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< General Auction Site Chat ~ A Good Example For New & Struggling Auction Site Owners |
| sunray |
 Posted: Fri Sep 18, 2009 12:40 am |
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A Good Example For New & Struggling Auction Site Owners
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I was just having a coffee a moment ago and reading the newspaper with the TV on in the background but I found myself drawn to raise the volume and pay attention by one particular hopeful in "The Dragon's Den".
It may already be in the US but, in case it isn't, the Dragons Den is a TV program where people pitch their business ideas to venture capitalists hoping to secure funding in exchange for equity in their business. Most pitchers fail to impress but, perhaps, 1 in 6 manage to get the backing they want.
In the show I just watched a lady appeared who had already launched a website. She was seeking £100,000 of invesment and she got it in return for a 15% stake in the business.
The interesting thing about this case was the stage she was at with the website, the simplicity of the concept and the understanding she displayed about the need for serious investment to get a proper web based business moving forward.
I must confess at this point that I would personally have avoided the idea like the plague. The website is all about cooking recipes. Basically people can upload their recipes to their space on the site and share it with others. The site is in the early stages of enabling functions such as online ordering of ingredients that go in to the recipes etc. The site is well presented and attracting users.
However. The site is currently burning cash at £22,000 per month and nowhere near profitable yet. So why did an intelligent, businesslike venture capitalist want in? In fact why did TWO venture capitalists want in (although only one had their offer accepted)?
On the face of it the idea is pretty bland. Recipe sites are ten a penny on the web but it was obvious this was a far more interactive and well thought through site. Nevertheless, it still revolves around recipes and to someone like me - a microwave, takeaway, eat out person who sees food as fuel rather than art - it didn't appeal at all.
But I can see why the investors wanted to risk £100,000 of their own money in this LOSS MAKING, just off the starting blocks, website despite it burning cash at an alarming rate. The subject matter of the website was not important other than it covered a topic with a pretty wide appeal that - if known about by people - would attract a fair amount of interest and visitors.
The potential of the site in terms of generating an advertising income is pretty good given the likely traffic flow potential. But it became an exceptional advertising platform because of one key ingredient, the woman behind the website.
Although nervous being on TV and pitching to potential investors who she knew could pick every hole imaginable in her idea, she proved HERSELF to be an asset worthy of investment over and above the website. Not only did she display a good level of knowledge and passion for her site and the subject, she obviously understood the kind of marketing investment ANY commercial website is going to need to become a market leader and profitable as opposed to being just another website scrounging a fiver in Adsense clicks each day.
If anyone is thinking about starting an auction website, has recently started one or is struggling with an existing venue that hasn't yet made a real impression then please try to see this show. If you seriously believe your site has the POTENTIAL to grab a slice of the internet pie and the people involved with the site are GENUINELY CAPABLE of seeing and understanding the real needs and demands of making it happen and delivering, then this show illustrates that you don't need to be making any profit in order to attract decent money to kick start your business. It is the potential for profit, the quality and clarity of the business plan and the management qualities on board that really matter.
This lady now has a proven, successful "dragon" involved with her website. She has got a £100,000 top up in the bank account to fund the continuing losses as the site develops and it will be interesting to see if her obvious belief in the idea and apparent business talent can make this idea realise its full potential.
The lessons should be obvious. If you are really serious about a auction based website, you should have a quality business plan and clear belief in the direction you are going. Given the plan and the belief in that plan, then you HAVE to be prepared to invest in it. Starting a one man/woman show in the back bedroom is all well and good provided you plan to be out of the bedroom PDQ. The required investment doesn't mean you have to plough in all your own cash savings and mortgage the house to the hilt (although you might), it means the business plan you MUST put together is of a quality that makes it "investable in" - if not by you, by someone.
The IDEA is the key. Why is your auction website GOING to work? How will it make eBayers move to you? How will it attract new customers that haven't yet seen an opportunity for them to trade proftably online? Simply being another alternative isn't an investable idea, especially if the only way you can attract customers is to sacrifice income. To become a REAL eBay alternative you need a UNIQUE idea that solves real problems for your target customers. Do you even have target customers in mind yet?
Today, as opposed to 10-15 yearw ago, simply providing a trading platform is NEVER going to be a UNIQUE business idea worth investing in. The software platform is now only a tool to enable the business idea. You, me and even a skunk can put an auction or store script online tomorrow if we think it will make money. But without a GOOD BUSINESS IDEA behind it, an auction or store script - no matter how technically good it is - will NOT in itself make a sustainable and profitable business.
So, while I know a few site owners don't take criticism all that well and some even melt down when I dare to offer up my opinions, I hope a few will see my true aim and start to think more positively when reading this. There will also be some people that try to highlight a few existing sites as examples of being successful as alternative venues but I'd ask them to be sure and check the annual accounts of these businesses before saying anything.
Almost all of the existing alternative sites and new launches that come along in future will inevitably fail. That's not being nasty or over critical on my part. It's a statement of fact and reality. These are mostly, or will be mostly, sites that think an auction script is a viable business on its own. They think paying customers will just appear like magic given a bit of forum and blog spam or even by a few Adwords ads. But I've got my fingers crossed that there is - or will be - a start up, realtive newbie or developing alternative that does already have or will be putting together a decent plan based on a GOOD BUSINESS IDEA that they can see their auction script enabling. If they have then just like eBay or Etsy proved, there will be people out there willing to risk the few million bucks needed to get a good site in to a prime position and attracting the huge traffic needed to win big. |
Last edited by sunray on Fri Sep 18, 2009 9:05 am; edited 1 time in total
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| rainbowseeker |
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Posted: Fri Sep 18, 2009 1:53 am |
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A Good Example For New & Struggling Auction Site Owners
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| sunray |
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Posted: Fri Sep 18, 2009 3:33 am |
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A Good Example For New & Struggling Auction Site Owners
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| 0ctavias0fferings |
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Posted: Fri Sep 18, 2009 7:56 am |
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A Good Example For New & Struggling Auction Site Owners
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Dragons' Den, Shark Tank, makes sense 
I have the impression that most of the start ups we've seeb wouldn't know a business plan if it jumped up and bit them. Sadly, that's one of the problems encountered far too often and not only in the online auction industry.
The vast majority of people couldn't even begin to put together a business plan because they have no clue about running a business, nor do most understand what running a 24/365 business entails, either in the real world or online.
A bit of thought before acting, a bit of research into what already exists, you know, that stuff they call market research, part of your business plan ... or it should be ... might save a lot of heartache and a great deal of wasted time and money. For the site owner and anyone who wastes their time listing there. |
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| sunray |
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Posted: Fri Sep 18, 2009 8:36 am |
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A Good Example For New & Struggling Auction Site Owners
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Yes, tend to agree that few start ups we've seen really had a proper business plan that the people involved truly believed in and worked to follow.
But the other question I think is being overlooked or ignored is "what is the business idea?".
As I said the auction/stores trading platform is not a business in itself. The product/service being provided is the business.
So, for example, eBay's marketplace business is quite simple - albeit a tough business to get in to nowadays. It's marketing and traffic generation for customers wanting to sell stuff. The database functionality is just one of the tools to enable this service delivery. All the time eBay's fees deliver the quality and volume of buyer traffic it does then people will buy the service they offer.
Delcampe have built a business specific to marketing and generating sales within the collectables niche. Etsy focus on delivering marketing and sales to crafters. Not one of these sites is offering a fee free auction site to list on with no other service behind it! Why on earth would anyone who seriously wants to sell things want that? What sellers want is a marketing/traffic generation service and - let's be honest - few of the start ups we ever see think this way at all.
Sadly, all too many sellers don't understand what they want from a trading venue either
It may be better to explain it another way. If I were planning a business I would first define what exactly the service/product I am selling is before I decide what software was needed. If I decided I was going to offer the best darn online car sales website on the internet then I may decide ProBid is the tool to achieve the functionality required. But my marketing would be all about attracting buyers to buy cars and certainly not the mods or features of my auction script!
As far as I can see, most alternative sites seem to think offering a place to trade is a viable product/service in its own right. They don't see the job of such a seller venue as being traffic generation or a marketing service they can sell. Ultimately they end up realising they have to give their "service" away for almost nothing because, for the sake of a bit of hosting and a £100 script, that's exactly what such a service is worth to sellers - next to nothing.
But sellers will pay some fees and a fair % of their turnover for slick marketing support that brings buyers through the door and gives them a viable business.
Hopefully I've made more sense this time. To put it bluntly, auction website software isn't ever going to be a turnkey business, business in a box, road to riches, gold mine or any of the other such terms people get in to their heads. |
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| leapingcat |
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Posted: Fri Sep 18, 2009 9:06 am |
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A Good Example For New & Struggling Auction Site Owners
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I've just watched that programme on the I-player and what impressed me most about her was she started by telling a story in a way that could have come straight out of one of Seth Godin's books. She was passionate about her business and she said why, and that is the most important initial thing. How many 'pitches', for that's what they are, from new site owners make you want to be involved. So far for me, NONE.
It appears that the Dragons who were 'out' were so only because they couldn't see the figure adding up, rather than any basic flaw in the idea.
I wouldn't necessarily rule out any new business that grows at a modest rate and uses pre-packaged software. The story, the dream, what the site can help the user are achieve, and the plans to make it come true are important; a list of features is irrelevant and anyone who uses that as a pitch will fail and deserves to do so. The same also applies to anyone who shows the personality defects that show them unfit to run anything. |
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| sunray |
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Posted: Fri Sep 18, 2009 11:23 am |
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A Good Example For New & Struggling Auction Site Owners
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Didn't realise it was on the iPlayer 
Despite what we both say about the lady concerned - I still wouldn't have punted my cash on the actual website concerned! |
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| rainbowseeker |
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Posted: Fri Sep 18, 2009 2:06 pm |
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A Good Example For New & Struggling Auction Site Owners
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I watched our US version a couple times and stopped because it was frankly dumb for all the reasons you guys mentioned......none of the applicants had a clue what they wanted except money. Most had no real plan and were not impressive as business people and the "sharks" were....well very sharky. The offers they made these people were much in excess of 15%.....most wanted half or more than half of the business and generally cut the amount requested considerably too with what they would offer to invest. Since for most of these start-ups I wouldn't have even considered investing I gave up watching. It was just too painful.......  You just knew they were doomed from the get-go. No business plan.....raped and underfunded if they accepted the sharks offers. Not pretty! |
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| mommyto3 |
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Posted: Fri Sep 18, 2009 8:10 pm |
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A Good Example For New & Struggling Auction Site Owners
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I have watched both the Dragons Den and The shark tank, for some reason I enjoy the Dragons Den much better possibly because of the personalities of the Dragons. They always want 40% or more of the business especially with folks the know the will be doing a lot of hand holding with to actually get anything back on their investment.
I love when they try to undercut eachother, that makes it even more interesting. |
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| sunray |
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Posted: Fri Sep 18, 2009 9:10 pm |
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A Good Example For New & Struggling Auction Site Owners
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I've not seen the US version but I guess they will pander to ratings more than the BBC version (who don't need advertisers). Attracting ratings thesedays seems to mean showing people to laugh at more than anything of any intellectual quality. 
But, in fairness, I don't watch the Dragons Den much here either as it is rare to see a good, competent pitch based on a good idea (in my opinion of course!). That's why I started this thread because the TV was just background noise but the lady's pitch grabbed my attention away from the newspaper in a matter of seconds. |
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