SO YOU WANT TO START A WEB BUSINESS - WELL LET ME TELL YOU
SOMETHING.......
Like a lot of people, we often thought about having our own
business, but weren't sure what to do. One day my wife, Kim, was
talking to her brother, Chris, and he started to talk about his
six pack abs. Not to let an opportunity to needle my
brother-in-law go by, I told him he didn't have six pack abs,
but had twelve pack abs from all the Budweiser he drinks. Of
course this brought on an insult melee, which turned into a
brainstorming session on a company called 12 Pack Abs., which
offered humorous athletic apparel. As the discussion progressed,
we felt that it was a novel concept to offer this kind of
athletic apparel, but "Abs" was too narrow and thought Gym would
be more encompassing. From that point on a business concept was
born. After that we met almost nightly, getting ideas for
different shirt designs. When we had ten or so, Kim, who is an
artist, drew up color pictures so we could see the designs. What
transpired below are our experiences in setting up our company,
12 PACK GYM, Inc., and our web site www.12packgym.com.
Since none of us ever put together a business before, the
prospects of doing so appeared daunting. However, we figured we
were a reasonably smart group of people with backgrounds in
business, art, management, and distribution. The first order of
business was to secure a domain name or internet address. I got
a recommendation from a coworker. I looked up that company on
the internet, and they were offering a two year registration for
forty dollars. I did a search on www.12PACKGYM.com, and it came
up as available. The price seemed reasonable, so I signed up for
www.12PACKGYM.com domain name. I later came to learn that we
could have gotten that cheaper if we had researched other
companies that offer that service.
The next order of business was to figure out what type of
business we wanted to be. Since there are three of us, our
choices were Partnership, Limited Liability Company or L.L.C.,
or a Subchapter S Corporation. Each entity has its own
advantages and disadvantages. Partnerships are relatively easy
and inexpensive to set up. The downside to them is you have
unlimited liability. With an L.L.C. you have the income
treatment advantages of a partnership, but you have limited
liability. The downside to these is that they are more complex
and cost more to set up. Also, there are differences in how
L.L.C.'s are treated depending on what state you are formed in
and doing business in. In addition, if you get into legal
trouble, because of their relative newness, there is limited
case law for these entities. The last type of entity and
ultimately the one we went with is a Subchapter S Corporation.
These are actual corporations that you own stock in where the
IRS treats income distributed to the shareholders like a
distribution from a partnership. You have limited liability.
There is very strong case law for this type of entity and the
rules are the same no matter which state you are in. The
downside to these is that they are complex to set up; there are
a host of different filing requirements with the state you are
incorporated in, and they cost more to set up. We set our S
Corporation up with the assistance of a company called Par Corp
Services, LTD, which I found on the internet. For a fee of
approximately $400.00, they filed the necessary paperwork with
the State of Illinois to incorporate 12 PACK GYM and answered
questions we had.
There are also additional things to be aware of when doing
business. In Illinois we have to collect and remit sales tax to
the state. Because we are so small, this is done on a quarterly
basis. The state contacted us shortly after we were
incorporated. They also need to know if you have employees for
payroll tax withholdings. Another beneficial thing to get from
your state is a tax exemption reseller's certificate. You
contact your state government, in Illinois they have a web site,
and apply for a tax exemption number. Once issued by the state,
you can use it with your suppliers to not pay sales tax on
materials used in the creation of your product. The theory is
that the tax will be collected and remitted to the state when
that product is sold to the end user. Be careful only to use
this for things that are ultimately sold to the end user,
otherwise, if audited you could face back taxes, penalties, and
interest. Look through your state's web site or call them. They
are happy to help you with making sure you are following all the
rules and doing things properly.
Another critical element to your business is lining up suppliers
for the raw materials used in your product. Kim went on-line and
researched dozens of clothing companies and transfer companies.
We requested information from them and talked to the ones we
were interested in using. Most of them are wholesalers and
require the reseller's certificate number. If you do not have
one, they will either charge you tax or not sell to you. I would
also suggest you find different, multiple companies that offer
the same or similar products that you can use in production of
your product. This is just in case one is out of stock or goes
out of business, you have another place to go to get what you
need. At this point, you will need to also think about is
packaging. A good starting point for packaging materials is a
company called Uline. Generally, their prices and selection are
the best and you receive your order the next day.
Another decision you will have to make is on shipping. Who will
deliver your goods to the customer? Chris looked at all the big
names like Federal Express, UPS, and the U.S. Post Office. For
our purposes the U.S. Post Office Priority Mail was the best
solution.
Keeping track of your company's financial information is
critical. There are numerous accounting software products on the
market for small business. Depending on the size and complexity
of your business, and your own comfort doing accounting, will
dictate to a degree what type of software to buy. With our
business I looked at Quick Books and Peachtree. Of those two,
Quick Books is a good program, but geared for someone not that
familiar with accounting. Peachtree, in my opinion, is a little
more sophisticated and has a better inventory module. I priced
out Peachtree on-line and purchased it for around $225.00.
In conjunction with all the above it is advantageous to have a
business checking account. We called around to many different
banks and received information on all their small business
checking accounts. We compared fees and services and decided on
an account at a local bank that offered free small business
checking if we write ten checks or less each month. Any checks
written above that limit we are charge a fee per check. We can
also, at any time, roll that checking account into a regular
business checking account, but we will be subject to additional
charges.
A big and expensive decision we had to make was on a web site.
All three of us have purchased merchandise over the Internet. So
we were familiar with sites that offered merchandise for sale.
As we surfed the net, we wrote down things we liked about
different sites we used and the URLs so the web designer could
look at them as an example. Our next step was to roughly draw on
paper what we thought our site should look like. My next step
was to look at canned web site creation programs to see if I
could do this myself. Truthfully, it would have cost us about
$500.00 for the software and I am sure I would have been in over
my head. Kim had a friend that was a programmer and he said he
would help us and create the web site. He came over and got all
our information and said we would have it in a month. Well a
month came and went and no web site. We were getting a little
upset because we wanted to hit the Christmas season. Finally,
after two months we decided to get a professional. I went
on-line and searched on web site designers. A free service came
up that required me to put in my desired information about our
web site and it would recommend a web designer for us. We also
looked in our telephone book for local web site designers and
contacted several of them. Based on our requirements, they all
submitted a proposal to create our web site. We talked to each
of them on the telephone and decided to go with the firm that
the on-line search site recommended. Let me tell you, it was the
best decision we made. They recommended a small firm based in
Chicago called www.evolvedsites.com. The owner is Siobhan Tobin
and she is absolutely wonderful to work with. They are very
professional, responsive, and will take the time to explain
things to novice people like us about how the web site works. I
would highly recommend that company to anyone looking to build a
web site.
Another decision that must be made is if you are going to take
credit cards on your web site. A starting point would be to ask
your bank who they would recommend. Our web site designer has a
company they work with or you can look on-line and find a number
of companies. We looked on-line and asked our bank. Be aware
that some banks do not support some of these credit card
clearing house software programs. The company we use is
Retriever and the credit card processor (clearing house) is
Authorize.Net. A couple of things you will learn as you
investigate these companies are the fees that are levied. With
ours there was a one time application fee, fixed monthly charges
of about $40.00, and a per transaction charge. I approached
dealing with these companies like I do buying a car. I laid all
my facts out for each of the companies I was looking at and
haggled with the price, but remember you don't have that much
leverage so be reasonable with what you are asking for as a
reduction. Also, American Express has a higher fee then VISA/MC
and with Discover Card you deal directly with Discover Card.
The last decision to get your web site on the Internet is
hosting. You can either host the site yourself with a server,
some software, a DSL line, and some technical know how for the
set up and maintenance. The other option is to have someone host
your site for you, which means you rent space on someone's
server and they promise to have your site up on the Internet.
They do the maintenance on the server, but probably not on the
web site. You can find hundreds of companies by searching on the
Internet that offers this service. Originally, we signed up with
AT&T, but when our friend didn't come through with the web site
we dropped that service. That mistake cost us about $200.00. We
looked at other companies on the Internet, as well as, our web
designer's service. We decided to go with our web designer,
www.evolvedsites.com, services because their rates are
competitive and their service is excellent.
Once all of the above was completed, we went live with our web
site. I would love to tell you that as soon as we flipped the
switch on our web site we were inundated with orders, but that
would be a little bit of a stretch. We were just one of many web
sites floating around in cyber space. Marketing is the name of
the game, but if you're like us you have big plans and a little
bankroll. My suggestion is to take it slow in the beginning. One
of the first things you should do is submit your site to search
engines. This service was included in our web site design. You
should also resubmit your site every twelve weeks or so to make
sure it is not dropped from the search engines. You can either
do this yourself or you can pay a company on the Internet to do
it for you. Doing it yourself is time consuming but I'm told
search engine programs are more receptive to this then the mass
submissions from companies. We have done both. After that is
done, it will take a couple of weeks for those submissions to
take hold. Another option is to issue a press release. Search
on-line using "press release" and many companies will come up.
We used Majon International. I looked at samples of press
releases out there and wrote my own, then submitted it to them
and signed up for one of their release packages. Our results
varied. We saw some increase in traffic on our web site. We
received numerous e-mails and calls from Internet Shopping
Malls, and Newspapers to advertise. We received a call from a
home shopping network company, which was very interesting, but
would have cost us $14,000.00 for a four minute test commercial.
But best of all we received a call from The Northwest Herald
newspaper that did an article on our business. It was half a
page in size and when it came out on 4/18/02, we saw a
tremendous increase in traffic on our web site. Another thing we
have tried was to use a company called I-web-marketing, which
guarantees traffic to your site. You select the number of hits
to your site for a prescribed dollar amount and submit your
information with them. Our experience with this is that we are
seeing an increase in site traffic, but not the corresponding
increase in sales. Our next avenue is to put advertisements in
selected print publications.
Some of the marketing avenues we haven't tried are reciprocal
advertising, which means you put a link to another web site on
your web site and they put your link on their web site. We have
not tried banners or pop up windows because they are pay per
click advertisements and could get really expensive. Not to
mention the pop up windows are incredibly irritating.
It has been a fun, sometimes strenuous learning experience
launching our web site business. I hope some of our experiences
can benefit you as you plan your own web site. Although
www.12PACKGYM.com has only been up for a short time, we are
encouraged by the response and will continue with this journey.
Remember to take things slow, have a plan, and surround yourself
with positive, capable people.