A few years ago, Elissa Pignati was a brand-new mommy who wanted to preserve her baby’s handprints in a ceramic plaque. “I researched all the local crafters and only found one person who could do it, and she was a two-hour drive away.” Undeterred, Pignati called for an appointment, only to discover that the artist was on maternity leave herself, and wouldn’t be available for 10 weeks, by which time Pignati’s baby would no longer be a newborn.
Realizing she’d just discovered an unfilled market need, Pignati and her friend Jennifer Carroll started By Baby, which takes little ones’ hand and foot impressions in a non-messy medium and turns them into ceramic keepsakes. They started the business by traveling around to new parent centers and events around the Bay Area, where they live. A few months ago, they launched their website, which has already matched their in-person sales. Soon, Pignati hopes, it will account for most of their revenues. “We really want this to be our primary source for orders,” she says.
To many, 2008 seems like a dreadful time to start a new venture. The economy is tanking. High energy prices and a falling dollar have driven up the cost of just about everything, leaving customers with little disposable income. Getting credit is all but impossible. Better to hunker down, the logic goes, put off entrepreneurial plans, and wait for better times.
You’ll be missing a great opportunity if you do. For many who’ve tried it, this turns out to be the perfect time to launch a new Internet-based business. Why? Consider the following:
1. Lower costs – Economic down times are neither better nor worse for starting a new business than boom times, according to Wil Schroter, a serial Web entrepreneur, and founder of Go BIG Network, an online community of startup companies. “The situation is just different,” he explains. “In boom times, capital is easier to get, but everything costs more. In the late 1990s, if you wanted to start an Internet business, you were probably raising $10 million. In 2002, you could start that same company for $200,000.”
These days, with tools for building websites and low-cost hosting readily available, an Internet entrepreneur can get off the ground for as little as $1,000, he says. “You can acquire customers and have a storefront at a very cheap price. With a bricks and mortar company, you would need a lot more.”
2. Little or no inventory – Inventory is one thing you absolutely need with a storefront, but might not with an online business. Mike Faith, president and CEO of Headsets.com recently decided to start a second online business, MotionSeats, which sells special ergonomic office chairs designed to strengthen the back. Faith spent a lot of attention and money on getting a strong website design and crafting a near-irresistible free-trial guarantee but one thing he didn’t do is buy the chairs themselves upfront.
“We put the website up, waited to see what sold, and bought the first few retail,” he says. “We lost a little on each chair, but it was a lot cheaper than buying five in each color and then seeing if they sold.”
3. Less competition — “In better economic times, you compete for everything,” Schroter says. “You compete for talent, for office space, for customers, and for attention from the media because there are so many cool startups to write about. When everyone’s running for cover, there’s much less competition.”
“There are very few people willing to spend money on marketing,” Faith adds. “That makes it a great time to be starting a business.”
4. High gas prices — Paying more at the pump is bad for many American businesses, as well as Americans themselves. But it does mean that more people are staying home, putting off both shopping trips and vacations till prices come down. That’s good news for e-commerce, because many people are using their computers to go shopping instead.
5. More Web resources — The Go BIG network is just one of many, many resources now available to new entrepreneurs. “The beauty of the Web is that there are so many people around the world who can help you do what you need to,” Pignati says.
Even better, the Web provides ready-made marketplaces, with customers primed to buy. “The biggest cost in any business is acquiring customers to sell to,” Schroter says. “The beauty of eBay and other such sites is they’ve done that heavy lifting for you.”
They also give you a quick and easy way to test your product or concept, he notes. “If you can’t sell your product on eBay, with millions of customers already in the store, you probably won’t be able to sell it elsewhere.”
Best of all, Schroter believes it can only get better from here. In the coming years, the Web will offer more resources, more places to connect with colleagues, and most important, more customers. “We always remind people that the Web is still in its infancy,” he says. “There are still whole generations of people who never or rarely use the Internet. We’re waiting for them to catch up.”
Imagine the size of the online market when they do.