From cyberspace to retail space: entrepreneurs are succeeding by turning a traditional business model on its head.(Small Business Corner)

Starting a new retail company is a risky business, and only a handful of ventures ever make it to the top. These days with the increasing popularity of doing virtually everything on the web--including shopping--the Internet has created an interesting twist. Instead of struggling to build up a physical store and then offering an online version further down the road, companies can start online, build up their business and then consider the ROI of opening a brick-and-mortar store much later. This reverse business cycle is not only less risky, but it's a far more cost efficient and flexible way of building a company.

In the past, businesses would start out with the traditional brick-and-mortar location. If it turned out to be a success they would open up another, slowly starting a chain. Down the road they would create an online version of their store to reach out further to a nationwide audience shopping on the web. Getting to that level of success, however, is a long, risky and painstaking process.

Real-world start-ups require a lot of capital. In addition to the cost of the products, there are all sorts of operational costs that can suck away at available equity. Even once in business, companies face the problem of cash flow. Bills often come in before the sales, making those first few months--even years--a very rocky climb. Just one slip and the company could fall completely out of the picture.

Today's business cycle uses the Internet to prevent such a fall from happening. By reversing the process, start-up companies can build their businesses online in a lower risk setting, and then move to brick-and-mortar stores later. The rocky start up period is smoothed out with lower upfront costs and more immediate cash flow, allowing for greater expenditure on marketing and inventory.

Starting out with an online store also allows companies to reach out to an internationally-wide customer base for a fraction of the cost of a traditional advertising campaign. Because online businesses operate from a virtual office, merchants can do this from any location, saving an immense amount of money while working more efficiently. This is crucial in the early stages of a company's development as they are still trying to build a customer base.

By utilizing the wide range of web-based shopping and auction sites, merchants can sell their products across multiple channels at once, much like opening multiple franchises around the globe, but for a fraction of the cost. New businesses can invest in services providing software, which allow merchants to sell on multiple web stores and shopping sites like eBay, Amazon and Froogle, simultaneously. These markets ...