How does a web company grow to the point that it can become worth millions of dollars? Furthermore, how is it that the same web company can not turn a profit in spite of the millions of dollars in stock that are in ownership? For years, investors have struggled to make sense of the same concept in the non Internet world. With web businesses and their overhead being even smaller than traditional brick and mortar businesses, it becomes even more of a mystery as to how this can occur. If you are thinking about taking your web business public, and you are under the misconception that millions of dollars in stock will equal millions of dollars in profit, think again. Here are some common ways that a business can still lose money in spite of having this key advantage:
Unable to cut expenses
Even in the web world you are going to have overhead. As the need for storage and transfer rates increase, you may find yourself unprepared for the financial obligations. With a down economy, such as the one the United States has been experiencing, an increase in revenues will not necessarily translate to an increase in profits. It becomes more important than ever before in bad economic times to control expenses and keep them from spreading throughout each department of your business. Pay particularly close attention to salaries and benefits that you offer to your employees.
Lost focus on visitors
When you are dealing with a web based business, the most important thing is the amount of visitors that you have to power the success of your site. Too many companies lose sight of their web visitors when they taste the first signs of success. At the end of the day, you’ll never have the customers, nor the advertising power that you need to get ahead if you don’t find some way to interest your audience and keep them around for the long haul. Never lose sight of the deals you offer and the content you provide. Either one or both are the reasons your audience keeps coming back and spreads the word to their friends.
Not meeting future goals
When dealing with a publicly traded company, you have to maintain expectations of the shareholders. Therefore, today’s profits can turn in to tomorrow’s losses if you fail to reach the goals that you set as a company. Perception is very valuable in the world of the stock exchange, and the shares that you have currently sold out can be gone in a flash if your shareholders get a bad vibe about the direction the business is headed.
Always be conservative in expenses and aggressive in revenue generating methods, and you will be well on your way to success.