The Risks and Rewards of Starting an Online Business

The success stories of entrepreneurship gurus, the impressive statistics about eCommerce, the sheer volume of businesses doing the job online — do all these have you wondering if venturing online is a wise next step for your career?

Perhaps you are warm to the idea but are apprehensive to move forward with it because you aren’t quite tech-savvy. Or you might be feeling intimidated by all the time and effort running an online business requires and the security risks moving your company online incurs. You may be facing financial constraints to start an online business. Or you might be thinking you’re doing great as it is and see no reason for a change.

Sure, there are plenty of reasons against venturing online, but the potential benefits can outweigh the expenses, fears, and extra effort by multitudes. After all, by the time you finish reading this article, there will be 100 new websites up and running online. There must be a reason for that.

So, before settling on either a yes or a hard pass, you must consider whether you feel prepared to face the potential drawbacks of running an eCommerce venture.

To help you, we’ll explore together the opportunities of entering the online business world and discuss the challenges of transitioning into the digital realm.

The Downsides of Running an Online Business

Not everyone is cut out to be running an online business. However, if the following risks of digital storefronts don’t dissuade you from venturing into the digital realm, you’re on the path to becoming an online entrepreneur.

# The Need to Understand the Technical Complexities of the Web

Even if you won’t be designing, developing, and maintaining your website yourself, it’s important to have a good understanding of digital technologies.

First, it’s essential to grasp technical terms, understand how design impacts your target audience, consider the implications of choosing one web technology over another, and recognize how content can resonate with your audience.

In addition to getting your website online, there are many details to consider in digital marketing, such as writing a blog, advertising on search engines, and building high-quality links.

If you’re not interested in acquiring these skills or don’t have the time to do so, be prepared to invest in experts who can navigate the complex technical landscape.

However, hiring experts isn’t a ready-made solution. Not all digital professionals are equally skilled, so you need to stay updated on their work, reports, and your site’s performance to evaluate whether your digital team is delivering good results.

All in all, venturing into the online realm means having to learn the ins and outs of the digital — otherwise, you’re putting your online business at risk of failure.

# Financial Requirements of Setting Up and Maintaining Your Website

Many aspiring online entrepreneurs are attracted to the idea of starting a website based on the ‘promise’ of a small initial investment, low maintenance costs, and the potential for significant returns.

While it’s true that you can use a template design, AI-generated content, and free stock images to set up a website for a couple of hundred dollars, this approach is not recommended for long-term success.

If you’re serious about your business, you’ll need to make a significant investment to establish a competitive online presence.

This means investing in professionally designed and coded website, hiring copywriters, securing reliable website hosting, and incorporating custom photography. Additionally, ongoing expenses like a search engine or social media advertising, search engine optimization, blogging, and link building are essential.

You can calculate an approximate price of building your business site using a website cost calculator — the digital marketing expenses are, however, difficult to predict.

So, running a website involves substantial expenses, and making a profit off it is not easy. While certainly more affordable than having a brick-and-mortar store, profitable and successful business websites are far from a bargain.

# Business & Customer Data at a Greater Risk

If you gather information such as payment details or customer data on your website, your data is at a greater risk of being targeted by hackers or creators of malicious software.

To protect your customers, but also yourself, in the online realm, you will need to take measures to safeguard your valuable data from scammers and fraudsters.

# The Risk of Failing

An online business can fail for various reasons, such as poor planning, ineffective marketing, or offering products/services with low demand.

Even expanding a physical store into the digital realm may fail if the target audience doesn’t search for products/services online, the site is poorly optimized for keywords, or the website has a bad user experience, slow loading, or is not mobile-friendly.

Like any business venture, there is a risk that the online business will not generate enough revenue to cover its costs and be profitable.

The Rewards of Moving Your Business Online

There are plenty of pros of transitioning your business to the digital realm; the following are only a few of the most important.

# Wider Market Reach & Increased Exposure

Certainly, the most compelling benefit of an online business is the access to a global audience.

Digital storefronts transcend the physical limitations that traditional businesses face. You can sell your products/services to prospective customers from anywhere in the world, at any moment.

No longer restrained by working hours, employee shifts, and local customer base, your online brand can serve clients worldwide, whenever they desire your services.

# More Cost-Efficient Business Operations

We’ve already mentioned that online businesses require significant investments, both initially and continuously as your business operates.

Nevertheless, compared to brick-and-mortar stores, running a website is more cost-effective.

For example, with an online store, there are no (or lesser) expenses on rent, utilities, and physical inventory. Additionally, there are cutbacks on employee paychecks and employer taxes. 

As an employer, a substantial portion of your employees’ compensation is allocated to taxes, which you can verify using a paycheck calculator.

Of course, online businesses do incur expenses such as digital marketing and website optimization, but all these costs directly contribute to enhancing your brand and expanding your business. Therefore, instead of money being distributed outward, it essentially circulates back into your business.

# Data-Driven Business Processes

Data is a benefit that a physical store cannot provide.

The digital landscape offers a wealth of data that can be used to make informed business decisions.

Online businesses have access to a treasure trove of information, from customer behavior analytics to sales trends.

For instance, demographic data can help gain a clear understanding of the target audience, tracking behavioral insights allows monitoring customer interactions and gathering customer feedback can provide product improvement insights.

These valuable insights can empower entrepreneurs to quickly adapt and remain competitive in an ever-changing market. Moreover, data-driven decision-making ensures the proper allocation of business resources towards profitable and attainable goals.