It seems the buzzword of the past decade has been home business.  From MLM companies such as Amway, to home publishing and dog walking - starting a home business seems like a legitimate way to increase your household income in your spart time, but like most things is easier said then done.

The internet opened up a whole new arena of opportuntity and possibility.  It has now become possible to own a business in the virtual world - which means a lot less overhead and expenses which translates into a lot less risk.  But what I continually warn my clients and readers about is that making money online is often more difficult than it is in the physical world.  Start a painting business and your function is simple - paint.  Start an online business and your function can be a bit more fuzzy. 

I recently put up a website my company ownes for sale on eBay called THE RESUME BUILDER.com.  I came up with this site back in the early spring, and had it developed by a firm in India.  The site provided the user the ability to instantly create a resume online using an easy to use question based format.  Once the user had completed their resume, they could flip back and forth between 7 different formats, and if they wanted to actually print off their complete resume, it cost them $18.95.   This business was profitable from the start and was making between $1500 to $2000 per month profit.  The winning bidder paid just $15,000 for the site, which surprised even me although it was still an excellent value. 

So what is the difference between that site that sells for $15,000, and one that sells for $15.99 here on Ebay ?

The obvious difference is that this resume site was a real business.  One that made money and was no different than investing in a franchise in your home town.  Most website businesses though differ in this sense.  Do this, do that, cross your fingers and click your heals three times, and POOF, you'll make all this profit.  The truth is, the only one who is going to make a profit is the guy selling you the site. 

So how do you determine what is a good, legitmate business investment and what is a site that won't make you a dime ?

First, the common sense acid test is important to consider.  This means asking yourself several key questions about the online business you are interested in.  Ask yourself would you buy as a customer from this particular site.  Does the site or business instill confidence to you the buyer ?  Is the retail price right, is the market over saturated ? Is there already a lot of major competitors ?  A good example would be a person thinking about buying an online auction business - how are you going to compete with Ebay and Yahoo auctions ? 

Just as importantly, do you understand the business industry you are getting into.  Don't assume that anyone can run a profitable website.

The next key issue to consider - and in most cases the most important in any type of business both online and offline is what is called the REVENUE MODEL.  In other words, how does the business make money ?

Back in the dot com boom era, there were thousands of ideas, and lots of money being invested in those ideas.  The problem was, most of these sites had no idea how to make money from them.  For example, before Overture came along with their system of paying for position on search listings, Yahoo and Google had lots of users, but not much revenue.  That simple idea though turned both companies into hugely profitable corporations.  The revenue model was set - that businesses will pay to be at the top of the search engine rankings.

What you want in a revenue model is to have a clear selling strategy. Here is what you sell, this is how you are going to sell it and this is how much you make.  For example, the Resume Site I mentioned earlier had a revenue model as follows. 

1. The user creates a resume for free.  This removes the stigma of a customer leaving the site before they use the service because of price.
2. Once the user completes their task, they then pay for the right to print of their resume. This works well because once they have spent the time, and once they see the professional results of their resume, they are far more likely to buy.
3. The resume is automatically activated, meaning that the site owner doesn't have to do anything but collect the checks from the payment processor. ( a wonderful feature of a properly designed online business ) 

The point I am making is that not only was the idea a good one - but the sales process ( the revenue model ) was equally as dynamic.  A good idea backed by a great revenue model is a powerful way to make money online and some would argue, the only way. 

This may seem a bit abstract to some readers - but it is important to remember that online business is just as competitive and difficult as a real world venture.  Think over any investment you are going to make in an online business very carefully.  Don't get sucked in by hype or promise.  Keep your composure, and do your research. 

Our company auctions of sites off about every few weeks that are all what we call REAL businesses. These are legitimate businesses, with real potential.   There are some very good developers on Ebay, but there are also a lot of real junk sites.  Be careful before bidding. 

If you have any questions, or would like me to offer an opinion of any site you are contemplating investing in, I'll be happy to do so.  You can contact me through ebay and I'll try to get back to you within the day.