Tag Archives: Christopher Caggiano

About 4465 days ago E-Commerce

Net Flix

realbusiness.com The Bootstrapper How do you compete with Amazon? By building a business the old-fashioned way Company: DVD Empire, in Warrendale, Pa. What it does: Sells DVDs and related products online Number of employees: 42 Conventional wisdom: You need to give your business away in order to compete in the big leagues. Unconventional wisdom: It is possible to bootstrap your way to dot-com success. Revenue growth: From $250,000 in 1997 to $16 million in 2000 Profit profile: Profitable since day one Capital: Start-up investment, $6,000; total capital raised to date, $6,000 There was a time not too long ago when people thought they could sell anything over the Web: furniture, gardening equipment, dog food, you name it. And, who knows, someday there just might be an online market for 50-pound bags of puppy chow and ceramic lawn gnomes. But if the past year has taught us anything, it’s that E-commerce isn’t as simple as throwing up a Web site and waiting for the inevitable flood of orders to pour in. Jeff Rix found that out when he started working for his father’s safety-equipment company, in 1994. Having caught the Internet bug while attending Bowling Green State University, Rix emerged eager to get Pro-Am Safety Inc. onto the Web. But after two years of trying, Rix found a less-than-enthusiastic online audience for the gas masks and fire extinguishers he was attempting to sell. In July 1997 a cyber-discouraged Harry Rix moved his son from Web development to outside sales, a transfer that left the younger Rix nonplussed. “He was grooming me to take over,” says Rix, referring to his father’s $11-million company. “I could have been set for life.” Instead, Rix took advantage of a chance discussion he had with his key programmer at Pro-Am, John-Michael D’Arcangelo. D’Arcangelo had recently purchased a DVD player — then a still nascent technology — and found a meager title selection at local stores. When D’Arcangelo visited www.DVDExpress.com (now Express.com), he deemed the site’s technology inferior to the E-commerce setup he had put in place for Pro-Am. At the time, only about 200 DVD titles were in circulation, but Rix and D’Arcangelo were betting that the technology would eventually replace VHS as definitively as CDs had replaced LPs. Plus, to their minds, DVDs were the perfect product to sell online: they were compact and uniform and therefore easy to store and ship. And the DVD demographic — then mostly technically savvy, affluent males — was the perfect candidate for Web sales. So in August 1997, using the technology they had developed at Pro-Am Safety and personal funds totaling $6,000, Rix and D’Arcangelo started DVD Empire as a side project. After taking in $250,000 in their first four months, they began to realize that their “hobby” was consuming more and more of their work time. So they quit their jobs at Pro-Am and moved to their own facility in February 1998. DVD Empire’s bootstrapped beginnings came from necessity but also from the urging of Harry Rix, a former Marine, who put up $2,000 of his own money for seed capital. “Harry runs his business very conservatively,” says Erik Ross, another former Pro-Am employee who joined DVD Empire as director of operations in June 1999. “Harry’s got a strong grasp of technology but also the hard-nosed business sense of someone who’s been through the sales ranks. That’s really given us perspective in a get-big-fast Internet world.” One especially important page the cofounders took from the elder Rix’s book was to keep everything in-house, from developing their own Web site and fulfillment database to setting up their own warehouse and shipping systems. Outsourcing didn’t make sense. “Depending on the relationship we have with the studio, we make about a 15% margin on each DVD we sell, and that’s really squeezing it,” Ross adds. Using a third party for fulfillment, for example, would cut that margin down another 5 to 7 points. “Now you’re down to less than 10%,” says Ross, “and when you factor in the number of orders screwed up and the people you’d have to employ to deal with them, you’re looking at 2% to 3%. And unless we got a ton of venture capital, we’d never get the volume to make 2% to 3% work.” Of course, the downside of keeping everything in-house is that inventory ties up cash, to the tune of $1 million in DVD Empire’s case, although Ross claims that the company turns that inventory an average of six to eight times a year. From the beginning, Rix and Ross followed a strategy that was wildly different from that of their competitors, many of whom took the venture-based, free-spending, low-margin, high-volume route. “Why should we spend $40 million on branding when there are only 10 million people with DVD players anyway?” says Rix. Adds Ross: “We decided that rather than spending on marketing, we’d put it all into the infrastructure to support the sales we were getting. We figured if we were growing any faster, we’d probably go out of business.” The test of that philosophy came soon and hard. The company ran into difficult times around the beginning of 2000, when its competitors — including Amazon.com, Reel.com, Buy.com, Express.com, and 800.com — engaged in an aggressive price war. “We noticed our growth rate started to slow,” says Ross. “We were used to 50% to 75% growth every month, and it went down to 25% to 30%.” Without outside funding, DVD Empire couldn’t cut its prices and survive. “We started second-guessing ourselves,” says Ross. Should they seek outside investment money? Spend more on marketing? “The worst part was knowing that there were life preservers all over the place,” he says, referring to the then-plentiful venture capital. “But we knew we didn’t want to go that way.” Their quandary ended — at least temporarily — when high-profile competitor Reel.com closed its doors, causing the rest of the industry to pull back from its price war. According to Chris Chiarella, an editor at Home Theater Magazine, Reel.com was simply one of the most notorious examples of the industry’s price-cutting absurdity. “The loss-leader concept has to be the exception, not your day-to-day way of doing business,” he says. By contrast, Chiarella says, DVD Empire’s strength was combining consistent, realistic pricing with timely shipping and good customer service. The infrastructure investment that the cofounders had committed themselves to making seems to have paid off. “Now we’re three E-Christmases into it, and everyone is spending money on infrastructure and customer service,” says Ross. “Well, we’ve already done that spending.” Now they’re ready to expand by adding products that are of interest to their existing customer base, like games for Sony’s new DVD-based Playstation 2. Still, the cofounders have no current plans to court outside funding. “We never say never,” says Ross, “but for the next five years we don’t foresee any scenario where we would.” DVD Empire’s diversification strategy has led the company in some unexpected directions. DVDs have a number of features unique to the medium, including director-commentary and foreign-language tracks, alternate takes, deleted scenes, and a multiangle feature, which allows viewers to change the direction from which they’re watching the action. The first segment of the video trade to take advantage of the multiangle feature was the adult-film industry. Curious customers began asking DVD Empire to carry certain multiangle-enabled titles, and the adult segment has since swelled to comprise 20% to 30% of the company’s business. Did Rix and Ross have any hesitation about carrying items that some customers might find offensive? “If our customers want it, we’re willing to sell it,” says Rix, although he adds that they took great care in segregating the adult titles onto a separate site. “Our tech-head following had no problem with it, and the price point is higher, so we make more money on it.” Does such a higher-margin product line have a deceptively positive impact on the company’s enviably positive bottom line? Rix admits that 60% of the company’s total net profits come from its adult division. “But we’d still be profitable without the adult merchandise,” insists Ross. “The biggest downside is it’s harder to hire for that part of the business.” Not to mention the fact that employees need to be extra careful about storing salacious materials. When this writer visited the company’s new facilities just north of Pittsburgh, an open box in a well-traveled hallway revealed a provocative promotional flyer for some of the product — much to the embarrassment of staffers who had intended to present a more family-friendly face. Still, Home Theater Magazine‘s Chiarella asserts that selling prurient material doesn’t have to be a black mark for the company. “As long as they police it fastidiously and make sure kids aren’t getting it, then people really have no right to complain,” he says. Of far greater concern to Rix and Ross is their remaining competition, some of it ailing (Express.com and Buy .com) and some seemingly stronger than ever (Amazon.com). Ross sees no reason why the DVD market can’t support more than one E-tailer. “Everybody seems to be forecasting against capitalism, saying it can only be a monopoly,” he says. “But I don’t really think you can squash every competitor, and I don’t think you have to.” Christopher Caggiano is executive editor of Inc. Technology. Ones to Watch The Inc. Technology staff considered quite a few companies for our “realbusiness.com” package. Most of the candidates ended up on the cutting-room floor. Some hadn’t been around long enough; others had great concepts that were yet to be proven. But a few companies (all founded in 1999) are starting with the right foundations in place. Here are some that we’ll be keeping an eye on. eKnitting.com, Berkeley, Calif. What it does: Sells yarn and knitting supplies to consumers. Founder: First-time entrepreneur Sarah Veit, a 28-year-old Stanford M.B.A. and inveterate knitter. How it makes money: Veit sells only the good stuff, from high-quality wools and cottons to more exotic silks and alpacas. “I have no desire to go head-to-head with Wal-Mart,” she says. What makes it “real”: A targeted niche market and tightly controlled finances. Veit conserved her precious marketing resources by attending the few trade shows that knitters flock to and advertising in the magazines she knew they read. Investment: A $150,000 SBA loan plus $350,000 in personal, family, and angel funding. Revenues: Projecting $500,000 for the fiscal year ending June 30, 2001. Profitability ETA: Profitable as of December 2000. Number of employees: 3. Why the jury’s still out: The company sells high-end products in a targeted niche. But it’s simply too soon to tell whether eKnitting has its market sewn up. Tutor.com, New York City What it does: Helps students find online or in-person tutoring in 400 subjects. Founder: CEO George Cigale, previously vice-president of the Princeton Review. How it makes money: Independent tutors charge students fees averaging $30 an hour; the company takes 10% of each transaction plus $1. What makes it “real”: The company struck partnerships with brands like the Princeton Review and Scholastic Inc. to attract students and tutors. By early 2001, with no advertising, Tutor.com had registered 25,000 tutors and averaged 20,000 tutoring transactions a month. The company plans to expand its reach by offering real-time homework help, services for adult learners, and licensing deals for school districts. Investment: $16 million in venture capital in 1999 and 2000; projecting another $15-million round late in 2001. Revenues: Less than $100,000 for 2000; shooting for $5 million in 2001 as new partnerships and expanded services take effect. Profitability ETA: Fourth quarter of 2001. Number of employees: 30. Why the jury’s still out: No serious revenues for 2000. MrSwap.com, San Francisco What it does: Gives consumers a forum for swapping used CDs, DVDs, and video games. Founders: Patrick Ford, a marketing veteran who worked at Microsoft and several Internet companies; Robert Kohler, a lawyer and veteran company founder. How it makes money: By charging swap recipients a “shipping and handling” fee for each transaction ($2.99 per CD, $4.99 per DVD, and so forth). The company also sells new merchandise for swappers who can’t find the used items they’re looking for. What makes it “real”: Among numerous Web-based swapping sites, MrSwap has a model that works. Its customers earn “SwapPoints” for the items they list, which they in turn use to “buy” the items they desire. Ford and Kohler have outsourced almost everything, including the fulfillment of the shipping and postage materials customers use to send items to one another. Investment: $750,000 in seed financing; $3.4 million in venture capital. Revenues: Under $1 million in 2000. Profitability ETA: November 2001. Number of employees: 15. Why the jury’s still out: The swap concept has a catch-22: In order for the swapping mechanism to work, the company has to attract a critical mass of users. But to attract those users, it needs to have sufficient swappable merchandise. With no fanfare and little venture money, the companies profiled here are delivering real stuff to paying customers and making a buck in the process. There may not be any “new rules,” but there are rules, and we suspect every one of them will look familiar. DVD Empire: The Bootstrapper SitStay.com: The Mom-and-Pop Shoebuy.com: The Scorekeepers Accuship.com: The Traditionalist Fashionmall.com: The Conservative Healthcommunities.com: The Underwriter Commentary E-tailing Intermediaries The Markets Please e-mail your comments to editors@inc.com.

About 4585 days ago Setting Up a Website

Web Awards 2000: General Excellence

Cruising for Profits General excellence: First place in Customer Service, ROI, and Innovation Company: Sumerset Custom Houseboats Web address: www.sumerset.com Why it won: The site has found innovative ways to maximize customers’ lifetime value to the company. Company revenues: $31 million Site-launch cost: $10,000 Judge’s view: “Sumerset creates a community between houseboat builders and owners that could never have existed without the Web. It has redefined the experience of buying a boat. The site transforms what might be a mundane activity into a highly engaging form of education and entertainment.” –Omar Wasow It could pass for time-lapse photography, Web-style. Digital photo 1, August 8: Houseboat #2896 has been in production for three hours. The hull, made of gleaming aluminum sheets, is complete. Digital photo 4, August 11: Welders lay down joists to support an aluminum subfloor. Digital photo 8, August 17: A dark, square hole gapes out of the reflective subfloor, into which the inverter batteries will be dropped. Digital photo 26, August 31: Carpenters erect a network of Georgia-pine two-by-fours and two-by-sixes as the interior framing. Digital photo 68, September 20: Installation of a four-burner stove and a microwave follows the wiring of the entertainment center. Digital photo 108, September 22: After a flurry of last-minute photo shooting, the finished 18-by-86-foot craft sets sail on a one-day test on the company pond. In a seeming sleight of hand, houseboat #2896 has come into being right before its owners’ eyes — and before the eyes of any other visitor to the Sumerset Custom Houseboats Web site. Providing digital snapshots of each in-progress houseboat is just one way that the $31-million boat manufacturer creates customers for life. It was also a primary reason that our judges gave Sumerset’s site top marks in three categories: Customer Service, Innovation, and Return on Investment. The judges were especially impressed with how CEO Thomas Neckel Sr. planned the site using the same goals that have set the company’s terra-firma operations apart in a highly specialized yet fiercely competitive field. The digital photos, for instance, are an extension of the individualized attention that Sumerset has traditionally given its customers — folks who are spending an average of $250,000 on their nautical escapes. The photos enable customers to stay in the construction loop after they’ve made their purchase — no matter how far they live from the manufacturing plant, in Somerset, Ky. And they help current and incipient customers garner design ideas for their own boats, which speeds up the production process. Our panel was also taken with Sumerset’s efforts, both online and off, to build a houseboating community, which not only brings in new customers and benefits current ones but also helps cement a long-term bond between the company and its clientele. The combination of customized information and an accessible Web environment even led judge Evan Schwartz to dub Sumerset “the Dell Computer of the houseboat business.” Selling a lifestyle Neckel knew from the moment he purchased Sumerset, in 1997, that the company needed to be customer focused. The staff readily agreed. “We’re not really selling boats — we’re selling a lifestyle,” says Cecil Helton Jr., Sumerset’s chief information officer. “The boats are a hideaway that lets customers recapture time with their friends and family. Our business philosophy is to do everything we can to restore time as well.” To hear customers tell it, the company has succeeded. “I’ve coded two-pound babies and felt less frightened than when I walked into Sumerset to design our boat,” says Debra Wollaber, a dean at a nursing college, who with her husband, Bruce, bought a three-bedroom, two-bathroom craft from Sumerset a year ago. “But Sumerset made it totally enjoyable.” Another customer, Joe Nunnelley, says he too went with Sumerset because of its culture. “They were definitely the most friendly,” he says. “They were persistent without being pushy, and they were always available.” For a Web site to fit in with that customer-centric culture, it would have to at least match, and ideally surpass, the company’s already stellar level of service. Which made Sumerset’s first foray into cyberspace a decided failure. In late 1997, Neckel invested in the company’s first Web site, which he says essentially amounted to a piece of static brochureware. “It wasn’t very well done,” he says. “I couldn’t even get page-view counts at first, and when I did, they weren’t consistent.” Fortunately, at about that time, Neckel met Helton, an economic developer and former hospital administrator with an M.B.A. and plenty of Internet savvy who was looking to make a career change into Web development. “Cecil’s not your typical geek,” says Neckel. “He’s a genius, but he actually bathes every day.” Neckel took Helton on as a consultant at first and within two months persuaded him to come on board full-time. Designing a customer-focused site Neckel and Helton’s first requirement for the new site was that it had to be interactive. “When customers look at Web sites, they don’t want to just see a picture,” says Neckel. “They want to have their questions answered and to get customized information.” Neckel knew that for Sumerset, that would be especially important during the sales process, given the complexity of the company’s product. But as he and Helton walked through the boat-building process, they realized that that kind of service was also critical after the orders were placed. “If I were building a home, I’d probably want to visit the site frequently to monitor the progress,” says Neckel. Why, he wondered, should building a house boat be any different? Since frequent site visits weren’t really practical for customers in the United Arab Emirates, or even Arizona, Neckel and Helton hit upon what they considered to be the next best thing: pictures posted on the Web site that charted day-to-day construction. “We figured if customers could watch their boats being built, we could maybe improve customer satisfaction,” says Neckel. The pictures would also pump up site traffic, which the company could take advantage of by adding new products and services. “What better way to get customers to visit every day than to show them something different about their boat every day?” says Neckel. And then there were the unexpected benefits of the visual chronicling. “There’s an interesting phenomenon in the houseboating world,” says Helton. “Bigger is better. We’ve had customers who asked to have their boat extended by one foot just to best another customer’s boat.” Helton tested the daily-pictures idea on a few tech-savvy customers. At first he thought it would be best to create a password-protected site for each customer. But when customers began asking to see other boats to get ideas for their own, Helton decided to give everyone access to all the photos and to protect customers’ privacy by identifying each boat not by its owner’s name but by a code number. “Some of our customers are country-western singers and movie stars, and they don’t want their name out there,” says Neckel. The new site was launched in early 1999, and within 120 days it was receiving 35,000 hits a day — up from the original site’s 200 a week. By October, the most recent version of the site was getting 40,000 to 50,000 hits a day. But the site has done more than simply increase the amount of customer contact. Neckel credits it with enabling Sumerset to put its business philosophy — to restore time for customers — into practice. “People used to make six or seven visits to the office after the initial design session,” he says. “We’ve managed to stop the follow-up visits almost entirely.” Helton adds that, in the long run, giving that time back to customers is often “even more important than cost savings.” Debra Wollaber says that the interactivity of the Web site helped seal the deal for her and her husband. She says that they were really excited when they finally got the online code for their boat (#2891). The couple began logging in regularly to monitor construction from their home, two and a half hours away from the plant. “It was a daily fix,” she says. “One day I asked for pictures of a specific part of the boat, and Cecil posted them the next day.” To Neckel’s surprise, the digital shots restored time for his company as well. For starters, because their output was visible for all to see, employees became more productivity conscious. “Nobody wants to have a picture be taken and not show progress,” says Neckel. And because customers were constantly checking in, mistakes were more likely to be noticed early. “Four months ago we were building a boat that had the wrong entertainment center,” says Helton. “The customer was able to stop us in time. Two weeks later, it would have been major dollars to fix.” Attracting customers With the new site up and running, Helton set out to spread the word to the houseboating public. Neckel encouraged him to be very selective about placing banner ads on boating-related sites. “We’re not trying to build numbers just to get numbers,” says Neckel. “We want to get our core customer. Someone who visits a marine site might only be in the market for a runabout. But someone who’s looking for information on taking a cruise — that’s someone who may be at our income level.” Helton also looked into placing ads and listing the company’s products on some heavily trafficked general-interest sites. America Online proved to be a particularly useful ad buy, he says. “As a test, we ran $3,000 worth of banner ads for three months,” he says. “AOL told us that normally a click-through rate of 0.5% is very successful, but we got 4.8%. And we sold two boats from that, which more than offset the cost.” He tapped into Amazon.com, too, one of the online companies Neckel admires most, by listing Sumerset boats for sale in Amazon’s zShops, a network of independent vendors that sell through the Amazon site. Helton admits that the company hasn’t yet sold a single boat through zShops, and that he didn’t really expect it would. “There’s something about the one-click process and a $200,000 boat that just doesn’t go together,” he says. But the zShop listings have generated interest. “It’s a good traffic builder,” he says. “We’ve probably had more than 5,000 visits from Amazon, which isn’t a lot, but it’s free. And we’ve had at least one sale from that.” Keeping customers for life Fully aware that banner ads take advantage of only a tiny portion of the Internet’s networking power, Neckel and Helton have put most of their marketing efforts into expanding Sumerset’s houseboating community. “We try to follow what Harley-Davidson has done,” says Neckel. “It has a production backlog and motorcycles that appreciate. So it maintains strong customer rapport to get that repeat business.” Integral to the strategy are the Harley “road shows,” events around the country to which the company invites Harley owners to show off what they have and trade up for what they want. One of the first things Neckel did when he bought Sumerset was to establish regular houseboating regattas, which now number six a year, to help the company build a Harleyesque sense of community. Sumerset now uses the Web site to publicize, and accept registrations for, the regattas. Customers who can’t attend can “watch” the goings-on over the Web, as Helton posts daily updates and digital snapshots. Neckel says that the seemingly passive form of marketing is actually very effective. “By bringing customers together as group, they produce their own testimonials,” he says. Debra and Bruce Wollaber are a case in point: Bruce placed their order at Sumerset’s Cumberland Regatta last May, after learning from others there about the boat-building process. The Web site has also sparked other, less obvious, strategies for generating customer loyalty. Among them is the company’s insurance program. Neckel knew how difficult it was for customers to find insurance for their houseboats and how prohibitive the premiums were once they did. So he negotiated with United Marine Underwriters, headquartered in LaGrange, Ky., to create a specialty houseboat-insurance product, which Sumerset now markets over its site. Both Sumerset and its customers appear to be happy with the deal. “Customers who were paying more than $3,400 for their previous insurance are now paying $1,200,” says Neckel. United Marine pays Sumerset a set fee to market its product on the Sumerset site. “That fee alone pays for the connectivity of our site and more,” says Helton. Warm-and-squishy aspects of building a customer community notwithstanding, what Sumerset is really trying to do when it aggregates past and potential buyers is sell them stuff — and as much stuff as possible. “In the grand scheme, this is still a niche market,” says Helton, who notes that Sumerset builds only about 150 boats a year. “There’s only so far it will ever grow. So you have to maximize the profit on the sales you make.” But with the Web site, the company has an opportunity to sell a lot more than just boats, Neckel says. To that end, Sumerset entered into an agreement in June with iiCaptain.com, a third-party online marine store, through which Sumerset’s customers can select from thousands of boating accessories, from depth gauges and fish finders to ropes, anchors, and engine parts. Sumerset gets a 20% commission on sales generated by the link. “We’ve probably done about $10,000 in sales, which isn’t a lot,” says Helton. “But that’s $2,000 we made without really doing anything.” Whitecaps along the way Of course, beyond the equipment cost of setting up the new site (which Neckel pegs at around $10,000), the company must factor in the cost of staffing it. In addition to Helton, three other employees contribute regular content. For Neckel, the biggest challenge to being a wired business in Kentucky is, well, being a wired business in Kentucky. With Lexington (the closest large city) 65 miles to the north, Somerset is hardly a nexus of Internet connectivity. “We have more T1 activity here than in the entire town,” says Neckel. He reports that it’s a battle just to keep the company’s Internet connection going. “We once had the site go down because someone hit the wrong switch at the local Dairy Queen,” he says. Neckel explains that the wires through which Sumerset used to connect to the Internet passed through a repeater switch in the rear of said Dairy Queen, with a piece of tape over the switch warning the soft-serve jockeys not to turn it off. “It wasn’t very professional,” he says. “We had to educate the provider on setting up multiple routes and doing maintenance.” Despite such minor setbacks, Helton has big plans for the future of the Sumerset site. He’s considering using video in addition to the digital photos to showcase the boat-construction process. But there are more stumbling blocks. Although the company has ample capacity for such a system, Helton is concerned that customers with a dial-up Internet connection will get frustrated waiting for the immense video files to download. And he and Neckel are also concerned about competitors’ looking in and stealing manufacturing ideas. Closer to fruition is an online houseboat-rental system, in which customers will be able to sign up for floating vacations aboard a boat from selected marinas with the option of putting the rental cost toward the price of a new boat. “We hope to have the whole thing up by the first of the year,” says Helton. But even if future enhancements don’t pan out, the Web site has already had a significant impact on Sumerset’s business health. Last year the company sold 44 boats through off-line broker-dealers — a system in which the boats are heavily discounted. “Now we’ve completely replaced those brokered sales with Internet sales,” says Neckel. “Cutting out the middleman increases our profits on those sales.” And overall sales just keep growing. Neckel projects that this year’s sales will nearly triple those of 1997. And all that from a simple URL and a little ingenuity. Christopher Caggiano is a senior staff writer at Inc. Annual Web Awards 2000 General Excellence Marketing Customer Service ROI Innovation Community Judges Please e-mail your comments to editors@inc.com.

About 4799 days ago E-Commerce

Managing by the Web

An increasing number of Web sites promise to provide everything you need to run and grow your business. We asked real-world CEOs to try Type the phrase small business into Yahoo’s search engine and you’ll see there are 7,618 sites listed in 68 categories. Narrow your search down to entrepreneur and there are a mere 102 sites. The Web is bursting with brand-new destinations — we get an E-mail notice nearly every day about yet another one — purporting to solve all the problems and fill all the needs of small businesses. They offer expertise on management, finance, business planning, technology, and recruiting. They offer online tools for creating business plans, finding venture capital, and scoping out the competition. And they provide chat rooms, where, they claim, you can engage in hearty discourse with like-minded CEOs. Naturally, they also sell every kind of office product you may ever need. In short, these sites bill themselves as one-stop shopping for busy CEOs coping with the day-to-day challenges of running a growing business. And you can do it all from the cozy comfort of your desk. It sounded great to us. Wouldn’t it be nice if you actually could manage your business entirely by the Web? So we sorted through hundreds and hundreds of sites and culled the 10 best of the general-interest small-business offerings. (In the interest of full disclosure: Inc. has its own Web site — inc.com, which is a sister company to the one that publishes this magazine. To avoid any potential for conflict of interest, we are leaving our site off the list.) Then we asked a panel of 34 CEOs and entrepreneurs to put the promises made by the sites to the test. We had them evaluate the wide array of online offerings and let us know which ones were worth checking out — and which were a complete waste of time. Boy, did they ever. Our CEOs told us in no uncertain terms that most of the sites weren’t up to snuff for business builders who live in the real world. We’d picked experienced CEOs and company leaders who described their Internet savvy as “good.” And we asked them to rate each site based on 40 criteria, including sophistication of content, quality of experts, and usefulness of online tools. Most important, we asked them if they would ever go back to the site — and for what reason. So what passed the real CEO test? The answer was clear: not much. In general, the sites’ level of sophistication was far below what most heads of growing companies could really use. As one of them put it: “It’s like going to a sale. You go because you might find a deal, but generally you walk out of the store with things you don’t really need.” Still, our panel turned up worthwhile nuggets hidden here and there. One CEO, for example, raved about Onvia.com’s request for quote (RFQ) tool, saying it was “incredible — easy to use, comprehensive, and what a time-saver!” And even the harshest of our judges said they might go back to most of the sites for reference. Certainly, most of the sites offered worthwhile starting points for novice entrepreneurs looking for the basics. And after we had studied the sites for more than two months, one thing became clear to us: Web sites are changing and developing faster than you can imagine. What fails to meet CEO standards today may improve dramatically tomorrow. But there’s still a long way to go. As one disappointed CEO put it when asked if she’d go back to a particular site: “Never. Maybe for a zip code.” Read on for what our panel of CEOs had to say about the best of the offerings for small businesses on the Web. Additional reporting and site evaluations were provided by Inc. staffers Jill Hecht Maxwell, Anne Stuart, Christopher Caggiano, and Susan Greco. The Lowdown on the Sites We asked several senior Inc. staffers to give us their take on the 10 winning Web sites. (For reviews of sites run by nonprofits, see below.) Here’s what they had to say: AllBusiness.com All singin’, all dancin’, AllBusiness.com covers finance, human resources, sales and marketing, and office services, among other things. However, our CEO evaluators tell us that this Web powerhouse tries too much to be all things to all CEOs. Despite its easy-to-use design and good organization, it ends up being overwhelming in scope. Among its useful amenities: a “virtual file cabinet,” in which you can store documents or Web tools. There are also handy links to the site’s numerous partners and informal alliances: Lawyers.com (legal advice), Barnesandnoble.com (books), Onsale.com (auctions), AtYourOffice.com (office supplies), and so forth. DigitalWork.com This site offers small businesses help in doing such tasks as collecting bad debts, issuing press releases, listing a site on search engines, and posting jobs to recruiting sites. Don’t look here for free content or discussion groups. This is a down-to-business site with a handful of very specific functions. While some services, such as online travel booking, are available elsewhere, time-strapped novice CEOs may find DigitalWork.com’s one-stop convenience worth a visit. IdeaCafe.com Geared to new entrepreneurs, this site offers information, networking, and inspiration. It might be tempting to dismiss it as a neophyte-only destination, but Idea Cafe scores points for its disarming attitude and fresh point of view. Although many of our CEOs thought it might be good for beginners, they generally said they wouldn’t be going back. Its food motif (“chewy biz questions”) gets tiresome really fast. The sophistication level of the questions in the chat forums also could try the patience of any CEO, as could the chirpy responses from the “advisers” (read: consultants on a marketing mission) who seem to provide the lion’s share of the feedback. Office.com As one CEO put it, it’s hard to figure out exactly what Office.com is supposed to be until you’ve cruised the site awhile. But even navigating it isn’t easy. If you stick with it, what you’ll find is an array of online tools and software — some of them fun, most of them pretty basic. Maybe the best thing we can say about Office.com is that it provides a number of decent links to other sites as well as articles aimed mainly at beginners. Onvia.com You need a lawyer, some insurance, and a Web designer — and you need them yesterday. One place you can turn is Onvia.com, an ambitious online marketplace for small-business products and services. You may find some decent suppliers — or at least a good deal on PCs — from these folks. And one CEO raved about Onvia.com’s RFQ feature. At best, Onvia.com is a shopping mall for small businesses. Most of its attempts to offer broad content — such as the news-and-tools section — fall short. Don’t even waste your time there. SmartOnline.com Smart Online looks as if it offers a lot when you first get there. The site bills itself as having easy-to-use Web-hosted software to help people start, grow, and manage their businesses — but in reality, it’s damn hard to find your way around it. What we did figure out looked as if it would be interesting for beginners; it ranged from canned business letters to tools for creating financial statements. workz.com If you’re thinking of launching — or relaunching — your Web site without spending a lot of money, you may want to consider the resources of workz.com. For real beginners, the site delivers layer upon layer of how-to articles, checklists, and links. You’ll find everything a novice needs — from advice on how to build a Web site and maintain it to how to actually make money with it — discussed here in detail. Our CEOs didn’t have much time for workz.com, but we think it might not be bad for absolute beginners. Not for Profit Here’s the Inc. reviewers’ bottom line on the best of the Web sites that are not focused on making money from your business: edge.lowe.org Edge.lowe.org is the business library you wish you had down the street. Cleanly lit and well organized, it’s a good place to begin research on many start-up topics, from preparing a profit-and-loss statement to creating a marketing campaign. However, the fact that it’s run by a nonprofit shows. The content is all pretty basic and may frustrate more experienced entrepreneurs. EntreWorld.org The official Web site for the Kauffman Center for Entrepreneurial Leadership at the Ewing Marion Kauffman Foundation in Kansas City, Mo., is helpfully organized into three areas: “starting your business,” “growing your business,” and “supporting entrepreneurship.” While it does have some original content and some promising if ill-attended chat groups, Entreworld.org mostly just links you to other sites you might need. Some of the material is old, and it’s probably useful only for those just starting a business or wanting to be part of the entrepreneurship-education community. sba.gov Run by the Small Business Administration, this utilitarian site is the definitive source for small-business information from the government. Visitors can search a comprehensive online library about regulations, download loan forms and other documents, and take “workshops” in tasks such as preparing a business plan. The material is at the beginner level and often needs updating. (Y2K information was still on the site in February.) But the site is well set up and a snap to search. The Savvy CEO’s Guide to the Small-Business Web What CEOs say about the best of the Web offerings for small business Would our CEOs go back? What is the site good for? CEOs’ quick take AllBusiness.com “Occasionally, whenever I have a specific need.” Reference “This site relates to small businesses and start-ups with little previous experience. Not the sort of site I look to for advice.” DigitalWork.com “Occasionally, whenever I have a specific need.” Applications, one- stop shopping, purchasing “Applications seem useful, especially to newcomers. But those applications are limited to 11 functions.” IdeaCafe.com “Never.” Training for novices “What’s the mission? Business or humor?” Office.com “Occasionally, whenever I have a specific need.” Training, reference, purchasing “I didn’t have a clue as to what the site is about. If I wasn’t critiquing this site, I probably would have surfed right past it.” Onvia.com “Occasionally, whenever I have a specific need.” Purchasing “The RFQ tool was incredible. I needed a new printing company, and within minutes I had 15 responses.” SmartOnline.com “Occasionally, whenever I have a specific need.” Reference “Nothing on the site really captured my interest. Some relevance for those thinking about starting a business. Minimal relevance for me in helping run a business.” workz.com “Never.” Training for novices “The site is very general, designed for the very small company just getting into the Internet.” edge.lowe.org “Occasionally, whenever I have a specific need.” Training, reference “This site is good for ‘just in time’ learning on a variety of subjects all entrepreneurs will invariably deal with at various stages of growth.” EntreWorld.org “Occasionally, whenever I have a specific need.” Training, reference “Good links to other sites.” sba.gov “Never.” Training, reference “Good if it’s relevant to you — all SBA- and government-related.” Our Entrepreneur Judges Amilya Antonetti, president, Soapworks Jim Brock, partner, Amicus Chris Colbert, president, Holland Mark Edmund Ingalls John Coleman, president and cofounder, VIA Richard Colombik, president, International Tax Associates Eric Crown, CEO, Insight Enterprises Liz Elting, copresident, TransPerfect Translations Prashant H. Fadia, president and CEO, Abacus Software Group Maura FitzGerald, president and CEO, FitzGerald Communications Larry Gilbert, president, The Event Network Mark Gordon, CEO, Synergy Networks Ron Harris, president and CEO, Pervasive Software Charlie Horn, president and CEO, ScriptSave Karen Janson, CEO, 10 Minute Manicure Linda Kaplan, senior account executive, Identity Group Andrea Keating, president and CEO, Crews Control Linda Kellogg, founder and CEO, Start-Up Resources Deb Klein, founder, LMI Management Eric Kriss, president, Workmode.com Daryl Magana, founder, president, and CEO, Bidcom Marion McGovern, president, M Squared Debbi Milner, president and CEO, Jade Systems Glenn Neff, cofounder, Marketing Connections Brad Neuenhaus, president, TPC Steven Nickerson, chairman and CEO, Mucho.com Gerry Philpott, CEO and president, E-Poll.com Linda Pinson, owner, Out of Your Mind… and into the Marketplace Robert Posten, managing partner, Icon & Landis Eric Schechter, president, GAME: Great American Marketing & Events Randy Schilling, CEO and president, Solutech Eileen Shapiro, venture consultant, The Hillcrest Group Al Shariff, owner and president, GlobeTrends Marc Smith, CEO, NetStrategy Maura White, founder and CEO, GoBabies.com Crowded House Why are so many sites targeting you? With all the sites competing for the attention of companies like yours, small business has become one of the most hotly contested spaces on the Web. And why not? Small business is big business. There are some 15 million small companies in the United States today, according to the Small Business Administration. They employ more than half of the private-sector workforce. In 2000 they’ll spend $10 billion on personal computers alone, the Yankee Group estimates. And most important, small businesses are going online. No wonder Onvia.com, AllBusiness.com, Office.com, and the rest are lining up to give small-business owners advice, sell them office supplies, let them chat with other entrepreneurs, and even — in the case of Idea Cafe — tutor them in the gentle art of paper-airplane folding. (See the site for an, er, explanation. Yes, it claims it helps you understand leadership.) And the Web-service boom also explains why, for instance, NBC Internet Inc. agreed to pay $225 million to buy AllBusiness.com, on February 1, which was the same day that DigitalWork.com filed for an initial public offering. “Internet penetration into small businesses is higher than ever. At the end of the year it will be close to 80%,” says Internet analyst Kneko Burney of Cahners In-Stat Group. “It’s a huge opportunity.” Overall, Burney says, more than 30 companies that provide small-business destination sites have plunged into the fray, 19 of them in a serious way. Although the revenue models vary, most of the companies aim to sell business-related services, content, or products, sometimes through partnerships with other E-vendors. “The Web really allows the creation or potential creation of a channel to what has historically been a very fragmented market — and very difficult to reach,” says Teymour Boutros-Ghali, CEO of AllBusiness.com (and, yes, the nephew of that Boutros-Ghali). Founded by an accountant, a lawyer, and a serial entrepreneur, and armed with $20 million in venture-capital backing, AllBusiness.com offers entrepreneurs help with legal matters and human resources over the Internet — “all the things that small businesses hate to do,” says Boutros-Ghali. In classic Web fashion AllBusiness.com is gunning for market share over profits and doesn’t plan to break into the black until 2002. E-commerce marketplace Onvia.com, launched in 1997, has attracted some impressive bets, too, including $71 million in financing from Internet Capital Group and other investors. With total revenues since its founding of $28 million and net losses of $44 million, Onvia.com was heading for an IPO at press time. By comparison, the cozy, playful Idea Cafe, a bootstrapped operation with revenues of less than $1 million, seems more like a labor of love. But, says founder Francie Ward, who runs the site with five part-time employees, it does make a profit, with revenues primarily from banner advertising. Back in the 1980s, when she was publishing small-business manuals, Ward figured that what entrepreneurs really wanted was to talk to other entrepreneurs, and her site offers that service. Workz.com founder David Johnson had a similar revelation. In the pre-Web world, he published newsletters for software users that boiled down a complex subject into simple, digestible tidbits. He started workz.com — which has $1 million in start-up funding — when he figured out that he could do the same thing over the Internet. On the other hand, not everyone sees the Web as a panacea. The Edward Lowe Foundation (named after the man who invented Kitty Litter) has had a Web site for small businesses since 1994. But last fall the foundation decided to supplement the site with a radically different channel for distributing information: an old-fashioned newsletter, printed on paper and sent out by snail mail. Says content-development manager Eric Vines, “A journal gains legitimacy if it has a print version.” –Emily Barker Please e-mail your comments to editors@inc.com.