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Building a Sustainable Web Business

January 22nd, 20077 Comments

So you’ve heard all the fuss about problogging. You’ve heard stories and rumors of people getting five maybe even six figures per month. You’ve probably also heard about the friend of a friend who sells beads online and makes a killer profit. You want to get in on the game. Fine.

But…

The single biggest mistake that new online entrepreneurs make is failing to build a sustainable business model. This can happen in a variety of ways, but there’s a common thread that ties them all together.

A business takes human energy to run. The fundamental issue to consider is the relation between human energy and total profit. Keep this in mind. Sustainable businesses are the kind where the relation between human energy expended and total profit is greater than linear (where total profit increases at a greater rate than human energy expended). In other words, as a sustainable businesses develops it should be able to leverage its assets and non-human resources to make profit.

Ask yourself this question: how much work will I be doing when I’m making $5000/month instead of just $50? Will I be doing 100 times as much work? If so, then you’re kidding yourself. You can’t do 100 times as much work as you’re currently doing. So end the delusion right now, and face the facts. You’re going to have to figure out a way to turn $50 into $5000 without requring an equivalent growth in expended human energy. If you can’t see how it’ll be done, then it’s time to start over.

Unfortuantely many online businesses jump into the game without seriously considering sustainability. Take this example from one of my friends. At my advice, he started a website. Within two months, the site was making about $1.50 per day. He projected that he could probably get up to $3.00/day just by letting the site sit and age. So, what if he could just create 100 sites that each made $3.00/day? That would be $3000 per month. Not bad.

But then I laid it out for him. The business model was simply not sustainable. Having 100 different sites meant having to produce content for 100 different sites, having to market 100 different sites, having to linkbuild for 100 different sites, having to update software and webhost on 100 different sites.

And he got it.

The problem is that 100 sites create more work in total human energy expended then they produce. The key to running a sustainable business is finding a business that snowballs itself. In other words, a business model that allows you to effectively leverage your assets and resources to acquire more profit, without more human energy. That’s key. Make sure to keep it in mind the next time you plan out your online business.

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Building a Sustainable Web Business

Ivo | January 22, 2007

Good observation. Especially when you write that creating 100 sites takes too much energy from any normal humn being.
Nevertheless this is a topic that comes up again and again on lots of webmaster forums. Questions like “Should I build 1 site that makes $100 or 100 sites that make $1?” are asked all the time on such forums.

Ryan | January 22, 2007

And you’re point?

I think I’m adding more value here than you project in your response.

For example, my post clearly states that the goal of any web business should be to incrementally use non-human assets and resources to do much of the heavy lifting. If your business model doesn’t spell out clearly how your going to move in that direction, then you are building your own prison.

If your business depends on churning out 10 insightful problogging posts per day, then you really have got to ask yourself what things are going to be like in 5 years. Are still going to be in that self-imposed “prison” or are you building the infrastructure to free yourself from those contraints that infringe upon quality of life?

Darrin | January 25, 2007

I see your concept is leverage and expand on what you already have. However, as I quote from the movie Ray, “You think pennies, you get pennies..” Just becuase you get $3.00 per day or even $100/day in revenue should not necessarily mean you should duplicate your current success and spread it all over, for example with 100 extra sites. We have been bred to believe that expansion quickly is a good thing & yes, many companies do it. However, why not cultivate what you already have and max it out to it’s limits. Then, you will not only have the funds to develop a scaleable site or even be able to utilize resources. Ultimately, at the end of the day, people will never go away. People are the lifeblood of business. I think we try to do to soon as loners rather then get the support we need. The question is, do people want to support in someones elses success?

Ryan | January 26, 2007

“However, why not cultivate what you already have and max it out to it’s limits.”

Indeed, I have a real world example of how this works and will post on it in just a day or so.

However, the fact is, that sometimes it takes many site before you discover that “one” that jut freakin takes off. I’ve only just this week discovered that one site that’s sufficient to pay a salary. But it took over 30 experiments to find the one that’s really blowing away.

Andrew | January 26, 2007

There are so many factors that come into play with an online business. Are you selling a tangible product, service, information etc? Depending on what your business model is will dictate the amount of time required to maintain the website. Blogging for a living on one or two blogs will probably take less time than selling a line of clothes, shoes or other product. But then again it depends on how long your posts are, the amount of research put into them etc.

The great thing about a website is you can automate a significant amount of menial tasks that would otherwise consume a great deal of time. Hooray for making a living online! Great post.

Ryan | January 27, 2007

Andrew, I’ve run a variety of businesses online. The problem with running a good blog is that they lose momentum *damn fast* - there’s little room for taking a break and letting the business run itself. You lose your audience fast. Plus, it’s hard to find someone with the ideas to fill in for you while your on vacation - writing quality content isn’t as easy as packaging and shipping a product. My wife or brother can do the latter very easily, but not the former. It’s not that she doesn’t know how to blog either.

My goal is to develop income streams which gain momentum that’s hard to lose and that keeps on rolling even if I take a vacation to Greece and Italy (this summer baby!).

Focus on Profit, Not Revenue | College-Startup | September 12, 2007

[...] problogging business models that have proved successful for other, successful multiple-blog owners: don’t overextend yourself, invest in writers, and market your site efficiently. Then leverage and repeat. If only I [...]

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Building a Sustainable Web Business was written by Ryan on January 22nd, 2007 at 9:00 am and posted in Blogging, Business Ideas, Getting Started

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