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What Price Ecommerce?
November 16, 2000

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' WEBSITE101: READING LIST
Reaching Great Minds Online
November 16, 2000 Issue #69
Mike Valentine, Editor, learn@website101.com



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WEBSITE101: READING LIST

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IN THIS ISSUE:
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==> Sponsor Ad: Online Incorporation
==> Feature Article: Average Cost of Ecommerce Site?
==> Guest Article: Business Plan or Business Proposal?
==> Cool Tool:
==> Classifieds
==> Subscribe/Unsubscribe information


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Average Cost for Ecommerce
by Mike Banks Valentine

In helping small business online I'm often asked for "Average"
prices for establishing an ecommerce enabled presence online.

There really is not an *average* cost for ecommerce because
there are far too many factors to consider in establishing
a secure and effective shopping environment and securing
ordering information. The number of products and their
pricing, sales volume and profit margin affects the type of
shopping cart software dramatically. The number of customers
you expect and whether you're maintaining a permanent customer
database for future marketing reference determines many expenses.

I have set up shopping carts for online businesses selling a
high-profit item with low volume of sales through a *free*
service that only takes a 10% cut of the sale price with NO
monthly fees or ongoing bank or merchant account fees. On the
other hand, if you have high volume sales with low margins
and more than 10 or 15 products to sell, it varies from a very
basic $20 to $50 monthly fee for the secure ordering environment,
(*without* database needs for customer retention or product
inventory, shipping and no updating of merchandise prices, etc.)
to a fully automated system with all of the above and additional
software requirements. It could be thousands of dollars monthly
because of complex customized solutions required.

The variables are too great to define an average price. What you
sell, how many sales you make, what your profit margin is and the
extent of your database and custom software required, all combine
to determine a price for YOUR needs.

Security of customer information is critical and should always be
of paramount importance. Most online shopping cart hosting services
can be trusted overall with the security of your data if you choose
a well known and respected company. That should always be well
researched before you commit to using any particular service.

If you pay the additional expense of hosting your own secure server
and maintain sensitive and private customer information yourself,
then you must simply follow sensible security recommendations that
have become internet industry standards. Once again, rely on a well
respected professional team to set up a secure environment for you.
Sometimes this is offered as a benefit of your hosting company,
or you might have your own server with an IT staff to maintain and
protect information. As stated before, the sales volume, profit
margin, number of products and complexity of your database needs
will determine how far you need to go. Starting with the simplest
hosted third party service and minimal record keeping done by hand
up through a fully automated complex system with built-in security
measures.

There is no quotable average because your needs are not the same
as that of other online businesses. If you operated an online
business with a sales figure, profit margin, overhead expenses
and operating costs that were the same as a similar business,
*then* you might determine an average for that sales volume,
within that industry and with that particular business model.

Return on investment should be a standard starting point for
determining your needs in the planning stages, so you absolutely
must assesss those needs before you launch your online sales.

All of these variables are a part of establishing a customized
solution for your business.

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GUEST ARTICLE
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Business Plan or Business Proposal: Which Do You Need?
by June Campbell


Do you know the difference between a business plan and a business
proposal? These are two very different business documents, each
serving a distinct purpose. Be sure you're using the correct type
of document to get the results you want.


A Business Plan is a document that describes in detail how your
business is set up. Business plans cover your business structure,
your products and services, your market research and marketing
strategy, and your complete budget and financial projections for
up to five years. Both startups and existing businesses require
business plans. Developing these documents requires a lot of
research and number-crunching.


You need a business plan for two primary reasons. First, spending
the time to do this work clarifies your thinking, provides you
with information previously not considered, and gives you a
workable strategy to follow for the period covered by the plan.
Your business plan is your blueprint to success -- it outlines
the steps to move from "business idea" to "business success."
And if your research reveals that your idea isn't destined for
success, then better to know it now then a year from now when
you have lost thousands of dollars. You can spend your time
planning another idea that could have a better future.


Secondly, if you are hoping to raise funds through a business
loan, a venture capitalist, an angel or an incubator, don't
even consider approaching these moneylenders unless you have
a thoroughly researched business plan in your hand. Experts
estimate that it takes approximately six weeks to develop a
business plan, so whipping one up the day before your
appointment with the banker won't work.


A business proposal is a document that you submit to another
enterprise proposing a business arrangement. There are two
main categories of business proposals: invited and non-invited.


As an example of an "invited" proposal, government and large
corporations wanting to purchase services or products from
private suppliers often post public "tenders" inviting
contractors to bid. You will be competing against all bidders
that noticed the posting and responded. Similarly, some
businesses will send "Requests for Proposals" (RFPs) to a
selection of businesses that they are willing to consider
as a potential supplier. In this case, you will be competing
against perhaps five businesses that the client has already
handpicked as "suitable".


Both of these examples require a business proposal. In some
cases, the client will provide a Bidder's Document that
stipulates the style of proposal that they want to receive and
the categories of information to be covered. If no Bidder's
Document is available, the style and categories of the proposal
will be up to you to decide.


If you are responding to an RFP or a call for tender, you will
know that the service/product is wanted, but you will be
competing against the other people who bid. You must "sell"
your company as the best possible choice of all the bidders.


In a non-invited proposal, you might have an idea for a product
or service that would be of benefit to Company X. You submit a
proposal to Company X suggesting that you provide this service
or develop this product in exchange for funding or some other
consideration. Although the nature of the proposal could differ
from the example given, essentially you are proposing some type
of business relationship (something more complex than "let's
exchange weblinks"). In this case, you don't know if the company
is open to your proposal or whether they will like your proposed
idea. However, if they do like the idea, you won't be competing
against numerous other bidders. Your proposal has to "sell" not
only your concept but also your company. It must convince the
client that not only is the service/product potentially valuable
to them, but you and your company are credible and stable.

Whether invited or non-invited, your proposal must be well
researched, well written and contain a reasonable budget. Spend
time on this document and you'll be ahead of the people who threw
something together on the bus riding to work!
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<BIO>June Campbell is a disgruntled online shopper and
professional writer whose work has appeared in several
international print and online publications. Visit her
on the Web for a FREE newsletter,FREE gifts, articles,
guides for proposal writing, business plan development
and more. ( http://www.nightcats.com ).


Writing Services by Nightcats Multimedia Productions
The Roundup -- a FREE business ezine-- plus "How-To Booklets"
for business plans, proposals, brochures and more!
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Copyright 2000 Mike Valentine

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ISSN: 1527-5094
Mike Valentine
WebSite 101
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  June 10, 2001