How much business do you want?

How to Start an Online Business icon

When you are building a website to generate leads for an offline business, you need to know who to target. But first, you need to know how many leads will justify the time required to build that website. Though a website can be created without much financial capital, it takes time and effort. Here, I look at the rewards you need to make that effort worthwile.

Rewards is the second step in my process for planning an online business. In the first step, Start Information Marketing with Business Purpose, I looked at the reasons why we are creating a business. One respondent wants a website to generate leads for an offline service business. Many of the techniques for creating a lead generating website are similar to information marketing websites. However, the Rewards step is totally different.

For information marketing, our rewards come from targeting a subject area. For lead generating, we must identify potential customers, and target them. For those of you who are anxious to skip rewards planning, and just start publishing a website, let me explain why this is important.

In the first step, I emphasized describing the purpose of your online business. If you are not clear about purpose, you have no foundation, and your business will not prosper. I have seen many websites fail to generate traffic because the subject matter was too vague. It can also fail by targeting a niche where there is not enough interest to earn the rewards you need. Your purpose statement drives everything in the right direction.

In this rewards step, I know I must look at lead generation and must assess if the project is feasible. I’ve seen thousands of websites created with the owners having no clue about the number of leads they need to generate. If you are creating your website as a hobby, you can skip this step. Just identify your expected rewards as “The number of leads I happen to get.” But, if you are serious about making money from your project, you have to be serious about identifying your Required Rewards.

How much is a lead worth?

Every business has it’s own lead valuation profile, but the principles are the same for all businesses. Leads always funnel to you. That funnel starts wide, with visitors to your website. The funnel narrows until you finally get a paying customer. You will never know exactly how many visitors you need to create a customer, but you need to have a realistic estimate.

If you want my personal help to estimate your Required Rewards, add your Statement of Business Purpose as a comment to my previous post. For now, I will give a general guide based on artificial figures. If you start a project with me, I will help you identify the important numbers for your situation.

Let us assume that every sale is worth $100. Working back up the funnel, we need to know how many leads will generate a sale. Lets say your lead handler has superb selling skils, and can convert one in five leads. We now know that a lead is worth $20. If you do not want to build a website, you could approach a marketing agency and pay them $7 per lead, or whaever your marketing budget allows.

We want to avoid marketing fees by creating a website to attract leads, but how many do we need?

How many leads do we need?

This is simple. Take your monthly income requirement, and work back. Let’s say we need our website to boost income from the business by $2000 per month. Leads are worth $20, so we need 100 leads per month.

From 100 leads, we expect 20 sales at $100, giving our $2000. That’s our required rewards taken care of, but is it feasible?

How much traffic do we need?

We know that we need 100 leads per month. For a website, we have contact forms, telephone number, and email address to create those leads. If we are properly organized, we will add newsletters, and social networking. If we are excellent, our website will be good enough to attract attention in the local press.

All these channels have their own profile, and we want to target as many as we can. The important factors are reach and conversion. Local press and websites have wide reach, but low conversion rates. Social media, can have very high conversion rates, but only if you do it right.

This is where we need to think about resources. Do you have existing networks you can build on? Are your skills written or oral? Which channels will suit you best.

Is the project feasible?

How to Start an Online Business iconIf we only have a website, with conversion rates of 1%, we need 10,000 visitors per month. We need to look at our catchment area to see if it is feasible. How many local residents in our target market regularly access the Internet?

If that is enough, we can stop this Rewards step, and move forward to Objectives. If not, we need to look at more channels. Choose ones which suit you from:

  • Newsletter. Weekly, monthly, or what can you manage? Does your subject have enough news topics? If not, can you create new angles on old topics?
  • Training Course. Easier than it sounds. Provide a series of articles about your topic that teach the subscriber something useful.
  • Social Networks. How much interest can you generate on Facebook, Twitter, Pinterest, and Google+? Join existing groups or create new ones. Are there specialist networks in your subject area?

Lets suppose we can only expect 6,000 visitor per month that are likely targets. 1% will give us 60 of the 100 leads we need. We then have to look at newsletters, social media, etc. You should choose whichever interests you most. Do not worry about experience – interest is most important, as knowledge can be learned and experience gained.

A possible solution to our 40 leads shortfall might be to introduce a newsletter and develop social media.

We estimate that 200 per month will read our newsletter and provide 10 leads. That still leaves 30, so we turn to social media. Looking at local groups as well as social groups, we aim to build a following of 1,000 people. We estimate 60 leads per month from that. If we do everything, we can expect 130 leads in total, giving a 30% contingency over our 100 needed. This is a good place to be. It means we can prioritize website, social media, and newsletter, working on whatever interests us most. Indeed, for many local businesses who only want to generate leads, social media is much more rewarding than creating a website.

How much business do you want?

If you intend to start an online business, please add your comments to Start Information Marketing with Business Purpose. Once we have a business purpose that makes sense, I will generate a page similar to this. Rather than lots of explanations, it will have specific questions that need to be answered before you can move to the next step. If you want to move faster, add your comments to Fast Tracking Online Business Ownership