7 Reasons Why Online Business Is Better Than Traditional Business

reasons why online business better than traditional businesses advantages digital company

It’s hard to start a business, but it’s well known that in general employees don’t get rich from staying employed to a company. Even if you grind every day in your 9-5 job, it will take you years to earn what big business moguls earn in a month or even a week. Having a business is certainly the way to go if you want to become rich in this lifetime. Not only that, but business owners and investors play life on their own terms. 

However, in this highly digital world, there are also plenty of reasons why going the traditional route may be a disadvantage to you. Kane Georgiou, serial online entrepreneur and owner of The Money Pig, highlights 7 reasons why an online business is better than a traditional business. 

1. Lower Start-Up Cost 

The first reason why an online business is better than a traditional business is because of the lower start-up costs needed to begin. Many of the big online businesses we know today started out from somebody’s own bedroom and just happened to gain traction along the way. 

Mark Zuckerberg, for instance, founded Facebook in his dorm room back in 2004. According to Zuckerberg, it only took him two weeks and hardly any money to start the website. Now, 15 years later, Facebook is a global company that manages to garner net earnings of over $22 billion in one year alone. Who would have thought that a college dropout could accomplish such a thing without a high start-up capital? 

In a traditional business, you usually need to have three basic things before starting out: a detailed business plan, a license to operate, and a large capital with enough back-up funds in case you don’t get your ROI in the first few months or even years. All of these need money, which not every aspiring entrepreneur or business owner can afford all at once. Obviously, just like in Facebook’s case, an online business doesn’t need any of those to start. 

2. Low Overhead Expenses 

In every business, whether online or offline, overhead expenses are inevitable. If operating expenses are what it costs to run a business on a day-to-day basis, overhead expenses are what it costs to keep the general business running from the background. 

For most businesses, overhead expenses take up a huge amount on the expenses column. That’s because unlike operating expenses, overhead expenses keep accruing regardless of whether the business is open or not. This means that for traditional businesses, the risk of incurring plenty of overhead expenses is much higher than online businesses. 

Here’s one example: a company pays its employees an hourly wage depending on how many hours they worked but pays the rent at a fixed price per month. If the company closes for three days because of a holiday, that translates to three days of not having to pay employee wages, since wages are an operating expense. However, the company gets no discount on rent despite the three-day-holiday since it’s an overhead expense and is required to be paid in order to keep the business running. 

For an online business, overhead expenses are not that big of a problem. Most of the time, the main things required to keep an online business running is a custom domain and a self-hosted website – nothing more, nothing less. The rest are just operating expenses that you can utilize to increase the profitability of your online business. 

3. Can Easily Operate Worldwide 

The ability to easily operate on an international scale is one of the biggest advantages of having an online business rather than a traditional business. 

And it doesn’t even have to be international. Even domestic businesses that are on the world wide web can have a higher chance of having a larger customer base than a traditional business that only operates in its own locality. You can build your profiles completely online and share them on social media sites where more people are bound to see them. This is a much better, and not to mention cheaper, marketing strategy than the traditional mediums available offline. 

4. Attracts More Customers 

As mentioned above, online businesses can get customers from all over the world, not just in their own locality. Gone are the days that businesses are forced to service just one location or area due to geographical restraints. 

Just ask Korea-based beauty and skincare and e-commerce shop, Wishtrend. The site was first launched in late 2011 and is now shipping Korean beauty and skincare products to all over the world. In fact, 60% of their sales are shipped to Western countries like the US, Canada, and Australia. 

This feat wouldn’t have been possible if not for the development of the online business model. Thanks to the rise of the digital world, businesses that thrive on the web can now attract more customers than ever. This is certainly a major advantage over traditional businesses that are limited by their physical locations. 

5. Can Be Quickly Outsourced 

One other benefit to being able to operate worldwide? You can also easily outsource your business to other parts of the world, therefore lowering costs and making the business more efficient and profitable. 

Outsourcing is one of the oldest tricks in the book when it comes to online businesses. Many online business owners in the West are known to hire contractual employees from developing countries, such as India and the Philippines, where the cost of living is much cheaper. These contractual employees can afford to be paid much lower than workers from developed countries, since their regular wage in their countries is also much lower. 

Of course, even a traditional business can be outsourced, but it’s usually limited to jobs like customer service and other business services. This is unlike an online business where practically every non-major position in the company can be outsourced for much lower labor costs. 

6. Relatively Lower Risk 

All businesses are risky, that much is true. There’s no such thing as guaranteed income in a business, contrary to what some multilevel marketing agents may say in their spiels. Just think, if a business was so certain, then everybody would be doing it and we would all be rich, right? But of course, that’s not possible, and all businesses carry with it a certain amount of risk. 

For traditional businesses, this risk is a big one. The location you chose for your restaurant may not have as much traffic as you thought. The products you bought for your boutique may not be as good or as popular with your local audience. Your USP (unique selling proposition) may not be as unique as it seemed at first. There are many more risks, such as accidents and natural calamities, associated with traditional businesses with a physical location and you have no choice but to deal with all those. 

An online business, on the other hand, has a relatively lower risk than a traditional business. For most online businesses, the biggest risk is a hacker breaking into their website. Of course, there are some problems that are common in both such as the lack of paying customers, but between the two, online businesses are definitely safer and easier to start. 

7. Higher Chance Of Scaling 

Most, if not all, business owners want their businesses to grow big one day. Just like a gardener growing his own garden, a businessman, their business is planted into the industry’s soil in the hopes of it growing and branching out one day. 

The thing is, this isn’t as easy as it sounds, especially if you own a traditional business that has to have its own physical store to be considered a branch. A physical store requires many things, such as a land where you can build on, materials for your infrastructure, multiple licenses for the business as well as the physical store, and of course, labor. In addition to this, a physical store has to abide by a strict guideline to pass safety and hazard, sanitation, and structural inspections. All these cost a lot of money and effort to handle, which makes scaling hard. 

Meanwhile, an online business can subsist on a much smaller budget at first, making it far easier and faster to scale the business. You can launch a site today, for example, improve on-page SEO and content to attract enough visitors for ad and affiliate revenue apart from your service and product offerings, and immediately expand to include more markets or products. This is exactly how it worked for many successful online businesses we now know and use today. 

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Indeed, a successful online business is more like an unearthed treasure than a growing tree. Finding one buried in the ground may be plain luck, but at least you know now where to build your mine.

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