Three e-business myths debunked

Despite several high-profile e-commerce failures, the Web isn't going away. Here's what every small business owner needs to know before jumping in.

Business owners like me get depressed reading the headlines. Jobless claims are at a five-year high. Once-high-flying stocks are now trading for dimes. President Bush says that "thousands of small businesses...pay taxes at the highest marginal rate." It's enough to give me the shakes, even without my morning coffee.

It got worse when I read a recent Business Week story, which stated that for every $1 in Web revenue last year, e-businesses logged $1.49 in Web-related expenses. Even more grating, and hitting a lot closer to home, was where that $1.49 went: Web consultants got the lion's share ($0.63) while venture capitalists got their pound of flesh in the form of $0.34. As a "content provider," I supposedly pinched just $0.03 of that largess. Talk about depressing.

YES

The fact is, during the biggest boom in technology history, the media's been shoving at us a generally gloomy outlook. But don't believe the hype--the Great Dot-com Disaster's spawned a slew of ideas that, for small business at least, are pure bunk. I've nailed down the three most amiss myths that we've been fed these last few months.

Myth Buster: Don't let the doom-and-gloom of over-financed, over-extended dot-coms muddy your decision about moving into the demi-dot ranks.

High-profile losers like Kozmo.com (consumed $240 million, went bankrupt) and Pets.com (over $80 million spent, out of business) made big headlines, but the number of small business Web sites is growing. Last year, the percentage of small firms with a Web presence reached an all-time high of 27 percent, according to a Gallup Poll.

Small-businesses dot-coms are the "demi-dots" of the Internet. (Kara Swisher of the "Wall Street Journal" calls them "ants," as in the parable of the grasshopper and the ant, but that name smacks of follow-the-leader behavior, something small business owners definitely aren't good at.) Unlike their big dot-com cousins, demi-dots are flourishing.

Why? Because the only thing small businesses share with those behemoth e-tailers going belly-up is the ".com" at the end of our URLs. We're not trying to muscle into the nationwide territory long held by established companies. And we're not spending King Kong-sized piles of other people's money to get online, so we're not pressured by venture capitalists to instantly turn an e-profit.

And small businesses are making money on the Web. The National Trust for Historic Preservation, which monitors the health of urban and small town business districts, says that Main Street merchants with a Web site report an average sales increase of nearly 13 percent since launching their e-efforts.

Myth Buster: Not every small business has to sell online to make the Web work.

In 2000, everyone was talking about buzzwords like e-commerce, e-tailing, and e-sales. Now, with bad news about e-commerce dot-coms blaring at rock concert levels, there's a tendency to associate their ills with small business e-selling efforts--and from there, it's just a quick jump to disparaging e-everything, as if the Web has the plague. That's wrong, but in fact the whole e-sales angle is overrated for small business.

First of all, e-commerce is still relatively rare for small businesses, even among those companies already online. Most analysts estimate that no more than one in four small firms that are online are actually selling stuff there. (For more, read this Preservation Frontline survey.) Secondly, businesses both large and small that get the most press are those selling exclusively on the Web. That's misleading, since to most small businesses, the Web is simply one more sales outlet --pure-play Internet small businesses are a minority of firms online and selling. It can be lucrative, certainly, and for some--like the thousands of newly -minted businesspeople who shill their wares on eBay and other online auction sites--online selling is actually the germ of their entrepreneurship.

But e-commerce is not the only way to get something out of the Web. According to the Gallup Poll, the percentage of small businesses establishing a site primarily to sell products stayed stagnant in 2000 at 13 percent, while the percentage of those who used the Web for other priorities, such as marketing, skyrocketed last year over 1999's numbers.

Myth Buster: E-sales may be the Web's sizzle, but the steak's behind the scenes--and the Internet is no less essential than a roof over your business.

If you think the Web is just this year's way for workers to waste time on sports, porn, and jokes-of-the-day, you're missing a big part of the picture, and maybe giving away the store.

More small businesses are starting to agree. According to a study by The Kelsey Group and ConStat, Inc., a quarter of the small businesses surveyed are using the Internet to integrate and streamline their own operations.

This, not e-commerce, is where I see the Internet paying off most handsomely for small businesses. With the Internet acting as both infrastructure backbone and software delivery system, small businesses finally can access--and more importantly, afford--the kind of operational efficiencies and integration long available to large- and medium-sized companies.

Customer relationship management (CRM) tools are a good example. Such software tries to integrate all the tasks and technologies that a business uses to attract and retain customers and prospects. Think of it as contact management, sales automation, and customer response all rolled into one. CRM hit the big leagues long ago, but most small businesses can't afford the huge costs of custom-written software, or even the hardware needed to implement it.

The Internet, however, can dramatically cut those costs and give small businesses entry into this operational efficiency tool. First, the Web lets small businesses skip setting up expensive servers. As long as the business's computers can access the Internet, they're connected not only to each other, but also to CRM software sourced from application service providers. Second, the economies of scale made possible by the Internet price CRM (at least entry-level versions) within reach of small businesses. NetLedger and Microsoft's bCentral both recently began "renting" CRM-style software over the Web--NetLedger rolled it into its new $99 per month 1 System plan, while bCentral charges $30 per month for its Customer Manager module. (I've been looking at both lately, and will report back my take on how such software can help a small business, in the next few weeks.)