Posted:
June 12, 2020
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A Guided Course for Online Businesses

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How To Start an Online Business


Starting an online business can set you up with a lucrative source of passive income, or even plant the seeds of your next career. It can also be a lot of work: Planning how to get your online business off the ground and making a profit is no mean task.

Luckily, if you follow these eight straightforward steps, you'll be well on your way to starting your own online business.

Consider low-cost business ideas.

Take some time to consider inexpensive business options. There are plenty of business models that let you get started for less than $1,000. Add a little elbow grease and a spark of inspiration, and you could well be on your way to a digital empire.

E-commerce

Specific e-commerce business models come with low initial investments and potentially massive payoffs. For instance:

  • Vintage stores, which often resell inventory hunted down in thrift shops or at estate sales
  • Online courses, consisting of self-produced instructional videos and live teleconferencing sessions
  • Handmade jewelry, created using inexpensive materials and tools
  • Stickers or enamel pins, which can be produced inexpensively in bulk using remote services
  • Homemade pet treats, which you can make and sell without the use of a commercial kitchen

These are just a couple of ideas to get you started. When it comes to low-investment e-commerce, there are plenty of ideas waiting for you to take action.

Amazon, Shopify, BigCommerce, and WooCommerce are four of the best and most popular platforms for operating an online store or business. 

Amazon: Has more stringent limitations on what and how you can sell products. Amazon has global reach and the fulfillment centers to warehouse products. 

Shopify: Highly customizable, Shopify comes with tons of plugins and lets you run just about any e-commerce store you can imagine.

BigCommerce: Best for SMBs and growing online businesses that require a lot from their online retail platform and have the funds necessary to invest. 

WooCommerce: This is probably one of the best platforms to get started with due to its compatibility to work well with Wordpress websites. Best for Wordpress users. 

Dropshipping

The drop shipping business model completely outsources all your inventory and shipping. It's up to you, so set up a store and market products. Fulfilled orders are prepared and shipped by suppliers who you've established working relationships with previously. So, as soon as a buyer clicks the checkout button, the sale is out of your hands. You collect your profit, and the rest of the money goes to the supplier. After that, you need to be available to provide customer support if something goes wrong—like the package getting lost or arriving late.

The drop shipping model is appealing because of its low startup costs; with a laptop and less than a thousand dollars, you can start a business from a table in your favorite coffee shop or living room. But, because of that easy accessibility, drop shipping is highly competitive. And you'll still need to leap through the standard hoops to set up your business, get your financials in order, and pay taxes. Our course on how to start a drop shipping business breaks it all down into digestible steps.

Affiliate marketing

Similar to drop shipping, affiliate marketing lets you profit from selling products without ever handling a piece of inventory. With this business model, you embed affiliate links on your website, blog, and social media posts, or else in a newsletter you send to your email list. When customers click the affiliate link and make a purchase from the affiliate's store, you get a cut—typically a 5-25% commission.

If your strong points are content marketing or social media, life as an affiliate marketer may be right. If you're already a blogger whose content appeals to a particular niche, you may be able to turn your WordPress pastime into a passive revenue source. So long as you're putting out content your followers' value—and attracting traffic through search engine optimization (SEO) and ads—you've got all the infrastructure you need to jump into affiliate marketing.

Startup costs are low—all you need to get going is web hosting, a domain name, and a WordPress account, plus a little know-how when it comes to blogging for your target audience. Keep in mind, though, the infrastructure you need may take time to build; search engine credibility, massive follower counts, and archives full of high-quality content don't show up overnight. If you're planning to start affiliate marketing, be prepared to invest time and energy in building your online assets.

Working as a freelancer

Ready to quit your day job? Online freelancing may be the answer. If you're already working remotely—coding, design, marketing, accounting, copywriting, you've got a valuable asset that can earn you cash as an independent operator. Even if your job is hands-on, you can still use online freelancing platforms like Upwork or Fiverr to set up a consulting business. For example, maybe you already run your own successful wedding photography business. You can earn a side income by marketing yourself as a photography consultant, helping mentor other business owners.

Whatever you specialize in, be prepared to set up a website for your freelancing business, as well as profiles on any freelancer platforms you choose to use. Also, assets like an active social media presence, blog, or newsletter can build credibility and stand out from the crowd. Finally, if you're used to working for someone else, becoming a freelancer will change the way you do taxes. Our independent contractor's guide to taxes has everything you need to know.

Starting a podcast

Podcasts brought in almost $500 million in revenue in 2019; by 2021, that figure will hit $1 billion. If you've memorized the weekly release schedules of all your favorite podcasts and figure you recognize the ingredients to an addictive program, then the microphone could be your path to stardom.

Podcasters typically earn their income through affiliate marketing. Embedding links isn't the way to go—it's up to you to promote businesses on your program. Podcasting platforms like Podbean and Buzzsprout connect you with affiliates from day one, so you never have to go hunting for a sponsor. They'll also host your podcast, and help you promote it and track your progress.

Besides the cost of hosting, be prepared to spend most of your startup budget on promotion through ads and sponsored posts. There's also the matter of your studio; entry-level professional microphones range in price from $100 to $500.

Write a business plan!

Your business plan is a roadmap for your online or any other business you're thinking about starting. It describes where you are now and the direction your business is heading. As your business grows, you should always return to your business plan for help planning growth, scaling, or forecasting likely difficulties. Having a plan in place before you get off the ground is key to building a successful online business. It keeps you centered on your goals—so you know what's essential and what isn't when it's time to make crucial decisions for the business growth.

A few questions your business plan should be able to answer:

  • What need is your business fulfilling for customers?
  • Industry competitors?
  • Business assets, such as startup funds, knowledge, and skills, or intellectual property
  • Business financial forecasting for the first two years
  • How long can your business go without making a profit?
  • What sort of sweat equity will it take to get your business established?
  • What will you need to earn each month to break even?

Your business plan can follow either the lean model (quick and dirty) or the traditional one (extensive and deeply researched). Our experts help you create the first business plan and gives you a step-by-step process.

Choose your business structure

How you elect to structure your business will determine how you will file and pay taxes. It also determines your liability—whether your assets are on the line in case your landscaping business can't pay its debt or gets sued.

The five main types of business entities recognized by the IRS are:

  • Sole proprietorship
  • LLC
  • Partnership
  • S Corporation
  • C Corporation

As soon as you start earning money from your own business, the IRS considers you a sole proprietorship. Meaning, you and your business are identical for tax purposes.

In some ways, that makes life easy—you don't have any extra paperwork to file or report. Partly for this reason, the sole prop structure is popular with freelancers. On the other hand, it doesn't offer any liability protection—so your assets are on the line in case you get sued or default on a loan, for instance. A single-member LLC structure is the next step up. It gives you liability protection, while still functioning much like a sole proprietorship. Many entrepreneurs and business owners start as sole props, then become LLCs.

Our guided resource to business structures lets you compare your options, and see the strengths and weaknesses of each.

Register your business name

If you freelance or start a sole prop under your name, there usually isn't any need to register a business name. But as soon as you begin operating under a trade or Doing Business As "DBA," for example, TwentyFour Designs," instead of "William Smith"—you'll need to register and incorporate that business name. Registration also applies if you're using any other business entity structure, such as LLC or Inc. 

Complete a business name search

Do some research online to make sure no-one else is using your business name. Researching can be done by using an online service company or by researching your state business website. 

File a doing business as (DBA) form

To run your business as a sole proprietor under a business name other than your own, you'll need to file a DBA with your state.

LLCs, corporations, and partnerships register their business names when they elect their business structure for federal and state tax purposes. However, you'd like to operate under a name different from the one you've registered; you'll need to file a DBA.

Snag a domain name

Once you have your business name, it's time to register a domain name. Even if your primary marketing and engagement platform is social media, and you don't need a website, it's best to buy and register a domain now. There's always the chance that once your business takes off, someone else may try to register your domain for their own business, and that isn't right! Plus, it'll lower your standing on Google search results page, which again isn't right. 

While you may not need a website to run your business, even creating a landing page or two-page simple one could benefit you in terms of growth, SEO, and research for future business partnerships. 

Sort out sales tax 

If you're running an e-commerce store, you may be required to collect sales tax in multiple states. If and when you do is determined by your sales tax nexus. Sorting that out can be a bit tricky; however, a majority of e-commerce platforms have built-in sale tax calculators and allows you to collect sales tax from customers during checkout. 

Launch your social media presence

Maybe you're planning to use Instagram as your number one sales channel for your vintage clothing store. Or perhaps you're launching an online consulting business and haven't considered using social media. Either way, one of the first steps you should take after starting your online business is to create a social media presence.

Even if you're not selling products through social media, having an active account shows potential customers and clients that you're engaged and accessible as a business. It can serve as a point of contact for customers who have questions or concerns. 

The most influential social media platforms for your business are:

Facebook

With younger demographics, like millennials and zoomers, Facebook has seen a decline in popularity. Nonetheless, on a global scale, it's still the most popular social media platform overall. Maintaining a Facebook profile makes your business easier to find by improving your SEO score.

Instagram

Especially among younger cohorts, Instagram has seen a surge in popularity for marketing products. Hashtags allow you to research and target specific groups of users, as well as see your competitor's marketing habits. And since it's primarily a visual platform, it's the perfect place to showcase new products.

Twitter

If you're publishing blog posts, videos, or podcast episodes, Twitter can be an excellent platform to keep your followers updated. It may also give you the chance to network with other businesses in your industry. But unless you're publishing regular content—or launching a unique brand identity—you can probably skip it.

Pinterest

A visual platform similar to Instagram, Pinterest is a good fit for niche businesses, especially ones dealing with handmade products. It's a popular source of inspiration for crafters, decorators, and hobbyists. Pinterest may be perfect for promoting your Etsy store, but if you're starting a software company or hiring yourself out as a business consultant, you probably don't need an account.

LinkedIn

Even if you're not much of a networker, having a LinkedIn page for your business is valuable. It proves you're legitimate: You're probably the only employee for the company, but it lets potential customers put a face to a name. If you're running a drop shipping or affiliate marketing business, where fly-by-night operations are popping up every day, a simple LinkedIn profile can make you more trustworthy.

YouTube

You already know the biggest search engine in the world is Google. The second biggest? YouTube. With one billion hours of video watched every day, YouTube has a massive reach. The sky's the limit of what kind of content you can create: From educational mini-documentaries on your industry to interviews with thought leaders, to step-by-step overviews of your products. Try entering search terms relevant to your business—"motorcycle parts" or "stain remover"— and see what's out there. You may find a new base of clients waiting. 

Get bookkeeping right from day one.

Organized bookkeeping means an organized business. When your financial records are in order, you're able to anticipate the future and make smart business moves. And it's especially important to have tidy books come tax time; the more organized you are, the faster it is to file, and the easier it is to take advantage of tax deductions.