If you own a small company that sells products and services, the words "electronic commerce," or e-commerce, should have a nice ring to them — like the ring of an old-fashioned cash register.

E-commerce, whether business-to-businesses or business-to-consumer, is all about selling products and services over the Web. Most small businesses should actively explore ways that e-commerce can enhance revenues and expand markets.

E-commerce gives your company an added sales channel and diversifies your revenue sources. If you have business partners, you can generate sales leads for them, which in turn should generate business for you. E-commerce gives you a tremendously flexible marketing and sales tool that you can use to respond more quickly to market conditions and competitive threats.

E-commerce provides important information about customer buying behavior — information you can use to fine-tune sales and marketing efforts. In fact, e-commerce is as much about saving money as making money. For example, you can reach new markets at a much lower cost than adding new storefront locations or running ad campaigns in different geographic areas or market segments.

Take your time

E-commerce usually is implemented in phases, which small businesses with limited resources can appreciate. You can test the market with new products and services, modify your Web site quickly to meet changing customer needs and keep your online activities aligned and integrated with your traditional operations.

Here is a sample evolution of an e-commerce initiative:

• "Brochureware." At this stage your Web site is basically a source for general information about your company and its products and services. You may want to enhance your Web site to enable customers or visitors to send you questions, request more detailed product information or provide feedback by e-mail. You can then turn these contacts into leads to complement your existing sales channel, or perhaps test-market new products and services online.

• Web storefront. At this stage, you add online buying and selling to your Web site.

• One-to-one relationships with customers. At this stage, you can use the information gathered in the first two phases to create personalized content to meet each customer's needs and preferences, and create Internet marketing campaigns that better address those needs. Personalization has been shown to increase customer satisfaction and retention and produce higher sales.

Identify your priorities

One of the ways to decide if e-commerce can benefit your business is to work through the following series of questions.

• Would your customers find it convenient to conduct business with you online?
• What types of purchases are your customers currently making online (with you and with other companies or institutions)?
• Which of your products and services could be sold online?
• What are your competitors' e-commerce capabilities?
• Are you losing customers or market opportunities to online competitors?

One small company that used e-commerce to create a million-dollar business is NewspaperDirect, a pioneer in print-on-demand services. This 33-person company has solved the problem of delivering anyone's favorite newspaper right to his or her doorstep — even when that person is a traveling executive whose hometown newspaper is the Los Angeles Times and the doorstep is a hotel in Beijing.

The idea for NewspaperDirect came to founder and CEO Miljenko Horvat when he realized how difficult, costly, and time-consuming it is to physically distribute newspapers. He thought it made more sense to print at the point of consumption, enabling hotels and others to print newspapers and deliver them to customers with their breakfast. The company distributes more than 160 newspapers to readers in 59 countries.

About 90% of the firm's external business is conducted online. NewspaperDirect's network foundation ensures that they can manage upwards of 15 gigabytes of outgoing data, while the company's underlying e-business infrastructure can support analytics and accounting that enables the firm to track how many copies of a newspaper have sold in a particular month, which newspapers generate the greatest profits and more.

Publisher partners can also sign into a private NewspaperDirect Web site and gain insights into sales, daily revenues and other statistics. The company posted $1.5 million in revenues in 2002 and expects to double that figure in 2003, while the list of newspapers it distributes is growing at a rate of 5% to 7% per month. "If you approach technology from a business-model standpoint and use it intelligently," Horvat says, "every business can benefit in terms of opening new markets and saving on costs."