How to Start an Online Business

In the pre-digital era, launching a business was often an exclusive venture reserved for those with substantial initial capital and well-placed connections. Securing external funding was a daunting task unless you were well-versed in finance and entrepreneurship.

Fast forward to today’s ecommerce landscape, and the narrative has dramatically changed. The online sales industry has seen exponential growth, particularly in recent years. Between 2019 and 2021, ecommerce sales surged by over 50%, accounting for 13.2% of total retail sales in the U.S.

Now, virtually anyone can initiate and grow an online business, irrespective of their professional history or prior experience in entrepreneurship.

That said, the road to success isn’t entirely hurdle-free. Aspiring business owners still face the challenges of conceptualizing a compelling product, establishing a supply chain or manufacturing process, and crafting an effective sales strategy.

Why Starting an Online Business is a Smart Move

You might be asking yourself, what’s the benefit of launching an online business as opposed to a traditional physical store?

The reason is simple: An online venture offers a multitude of perks, such as:

The startup costs are relatively low.

A lot of people dream of starting a business but are held back by the substantial financial investment it typically requires. Between leasing a space, stocking up on inventory, and covering employee wages, the costs can quickly add up. A failed business could spell financial disaster.

In contrast, the requirements for starting an online business are significantly less demanding:

A computer.
A domain name.
A website building platform.

Essentially, you can kickstart your online business with as little as $100, eliminating the need to gamble away your life’s savings to pursue entrepreneurial success.

Significant opportunities for growth

In a physical storefront, you’re constrained by real-world factors such as high property costs and local market demand.

Conversely, with an online business, geographical and demographic limitations virtually disappear. You have the capability to sell to anyone, anywhere, and as online shopping gains more acceptance each year, your prospective customer base continues to grow.

By the year 2025, it’s predicted that ecommerce will make up nearly a quarter of all worldwide retail sales. Additionally, the number of global internet users is expected to swell to 5.6 billion by the same year.

This increasing online presence translates to greater visibility for your digital brand, especially if you’re open to international expansion.

Online 24/7/

One more edge that digital businesses hold over physical stores is the ability to operate around the clock, unaffected by lockdowns or other unforeseen events, once your e-commerce site is live, it’s essentially ‘always open,’ enabling customers to make purchases whenever they choose.

Because you don’t need to be on-site to facilitate these transactions, your business can earn money with reduced daily oversight.

Identify Your Specialty and Business Concept

A business niche is essentially your area of concentration—a specific market segment and demographic you aim to serve. This could range from fitness aficionados to amateur crafters to career professionals.

Choosing a niche is a critical step for your new venture. To zero in on the ideal audience, make sure they possess:

An unaddressed issue.
A readiness to pay for a resolution.
Adequate disposable income to afford your solution.

After pinpointing your niche, take the subsequent steps to flesh out your business concept:

Launch an Online Store

E-commerce has existed for almost 40 years, yet the current landscape makes it more favorable than ever to initiate an online retail venture.

According to a report titled “The Future of Retail 2019,” 32% of U.S. shoppers receive at least one Amazon package weekly, while 10% receive three or more packages from Amazon every week.

After you’ve zeroed in on your niche, the next steps are to choose an e-commerce platform, get your online storefront operational, and begin attracting visitors. If you’re considering self-hosting, specialized services are available for that purpose.

You also have the option to commence selling through established online marketplaces like Amazon, eBay, or Etsy.

Dropshipping

Dropshipping is a fulfillment model that lets you sell tangible products without the need to keep stock on hand.

The process goes as follows:

A customer places an order on your online store.
You pass along the order details to the supplier.
The supplier ships the product straight to the customer’s doorstep.

This approach is particularly appealing for those looking to venture into e-commerce without the financial burden of holding inventory. With projections indicating that the market could reach a staggering $557.9 billion by 2025, it’s clear that dropshipping is a growing sector.

Join an Affiliate Program.

If you’re keen on starting an online enterprise but don’t want to deal with product creation, affiliate marketing might be the path for you.

It’s a widely used method for generating online income. According to SaaS Scout, brands are estimated to spend around $12 billion annually on affiliate marketing, a number anticipated to rise by 10% in the coming years.

Here’s how the affiliate marketing model functions:

Enroll in an affiliate program.
Choose a product, either digital or physical, from another provider to endorse to your followers.
Earn a commission for each purchase made via your unique referral link.

You can showcase affiliate items on your blog by crafting content optimized for SEO or social media around pertinent keywords. This content is then fine-tuned to attract organic Google traffic. Alternatively, you can market affiliate products to your email subscribers, even letting your affiliate partners conduct webinars targeted at your audience.

The startup expenses for affiliate marketing are incredibly minimal; all you need to cover initially are the costs for a domain name, web hosting, and email marketing software.

Offer web design services.

Build a portfolio website to start drawing in clients. You can pick up the fundamentals of web development and design through online learning platforms and hands-on practice.

Another route is to join freelance platforms like Upwork or 99Designs. Freelancing comes with its own set of challenges. Although you enjoy the perks of geographical freedom and a flexible timetable, income can be inconsistent, especially in the beginning.

No matter which path you choose, possessing web design skills opens doors to not just client work but also to crafting and selling your own products. This can help offset financial unpredictability and offer more control over your career.

Build an Attention-Grabbing Blog

Are you skilled at crafting words? If so, you might want to think about blogging as a potential online business avenue.

Although a blog alone isn’t a business, it serves as a platform to cultivate a following. Once you’ve garnered an audience, you can monetize through various means like selling your own products or services, endorsing affiliate products, or collaborating with brands for sponsored content. This enables you to generate a passive revenue stream while focusing on other business endeavors.

Perform Product Analysis

When conducting product research, you’ll want to review the following primary product types:

Tangible Products

As suggested by the term, physical goods are material items that require manufacturing, warehousing, and shipping to the end consumer.

While dealing in tangible products can yield substantial revenue, it’s crucial to efficiently manage operational expenses to maintain healthy profit margins.

Digital downloads.

You have the option to offer digital products as well, which encompasses anything that can be downloaded directly onto a user’s device, such as eBooks, audio lessons, podcasts, or online courses.

Digital items generally boast higher profit margins compared to their tangible counterparts. That said, setting the right price can be challenging, as digital products are often viewed as less valuable than physical ones.

Services

Nearly any service that can be provided remotely is marketable online. Offering services ranks as one of the quickest methods to launch an online enterprise and generate income.

However, it’s crucial to understand that this business model essentially involves trading your time for money. Consequently, there’s a cap on your earnings, as there are only so many hours available in a day.

Perform Market Analysis

Conducting market research is a crucial initial phase for launching your online enterprise. It assists in assessing the potential depth, competitiveness, and profitability of your chosen business sector.

The worst-case scenario is introducing a product or service that nobody is interested in purchasing. Through online market research, you can identify the wants, needs, or gaps relevant to your target market.

Here are the steps to kickstart your market research:

SERPs.

Search for different versions of your product or service keywords and scrutinize the Search Engine Results Pages (SERPs). What kind of content currently occupies the top spots? Which companies are spending on ads to appear above the organic results?

This exercise allows you to get an early read on your competitors and collect data that can inform an initial SEO and digital marketing plan, tailored to the preferences of your prospective audience.

Understand your competitors

You should scrutinize your primary competitors beyond just what appears on Search Engine Results Pages (SERPs).

Who are the major players in your industry? What are their revenue streams like? What assets and drawbacks do they possess?

By closely examining your market competition, you can identify potential advantages that could set you apart.

Monitor Keywords with Strong Performance

Examine how product demand fluctuates within your niche and identify which content performs best by keeping tabs on relevant keywords.

Recommended tools for this analysis are:

Google Trends
Google Keyword Planner
Ahrefs
Semrush

Identify Your Ideal Customer Base

By grasping the characteristics and needs of your target market, you set the stage for attracting sales and expanding your business. These insights collectively contribute to a comprehensive understanding of what motivates your ideal customer to make a purchase.

To delve into their requirements and tastes, consider investigating the following aspects:

Demographics.

Demographic data includes basic socioeconomic characteristics and templates such as:

Age.
Gender.
Ethnicity.
Income.
Job title.

Psychographics.

Psychographic data includes various psychological characteristics such as:

Values.
Beliefs.
Interests.
Opinions.

Identify Products to Offer Online

Running a prosperous online business will be difficult if your products are subpar. Even if they gain attention, it’s likely to be negative.

As you identify products to offer online, think about your sourcing strategy and consider the following steps:

Make your own products.

This route is generally simpler if you’re dealing in digital products.

Conversely, creating physical goods demands considerable effort in design, materials, and stakeholder communication. The financial investment is also more substantial.

Nonetheless, in-house manufacturing offers a competitive edge in terms of quality, product variety, and branding opportunities.

Securing a Dropshipping Partner

Identifying a manufacturer who supports dropshipping can be a profitable venture. This is particularly the case as numerous small business operators work out dropshipping arrangements with foreign manufacturers to reduce operating expenses.

Collaborating with a wholesale supplier.

Partnering with a wholesale distributor allows you to access a variety of products that you can feature in your online shop. Some wholesalers even provide distribution services to help you get your products to customers.

Product Viability

Before you commit to a large purchase or production run, it’s crucial to comprehensively assess the potential success of your product. Consider the following questions:

Are there existing online businesses that are successfully selling similar products?
Is the market demand for this product steady, or is it just a passing trend?
Is the financial aspect of the product sound? Can you sell it at a markup that ensures profitability?

Keep in mind, the ultimate question isn’t how innovative or appealing the product is, but rather whether it holds up as a profitable business venture.

Establish Your Brand Identity and Aesthetic

A brand encapsulates the core identity of your business. It’s crucial that everything from your business name to your website’s design and text reflects a unified visual and conceptual message. This consistency should extend to external platforms, like social media channels, email campaigns, and even your product packaging.

While shaping your brand identity, consider the following elements:

Your logo
The color palette
Landing pages
Webpage layouts
Font choices
Imagery and graphics

The culmination of these components should collectively define your brand image.

Educate Yourself on E-commerce Regulations

Don’t make the mistake of thinking that because you operate online, traditional business regulations don’t apply to you.

That’s far from the truth.

Even though digital businesses often require fewer permits and licenses than physical stores, there are still a variety of legal aspects to consider. For instance:

What type of business license is required to commence your activities?
What’s the most suitable business structure for you—should you opt for a sole proprietorship, an LLC, or a corporation?
What permits do you need to secure, if any?
Are any inspections mandatory?
Is a sales tax license necessary for your operations?
What online-specific regulations should you be aware of?
What are the legal requirements for employing contractors or full-time staff?

Remember, laws differ from place to place, so always consult with local authorities to get the most accurate information and
educate yourself further on the laws and guidelines governing online businesses and e-commerce ventures.

Your Online Store

Following considerable setup efforts, it’s time to gear up for your website’s launch. To set your website on a path toward success and long-term viability, take into account the following action items:

Ecommerce Platform.

An ecommerce platform serves as the technical foundation for conducting sales on the internet. This software equips you with essential functionalities ranging from showcasing a product catalog to facilitating payment transactions.

Some top choices in the market are:

BigCommerce
WooCommerce
Shopify
Adobe Commerce (Magento)
Salesforce Commerce Cloud (Demandware)

Ensure you pick a solution that meets all your requirements while fitting within your budget.

Incorporate your merchandise.

After you’ve selected your ecommerce platform and picked out a theme, it’s time to populate your catalog with products. While doing so, be particularly mindful of:

Product Imagery: Offer high-resolution pictures that display your product from various perspectives. For more guidance, refer to this ecommerce photography guide.
Product Descriptions: Rather than merely listing features, emphasize the benefits that customers will gain. For tips on crafting engaging product descriptions, check out this article.

Both product visuals and descriptive text play a crucial role in the conversion rates of your product pages, so invest the effort to make them as effective as possible.

Select your shipping strategy.

Speedy, no-cost shipping is the primary motivator for consumers to complete an online transaction and can substantially impact both the volume and quality of your sales.

Make certain that there are no delays in delivering products to your customers. Consider employing a variety of shipping methods, such as:

In-store collection
Less-Than-Truckload (LTL) freight providers
Same-day or next-day delivery options
Complimentary shipping

Ensure all systems are functional.

Ultimately, after your online store is up and running, rigorously test every element. Confirm that:

The site displays correctly on a range of devices, from desktops and tablets to smartphones.
Your website operates smoothly across various browsers, including Chrome, Firefox, Safari, and Microsoft Edge.
All clickable elements are functioning and linked to the appropriate applications.

If resources permit, consider bringing on a Quality Assurance specialist to conduct extensive site tests and provide insights based on the results.

Expand Your Business

After you’ve got all the essentials in place, the next step is to funnel traffic towards your ecommerce platform. Focus your efforts on the following avenues:

Paid Advertising: Set aside a budget for pay-per-click (PPC) campaigns across social media and search engines. This is an immediate way to elevate your brand’s visibility as a new entrant.
Influencer Collaborations: Begin forming relationships with key influencers on social media platforms who can vouch for your products through authentic endorsements.
Organic Social Media: Balance out your paid promotions by cultivating a following on social media channels like LinkedIn, Instagram, and Facebook, which can generate organic traffic.
SEO Practices: Make sure all your web pages are optimized for search engines, and develop a content marketing plan to boost your written material.
Email Outreach: Create an email database by capturing the addresses of your site’s visitors. This enables you to directly market your offerings to a dedicated subscriber base.

In Conclusion

Embarking on an online business venture doesn’t need to be daunting.

Simplifying your journey starts with breaking it down into manageable steps. From initial research and development to your website’s ultimate go-live, the roadmap may be intricate, yet it’s far from perplexing.

By adhering to this guide and utilizing insightful analytics, you can establish a prosperous online enterprise that’s operational sooner than you might think.

Common Questions on Launching an Online Enterprise

What’s the ideal kind of online business to kick off?

This largely depends on your skill set and individual tastes.
Common pathways are service-oriented online businesses, which often evolve from freelancing ventures, and product-centric online businesses like e-stores. Both usually demand minimal initial capital and offer effective scalability.

Which online business is the most lucrative?

Ecommerce stands out as one of the most profitable types of online businesses, offering boundless scalability opportunities.
Starting with a specialized niche store, you can eventually expand it nationally or even internationally to cater to a global customer base.

What products are sellable online?

In today’s digital age, you can sell almost any item online, provided there’s market demand for it.
To gauge a product’s viability, examine your target market size— the approximate number of potential customers — along with potential profit margins — the revenue you can generate by selling at a price the market is willing to pay.

Is it possible to start an online business without capital?

In theory, you can launch an online business without significant upfront investment.
That said, there are nominal initial costs like domain registration, choosing a website platform, and content development. If you opt to build your website yourself, you can keep costs to a minimum.

Is marketing essential for launching your business?

Marketing isn’t strictly required to get your online business off the ground, but some form of promotional effort will be necessary at launch.
If you already have an audience, such as social media followers or blog readers, a strategic launch marketing campaign can yield rapid returns.

Is a business plan a must for an online business?

Absolutely. Venturing into an online business without a plan is akin to driving blindfolded— you might reach your destination but you’ll risk encountering avoidable challenges along the way.
While a full-fledged business school plan may not be necessary for a small ecommerce setup, a brief strategic outline is advisable to guide your initial steps.