Did you know that 29.7% of all American business is conducted online nowadays?
Would you be surprised if we told you that there are currently 12-24 million ecommerce businesses across the globe?
None of these statistics should come as a surprise considering the low overhead, high margins, round-the-clock availability, and remarkable scalability that come with starting an online business.
That being said, starting an online business isn’t without its challenges.
If you don’t have a clear roadmap, your business initiative may not garner enough momentum to get off the ground.
On that note, this guide will cover all you need to know about how to start an online business, from conducting market research and developing a business plan to marketing and growing your small business online.
Let’s get down to brass tacks!
- 5 Reasons to Start an Online Business
- 9 Steps to Starting an Online Business
- Wrapping Up
5 Reasons to Start an Online Business
If you’re hesitant about starting an online business as opposed to an offline one, here are a few notable reasons why you should go the online route.
1. Low Start-Up Costs
The start-up and operating costs that are associated with online businesses are often much lower than the ones associated with brick-and-mortar counterparts.
You don’t have to spend money on a storefront or a warehouse when starting an online business.
You can ship directly to your customers via an outsourced supplier.
This is referred to as drop-shipping.
Some of the start-up costs associated with starting an online business include the cost of creating your website, designing your brand’s logo, and registering your brand name.
Some of the ongoing operational costs associated with starting an online business include website maintenance and hosting, internet connection, advertising and marketing, and transactional costs.
2. Worldwide Market
Online companies are able to operate 24/7 and target any corner of the world without any problems, thanks to the power of the internet.
The same cannot be said about offline businesses.
Businesses with online stores aren’t limited by geographical boundaries or by specific hours of operation.
They can produce revenue around the clock!
3. High Scalability
Location and visibility are very important when running a brick-and-mortar business.
If the business is located in an area with low traffic, it’ll have a hard time attracting new customers.
On the other hand, an online business can reach potential customers from all over the world.
Since you can leverage the power of the internet, the potential for scaling your online business is boundless.
4. Flexibility and Mobility
One of the many aspects that entrepreneurs find appealing about starting an online business is the freedom and flexibility they provide.
Online business owners have the freedom to work from anywhere and at any time!
Think about it: Would you rather commit to a fixed schedule in a fixed location or office, or would you rather have the freedom to work in the location and at the time of your choosing?
Having said that, you must remember that discipline is key when running an online business.
You need to find a balance between freedom and responsibility.
5. Cost-Effective Marketing
Marketing your online business is made easy with the internet.
There are many online marketing channels that you can make use of to boost brand awareness, including:
- Social media marketing
- Affiliate marketing
- Search engine optimization
- Email advertising
- Content marketing
The awesome thing about all of these online marketing channels is that they’re all relatively cost-effective when compared to more traditional means of marketing, like newspaper and TV ads.
9 Steps to Starting an Online Business
Now that you’re aware of the many benefits of an online business as opposed to an offline one, let’s go over the steps of starting an online business.
1. Figure Out Your Business Idea
The first step to starting a business, be it online or offline, is to figure out the type of business and lifestyle you’d like to be in.
Once you pinpoint the right business idea for you, you can then assess its viability.
Are you looking to sell existing products or create your own product and sell it? Maybe you want to provide a service rather than a product, or maybe you’re looking to monetize a social following.
Some of today’s most notable online business ideas include:
- Starting a clothing line
- Selling online courses
- Launching a podcast
- Opening an online store (e-commerce)
- Becoming an affiliate marketer
- Selling handmade goods
- Creating and trading NFTs
- Building and monetizing niche websites
- Providing a freelance service
- Starting a membership community
- Flipping thrift store finds
- Starting an affiliate program
- Providing a consulting service
- Software, app, and web development
There are literally hundreds of online business ideas that we can think of, with some being more unusual than others.
You just have to figure out which idea suits you the most.
While brainstorming business ideas, you should consider how much you’re willing to spend to bring your idea to life.
If you don’t want to spend any money, check out our article on how to start a business with no money.
2. Conduct Market Research
Now that you have an online business idea in mind, the next step is to evaluate that idea by conducting market research and identifying your target market.
There are many approaches to market research.
The most basic of which is keyword research.
With it, you can figure out whether or not there’s a demand for your business idea.
Some of the most effective keyword research tools include Ahrefs and SEMRush.
There are also free keyword research tools that you can use, such as Google Keyword Planner and Ubersuggest.
Researching current trends is another way of conducting marketing research.
Google Trends is one of the most effective ways to discover trends in your niche and capitalize on them.
Ideally, you should be part of your target audience so that it’s easier for you to understand their problems and needs.
Being part of your target market will also make you more relatable and trustworthy.
3. Find a Problem to Solve
The purpose of any business is to solve a problem.
So, your next step is to pinpoint a problem in your business niche and figure out how you can solve it.
In most cases, the bigger the problem, the more money people are willing to pay to have it solved.
So, be sure to find a problem that people perceive as big enough to require an external solution.
Having said that, starting a business isn’t always about finding a new problem to solve.
It can be about solving a common problem in a better, more efficient way than your competitors!
There are many ways to using online forums to pinpoint problems in your niche.
For instance, you can join a relevant online forum and start a discussion with the forum’s members about the most common problems they face.
Another way to find a problem in your niche that you can capitalize on is to use a keyword research tool to find out what your target audience is struggling with so that you can provide a solution.
Alternatively, you can look up another successful online business in your niche, identify the problem they solve, and then provide a more convenient solution (i.e., cheaper pricing, higher quality, greater efficiency, etc.).
4. Conduct Competitor Analysis
Analyzing the competition is an important part of any business strategy.
It allows you to understand your target audience better and identify new trends and successful tactics in your niche.
Conducting competitor analysis will grant you insights into your competitors’ business models, pricing models, marketing strategies, and more.
There are many ways to conduct competitor analysis, including:
- Signing up for your competitors’ newsletters
- Following your competitors on social media
- Using SEO tools to compare your competitors’ online performance
- Buying and examining your competitors’ products
- Assess your competitors’ email strategies
We also recommend conducting a SWOT analysis on your competitors so you can identify their strengths and weaknesses and then capitalize on your findings.
5. Determine Your Business Model
Next, you need to choose a business model that suits your products, services, and target market.
There are four common business models to choose from; B2B, B2C, C2B, and C2C.
- B2B (Business to Business): This is a model whereby the company sells its own products or provides its services to another company. Examples of such companies include Alibaba.
- B2C (Business to Consumer): A business model whereby the company provides its goods and services directly to consumers. A good example would be streaming services like Netflix.
- C2B (Consumer to Business): This is when an individual provides their services to a company. Examples include freelance writers, designers, marketers, and translators.
- C2C (Consumer to Consumer): A model where an individual provides their products or services to another individual. This is typically conducted through online marketplaces and freelance websites.
6. Take Care of Legal Tasks and Paperwork
This stage of creating an online business is a bit dense.
It involves defining your business structure, registering your business name, and obtaining permits and licenses.
Here’s a quick summary of what you need to do at this stage:
- Define Your Business Structure – Is your business a sole proprietorship, corporation, limited liability company, general partnership, non-profit corporation, or other?
- Register Your Business Name – Once you’ve chosen a unique name that represents your brand, you’ll need to register it as a trademark, entity name, domain name, or DBA (Doing Business As).
- Federal and State Tax ID – Applying for a federal ID is important for obtaining a business license and having a business bank account. Not all businesses need a state tax ID, though.
- Apply for Business Licenses and Permits – Just like offline businesses, online businesses need permits and licenses to operate. The required documents will vary from one business to another.
7. Build Your Business Website
Building a well-designed and well-coded website for your business has never been easier.
There are numerous website builders that enable you to build your own website in no time without any coding knowledge.
Once you’ve found the right website builder and template for your needs, you’ll need to choose a domain name and register it.
Then, you’ll need to choose a suitable hosting provider.
From there, you can start adding useful pages and relevant content to your website before you publish it.
Just make sure your website is user-friendly, well-optimized, and well-secured.
8. Set Up a Business Funding Plan
If you’re unable to bootstrap your business on your own, you’ll need to set up a funding plan that will grant you access to the funds needed to get your business off the ground.
There are several ways to obtain funding for your business.
You can apply for a small business loan, opt for seed financing, or go the crowdfunding route.
Each funding approach comes with its own set of benefits and drawbacks.
So, make sure to educate yourself on the approach of your choice before making any decisions.
9. Start Marketing Your Business
Now that your website is live, it’s time to let the world know that you’re in business.
First, you need to establish a social presence on social media platforms such as Facebook, Instagram, and Twitter.
As a small business owner, you can increase your brand awareness and attract more leads by running paid ads.
You can also team up with influencers and have them promote your products/services on their social media accounts.
It’s also important to make use of email marketing.
It’s one of the best ways to engage your customers, boost your sales, and establish a loyal following.
This can be done using tools like Mailchimp.
There you have it! Now, you know how to start an online business! It all starts with a brilliant idea.
Then, it’s all about systematic market analysis, obtaining the right permits and licenses, and marketing your business in a way that attracts as many leads as possible.
Hopefully, the information shared in this article has helped you kickstart your journey toward becoming your own boss and conducting your business online.