared toward Scandinavia, Canada, and The United States. Most of my sales happen around 4 in the morning before I wake up.

Warren Buffet once said if you can’t make money while you sleep, you’ll work till your dead. The ability to have your message reach every part of the world makes it possible to do exactly what Warren Buffet said.

What are the disadvantages of starting an online business?

1. Limits in regards to sales

There’s a lot you can do in regards to sales with an online business but it rarely gets to the level of face-to-face marketing because you can’t react in real-time in most cases. 

A big part of sales is addressing objections people might have regarding a product or service. 

If you as salesmen are physically there with the customer when he has an objection you might be able to get him to tell you what his specific objection is. This knowledge gives you the chance to address it and increase the chance of a sale.

This isn’t the case with online businesses. At the most, you try to anticipate what objections customers can come up with by doing interviews, surveys, customer avatars, etc, and include them into the copy. 

This is why a lot of sales pages come with faqs and entire paragraphs about things they don’t need to worry about.

This can be effective but you have no guarantee that they’ll read the part where you address their objection.

2. Online businesses deal with more immediate Competition

Physical businesses deal with competition just much competition as online businesses. 
There’s a big difference in how online businesses deal with competition compared to physical companies. 

Let’s say for example you go to a shoe store to get some boots and you find a pair but you’re not sure if you want to purchase them.

To look for another pair in another shop you’d still at the very least have to physically walk to that store without knowing if you’d succeed. 

This isn’t the case with online businesses. 

Let’s say you’re looking for thas same pair of boots online and type the keyword hiking boots in Google links to multiple websites will appear. 

According to statistics, 31% of the clicks will go to the first result which is good if you’re ranked first.

That being said, if they aren’t sure about the boots they’re 1 click away from going to another website and purchasing the hiking boots there.

3. Website difficulties can cripple your business

Any legitimate online business is run from a website which is a good thing and a bad thing at the same time. 

The reason for that is that the entire livelihood of your business is predicated on your website working properly. 

The moment your website is down everything stops. No more sales and potential clients will come in to look at your products or services.

In the last 4 years, I have had 2 times that I experienced website difficulties. I learned the hard way the first time that it’s important to invest in technical support. 

The first time I panicked like crazy trying to find someone to help me get my website back online but the second time it was fixed in a matter of minutes.

By the time I got the alert that my website was online tech support already fixed the problem. 

Physical businesses while having their unique problems don’t have to deal with this specific problem.

A few last words

Running an online business comes with a lot of perks but it takes a lot of patience, resiliency, and work.

Dependent on the type of online business you start it might take a while before you start to see the progress of any sort. 

It’s in this initial stage you’ll be tested the most from a mental perspective but once you go through that and you’ll get into what Robert Greene would call the cycle of immediate returns. 

That's when the results will come.

It might not be the most detailed advice but knowing this has helped me a lot in the past. I hope it can do the same for you if should decide to partake in this online endeavor.

How I created my online business

There are a lot of methods you can use to earn money online but unfortunately for most ideas, I didn’t have enough money to start. 

After spending days typing in keywords such as “how to start a business when broke” and “How to start a business for free” I found a method that worked for me.

It didn’t require me to create a product, do customer service, or invest in $1000 courses.

It made it possible to earn money online by creating content about my interest and turning it into the closest to passive income.

It’s called affiliate marketing.

It’s a form of marketing where companies make deals with people to promote their products in exchange for a commission based on the sales of your referrals. 

You might have come across thousands of affiliate websites without knowing it simply because they don’t try to sell the products but share information about them. 

It’s a billion-dollar industry that’s been growing every year. 

Interested in learning more about affiliate marketing and how to start?

Take a look at my pros and cons of affiliate marketing post. 

In this post, I’ll explain everything you need to know and show you the step-by-step program I used for starting my business.

That’s all for today. 

If you have any experience with building an online business I’d love to hear about it in the comments.

See you at my next post.