Online Directory Business Model and Plan
In the Article (Quick Access)
A profitable small business idea that requires minimum investment is an online business directory.
I have run it, nailed it, and exited this business in the past.
So in the blog, you get to hear from ‘horse’s mouth’ (neigh!!!).
In this blog, I will explain how to start a business directory website and then – turn it into a profitable venture?
Some of the sub-topics you will also find in the blog including how to set up a business model for a business directory and how to create a business plan for an online business directory.
The idea is to teach you the steps to start an online business directory website and how to make money with a business directory website.
Let’s get Rolling!
Long before Craigslist- the famous business directory made a name for itself in the online business directory space, I ran an online business directory for a small city.
Unlike my other small business that has involved outside professional help to plan and run operations like a professional bookkeeping and accounting company to help us with financial planning, bookkeeping, and other financial activities or a marketing agency, this business had no outside professional help.
As a matter of fact, the business was started because of our core business failing to sustain and offer a decent revenue.
As they say, “necessity is the mother of all inventions.”
In our case – The necessity was ‘Survival.’
Before I take you through my journey of running and succeeding with a business directory, how about, we understand a few basics of an online business directory?
By the end of the blog, you should have all the knowledge about starting and running a successful online business directory website business.
Let’s get rolling!
What is an Online Business Directory?
An Online Business directory is a platform with information in the form of business listings sorted in an organized way under categories and subcategories.
You, as a customer, can easily search information of business listing based on simple and advanced search parameters.
Plainly speaking, Online Business directories do exactly what famous large companies like yellow pages or printed local business directories in the past did for us.
There are thousands of online business directories across the globe catering to different niches and locations.
What are the different types of business directories?
The ever-growing reach of the internet has boosted the business of Online Business Directories.
Today, we have generic business directories catering to the needs of cities (our business directory was one of them) or country-based business directories (think of yellow pages and google business) providing information of businesses in the country.
And then, there are niche business directories like Yelp and Zomato (directory for food businesses).
Some of the famous names in Australia include – Truelocal, Yellow Pages, Start local.
The plan to start an online business directory website starts with learning the steps to set up the website and then building a revenue model around it.
In the next few sections, I will take you through all the necessary sections to help you put together a business plan of the online directory business model.
How to start an online business directory website?
Steps to start an online business directory:
If you know How to take your business online, it would not be a herculean task for your to start an online business directory.
The steps to set up the online business directory include –
Step 1 – Book a Domain Name
Start by finding a name that resonates with your business.
You can jump to one of the domain name booking websites and buy yourself a domain name.
My favorite domain name buying service is GoDaddy.
Note: If you are new to the online business world and require help with the basics of starting an online business, I highly recommend that you start with the blog – ‘How to take your Business Online and then come back to this blog.
The above-mentioned blog will help you understand simple basics like domain name, web hosting, etc., and I will also explain to you in a step-by-step manner how you can buy these services online.
After you have bought the domain name, time to find a CMS and a theme that helps you quickly get started with an online business directory.
Step 2 – Decide the CMS and start the website.
Content Management Systems, aka CMS, has made life a lot easier for nontechie guys like you and me.
Today, we do not have to rely on designers/developers to start an online business.
To get your online business directory up and running on the internet, all you need to do is head to Engine Themes.
Their directory theme beats all the competition – hands down.
The best part is that the directory from their website costs you less than $ 100 and has every feature you will need to run a business directory.
I would recommend that you try their demo now to see how well and smooth it runs.
Setting up the business directory is easy. Running it might not be as easy 😊
As soon as the online business directory is set up, you will come across a few terms used in the business directory.
Step 3 – Buy a Hosting Space
An online business directory on WordPress can be hosted on a hosting space optimized for WordPress.
You have 100 options to choose from. However, I strongly recommend selecting Siteground as they are optimized for WordPress, and engine themes can be easily hosted on their website.
Step 4 – Learning to use the Online Business Directory
Here is a simple explanation to help you understand the online business directory setup better:
- Admin: The Administrator of the website. He/she has complete control over every single feature of the website. For example, Admin has the power to approve, edit, delete, add – Users, business listings, Comments, activity, etc. Also, the admin can define the revenue model for the website by controlling the membership options and advertisement rates.
- Vendors: They are the ones who post their details on the business directory.
- Business Listing: A business listing is the listing of a business, service, or product posted on a vendor’s website.
- Category/ subcategory: The categories and subcategories are nothing but a method to properly segregate business listings properly in a business directory. For example, if you run a business directory that provides information about restaurants in your city.
The category could be cuisine, and the subcategory could be the type of meal (dine-in, buffet, home delivery, etc.) . Most of the business directives have N Level of hierarchy for categories/subcategories.
- Client/users: These are the users who will visit your website.
The usual facility available with them in the directory is to manage their profile, rate and review a business listing, comment, and share on social media.
And you are all set to start using the online business directory.
Time to learn – how to monetize the business directory.
Learn the online directory business model (revenue)
Like the business model of good old bulky printed directories, the business model of online Business directories revolves around highlighting paid listings. i.e., giving preference to the ones who have paid extra bucks and selling the advertisement space.
The revenue model of online business directory-based business (the majority of cases) revolves around two models:
- Membership fees:
The concept is simple. Online business directories set up a membership structure where they charge you based on the facilities availed by you.
Let me explain to you with an example. I am running a business directory and want to have a revenue model around the facilities I offer to vendors who list their business on our business directory.
I decide to have 3 membership levels: Platinum, diamond, and gold.
The Platinum Members:
- Pay $ 100/month
- They get featured in the top 2 listings in 3 categories (featured means getting that highlight around your business listing).
- They are also given a facility to upload 15 pictures
- Lastly, Platinum members get to link their 5 social media accounts to show regular updates posted by them on social media directly on their business listing page.
The Diamond Members:
- Pay $ 70/month
- They get featured in the top 2 listings in 1 category.
- They are also given a facility to upload 5 pictures
- Lastly, Platinum members get to link only one social media accounts to show regular updates posted by them on social media directly on their business listing page.
The Gold Members:
- Pay $ 30/month
- They get featured listings in 1 category at the bottom of the page (not the top listing, just a highlighted listing of their business at the bottom of the page).
- And they are given a facility to upload 2 pictures
Now, you can design your own revenue models based on the market response and demand of the online business directory website.
– Selling of Advertisement space:
Think of good old times (not the king of good times ….Hint-2!) when the internet was just a tool to send emails. “Online” business directories were non-existent.
If you remember correctly, the business directory sales guys will come to our office to sell us ad space on their printed directory.
The ad on the cover page was the most expensive one, and the one on the inner pages was a little affordable.
The pitch always went based on how good the circulation of the last business directory was and which page received how much appreciation.
Fast forward today, and not much has changed when it comes to selling ad space on the business directory website.
Although, there are some complexities involved at times which is understandable, considering how advanced markets have become.
The core as a base revenue model remains the same. For the sake of simplicity, let me explain to you the advertisement revenue models:
– A fixed price for a banner space:
The simplest and easiest revenue model of advertisement is where you have a flat rate for fixed ad spaces on the website. Then, the customer takes a banner space and pays an X amount for the same.
– CPC or CPM business model:
Most of the business directories find it difficult to get paying customers(especially the new ones). Hence, they rely on taking 3rd party ads from Google and other platforms.
The ads are placed on the website in a space that is usually meant for paying customers.
Well! Since there are no paying customers – why let space go waste?
The business directory website owner is paid based on CPC or CPM (CPC stands for Cost Per Click and CPM Stands for Cost Per 1000 impressions) at a rate decided by the advertising platform.
Famous directories implement the same model (CPC and CPM) for their paying customers where the customers are charged on CPC or CPM generated on the ads on the platform.
-Revenue-based on lead generation:
At the end of the day, any business spending money on the market and promotions is the number of leads and quality of leads.
Some famous business directories have started committing a minimum amount of leads as a part of their membership package to address this.
I remember buying a similar package from a famous business directory last year.
Although the number of leads generated was good, the lead’s quality was quite bad. As a result, we did not renew our membership with them.
There are business directory websites that have well-designed revenue plans based on the number of leads.
You buy a plan of, say, X dollars for 30 leads and so on.
Marketing the online business directory website
Marketing a business directory website can be challenging. To start with, you need to have a good amount of traffic to ask your members (vendors) to pay you membership money.
And getting that traffic is not easy as the users only come to your website when they find a respectable number of business listings to help them with their searches.
I know of guys who want to get rich asap.
From day one, they have a membership structure proudly displayed on the first page of their online directory website asking business owners to give money to get a space on their website.
And days pass without any registration.
Let’s understand the problem here. First, the complex scenario where you have to balance the number of business listings and keep the website visitors engaged is difficult.
And, there are good chances of online business directory websites failing to either attract vendors or users. Thereby leading to failure.
You need a smart strategy to market a business directory website.
Here is the online business directory marketing strategy I suggest:
- Start by populating the information of business listings yourself. Then, you can get a lot of data from the internet.
If your hands are full, hire a data entry operator to populate all the data for you.
- Send an invitation email to all business owners (whose listings you have created) to verify their listing. In addition to verification, ask them – if they want you to remove the listing or make some edits to the listing. Do not forget to mention that “It’s free and how much you appreciate having them on your website.”They are the sole reason for users to stay on your website. Make them feel special. As far as I know, no one minds a free business listing. In fact, there are good chances some of them will come back to you suggesting edits to their listing. So make a relationship with them.
- Once you have a respectable number of listings on the business directory, focus on driving traffic to the online business directory by using methods like:
-Social Media Marketing
- Remember, Business directories can be “boring” at times. Think of adding new sections such as:
-Latest news in your industry.
-The latest blog with tips, tricks, advice should help.
-The latest events in your industry can do the trick.
Be ready to spend your time waiting for that perfect balance of website visitors and registered vendors.
Most of the online business directories I see failing are the ones that want to generate revenue from day one.
Alas! It does not happen so soon with new brands—especially online business directories.
What are the challenges faced by online business directories?
- Within 3 to 4 months, we almost had 100+ paying members, and in a year’s time, we had every single business in the city registering on our website.
- A lot of competitor websites started in our city and started selling the same service.
Despite all their ctrl-C + ctrl-v effort, they were always miles behind our popularity.
- We went to sell ad spaces on our website.
I still cannot forget the day when my sales guy and I closed a good deal for top banner space on our website for one year.
I think it was 75K per annum. But, of course, the money I am talking about does not look big today, but it was a lot of money back then.
- Small businesses started using their email ids on our portals and their business link on our website in their marketing and promotions.
This validated us as a famous brand name. There was a time our web portal became more famous than the parent company.
- To meet the high demand, we had a team of 3 sales guys to support us with marketing (they also doubled as operations guys 😊 ).
- The biggest challenge and the most overlooked challenge is from Google My Business.
Type any business name in google, and the first listing to show up will be googling my business List. You have to beat them to be the best.
- The money required to market online business directories is not the same as setting up a business directory.
There is another big misconception about an online business directory. People think it is affordable to run a successful business directory.
Let me tell you one thing; it is affordable to set up an online business directory. But when it comes to running one, you will not at all find It affordable.
There will be expenses in digital marketing and data entry.
Be ready to spend some money.
- The revenue model of online business directories is not easy to set, and I write this with a lot of first-hand experience.
We, the customers, are a spoiled lot. We will expect a new business to go a little out of the way to give us more than what their simple membership plan offers.
Work on a fluid revenue model, and you can evolve it with time.
- Creating trust between the users and vendors is another challenge.
You will have to be on top of activities on the website to make sure the spammers are always kept at bay.
To help you relate better to what I explained above,
Here is the case study of our business directory business:
How our business directory idea was conceptualized:
The year I quit my job was a happening year (if you know what I mean 😊 ) for our small town.
The city had recently been declared an SEZ area, and every known industry ad bought space to set up their industrial unit in the city.
We, too, started our IT Company in the city, hoping to cash in on this huge influx of industries.
This is where our plan went a little awry.
All the industries had their software and websites managed through head offices in big cities. They were not interested in entertaining us.
Those who entertained us did not pay us the money.
They treated us like a small city web development company with little or no credentials to speak of.
We were soon looking at a sad ending to our venture.
As they say, “All that glitters is not gold.”
We were just learning it the hard way 😉
I sat with my business partner, my dear brother (who by then had learned web designing and development on his own without receiving any formal training in it), and we reassessed the IT scenario in our city.
We soon realized selling to industries was out of the question.
The second target audience is the local business owners who were reluctant to spend money on websites.
The problem was they all wanted a website to showcase themselves as 20th-century businesses in Rudrapur to the industries setting up base in the city, but they did not want to spend a lot of money on a website.
We decided to launch a business directory by the name of rudrapuronline.com and sell memberships on the website at affordable rates.
How we set up the business model of our business directory:
Remember the revenue model I explained to you earlier. We, too (like all online business directory websites), designed a membership-based structure for our clients with three membership structures.
I do not remember the exact amount we charged, but it was somewhere in the range of 500 to 2000, where the cheapest membership provided the local businesses with 1 page and 1 picture and no email.
The second membership provided them with 2 [pages, 2 emails, and 3 pictures, and the most expensive membership offered them 3 pages, 10 images, and 5 emails.
And we sold ad spaces on our website.
I don’t want to boast about our achievements, but why to let go of the opportunity (it was one of my first ventures, and I really want to share the success with you).
- We did not have a CMS like WordPress to support us. Hence, every page had to be designed using HTML/CSS.
- Top it up with every client wanting a different design and color for their page. The first version was a jazzy website with many colors in it.
Our offline advertisement budget included hoardings and templates, which put a heavy dent in our pocket.
Although we recovered the money we spent gradually– we had to make the initial investment from our end to promote the business.
- We learned the hard way the cost of running the offline advertisement.
- After-sales required a lot of support. There were times our guys had to take the camera (yeah, we used our own camera as we did not have mobile phones with good cameras back then) and click pictures of businesses.
- Online ad space did not sell like hotcakes. We found advertisers only on the property and builders page other than the home page.
Despite all the hiccups, challenges, etc., the business was a success.
To make the website interesting, we added a news section and an online games section (simple flash games we were pulling from other websites).
The portal further added add-on services like a job portal and a property section for the city.
Unfortunately, I shifted out of the city, and my brother (tried very hard) to sustain the business.
The times changed, and the market slowed down in the city, which killed our business.
Anyways, it was good till it lasted, and to date, I am proud of the venture.
How to create a business directory website?
A simple method to create a business directory website is to use a wordpress and then use a wpengine business directory theme to quickly set up a business directory website.
The theme comes with all the necessary modules required to create and start a business directory website.
How to make money with a business directory website?
There are different monetization methods that you can use to make money using a business directory website. The prominent ones being – selling memberships and selling ad space on the business directory website.
How to promote an online business directory?
The methods to promote an online business directory include search engine optimization and social media marketing. You can use different SEO techniques to rank high on google and social media marketing, promoting your online business directory on various social media platforms.
How much should I charge for a directory listing?
The directory charges for members depend on many factors, including the benefit the advertisers can get from your business directory, which is related to the relevant web site visitors your website gets.
I recommend that before you set up a membership fee, you set up a business plan to take into consideration various factors that might impact your sales strategy.