The Entrepreneur's Guide to Investing in Digital Business
Being financially independent and investing in new businesses are just some of the perks of being a web entrepreneur and successful SEO. After working for clients for years, wouldn’t it be nice to have something to call your own? After all, who better to rank and maintain a website than someone who does it as a job already! But if you are looking to invest in a tech startup, find a co-founder, or go on a joint venture journey, you may have some questions. How do you know whether a business is a viable investment? What about longevity? How much time and money do you really need? Here is some advice that may prove useful for keen entrepreneurs and innovators who just can’t wait to get out there and test things for themselves...
What you need to know about investment
There are many different ways to get financially involved with digital businesses, whether you want to invest some money as a silent partner, or go all-out and run a business that’s got your unique stamp on it. Think carefully about your strengths and weaknesses, and be realistic about the time you have to commit to a growing business venture. Be analytical and critical about your possible contributions to a business.
A business can be a bit like a freight train — it picks up velocity fast and isn’t easily slowed down — once you decide to go for it, you just have to hold on and ride it out.
Tech startups: gold mine or potential disaster?
Startups operate in a high-pressure world that can easily turn toxic. Software and products that started out as casual experiments between friends end up becoming million dollar business deals and loyalties are tested to the max. Getting involved as an investor in a tech startup may seem like an exciting no-brainer, but make sure you spend enough time analyzing the dynamics of the team.
If you don’t fully understand the product and the market, you could be in for a rough ride. As an investor or business partner, it’s advisable that you have a good understanding of the market — as this knowledge will allow you to accurately pinpoint growth. Not understanding how something works is not a good way to start a business relationship.
It’s not that tech startups aren’t potentially amazing opportunities (they are), but you need to be aware that you’re stepping into a high-octane world, and you need to keep your wits about you. Agreements and legal documents are a must — even if the business is operating out of someone’s front room. The same rule applies if you decide to team up with a couple of buddies and found your own business. You need rock solid business agreements that clearly state who owns what (and why).
Running an agency vs. remaining freelance
Sometimes being an entrepreneur or freelancer can get a bit lonely and the next logical step may be hiring a team. Be aware that the responsibilities that come with setting up a physical office and hiring a team on-site differ vastly to buying services off other freelancers. Think carefully about your margins...and energy levels!
If you want to buy in to an agency, make sure that you have a full understanding of the management dynamics, and a thorough picture of the current client base. Are they all long-term clients? Are they locked into minimum terms? Does the agency have money in the bank and room to grow, or have they hit a plateau? Part-owning or running an agency is a heavy responsibility.
A word on JVs
Joint ventures are a staple of the internet entrepreneur world, and in a lot of cases, they world out brilliantly. Whether it’s the joining together of money and skillset, or brainpower and assets, joint ventures allow people to maximize their potential and split the profits. Just make sure that you aren’t giving too much of your IP away, and that you discuss moving on from the business too. It might seem counter intuitive to talk about the end before you’ve even begun, but trust me— you need to.
A JV is an easy way to figure out whether you’re ready to be more independent and do your own thing. Having the support of a close friend and associate is a great comfort, and cross-promotion is also an awesome way to maximize marketing ROI.
Too good to be true?
Someone selling a domain, Facebook group, or collection of contacts for dirt cheap? It’s tempting to leap at a bargain, but consider whether something might be too good to be true first. It’s easy to inflate site metrics or market a clever idea as a ‘goldmine’, but the digital world is full of scammers and people who will happily walk away after you pay them.
Make sure you understand the ins and outs of any affiliate marketing scheme you’re signing yourself up for, as it can be a hard industry to crack. What’s making money right now might not make you much money eight months down the line. Is that a risk you’re willing to take?
The best advice for anyone considering a leap into the unknown is to speak to a wide range of people, including people who are NOT from the industry, to get some perspective. At the same time — the decision is still entirely yours and you are the only one who can make it.
Ecommerce — guaranteed money?
Ecommerce is on the rise as people shop from the comfort of their homes and mobiles. From bedrooms and bathrooms, to coffee shops and the subway — everywhere is now a potential retail outlet. Running an ecommerce business is a great way for entrepreneurs to make some ‘passive income’, and it’s a route that many bloggers, marketers, and SEOs go down. It takes time, dedication, and determination to set up a good ecommerce brand. You need to get clever about ecommerce shortcuts and automation hacks if you want to set up a profit-making online shop fast.
You may be better off buying an established e-store for your first venture — Exchange has some good listings for first-time buyers. Make sure that you spend time talking to a store owner before taking over, and that you have a clear understanding of their supplier relationships.
Following your dreams?
An idea that won’t leave you alone? Now there is a lot of debate surrounding the whole passion/business divide, but it’s never a bad idea to follow your dreams and desires. If you really believe in something, you will probably put more effort in, which will then show in your business plan and marketing. So why not start that store or website you’ve always been dreaming of, and see how it goes?
Investing in an online business is a one exciting ride. Whether you are turning a profit on products, content, services, affiliate clicks, sponsors — money is key to brand longevity. Passion projects need to become money projects as well if you want them to be your main hustle, so spend time delving into plans and forecasts. Just because it’s digital, doesn’t mean it isn’t ‘real’ business.