mistakes that bring down online small businesses

5 Reasons Online Small Businesses May Collapse And How to Prevent That?

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mistakes that bring down online small businessesWho would have thought a simple online mobile recharge and bill payment platform could someday grab the attention of the very famous American business magnate and investor Warrant Buffett? Definitely not Mr. Vijay Shekhar Sharma, the Paytm founder! Over past few years online small businesses have turned so big that it compelled the Oracle of Omaha (Warrant Buffett) to change his decision of not investing in the tech space.

Now the buzz is Mr. Buffett’s investment firm Berkshire Hathaway has bought an approx.. 4% stake in the parent company of Paytm One97 for a whopping INR 2,500 crores. Sounds too good to be true, isn’t it!

If success stories like Paytm are encouraging you to take the plunge into the unfamiliar world of online small businesses, then prepare yourself by checking out few important (and yes shocking) statistics.

  • More than 50% small businesses fail to move beyond their fourth year. And for wannabe entrepreneurs focusing on internet business, the disappointing news is that almost 90% online start-ups scrap their projects within 120 days of launch, oh yes, you hear it right- one hundred and twenty days!
  • Most small businesses fail due to insufficient cash flow, incompetency, inadequate experience, little business knowledge and lack of managerial skills.
  • An approximate 70 percent small businesses rely on personal savings to fund the setup. So if your online small businesses fail, they are most likely to deplete your savings too.

Still ready to make your move? Then continue reading to know about the 5 horrible mistakes to avoid to ensure success of your internet small business.

What Are The 5 Reasons That Can Bring Down Online Small Businesses?

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You Fail to Understand the Needs and Demands of Targeted Customers

Take a look at the largest internet companies and you realize that they are actually superb in understanding user behavior. Those 40% small businesses who fail are the ones who fail to analyze what their target customers really ‘WANT’!

When it comes to online small businesses, the easiest customer analysis strategy that can be adopted is conducting an online survey and then smartly using the social data. If you are socially active with dedicated fan following, then the customer analysis and segmentation definitely become easier.

Suggestions – For beginners, few customer analytic tools worth trying within limited budget are Zoho CRM, Hootsuite, and Kissmetrics.com. 

You Are Running An Internet Small Business Without A Website

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During my interaction with several small business owners who operate online, I found out many of them are operating without a website! When asked, they cited reasons like high cost of designing and maintaining a website, additional cost to keep it updated on a regular basis and so on.

Then many have this excuse that only e-commerce owners need website, whereas for other businesses a website is not a necessity. What a wrong notion!

The problem is they fail to realize the basic purpose of maintaining a website. The online portal is akin to maintaining a virtual office that customers can visit anytime to get detailed information about the company, and its business activities.

Suggestions – Website design and maintenance is no more a costly affair. There are many freelance web developers who can take care of your small business website needs at affordable prices. Check out platforms like upwork, freelancer, or LinkedIn to connect with competent freelancers. Don’t have the fund to hire a web designer?  Plan a self-hosted WordPress Site, after a little bit research and study.

You Are Not So Good In Managing Cash Flow

7 Free Accounting Software Packages and Why They Are Indispensable to Smoothly Run a Small Business!


I really love this famous quote of Richard Branson, “Never take your eyes off the cash flow because it’s the life blood of business.” Yes, be it a brick-and-mortar shop or an online store, a business should be operated like a BUSINESS with a sharp eye on the operating expenses, overhead costs, additional expenditure and so on.

If your business financial knowledge is zero then try to improve it rather than finding solace in words like “don’t expect profit in the first three years of business.”

Even if your business is not generating profit, you simply can’t overlook the steady inflow and outflow of business cash. Once you get comfortable with the cash flow, you learn the significance of minimizing operating expenses, and making tax deposits in time.

Suggestions – Use an accounting software like Tally.ERP 9, Zoho Books, MARG ERP 9+ Inventory & Accounting Software or MProfit to simplify the process.

You Are Running Online Small Businesses Without Internet Marketing Strategy

Have you Analyzed the Drawbacks of Your Internet Startup Idea

Your internet business should be prominently visible in this highly crowded digital world. If your website is appearing on the fifth or sixth page of search engines like Google then there’s little chance customers will give it a second look. This is when a powerful internet marketing strategy can come to your rescue. However it is the trickiest part of running an online business.

A sound digital marketing plan should be devised taking into account several key areas like SEO-friendly content, email marketing, social media marketing, website analytics, brand management, and a lot more.

Suggestions- Should you hire a digital marketing expert or do it on your own- take the right decision after carefully considering the pros and cons. Try LinkedIn to find expert digital marketers.

You Are Not Committed Enough

Ask yourself, why do you want to start an online business? Is it because you believe

  • It’s easy to set up and run online small businesses at your leisure time?
  • An internet business is the easiest avenue to get rich quick?
  • Such a business is much more exciting than the boring 9-5 routine? Or
  • An internet setup doesn’t need significant investment?

If these are your reasons to get started, then stop right there! Your enthusiasm is most likely to fizzle out the moment you start facing rejection and criticism.

Yes, this is what happens with new entrepreneurs who start an online business with a rosy picture in mind. They don’t prepare themselves to commit long-term and learn from the failure. Often they end up losing patience, interest and yes their precious time and money.

Suggestions: Don’t start online small businesses because they are going to make someone else rich! Start an online venture only if you feel strongly about it, only if you are mentally prepared to commit yourself long-term.

Seek a mentor/partner or even a friend who is ready to listen to your problem, and is willing to motivate and guide you through the crisis. Social media, industry meetups, networking events and mentors’ platforms (e.g. Find a Mentor) are few easy ways to find the right mentor/partner, matching your industry.

The Summary:

What are the 5 terrible mistakes that can bring down your online small business?

  1. Failure to understand the needs and demands of targeted customers
  2.  Running an online small business without a website
  3. You are not so good in managing cash flow
  4. Running an online small business without an internet marketing strategy
  5. You are not committed enough

To conclude

In this highly competitive business world, you just can’t afford to take online small businesses casually because after all IT IS A BUSINESS which needs to be run like a business and not a side-hustle. Often a simple mistake can bring down the curtain on your dream venture. Don’t let it happen!



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