Why Most Online Businesses Fail

Why Most Online Businesses Fail
After completing 18 years of selling online, I am in a reasonably good position to talk about why most online businesses fail and also why just a few of them succeed.

The typical nature of any business usually revolves selling of some products or services to consumers or another business.

Online businesses are generally similar to offline businesses. Websites advertise, market, sell or trade products or services to their visitors or other websites.

Starting an online business is often seen as a very lucrative venture and most people readily invest in their own website looking to 'easily' and quickly start making money online. However, they soon realize that it isn't as easy as it seems.

Most end up closing down their eCommerce ventures while some choose to try, try till they succeed at the same. Just a few actually end up making more money than they invested into their online businesses.

Every week, we see or hear about some new online venture seeking or acquiring funding from high profile venture capitalists and crowd funding enthusiasts.

Once again, almost 90% of these funded ventures also end up failing. That is, 9 out of every 10 funded websites, apps, etc. end up making losses thereby rendering the entire venture an utter failure.

The fundamental issue connected to online venture failures is a great misunderstanding about what makes a business money and what doesn't.

The reason most online businesses fail is not because they don't have a terrific product or service to sell but because they just don't realize the fundamental reason behind potential customers buying their product or service on offer online.

Before I explain this I will share an example of a 'rather' conventional business in India. Hopefully this example will help you understand this post much better...

Around every street corner in a big city like Mumbai you will find a tea seller or someone who is referred to as a 'Chai Walla'.

These tea vendors are popular right now since our PM Narendra Modi was once supposed to be a Chai Walla himself so it makes sense for me to use this example to drive home an important point here.

After reading several books on marketing and sales, I started taking a keen interest in small scale businesses where perishable products and services were sold every single day.

That is the reason why I would spend considerable amounts of time on studying street food sellers in Mumbai.

My observations of a Chai Walla near my office at Andheri Station (West) was an eye opening experience for me since I got to know that some of these tea vendors actually make Lakhs of rupees each month.

You might think that I am joking about them making that much money but it would be wise for you to observe one of them for an hour or more so that you understand a bit more about the financial success of their little tea stalls.

When I observed the Chai Walla at Andheri Station I carefully counted how many cups of tea he sold in an hour during the day.

After counting the number of cups he sold per hour on 4 different occasions I was able to find out more or less accurately how much money he ended up making each month.

The Chai Walla sold over 150 cups of tea per hour. And approximately 1200 cups of tea every day.

Maybe more, maybe less. But I am taking the hours between 8am to 8pm into consideration here.

I have taken out 4 hours from these 12 hours because less cups of tea were sold between 12pm to 3pm.

Let us assume that this particular tea vendor sells 1000 cups of tea a day. Each cup of tea (or Cutting Chai) costs Rs.5.

The total production cost per cup is Rs.0.80 paise. Leading to a total profit of Rs.4.20 per cup of tea sold.

Basically, at the end of the month this particular Chai Walla ends up making a profit of over 1 Lakh rupees.

Not bad for a small tea vendor on a crowded street in Mumbai.

I had the good fortune of renting out an office (for a year) above a Wada Pav stall.

In fact, the owner of this stall was also my landlord and it was his place that I was leasing out for my classes on weekends.

During the year that I was there I started observing his little business more closely to help understand how many Wada Pavs he sold each day.

His hours of operation was only between 5pm to 8pm, from Monday to Saturday, and closed on all major bank holidays.

Yet as per my discreet but focused observations he sold over 2000 pieces of his snacks in those 180 minutes of running his business every single day.

Since the average cost of each snack is Rs.10, he makes Rs.20,000 per day.

Not per day, but in 3 hours, since his shop was open only between 5pm to 8pm.

What a cool business he had created for himself.

You can read the post I've written about him on 'How A Street Food Vendor Makes 16,00,000 A Month Working 3 Hours A Day'.

These two examples I have shared in the paragraphs above are important to help us understand why most online businesses fail and why just a few of them succeed.

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Google Adsense is an online program that helps online business owners make money online by publishing ads that Google serves on their websites based on an amazing technology which displays text and image ads after matching the page content, visitor profile, etc. along with available ad inventory and displaying only those ads which are relevant to the person visiting that website at that particular time.

The result is highly effective advertising that generates much higher click-through rates in comparison to any other form of online advertising.

For example, let's say you are reading an article about "making money online" then if Google Ads are running on that page you will notice that the ads that are shown to you are directly connected to making money online.

Sometimes, the ads that are shown might be connected to particular websites you visited during the last few days or weeks.

So, let's say, you visited a travel packages websites to book hotel rooms for an upcoming family vacation.

Then, you will notice that the ads showing on that article related to making money online are showing hotel room booking sites such as Agoda.com, Booking.com, MakeMyTrip.com etc.

Obviously, the power of such sensible advertising is much greater than any other forms of advertising currently being shown online.

Google ends us making a few Billion dollars each year via their Adsense program and Millions (estimated) of website owners get a decent share of this ad revenue for themselves.

I've written a post about the lessons I've learned while making more than $30000 thanks to Google. You can read the post '10 Lessons I Learned From 30 Articles That Made Me $15000' for full info.

Google Adsense has paved the way for most other ad programs online. Now you will find that Facebook, Yahoo, Bing, etc. all use advertising technology similar to Google Adsense. And they are making tons of money too.

Wait a minute though. Maybe I am drifting away from the main topic or so it might seem to you.

This post is connected with telling you about why most online businesses fail and the reasons for a few of them succeeding.

The first part told you about the Chai Wallas and the Wada Pav sellers. This part shares a bit about Google's way of displaying ads online.

Both pars are directly connected with the main topic so don't lose the plot now or else you will not learn the lesson.

Over the years, I have experimented a lot with varied online businesses and most of them ended up losing me loads of money, time and effort.

Each time I failed I was more determined to succeed on the next venture but it never quite worked out in my favor.

I finally realized that I was doing something terribly wrong.

Just like other online businesses I had something to sell but I was unable to sell it enough times to help that particular venture make enough money.

There was something missing in my business plans and after 10 years of being in business I finally understood what I was doing wrong.

I realized why most of my online businesses failed and why over 90% of other net ventures failed as well.

We were all goofing up on one of the most important aspects of any successful business.

And after 9 years of trying almost everything that I could I finally discovered what was the missing ingredient in the recipe for online business success.

It happened one day 9 years ago. It was a chilly evening in November just a few days after I had returned from a week's vacation.

I was just sitting there near the window looking outside and dreaming away when it finally struck me what was wrong about the way I was doing business on the web.

Before I share with you this 1 major secret let me ask you for a little assistance with something right now....

If I told you to bang a nail into a concrete wall with your bare hands then how long do you think it would take you to complete this particular task?

Please read the above question again if you don't understand what I am asking you to do.

All you have to do is bang a nail into a concrete wall in front of you. But you can hit this nail into the wall only using your bare hands.

How long do you think it will take to bang this nail into the wall?

You might think I am crazy for asking you to do something that's almost impossible.

Banging a nail into a wall using only your bare hands might take hours and you might bleed to death in the process.

Now, let's say I give you a small knife to help you hit that nail into the wall.

Do you think you can bang it into the concrete wall now?

I don't think so. Let's say I give you a piece of string, a fork, some oil, a piece of rubber, a glove.

Do you think you can bang a nail into a hard concrete wall with any of these items?

Of course not. And if you somehow manage to do it then it is bound to take a very long time.

Let's hand you a hammer now. How soon do you think you can have that nail into the wall now?

Finally, you heave a sigh of relief. You tell me that you can bang that nail into the wall in just a few minutes. Maybe less.

This short illustration is most important to help us all understand where we are going wrong when it comes to selling on the internet.

It also reveals what we need to do to help change things almost instantly.

In the final part, I will share with you the main reason why online ventures fail and what you can do to ensure that your web business does not fail from now on.

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In the last 2 parts I shared with you a bit about Google Adsense, hitting a nail into a wall, the Chai Wallas, the Wada Pav sellers, and a bit more.

You are now reading the final part in this series.

I wasn't completely honest with you though. In the last part I mentioned how many of my online businesses failed miserably.

However, that was true for all my online ventures except for one of them.

This particular online business made me enough money to help fund all the others put together.

This solitary online business helped pay the bills and put good food on the table. It also helped me live a reasonably good, relaxed and comfortable life where I find myself waking up whenever I feel like, doing whatever I want to, and living the life of my dreams.

The online business that succeeded for me was (and is) Savio DSilva Classes (or Enoma).

In this business I sold our soft skills training courses and counseling services to thousands of people living in every nook and corner of the world.

And, we did it without spending even a single rupee on advertising. Yes, you heard that right.

We never advertised our courses or services anywhere else (apart from our own sites) during the last 18 years.

But, yet, we managed to train thousands and counsel hundreds.

It was this online business (SDC Enoma) that (also) helped me understand what I was doing wrong in all the other businesses I was trying to succeed in.

You might have heard of Flipkart.com. It is a website where you can buy books, clothes, computers, cell phones, etc. and have it delivered straight to your doorstep.

In fact, for most of their products you can even pay for what you ordered when it is delivered to you.

I have bought dozens of things from their website and must say that no other company can match their efficient delivery services and overall product quality. FlipKart is a runaway success on the web. And is quickly becoming the world's number 1 site for shopping.

But there are thousands of other websites similar to Flipkart.com but only a handful of them achieved even 1/10th the success that Flipkart has managed to achieve in just a few years.

Colgate sells Billions of dollars worth of tooth paste each year.

Even the company that sells 10 times less tooth paste than Colgate makes Millions of dollars each year.

What's even more fascinating to know is that there is less competition in such markets.

Overall, there are less than 30 tooth paste manufacturing companies in India.

Diapers, shampoos, soaps, tampons, hair oils, and other personal hygiene and care products sell in the Billions too.

After reading about successful online businesses for years I finally understood what was the primary reason for their success and why everyone else was failing no matter how hard they tried.

It hit me that Winter's evening in late November while I was daydreaming by the window.

And it all became so clear to me then that I was wondering why this secret had never occurred to me before that day.

I fully understand that you have been a faithful reader for reading up on the earlier two parts and now this one as well.

I know that you want to know why most online businesses fail and what you can do to ensure that your online venture succeeds.

So I will not beat around the bush or waste any more time in revealing what this is.

Businesses that meet the needs of men and women succeed and those that don't do not succeed.

You might want to read up on my post titled "The Difference Between Needs, Wants And Desires" to help you understand what our needs are.

Basically, companies that sell products and services that people need have the biggest chance of making loads of money online.

And companies that sell products and services that people want (but don't need) usually end up failing.

A need is most important for a man or a woman. A want is not that important to have.

However, there are few examples of businesses online that have succeeded by selling products and services that fit into the 'wants' category but you will soon realize that those websites don't last too long or cannot maintain their success for a long time.

It is important to note that the needs of men and women in today's world also include communication devices and gadgets.

Some other wants have also become needs in the modern world. Similarly, some needs have now become wants.

Let me give you an example of 2 websites I manage that fall into both these categories....

Gobog.com is a website that provides mainly information about or connected to life enrichment and personality development.

Unfortunately there are already thousands of websites online that provide information about these two topics.

Yes, you will definitely find wonderful articles, musings, etc on this site. We have a small but efficient team of content writers who ensure that the information presented to you is of a high quality.

However, the chances of Gobog being a successful online business are fairly slim simply because we are serving the wants of people here but not meeting their needs.

There might be some pages on this site that help meet your needs but overall Gobog is doomed for failure.

Also, our chances of being read by Millions of readers is practically impossible since there are virtually over 1000 pages online related to every single topic we write about here.

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It might seem odd (and funny) for you to hear the Founder of Gobog saying that his business is destined for failure. But that is just how it is.

At the same time, I have found a simple way to ensure that Gobog can help another site of ours succeed thus all hope is not lost on this particular project of ours.

The other site that is reasonably successful is Osovo.com.

The name of the site is so catchy and easy to remember but yet I am listing this here simply to help you understand exactly what I have said a bit earlier in this post.

If you visit the site now then you will find that it is a tiny website with just a few pages.

One is the homepage, the other pages are forms. The site offers audio books for sale.

Gobog already has over 1000 pages online but it will possibly never be able to make as much money for us as Osovo does.

Our audio books on Osovo fulfills a need of an educated adult looking to enhance his or her quality of life while Gobog simply provides information.

The audio books available on Osovo are directed towards a particular need of every human being. To live a better life through effective time management, goal setting etc.

The audio books have already been listened to by thousands of people either in the classrooms of SDC Enoma or in audio book form itself.

To help you understand the difference between Gobog providing information and Osovo fulfilling a need, I will end this post using the examples provided in the first part....

Remember the Chai Wallas and the Wada Pav sellers?

Well, almost all of them succeed at selling cups of tea and Wada Pavs because they are meeting one of the most basic needs of men and women all across the city of Mumbai.

It might sound a bit weird to you if I tell you that the Wada Pav seller in Andheri West (where I had my weekend classes) makes more money than most restaurants in the area.

But as you will eventually find out it is absolutely true.

Google fills a need. It provides all the information on the web within a few seconds.

It helps us find the information that we 'need' whereas the sites that actually provide the information becomes a want.

That's why Google is a successful business. Unfortunately, the websites that actually provide the information that you searched for (Gobog as an example) will probably never make as much money as Google does.

Rediff.com is a big success online. They have lakhs of pages of content housed on that one website but do you think people go there for that content?

Of course not, almost 90% of Rediff's visitors visit their website every single day just to read their email.

Email is their need. The additional stuff that Rediff provides is not a need.

Facebook fully satisfies the human need to connect with others around them.

Twitter does the same thing. Both are highly successful ventures that do not even sell anything.

They make money because they help promote your products and services for a small price.

Wikipedia is among the top 10 most visited websites online but yet it fails to make more money than sites ranked hundreds of spots below them.

Quikr.com, OLX.in, Zomato.com, etc. all make much more money than Wikipedia does.

Even websites ranked between 1000 to 2000 in the world end up making more money than Wikipedia.

Wikipedia.org is an excellent example of an online business that only gives the information you want but does not provide you anything that you cannot get on thousands of other websites.

Bottom line, successful online businesses fill or meet the needs of men and women.

Sites such as Gobog can help advertise or promote other successful businesses but on her own Gobog is doomed for failure.

From today, build an online business that meets the needs of people and you are almost certain to succeed.

And it is your job to ensure that businesses that meet the wants of people should either be shut down or used to promote only those businesses that meet the needs of people.

Better still, figure out how you can turn your 'failing' ventures into profitable ones by focusing on filling up a particular need of human beings.

Enough said, read this post a few more times and send in your feedback through the feedback link provided at the bottom of this page.

There are virtually Millions of websites online but just thousands of them end up making enough money to be called a successful venture.

I gained a lot of wisdom that day while I was daydreaming by the window.

My life changed because I finally knew what I needed to do to help my online ventures succeed.

Thanks so much for reading. I appreciate your time. I hope that you gained something of value in this series.

If you did then please help pass on the message by sharing this post with your family and friends.

Savio DSilva
Savio DSilva
Audio Book Creator. Life Coach. Soft Skills Trainer. Counselor.
Meditation Practitioner. Food Technologist. Frugal Marketer.

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Published: October 31st 2017.

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