Money, lies & Web sharks

• NAOMI HULBERT
• 12 March 2008
• Page 1 of 3 : single page

Photo credit: Getty Images

Topic 1: Generating capital

Naomi: Let’s open with something dear to our hearts: cash. And in particular, how do we get enough of it to launch or boost our businesses?

Seamus: Well, when you’re approaching financiers, I’d suggest being careful about the amount of hot air you blow. It’s good to toot your own horn, just be sure you’re playing an honest tune. Got carried away with the metaphors there, but you know what I mean.

David: Raising funds doesn’t have to be harder than raising the dead, but it will be if your business, its books and potential value aren’t clear. Investors will be reluctant to put money into an operation which doesn’t look squeaky clean or is troubled by basic matters such as projecting future returns and indicating profit and loss.

Marguerite: Building a business plan, having strategies to improve cash-flow, and that little old thing called ‘structured product’, are phrases we all have to come to terms with.

Larry: For most new businesses, generating capital means visiting the bank manager with a business plan and enough number-crunching spreadsheets to put you off MS Excel for life. But the beauty of opening an online business is you don’t need a great deal of capital to start earning money. With low overheads, no high-street rents and no need for lots of staff, your business can potentially earn as much as a bricks-and-mortar store while you’re still working in a spare bedroom.

Naomi: Right. So where do we start?

Larry: To make a bit of money from your website you could join affiliate programs, where you earn money for every referral to their business. One of the most well known is Amazon’s. By hosting a small ad that you can tailor to fit your site layout, you can earn a percentage from sales generated by traffic from your website to Amazon. Or Google AdSense determines relevant ads to place on your webpage by ‘reading’ the surrounding copy. That way, if your website talks about pet care, the AdSense program will generate adverts for local vet services or pet stores. So it provides an additional service to your customers rather than hitting them with irrelevant advertising that just annoys them. A handful of local online businesses have had such huge success with these schemes that they now form their main income stream.

Seamus: But don’t, don’t, don’t go and get mixed up in any dodgy net schemes! Capital, equity, serious money and serious business are some of the hottest targets for online crooks. Make sure there is a door you can walk through with anyone you choose to deal with in this context.

Marguerite: You have to be so careful. Have you checked the internet lately about generating capital? It’s the aim of every small business, and there’s any number of financial gurus waving their flags for your business… “Just send us X amount of dollars and we can make your business explode!”

Naomi: In that case, what if I want to raise capital in a more traditional way?

David: Before this meeting, I had a chat with Craig West, a senior advisor at Peak Partners, a company that acts as an investment bank for SMEs. He says thousands of companies seek to raise private equity funds each year, with money coming from any number of areas: personal savings, bank debt (like remortgaging your house), credit cards, family and friends, ‘business angels’ and mentors, and private individuals and corporations. Then of course you can also secure funds by listing on the stock exchange.

Naomi: Not to mention all the government grants…

David: Absolutely. State and federal governments could be reservoirs of capital through assistance, grants, incentives and traineeship schemes. But qualifying for these can be painful and prolonged, and some would say it is as much about networking and filling in the forms as it is about the supposed quality of your product or service. Government tenders can give your business a big boost, provided you know where to look and how to respond.

Marguerite: Getting to know your market is half the battle. The Australian Bureau of Statistics offers free information for small businesses or those planning a franchise, to help you know your product and make it more available to your customer base. Really, the ABS should advertise this service better! The information’s pretty varied, like finding out which households in the local area have internet connections before you take the plunge and set up an online ordering service. Another is working out where your target business would be most successful by finding out the best location to sell your product. Like, a women-only gym would do well if it was located at a place frequented by women earning $600+ a week.

Topic 2: Truth in advertising

Naomi: It’s exactly a year since multinational GlaxoSmithKline was found guilty of misleading the public about the Vitamin C content in Ribena, a truth which was uncovered by two 14-year-old schoolgirls in New Zealand. Let’s talk about integrity in our advertising.

Marguerite: The lines of truth and advertising can get blurred. We’re told advertisements must be truthful, but when a shiny smiling TV mum holds up a jar of spread with more sugar than a Motown modernist and squeaks, “It’s healthy with the goodness of added milk,” it’s time to scratch your head.

Seamus: I’m a big fan of Seth Godin’s take on a lot of this stuff. That all marketing is storytelling, and a story should be one that a consumer will choose to believe. It must be an authentic story, but the experience beyond the product or service itself doesn’t have to be tangible.