Saturday, February 16, 2008

Its not a website, damn it!

When we first started working on FirstPhera, people often asked me "How's the website doing?", to which I'd immediately respond correcting them that it's a business, not a website.

This distinction might be minor and probably unimportant to most, but it's perhaps the most important thing for the entrepreneur to understand. What is it about "websites" like google.com, yahoo.com or craigslist.com that unequivocably classifies them as a business vs others that are just websites.

My first thought was, well, Business = Website + lots of Revenue

Easy. But this seemed too simplistic - lots of websites have revenues these days, thanks to adsense, and yet, it does not tell an entrepreneur what needs to happen to become a business. This formula could easily be construed as turning on advertising on a website site and resting in peace. Nope, that wouldn't work.

A business needs to keep churning revenues over the longer term.. something differentiated... something sustainable. I suppose a better equation would be -

Business = Website + lots of Revenue + sustainable competitive advantage

That's better - if you have revenue and if your spare parts running the machine are better, you should produce more and last more.

But, where does the advantage come from? I wanted a formula to turn my website into a business. And this doesn't tell me that. So, I broke competitive advantage further down into the core components of the business

Business = Website + lots of Revenue + [better product + greater customers + better distribution]

This feels much better. Its suggests - you ought to have one of
a) Better product - either better quality, wider range or lower costs
b) Greater number of customers - your customer acquisition needs to be cheaper than your competitors - whether its because your uncle works at a major broadcasting channel or you have kickass strategic partnerships
c) Better distribution - need to be better than others at getting your products into the hands of your customers

Do this, and do it right for a few years and ultimately it'll become a brand
Ultimately, a kickass business is one that is a
Brand + Website + lots of Revenue + better product + greater customers + better distribution

What's your formula?

1 comment:

Welcome to my world !!! said...

Excellent post. Your writing is very clear and concise. You could convert these blogs into Business 101 some day ;-)