People come to me every day and tell me they “have a great idea for an online business. Nobody has ever thought of it and it would make a really great website”.

I say “That is so exciting! What is your revenue model?” (Then I get £1 every time the answer goes like this…)

“Well… erm… we’re not really sure about that, just yet, but we’ve got all the design done and we hired an accountant…”

I AM GOING TO BE RICH!

More seriously though; I understand that the web is an extremely exciting, democratising medium, and so it should be. Business and entrepreneurialism has often been curbed or concentrated within social groups that have independent funds for investment, or the contacts to drum up private investment. An internet business can be born from little investment and in many ways this levels the playing field.

All this is for the better; however on the downside there is a lot of un-tempered enthusiasm regarding web business, combined with a lot of ego, legend and deliberate misinformation.  True, the web has been a goldmine for many, and many barriers to participation are broken down by this medium; but that does not mean that an online business plan should be any less thorough or intangible than a traditional business plan.

Please, don’t throw any more money away until you are aware of the following…

There could be a really good reason that nobody has ever done it before!

Something about the romanticism of the web; the way it connects people from across the globe and from all walks of life in realtime – makes some people lose all common sense. Just because the web can make something technically possible does not mean that it is useful.

I like to do a little old-skool sanity check when thinking about online business proposals. Imagine if you saw a card in a newsagent window, with this particular product, would you buy it then? Would anyone? Enough sales to make a business? Just because the web makes it easy to connect the people that make single plastic limbs, to the people that have amputee mannequins doesn’t mean you should.

TIP: Just over 30 million people in the UK are online. 90% of them search on Google. Use Google Keyword Tool, to find out how many searches a month there are for your product or idea, as an approximate and free barometer of public interest.

Build it. They will come.

This statement is a quote from one of the three or four-hundred Kevin Costner baseball films. In Field of Dreams, Costner is encouraged to build a baseball field (pitch? whatever?) so that dead baseball players will turn up to play there. (So if you’re still with me, the formula is… believe + build = dead baseball players.) A lot of people say this about the web. “Build it. They will come.” In my experience they are the same people.

Even if they are right – a handful of dead baseball players doth not an audience strategy make.

3. Have a Commercial Model from the Get-Go!

You wouldn’t put all your life savings into one investment account unless you had a fairly good indication of how it may return, right? So why would you invest often thousands of pounds into creating a website without any idea of how and when it might be profitable?

[Aside – Of course there are times when audience comes before business model, and that’s great if you’re VC funded or otherwise keeping food on the table. If your objective and desire is to create an online business, then your audience strategy and business strategy are inextricably linked.]

An exploration of the multitude of web business models is an enormous topic, and one I’m going to follow up with.  In the meantime, the most fundamental advice I can give is to establish and research your expected revenue per capita. Here’s a couple of ways to contribute to this.

• Use a specialist commercial web consultancy to assist you with your strategy
• Phone your competitors business development team and pretend you are interested in a partnership of some sort – see what you can glean
• Find any publicly listed web business with a similar business model and read their financial reports. It’s all there
• Transpose real-world learning’s to your online idea, subtracting the different costs of sale encountered here (site build, site hosting and maintenance, site development plans, traffic acquisition costs)

Before embarking on your online business venture I hope that you will consider and consult as much as possible before starting to invest. Our industry is still in its’ infancy and there are new developments, ideas and business launched every day, that revolutionise the way we shop, the way we find and listen to music or how we donate to charity. Its’ an exciting and evolving time, so do jump in with both feet. I mean both feet; a level head and a truck load of research.

1. Introduce an aggressive analytics procedure.

It matters not that the revenue you generate goes forward to support a cause, as opposed to generate a profit. An online donation is still a conversion, or ‘sale’. Analyse your traffic on a regular basis (at least monthly) to identify benchmark performance metrics and trends, and adapt accordingly. Using products such as Omniture SiteCatalyst, or Google Analytics (free), you can set your own criteria as to what is a conversion, though I would suggest the key conversion would be the completion of a donation transaction. You should on a weekly or monthly basis, look at the absolute number of unique users, by referring source of traffic and total number of donations for the same period. If you divide the total number of donations by the total number of unique users (by referral source) you will know your average conversion rate for the time period. You can then analyse each referring source individually to assess if that source provides quality traffic, i.e. traffic that converts at a rate equal to or higher than average conversion rate. If you have a spreadsheet whizz (or if you can afford a data analyst in your organisation) have them put together a pivot table with other comparable data, such as average donation value (site-wide), compared to average donation value by referral source. In terms of using the data, such analysis will show you how and where to focus your traffic generation efforts. If, for example you discover that a medium sized source of traffic, has a conversion rate half of the average and a low donation value – you know you could be using your time more efficiently elsewhere, by growing a smaller, but more efficient referral source.

2. Online advertising (for free).

It goes without saying that one of the best ways to attract online donations to your cause, is to advertise your cause to people online! As a charity you get to do this for free! Yes. Seriously. Free. Not everywhere of course, but on Google AdWords for example. Google Grants is the scheme that allows registered charities to apply for a free grant, of $10,000 a month to spend on AdWords. Of course there is a heavily scrutinised application procedure to avoid abuse of this scheme, and it does take a very long time to be approved. However for $10,000 a month to spend on one of the most responsive and efficient forms of advertising (search engine marketing), with the world’s largest search engine, who can’t wait a few months? Find out more about Google Grants.

Additionally; to raise brand awareness and profile you should take advantage of free advertising opportunities that exist with some of the display ad networks. AdJug, for example is one of the fastest growing, open and transparent ad-exchanges in Europe, serving over 1 Billion ad impressions a month, and offering free inventory opportunities to a different charity each month. Contact Nikki Staveley to find out if you qualify.

3. Use Social Media to Increase Donations

As a charity, you naturally have an engaging message and purpose that will strike a chord with many people. Social media is therefore a perfect and free method of interacting with your supporters, finding and attracting new supporters, and of course generating traffic and donations to your website. What is social media? In this case we’re talking about online media which allows members to link up, share information, establish a profile, contribute stories and develop two-way communications. Such examples of social media that facilitate this behaviour are Facebook, Twitter and Qype. Let’s be clear however that there are different ways of using social media; i.e. advertising on a social media outlet, or being an active and valuable member of a social media outlet. We’re talking specifically about being an active and valuable member of a social media outlet. As the first stage of the buying cycle is ‘awareness’, using social media to increase awareness of your brand, cause, values and work is an absolutely invaluable opportunity. Posting stories, interesting facts and time-sensitive campaign information is easily possible using social media, and all serves to engage your community of fans, friends and followers with your core message. Our recent work with GlobalGiving UK, a charity that supports real people and projects at grass roots level uncovered some incredible statistics and a case for expansion of social media strategy. Our analysis showed that Facebook and Twitter featured highly in the top referring domains for GlobalGiving UK traffic, and most importantly that this traffic resulted in conversion to donation at a far higher than average rate. In the case of Twitter this was twice the average conversion to donation rate, and with Facebook – even higher still.

Follow @GlobalGivingUK to see how they are communicating their message to Twitter friends or become a fan on Facebook.