Internet tool kits no substitute for sound business plan April 2, 2000   By JIM BROOKS Tune into the market reports on CNN, CNNfn, or any news network and it's no secret -- technology and Internet-related stocks are responsible for the stock market's rollercoaster ride. New records highs seem to be so commonplace on the Dow Jones Industrial Average and the Nasdaq that few people (other than investors and market watchers) seem to notice. Securities and Exchange Commission Chairman Arthur Levitt recently pointed out that the technology-fueled market gains are justified, but warned that investors should avoid getting overextended just to get in on the action. Many new Internet companies' valuation ``seem to defy traditional explanation,'' he told Reuters recently. ``The run-up of these valuations is largely the result of multiple stock splits and soaring stock prices fueled by an almost insatiable investor appetite.'' A number of once high-flying Internet companies may be heading for crash landings, according to quarterly reports filed with the securities and Exchange Commission. • Consumer health Web site DrKoop.com reports ``sustained losses and negative cash flows'' since the site's launch, threatening its continued operation over the long haul. • Music retailer CDNow -- a site that has millions of active customers -- reported after recent merger talks fell through that it has only enough cash to continue operations through September. • Online grocer and former Wall Street darling Peapod is actively seeking a takeover of its operation. The company is hoping to secure $20 million in new operating cash. The road ahead may be rocky for these and other Internet startups, but it isn't the end of the road. The euphoria over Internet companies and investments can't replace a solid business plan. DO-IT-YOURSELF WEB BUSINESS. The excitement and buzz surrounding Internet and Internet businesses has filtered down to the Mom and Pop level tool. The Internet is full of individuals with rags-to-riches success stories that can too often make even the wildest claims seem plausible. And there are many businesses hoping to capitalize on the excitement. Seldom a day goes by that I don't receive an e-mail that promises a ``system'' that will deliver untold fortunes into my bank account. These types of e-mails are considered ``spam,'' or unsolicited messages that only serve to waste space in your e-mail in-box. But the get-rich offers are getting more professional. Recently I've seen an infomercial on late-nite TV for a kit that not only will help you understand the Internet and e-commerce, but will actually put you in business. The product is called the Internet Tool Box, created by a company called Themeware Corp. The infomercial features actor Richard Karn (``Al'' from TV's ``Home Improvement''), who describes how the product can get you up and running with your own Internet store front in short order. The $49.95 Internet Tool Box sounds like the best thing since sliced bread from the infomercial description. Using your Internet Tool Box, you can have an e-commerce Web site without worrying about products -- the Tool Box includes business opportunities and products that you can sell from your own Internet Web site. To the credit of Themeware and the Internet Toolbox, the Web site accurately describes the product as a ``comprehensive tutorial,'' and not as a turn-key business. The Tool Box consists of a video, three CD-ROMS, several pamphlets, a catalog, a mouse pad and an Earthlink Internet access account and a template Web site. The package offers some excellent entry-level information about the Internet. And yes, the kit includes a trial membership in a service called iClub, a program that actually allows you to sell a variety of products and services on your newly created Internet Toolbox Web site. But if you build a Web site and fill with it iClub-supplied products, your Internet storefront will be empty after 60 days unless you pony up the required $299 and $19.99 annual fee. Running a business is more than having products on a Web site. It means establishing a solid business plan, as well as promoting the site using effective marketing techniques. The Internet Toolbox fortunately isn't expensive; you can order one at the company's Web site (www.itoolbox.com) if you wish. The important thing to remember is that despite anything implied in the infomercial, you aren't buying a business, you're paying for a product that may help you understand e-commerce and the Internet. WIZARD NO MORE. If the Internet Tool Box can help someone understand how to create an Internet business, then perhaps Wall Street should buy one for legendary stock guru Julian Robertson. Robertson plans to close his own investment group -- Tiger Management -- due to its heavy recent financial losses. Over the past 18 months, Tiger-managed funds have dropped from $21 billion to $6 billion in value, and he recently referred to the current market frenzy for tech stocks a ``Ponzi pyramid destined for collapse.'' The billionaire has long been referred to as the ``Wizard of Wall Street'' because of his ability to pick successful stocks. The secret to Robertson's success has been his strict adherence to buying only companies that fit his requirements for earnings, cash flow and management practices. But Robertson's success has shriveled with the Internet-fueled growth streak that's hit the market. Robertson was quoted recently saying that Wall Street ``is irrational and gone mad'' over Internet stocks. In the end, will solid business principles win out over the market madness for Internet investments? Only time will tell. Comments and questions about this column may be sent to jbrooks@myoldkentuckyhome.com, or visit www.myoldkentuckyhome.com on the World Wide Web. | HOME |