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Home » Computers And Internet Articles » When Not To Invest In An Online Business

When NOT To Invest In An Online Business

A friend of mine, Joe (not his real name) recently asked for my opinion about investing in an online business. He had found this "fantastic" money making opportunity on the Internet. Joe was thinking of investing a substantial amount. All he had to do for this "online business" was view a couple of websites a day and he would be paid a percentage of his investment every month. He said some people were making thousands every week! When I heard this, red lights flashed in my mind and they were screaming "SCAM! SCAM! SCAM!"

When he had finished telling me about the "investment", I asked him two questions: "Don't you think it sounds too good to be true and have you done any background research into this?" Joe said he did do some checking and although he found a fair bit of criticism about this "investment" on a couple of online forums and chat rooms, he was still willing to invest and see if it worked. I then asked, "Joe, you sound desperate. Is everything OK with your business?" The truth finally came out. Joe's business had folded about a month earlier and YES, he was desperate. I advised him to hold on to his money – that he would need all his money to help him and his family through the tough time ahead. I offered walk him through starting an online business if he really wanted to – just not this particular one.

This wasn't the first time someone had asked me about such "investments" when they were in the midst of a crisis. Desperate people resort to desperate measures. It's so very easy to believe what you read on the Internet. The web is filled with millions of sites that guarantee you riches if you will just make a "minimal investment". The cold, hard fact is that there are many irresponsible internet marketers out there who prey on the weakness of desperate folk, getting them to part with their money – which is a precious commodity when you're jobless – to make themselves rich.

Most people fail to realize that in many ways, an online business is like a regular business. It takes time and effort to build it into something successful. It definitely does not happen overnight the way many internet marketers would have you believe. After all, if they told you the truth - that it DOES take time and effort - would you part with your money so easily?

Here are some examples of when you should AVOID investing in an online business:

• When you've just lost your job or source of income. The sense of desperation leads many into rash decisions that they soon regret and they are left much poorer!

• When you're all hyper after discovering that one-in-a-million opportunity which needs your response A.S.A.P because "places are limited".

• When you've had a bad day at the office, and you've been grilled by your boss and you want out – NOW!

• When you read or hear someone tell you how "easy" it is to make tons of money on the internet and they want you to join them – NOW!

• When you suddenly find yourself in a financial crisis.

• When you've just quarreled for the thousandth time with your wife about money.

You get the message – DON'T invest in an online business when you're emotionally charged. That's exactly what internet marketers WANT you to do! I know it's hard to do but channel all that energy and frustration into research instead. Do it as if your life depended on it - and it probably does. Be ruthless in your fact-finding. Be objective in what you read and hear. Be merciless in rooting out potential SCAMS. Give yourself some breathing space, do your homework and when you find an online business that you are confident about, JUMP IN! Go into it with all your heart and don't stop till you've reached your goal!

Until then, I've said it before and I'll keep on saying it – the Online Business Pie is growing everyday. There is ENOUGH FOR EVERYONE plus more to spare! It's not going to just disappear one day so don't worry. When you're ready, you can dig in and enjoy your slice of the pie too – Cheers!

And here is another random article you might be interested in...

Accepting Credit Cards - Positives vs. Negatives

Today there are hundreds of thousands of small & medium size businesses in this country that take orders via credit cards. In addition, every day in this country, there are hundreds of companies entering the world of e-commerce. They come from many industries including retail, internet, mail order, home based businesses, B2B, professional services, wholesale and mobile businesses. In many cases they are "taking the plunge" to accept credit and debit cards for the first time. Some are successful and some are not. As with any other business venture, the companies that do their homework typically have a better chance at being successful.

To help you start your homework, let's look at the advantages of accepting credit cards for your business.

6 Benefits of Accepting Credit Cards

1. Convenience - You probably already know that accepting alternative forms of payment like credit and debit cards helps make it more convenient for people to pay you. This will increase your sales and profits. Some studies say by 30 -100% or more (Visa International).

2. Increases Your Credibility - Did you also know that advertising your acceptance of credit and debit cards increases your credibility? It's true. The public knows that a Merchant Account status is not always easy to get and will look at you as more of a solid company -here to stay. "Hmmm... doesn't accept credit cards? Is there some kind of credit problem I should know about this company?"

3. Increases Your Average Sales Order - Were you aware that you're AVERAGE SALE AMOUNT GOES UP when you accept credit cards? Studies prove (and I am sure it's true of most of us) that when we are ready to make a purchase and we are paying with a credit card we are more inclined to purchase the "upgrade" product or service. Human nature seems to cause most of us to be inclined to purchase the "better model or service upgrade" when we can finance the purchase with a credit card.

4. Impulse Purchases Go Up - Did you also know that your willingness to accept credit cards also causes impulse purchases to go up? Customers are more likely to purchase when they can use a credit card versus paying with cash or a check. For some reason human nature - especially in the US - causes us to think paying on credit is easier.

5. Increases Cash Sales - I bet you didn't know that the mere presence of credit card logos at your business location increases CASH sales. A fascinating study was explained in the book Influence by Robert Cialdini. This scientific experiment documented that the mere presence of Master Card/ Visa logos will increase cash sales by as much as 29% in controlled studies - even though credit cards were not used! If your business accepts cash, this is an extra bonus of accepting credit cards and advertising that you do.

6. Cuts Back on Bad Checks and Collection Costs. -By accepting credit and debit cards through a reputable Merchant Account Provider, credit cards orders will be screened for fraudulent transactions. Some providers, like Cardservice International, will take extra steps on address verification, verifying the extra four digits on the credit card, and blocking selected credit card numbers, Internet protocols, names or addresses. These are extra safety measures you can take to find peace of mind that the orders you are receiving - particularly on the Internet - are legitimate. When a customer is a "slow pay", a common collection technique is to call the customer and suggest they give you their credit card information over the phone right then to clear up the default. Without this option you would typically have to wait to see if the customer sends you a check like they said they would.

Disadvantages of Accepting Credit and Debit Cards

Like anything else, the benefits of increasing sales and profits by accepting credit and debit cards do not come without some risks. Sure, one disadvantage is that you have to pay a percentage of the sales that are paid to you with a credit or debit card in rates and fees. You also have to wait from one to three days for your money to post to your checking account. You should be aware of other issues also.

1.) Chargeback Risk - The customer who paid you with a credit card has up to six months to dispute the charge. Should they not be happy with the product or service, they would typically call you and negotiate a resolution. Should you decide to give the customer a credit than you will typically pay your Merchant Account Provider the same rates and fees that you paid when you accepted the charge - even though the money is flowing OUT of your account.

Worse yet, the customer may still be dissatisfied after calling you because you felt a credit was not justified. The customer may not call you at all.

In any event, the customer has the right to dispute the charge and write a letter to the bank that issued them the credit card they paid you with. The bank will contact the Merchant Account Provider who will then contact you to "retrieve" the signed receipt or possibly other evidence of the sale. This is called a "retrieval request" and usually costs $10 or more. The Merchant Account Provider may "charge back" the amount, which also has a fee of $10 or more. Consumer Protection Law will usually side with the consumer and not you.

Should the order be a Mail Order / Telephone Order (MOTO) or an Internet order then your defense is very weak because you may not have a signed receipt. Make sure your "Descriptor" includes your phone number. This is the name of your business which the customer sees on the credit card statement they get showing the charge. If your phone number is included the customer will have a greater likelihood of calling you first to resolve the dispute. This could save you both a Retrieval Request fee and a potential Charge Back fee.

2.) Your Money Can Be Held Back By the Merchant Account Provider. An ounce of prevention may be worth a ton of headaches. When you filled out your Merchant Account Application you were asked the type of business you have, the monthly volume of sales you anticipate, and the average order size you anticipate. The reason Merchant Account Providers run a credit report on you and are concerned about your business type and sales volume is because ultimately the Merchant Account Provider has to make good your charge backs if you are not able to.

Should you declare bankruptcy, not ship your product, provide your service inadequately, or even be running fraudulent credit card orders, the Merchant Account Provider could really be hurt. Because of this, a "Loss Prevention" department will watch your processing activities and has a good idea of the types of businesses that have greater risk to the Merchant Account Provider. A Merchant (or the sales rep) may describe the business differently than it really is in order to get the Merchant Account Application approved more quickly. Once the Merchant Account Provider finds this out, they may hold your funds until everything is straightened out.

Spikes in your processing above your average daily approved sales volume estimate and much larger average order sizes than you were approved for will also concern the Merchant Account Provider. Trouble sometimes arises when a Merchant is stacking up credit card orders waiting for their Merchant Account to both be approved and setup properly. The Merchant finally goes live and keys in a bunch of orders the very first day. Alarm bells go off.

The lesson learned is to make sure your business description, monthly volume estimate, and average order size (or average ticket) are all correct. If you have more than one business make sure you set up each business properly and separately. The expense to do this is not great compared to the risk. The right kind of credit card terminal, as example, permits multiple Merchant Accounts.

The Bottom Line

Make sure you keep your Merchant Account Provider informed. Are your sales seasonal - which could cause a spike? Did you make a large sale that you keyed into your terminal or software that is well above your estimate of average order size? Are you getting into another business all together? Save yourself some headaches and call first for advice from your Merchant Account Provider.

You also may want to look at the cost of NOT accepting credit and debit cards. Never mind all the hype about "My sales increased 500% because I started accepting credit cards." - Although in some cases I have seen this to be true. DO think about the likelihood of getting even just a few "extra" orders for your product or service because you accept credit and debit cards. Based on your average order size, how much profit will you make on each of these "extra" orders. Add to that the savings on labor by possibly not having to send out invoices. What about the labor savings by converting to an electronic check service so you just enter the check information on the Internet. Add to that using credit and debit cards as a collection technique for your slow pays. I know it sounds self serving because I am in the business but it is hard for me to imagine ANY business not choosing to offer as many payment methods as possible to their clients and customers. The question becomes one of choosing the best method of accepting credit and debit cards - not whether to accept debit and credit cards for your business or not.

What this guide is all about is giving you the education to make a decision on a Merchant Account Provider, a bank, or even a third party processor based on a cost benefit analysis and your service needs.