In many ways, starting an online business is similar to starting a brick-and-mortar store. You’ll plan your business, organize your funding, produce your product, and get to work. But, there are unique aspects of running an online-only business that would-be entrepreneurs need to consider.
I’ve laid out a few of the various types of online businesses that you might be interested in starting, both those based around existing platforms like Etsy and eBay, and self-hosted eCommerce sites. We’ll also go over the process for starting an online business, and the steps you’ll need to take to get your business up and running.
In addition, you’ll find links throughout this article to other Bplans articles, which you’ll definitely want to check out. They’ll help you go into more detail about the different aspects of starting your online business, such as setting up your website and how to register your business name.
The different types of online businesses:
Wondering what type of online business to start? There are a few different options, and the best type to start will largely depend on your specific business, and what it is you’re selling.
An eCommerce site:
An eCommerce site is the most direct form of online business you can start; with a self-hosted eCommerce site, you will be selling your goods and services directly to your customers, without a “go-between” such as eBay or Etsy (we’ll get to those more later).
The best part about a direct eCommerce site is the level of control you have over your store. You’ll be able to customize virtually all the options when setting up your own eCommerce site, such as the complete look and feel of your store, but this flexibility makes the process that much more complicated, too.
Your biggest considerations with an eCommerce site will be setting up your website to offer the best user experience. Choosing the right web design is crucial, as is making sure that your shopping cart software is well-suited for your business. Be sure to check out the various shopping cart options available—from Shopify to X-Cart and many more.
An Etsy store:
An Etsy store is, by comparison, relatively easy to set up. The format of an Etsy store remains relatively similar store to store, though you will have the ability to customize your layout a little. However, all customers will buy through the Etsy interface, and the legwork to get your site up and running is minimal. This may be a positive or a negative to you, depending on how much control you wish to maintain over your site.
The biggest consideration, aside from the lack of flexibility? Etsy is a site for creative types, and focuses on handmade items. Now, if you sell handcrafted goods, resell vintage items, create and sell your art, and so on, you’ll fit in on Etsy no problem—in fact, it might be perfect for you.
But, if what you’re selling will be mass-produced, you’ll want to steer clear; although Etsy has recently made it clear that while they allow their sellers to potentially partner with outside businesses to make their products, mass-produced goods are not welcomed on Etsy.
An eBay store
Similar to Etsy, starting an eBay store has some significant advantages, which are also at the same time potential downsides. As with Etsy, you won’t have to set up a website, customize your online storefront, or choose a shopping cart software—when you use eBay to sell your products, that’s all included.
However this means, like Etsy, that your customers will have to go through eBay to buy from you, and you’ll also have little control over the visual layout of your store. As with Etsy, this may be a pro or a con for you, depending on your business.
Unlike Etsy, there is no stipulation with eBay stores that the goods be handcrafted or vintage resale. However, there are still certain items that are prohibited, so make sure to look into the details of selling on eBay before you decide that it’s the right choice.
A site with no physical goods sold
That’s all fine and good, but what if you’re not selling physical goods, but rather consulting or other services?
If your business still needs to accept payment via your site, you’re most likely better off setting up your own website, with a very simplistic shopping cart software. However, Etsy is home to plenty of web design businesses, for example, so this platform isn’t altogether out of the question.
Steps to starting an online business:
1. Plan your business
Like any business, you’ll need a plan. Your planning process should include thorough market analysis, plans for how you’ll fund product production, and perhaps a SWOT analysis to begin your planning process.
2. Write your business plan
Once you’ve done a bit of preliminary planning, it’s time to write your business plan. Unless you’re asking for funding from the bank, an investor, or have a similar “business plan event” coming up, you’re better off sticking to a lean business plan. A lean plan is quicker and easier to write, and distills your plan down to the essentials.
3. Register your domain name and set up your website
If you’ve chosen to set up your own eCommerce site outside of a platform such as eBay or Etsy, you’ll want to make sure your chosen domain name is available and ready for use. Once you’ve secured it, the process of setting up your business website begins. You can choose to outsource this to a professional, or DIY it with our handy guide.
4. Make it legal
There are a few steps you’ll have to take to make sure your business is legal. While generally speaking, the same rules apply for online businesses as brick-and-mortar businesses, there are a few subtle differences:
Read up on online business regulations
The most important distinction when it comes to doing business online versus in person is online business law. These laws regard the distribution of your customers personal information, as well as other privacy and intellectual property regulations. The SBA gives a thorough rundown of the specifics of online business law, so make sure to brush up on them before you start your online business.
Visit your secretary of state’s website for state-specific requirements
State specific requirements will, naturally, vary state by state. For instance, you’ll be required to collect state sales tax from your customers. Visit your local secretary of state office’s website for more information on compliance at a state level.
Learn about tax obligations for running an online business
Do you operate your business from your home? If you run an online business, it’s likely. As such, you may be eligible for certain tax deductions. You’ll additionally be required to pay income tax, so before setting up your online business, it may be a good idea to consult with a lawyer and make sure that you’re all covered going forward.
Ultimately, starting an online business is very similar to starting a business with a physical storefront. The planning and legal aspects remain similar; while you may not be faced with the prospect of finding a retail location, you’ll still want to make sure you’ve got a solid plan for your business, a great website, and have dotted all your i’s and crossed your t’s before you start selling.
However, while starting an online business does involve some initial legwork, the low cost of overhead and flexibility of the platform make starting an online business a great choice for many entrepreneurs.
Do you have questions on starting an online business, or tips to offer fellow entrepreneurs?