These days nearly every business has a website, and those that don’t have at least thought about it. Google is very quickly replacing the Yellow Pages as the first place to hunt for information about a company and customers are starting to find it odd if your business does not have a website.

The website has tremendous advantages over traditional advertising. It is your 24/7 salesperson that delivers the message perfectly every single time, can be instantly changed at a whim, and can store as much company and product information as your potential clients care to view. It is also a 24/7 support center, lead capture, hyper cost-effective storefront, traffic analyzer, survey tool, and much more. Yet time and time I encounter people who have only one burning question…

“If a Website is so Great, Why the Hell am I Losing Money on this Thing?”

As a website developer I am constantly facing the challenge of providing my business clients with website solutions that generate a positive Return On Investment. Simply building a website and tossing it online, no matter how complex and e-commerce enabled it is, does not money make. Yet many business owners think exactly this, and experience has taught me to never develop a website for somebody who I cannot steer away from this mentality.

Just like a profitable business, a successful site needs a plan. At the heart of this plan is your desired outcome, which will shape what you put on the site, how much you’ll spend on development, and what kind of marketing you will do. Here are just some of the motives a business may have for starting a website:

Modern “Yellow Pages Ad”: a business may simply want to take advantage of the inexpensive and rich internet format to present potential clients with basic business information. These kinds of sites tend to have basic information about the business, store hours, and contact information. Traffic may come from local business listings (like the Chamber of Commerce or Google Maps) and advertising that the business itself puts out (flyers, business cards, etc). There is nothing wrong with having a site this simple, particularly in a brick and motar industry.

Online Marketing: this is a much more serious version of the Yellow Pages ad. Rather than simply using the website as an informational resource for people who want to know more about the company, the purpose here is to actually attract new customers from internet sources. Traffic will come from whatever online marketing methods you succeed at, such as banner ads, search engines, PPC ads, product-related websites, media sites, blogs, etc. It’s really important to have someone experienced in online marketing developing this kind of website; many business owners make the mistake of finding a web developer with no marketing experience (mistake #1), dictating to them what the website should have (mistake #2), and then wondering how they spent so much money with revenue to show for it. Bonus mistake points for not even attempting online marketing.

Existing Customer Support: many smaller businesses omit this very important opportunity to keep clients happy while selling more to this highly receptive group. A “customer support” site can mean very different things. It can be a place for clients to receive the latest updates or documentation for your product, it can offer an actual help ticket system, or it can be a place where clients can manage their accounts. In all cases you definitely want to use this area to inform clients of new offerings and post special “existing customer only” promotions. Customers love to receive exclusive bonuses and since they have already bought from you they are very likely to buy again. This style of site still needs to be marketed, but this time towards your existing clients. You can do this on materials that your customers receive such as the product/service itself or on an opt-in mailing list.

Internal Management and Collaboration: not every site has to face the public. There are many advantages to having an intranet or internet site to help you manage your business. You can use this area to collaborate effectively with company units across the country or globe, such as sales teams, branches, investors, or your board of directors. You can also build in internal functionality for easily importing your website’s sales into your accounting software or managing your customers. With internet access available 24/7 to almost anyone and anywhere, you gain a great deal of mobility by not limiting yourself to having to access your data from a single PC.

Selecting a Revenue Model

Depending on your desired end result you may apply any combination of the following four types of revenue models to your site:

• Direct Sales: sales can be traced directly back to the website. Relatively easy to measure ROI.
• Marketing: presenting more information about your company and building brand awareness. Helps increase sales but works alongside other general marketing. Just like buying an ad in a magazine or a billboard, it’s not always easy to measure ROI.
• Advertising/Affiliate Revenue: characterized by free content sponsored via advertising of 3rd party products.
• Cost Savings: your website return may actually come from the money you save by using it in place of other techniques. Providing customer support online and using online collaboration tools are great examples.

Each of these four categories have many different revenue models within them. All of them have their own unique challenges and literally millions of ways of implementing the site. Once you know what it is that your website is doing to make you money, you need to figure out how it will attract this money. This means knowing how to measure the ROI that you are receiving from your site, and constantly working to optimize it (the initial site delivers only a fraction of its potential). It also means you need to find someone that can not only get a great website built, but who understands the revenue model in question and can make make it profitable.

If your website is currently a money pit, hopefully by this point in the article you have some idea why. Fixing it may be a matter of hiring an internet marketing consultant, learning online marketing strategies yourself, and possibly the scrapping the site and starting it over. If your problem lies in no one coming to the site then intelligent and effective marketing is where you need to invest. If people are coming but not buying then new sales copy, a more effective design, or better product/pricing may be what needs to be done. You also need to make sure that when you do get a sale, that all the marketing effort directly involved in getting that sale still leaves you with a profit.

There are many great website developers out there who will simply do what you are told. The finished product may be of extremely high quality and be built on time and exactly to spec. None of this will matter if you don’t have someone who also understands the ROI aspect and can advise you in building a site that will make money for your business.

The first time I consciously decided to start a business (computer sales & repairs), I held an amazing amount of misconceptions. They could all be summarized as “money simultaneously grows on trees and is brought in by the wheelbarrow by customers eager to purchase my wares”. You’ll have to forgive me, as I was still well in high school.

To my credit I knew that I had to work hard, but somehow in my mind there was a nice thick line drawn directly between work and success. If I worked hard through the night, slept through class, and put every ounce of strength that I had into the business, then profits and growth were my divine right. I was half correct of course, as rarely is an easy way of making money simply handed out on a silver platter. But somewhere I had made a terrible mistake in the formula and got half of it wrong. It turns out that you can toil endlessly in the fiercest conditions known to man, but if what you produce is of value to few then your rewards will be proportionally small. That big thick line does exist, but it’s actually drawn between success and value.

The Real Reason Why a Business is Successful and the Consequences of Using the Wrong Formula

The principles here can apply to VC-funded start-ups with $6 million in the bank too. However today is all about small business, the kind that I have started several times, and which can turn pizza money into a high income or reduce your income to not being able to afford pizza.

In my case I had worked very hard, but most of that time had been spent on an unadvertised company website that nobody would visit, writing paragraphs extolling company virtues that no one cared about. I had spent virtually no time on the things that would have mattered, such as handing out fliers door to door or networking (unless you counted trying to sell $2000 machines to penniless high school friends). I also firmly butchered the notion of “you gotta spend money to make money”, holding dearly to my heart the belief that effective marketing had to be paid for and by not having money I had no chance against the competition. I was terribly wrong again; my current venture has still spent less on marketing than what I had proposed for the computer sales business, but it’s making thousands in profit per month and growing quickly. I wanted fancy business cards, full color fliers, expensive newspaper ads, and everything else that other companies had, except that I didn’t have $100K in starting capital. Boy, what was I thinking.

So a high school kid knowing nothing about business failed. Big surprise…

Except that I’m not the only one that got the formula wrong, and I was certainly not the oldest! When statistics like 90% of small businesses fail in the first five years abound and examples of basic business mistakes can be found by walking a mere block through any downtown, it doesn’t take much to see that a whole lot of business owners are getting the fundamentals wrong too. Rational, intelligent, and well-intended people, who when reading this article may think “wow I would never be that stupid”. The problem is that until you look back at the situation and write down what it is that you did, the mistakes aren’t nearly so obvious.

Having realized that my original “work very hard” formula was wrong, I’m now convinced that following the correct one with just as much passion and dedication can lead to highly predictable success. The real trick is to provide value, as much and as often as you can. The more value that you provide, the more profit will follow. It is your duty as an honest, ethical and smart business person to come up with ways of providing value and providing that value to as many people as it will benefit. Uncoincidentally this is a recipe for making a whole bunch of money. Convinced and ready to begin?

You are going to start a successful business, and you will do so with the correct time-tested formula used by everyone from BMW to Walmart to As Seen on TV products. You are on a mission to consciously provide value, over and over again, and you will apply this philosophy to all aspects of your business. Your product, be it a commodity like a computer part or something entirely unique and handmade, will be put forth in a way that puts your customer’s needs front and center.

Your business will be delivering something useful to solve a problem. But you won’t stop there. You will find the best way to provide it to the people that need it. Your marketing, your sales, your shipping, and your customer service will be just as focused on the customer and the value that you can provide as the product itself. It’s all equally important, because you are only providing value if people know about your valuable product and have an easy way of obtaining it. The truer this sentence is for your business, the better off it is (so long as you don’t have a business model that actually loses money… which happens far more than you might think).

Starbucks didn’t hit its culturally engraved status because its staff is able to provide the extremely unique and skill-heavy service of making a cup of coffee and charging an arm and a leg for it. The people that disagree with this are (shockingly) not the owners of mutli-million dollar coffee businesses themselves. There’s something more to it, and thats the entire Starbucks experience created around it. An experience that does indeed provide people something they desire and thus value that they will pay for. They took a commodity and turned it into a highly profitable business. What you might not know is that they weren’t even the first ones. Decades prior Second Cup, another highly successful coffee store, had revolutionized coffee too by providing a good cup of coffee to people on the go. Prior to that coffee purchased by the cup was a throw-in at diners and tasted like it. Just because someone has already done something revolutionary doesn’t mean there’s no room for you to up the ante.

As a small business starter who probably has little or no money this doesn’t apply to you. You can’t possibly be able to provide value on that level. You can’t come up with a product that customers will happily buy and give you rave reviews for. Providing excellent value won’t allow you to compete against the big established company. Oh wait that’s me from high school talking. Yes you can provide value and yes you can get a business going on next to nothing. Just by sticking to the fundamentals and getting them right you can leap ahead of most of the competition by creating a profitable business. The entirety of the business model for my new venture has been to fill in as many gaps between website clients and website development companies as possible, thus providing genuine value that gives clients a reason to choose me. I do all this through a sustainable business model that I’m constantly evolving to become a more efficient value generator. It’s worked very well, growth is incredible, and my initial investment was the cost of a business registration and a few phone calls. Nothing I’ve done has required advanced calculus, divine wisdom, or a pile of money. So what’s stopping you from doing the same in your business and succeeding?

Oh and by the way, none of this is original or new. Materials with insights into all manner of the value-oriented philosophy are widely-available. I first came across it myself after buying Jay Abraham’s Getting Everything You Can Out of All You’ve Got, and I’ve seen it in countless other places too, including business class. It is not a lack of knowledge of this concept that is the problem, it is a lack of business owners seeking and implementing it.

Reading is key to having new ideas to fuel the expansion of your business. I currently have 30+ unread business books that I’m slogging through, many of which have provided me terrific ideas to utilize in my business. Sometimes I come across a book that I feel is worth mentioning on this blog, and having read Bag the Elephant by Steve Kaplan I can happily say that this is one of those books.

The book is all about the dream of many small business owners - bagging that large corporate customer that will provide steady revenue and skyrocket the growth of the company. Through 200 well-written pages Kaplan presents a practical plan for doing just that. He demystifies the process involved from start to finish in a blueprint that any small business owner can follow, spelling out the big and small points of interacting with a giant company and its bureaucracy.

What really sold me on this book and the techniques inside is the practical approach it takes. Kaplan has bagged his own elephants, with the first ever being Proctor & Gamble. He draws on this experience heavily within the book, with the Proctor and Gamble account being the focal example as Kaplan lays out his plan. In addition to the usual high level business recipes that business books love to provide, he shares indispensible tricks that he picked up along the way such as the time he got his status upgraded from supplier to contractor to get his own security badge (allowing him to setup and attend meetings far more easily than the competition).

It goes without saying that a truly large contract is a breakthrough for a company and properly managed it is the start of a truly booming business. This plan provides an amazing playbook to draw from to accomplish this and to do so without collapsing the company along the way. Kaplan makes sure to cover how to manage the relationship and the critical mistakes people make that could cause the deal to destroy them. Everything within the book is highly readable too, making it one of the scarce non-fiction books that are hard to put down.

I highly recommend picking this title up as I can’t imagine any business owner not being able to learn a significant amount from it, whether you are eyeing your first elephant or are looking to expand your impressive client list.