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10 Mistakes You Should Avoid While Starting An Online Business

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We have positively reached the digital age. Services and products that we always needed, required us to hunt down the provider either through reviews from people we know or through advertisements through print media. This old school practice is not the case now. With smartphones, notebooks and tablets, things are required to be a few clicks away. Most successful businesses have always been able to evolve and adapt to modern times which has successfully resulted in increased profits, development and longevity. Any business, depending on the category or sector of business it falls under always finds tricks and turns for it run smoothly.

One such accepted, popular trend is to tap into the ever-growing online market. The incentives of universal reach and an increase in the volume of sales from operating online is just one of the many pros that enable a business to take this route. Trends indicate that running a website or a business online is profitable for obvious reasons and several key figures in the online space are a testimony to that fact. While only a few online businesses reach the summit, several businesses falter and fail along the way because they made mistakes that could have been avoided or the online business failed to address problem-solving techniques efficiently. We should learn from our own and others’ mistakes. From these instances, we can learn and educate ourselves in order to avoid running a business operating online into the ground.

Staying Afloat

Every business always focuses on ‘what is the right thing to be done?’. History has shown that founders overlook the mistakes that are easy to make when starting a business online. Ever wonder why an online business suffers and probably shuts down? It is because online businesses fail to acknowledge critical mistakes made in the past by other companies or websites. Generally, people involved should educate themselves before starting a business online in terms of research, complying with regulations and how to go about starting an online business. Listing out effects of decision making, quick damage control and staying in a state of denial is unacceptable. Apart from knowing these important aspects, failures serve as examples to recognise and avoid, in case you plan on starting or have already started a business online.

Keeping these in mind, I’ve come up with a list that online businesses should consider when starting an online website.

What not to miss while starting a business online

1. Ill-advised Naming Of The Online Business

The name of a website is one of the most critical aspects of a business and hence it occupies our first spot on this list. The site name is something a customer or a user remembers and thus, should be made easy to remember. The name of a website shouldn’t be misleading in terms of what the company does. Online portals are available to check the names of a business available for use, along with its price. If you are looking for a good name, then luck may have it that all the good ones are taken, but with a little brainstorming and help, your website would have a decent name in no time. To further elaborate on this, please check out our article on how to choose a name for a website. BBC has covered this extensively as well.

2. Not Registering An Online Business

If a company is running an online business as a sole proprietor or as a partnership and makes less than INR 10,00,000 revenue in a fiscal year, then the option to register the business is vested in the proprietor or founder. If a company is registered as a limited liability partnership, as a One person company, private limited or public limited, then registration is mandatory in India. It is important to note that in order to accept payments for your website, it is important to register an online business irrespective of the form the entity takes. Registration also serves as proof of a company’s existence and acts as a legal record in case of disputes that arise thereof. Thus, initially a business need not be registered, but in order to make sales, grow the business, accept payments, prevent competitors from stealing any Intellectual Property Rights (IPR), etc. the business will need to be registered under the Companies Act, 2013.

3. Use Of Contracts

Contracts legally bind two or more parties to an agreement or undertaking that was previously signed and acknowledged by both the parties at an earlier date. Every relationship an online business enters, it should establish a written and formal relationship in the form of contracts. Whether it is the guy who sells your business security, food or is a third-party vendor, a contract protects the interests of the parties attesting to it. Contracts have legal implications as well and can be upheld in a court of law. Most businesses do make the best use of contracts, although the provision of a contract does not guarantee that the contract will be duly carried out. Thus, it is important to read the terms and conditions of a contract.

4. Not Securing Intellectual Property Rights

IP rights are generally listed as assets on a company’s balance sheet and include processes in producing goods and services, logo designs and company technology. The biggest sin for a company is to not secure IPR, in case the website does possess intellectual property. Though it is not mandatory, it might as well be made mandatory for an entrepreneur or a founder when starting his business online to protect his interests. Patents, trademarks, copyrights are tools used to secure intellectual property rights. No other website will be able to use the same content, designs, processes or technology once it is protected with the use of IP rights.

5. Not Having A Privacy Policy

A privacy policy is a legal requirement and is used to protect the interests of a user or customer by disclosing to a user the type of information collected, the purpose of collecting such data, which third-parties will have access to such data and how will the data be disclosed.

All companies that collect user data are formally required to have a privacy policy on their website that a user can view before making the decision of using a website. If any person feels that he/she has been wronged, misinformed, caused intentional loss or gain and/or subject to negligent security practices by a website, such a person is liable to compensation. To get a better understanding of privacy policy, do take a look at our previous article on WhatsApp’s latest privacy policy.

6. Not Getting A Disclaimer where required

A disclaimer is a statement made on a website that denies responsibility for what information is provided on that website. It secures the website owner against risk or uncertainty. A disclaimer can be used for a user to waive their right to take legal action, or mentioned in order to prevent injury or damages, monetary or otherwise. A user must be able to view the disclaimer before using a website. In India, disclaimers carry legal implications and not having one could subject your website to severe legal risk. Though again it isn’t a compulsion to have one, prevention is better than cure and thus it is better to have a disclaimer even if it isn’t required. To get a better understanding of how disclaimers work, do check out our article why does a Website need a Disclaimer.

7. Not Registering A Domain

Websites like BigRock, Netlynx and Godaddy offer services such as domain registration. One can just look up at the list of available domain names and select their desired domain name by registering and paying for it. No two domain names can be similar, each domain name has to be unique. A domain can be registered for a year and up to ten years. Upon expiry, a domain can be repurchased or renewed. The same service providers also provide domain hosting services which are essential so that web files can be stored and accessed on the internet.

8. Complicated, Unfriendly Design

A website should be designed to engage a customer apart from attracting them to a website. Website design consists of two important aspects namely, the user interface (UI) or the device a user uses to access the website from and user experience (UX) or the pleasure obtained by the user from the use of a website. Online business that is unique or has a seemingly brilliant product or service may still fail because of bad user experience, long refresh or load rate of a web page, too many advertisements, inaccessibility of features or because of just a plain boring design. It is important from a founder’s perspective to have a qualified designer do the website UI/UX designs. Several sites offer templates so that one can build their own website from scratch upon a payment for use of services.

9. Neglecting Marketing And Social Media

As businesses have become more popular online, so have advertisements, promotions and the power of social media. Online businesses that have taken advantage of social media and online marketing have sustained over longer periods than most companies that have neglected marketing. Again these factors do not have legal implications but are the determinants of the prominence or failure of an online company. Facebook’s Paid Ads and Campaign Manager, Google’s Adwords and Adsense, SEO, SMO are some of the tools that will help you increase traffic to your web page. Social media adds an essential factor to the functioning of business- shareability, virality and stickiness of an online product or service.

10. Excess Or Minimal Capital Influx

This not only applies to online businesses but offline businesses as well. Capital is what makes a website run. Capital is required for increasing capacity, running servers, buying goods, rendering services, registration and other compliances Bootstrapping or self-financing is utilised when there isn’t any immediate capital need and the company makes revenue finance its operations. Start-ups, private and public companies sometimes have the need to borrow capital in exchange for equity, preference shares or a nominal rate of interest. It is important to factor the capital structure and requirement of the website. Too much or too little can be damaging either way and it’s good to know what to avoid.

Sometimes you take the beaten road, sometimes you don’t.

Your homework is done. On the way, you will have to test and experiment with each product or service as it is still unique in its own sense. Social media, for example, may work for one company, may not be the driving factor for another, but, in essence, it is still needed. Today, shortage of information can not be used as an excuse. Why make a mistake that you know has not worked for someone else? Why implement strategies you know have repeatedly failed for other companies? Why be old-school? Businesses today need to get with the times, need to follow principles that have been tried, tested and ones that have genuinely worked for other companies. It calls for a deep understanding of user behavioral changes with modern technology, the startup bubble, and the app revolution.

19 Oct, 16

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