Luke Babich January 24th, 2023

9 pros and cons of being an online business owner

Most people know that being an online business owner can be lucrative, but few actually grasp just how much money is being made out there in the e-commerce world. According to a top investment firm, e-commerce in 2022 is worth a staggering $3.3 trillion worldwide, and is projected to rise to $5.4 trillion over the next four years. While that’s a stunning growth rate, what’s more amazing is how easy it is to get into the game. 

In some cases, you can launch an online business in a single day using only your laptop. Of course, that doesn’t mean you’re destined to start the next Amazon. It’s extremely competitive out there, and if your business fails, it can take the rest of your financial security down with it, especially if you rack up a lot of debt.

The bottom line is that there are pros and cons to being an online business owner, and whether it’s the career path for you is going to depend on your goals, your talents, and, let’s face it, a lot of luck. Let’s look at some of the positive and negative aspects of being an online business owner!

Pros

Mobility

One of the most extraordinary quality-of-life benefits of being an online business owner is that you aren’t chained to a desk in an office — you can work from anywhere in the world. And with amazing countries such as Costa Rica, the Bahamas, Croatia, and many others offering “digital nomad” visas to international remote workers, you can easily run your dream business from a dream location. 

Low startup costs

Before the internet, starting a business meant leasing a storefront and commercial space, outfitting the space, hiring employees, and a lot of other expensive “behind the scenes” work. Today, starting an online business can be done for as little as registering a website and paying a freelancer to whip up some copy. Using Shopify to manage your online storefront is affordable, and if you use dropshipping or a fulfillment service, you won’t need to lease expensive warehouse space to store your inventory. 

The fact that you don’t have to lay out a lot of cash on a physical space can have a multiplying effect on your prospects for success. After all, brick-and-mortar businesses have to factor all those overhead costs into their prices. Since you don’t have the same expenses, you can beat them on price!

Global reach

When you have a brick-and-mortar business, the conventional wisdom is that you’ll pull in customers from within a 25-mile radius. In some businesses, or in super dense areas, you may pull customers from an even smaller area.

With an online business, you can potentially win any customer who sees your ads or marketing — which, in the social media era, means you can pull in business from nearly anywhere in the world.

Optimization through tech

In the pre-internet days, it was tough to find out what customers wanted. You either had to convene a focus group or physically survey customers. Both methods were expensive, time-consuming, and unreliable since there’s a disconnect between what people will tell you they want and what they actually want.

Today, it’s much easier to learn about customer behavior. Data collection and analytics can reveal actual customer preferences and map out their behavior in real-time, while new online management tools can help you mobilize efficiently. This is all incredibly useful when it comes to helping you optimize the customer experience, and customize your ads and marketing material.

Cons

A slow launch

Opening a brick-and-mortar store can be slow in the beginning, but most businesses can still get business just from foot traffic. In the beginning of your online business venture — before your website is fully indexed and ranked by Google — it’s going to be very difficult for you to drum up any business. Typically, Google takes 6 to 12 months to index a new website, so you should plan on the first year being pretty slow — and make plans to earn money on the side.

Extremely competitive

We just touched on how easy it is to start an online business. Well, the downside of that accessibility is that a lot of other people have started online businesses — and you’re competing with all of them. There are so many other online businesses right now that your chief concern shouldn’t be competing with them on quality — but just figuring out how to stand out from the huge crowd. That’s why many experts suggest building your business up a little before you take the plunge and abandon your day job.

You need some tech skills

If you open a brick-and-mortar business, you’ll have to either build the space out yourself or pay someone else to do it. The same applies to an online business. 

You’ll need to build an attractive, functional website where your customers can see your product and communicate with you. This website is likely going to be how you make your initial impression on customers, so it has to look legitimate, and convey your values and aesthetic. 

You need to be nimble and responsive

If you’re active on social media, you probably know that everything moves faster in the internet age. Trends that used to last years may only last for a single season now, and customer behavior can change, en masse, in the blink of an eye. For example, if a real estate startup begins offering home buyer rebates, all of its competitors have to adapt, or they’ll rapidly start losing business.

You’ll have the data to track these shifts, but you’ll also need the confidence and decisiveness to change course when you think you see the winds shifting. Hesitate, and you could lose your entire market to your competitors.

Customers appreciate solidity

It’s not that online businesses lack credibility — it's more like brick-and-mortar businesses benefit from having a tangible, physical presence. The fact that a customer of a brick-and-mortar establishment can go to the store, browse and handle the merchandise, and talk to an employee (or a manager) can give them a peace of mind that might be lacking when they deal with an online-only business. 

There’s also the credibility issue. A physical business represents a history and a real investment, while an online business, especially if it’s new (and most are), could just be a slick website with nothing behind it. This is why online reviews are so important — they’re the closest thing an online business can get to proof of legitimacy.

Luke Babich

Luke Babich is the Co-Founder of Clever Real Estate, a real estate education platform committed to helping home buyers, sellers and investors make smarter financial decisions. Luke is a licensed real estate agent in the State of Missouri and his research and insights have been featured on BiggerPockets, Inman, the LA Times, and more. Education: B.A. with Honors, Political Science — Stanford University

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