skibum - 2:01 pm on Aug 23, 2006 (gmt 0)

You shouldn't base a business with high fixed costs. You should build a lean, flexible business that will thrive on feast and survive famine. You should start small and only grow with reinvested profits.

Agree 100% & once you know how to make money with free traffic, what converts, and your ROI, unless you got hit with those minimum bid increases you can virtually always get traffic (even though it might not be a lot) and add at least an incremental amount of income by doing that.

You need to capture your visitors information, provide reasons for them to come back to your site on a regular basis to get off your dependency of free search traffic. Most of all, ya gotta keep those fixed costs low at least until you can buy luxuries with whatever money your make from the money you already have. PPC prices are probably in large part influenced by free traffic that websites and businesses get. In a sense, if businesses are looking at the big picture, you could think of the engines as getting paid for all traffic & Google has got to have some metrics that show how the two are related. If a company takes a big hit on free traffic, there is probably some kind of predictor as to how that will affect PPC spend.

If you've got the number one spot for widgets and that is worth $500,000 in profits a year, then you might be willing to run at break even (looking at immediate ROI) or a little below to grow your business on PPC. Once that free traffic stops or gets interrupted you can either spend more on PPC to make up for it in which case you may sustain business but lose money or pull back and start to whither away.