If you’re interested in starting an online business, you’re not alone! A survey conducted by SME Loans in 2020 revealed that 68% of Brits wanted to start their own business, but 43% of these aspiring entrepreneurs didn’t think they would actually go through with it.
What makes the triers stand out from those who actually give it a go?
Those who set up their own online businesses are those who design a step-by-step business plan and immediately begin ticking off the first few tasks. The simple act of actually starting (no matter how small the step) can build the momentum needed to propel a newbie through the stages of starting a business.
In this article, we’ll explain the crucial steps in starting an online business so that you’re not starting at square one. You’ll be able to find these in the best business books, but we’re sharing it here for free to help you get going.
Choose a product category
Before you take any steps to create an online business, you need to establish the general topic or ‘niche’ in which the business will operate. This is where it all begins, and for many online entrepreneurs this is the easiest step, but for others, it can take longer to decide.
Your business will stand a better chance of standing out from the crowd and succeeding at something if it can focus on a specific topic, rather than attempting to become a ‘Jack of all trades’ like online conglomerates like Amazon and Google.
If you’re stuck for ideas, consider brainstorming topics that personally interest you. After all, your online business will take many hours of your time, so it makes sense to choose a topic that fires you up and gets you excited. This way, you’ll be highly motivated to spend time on your online business irrespective of potential financial rewards.
Pick an online business model
After deciding a category, you next need to shape how your business will make money. What business model will it follow?
There are many distinct and profitable business models for you to choose from:
- Hosting display ads on article content
- Referring customers to other businesses in exchange for affiliate commission
- Dropshipping (receiving orders for physical products, and placing a back-to-back order instructing a third party to despatch the goods directly to the customer)
- Direct sales
- Operating a membership or subscription model (freemium v premium) either for a service or access to an exclusive online community
- Premium app downloads
- Marketplace charging users a fee to transact with each other
We advise against trying to forge an entirely new business model. 99% of existing online businesses will use a variation of the models listed above. The advantage of picking an established business model is that it’s a tried and tested method, and you’ll find plenty of advice freely available online surrounding each way of doing business. In other words, you will be able to learn from the mistakes and lessons learned by other businesses on their way to profitability.
Choosing a business model is perhaps the single most important choice you will make when starting a business. It may seem academic, but the business model will determine how much investment you need to make to get off the ground, how complicated your operation will be, and whether you’ll be directly transacting with consumers.
Running display ads on a blog may translate to little more than spending a few hours a week writing fresh content for the website and responding to blog comments. The ad sales can be highly automated by a snippet of code.
However, aiming for a direct sales model will involve sourcing suppliers, buying and storing inventory, and processing despatches and returns.
Choose a domain name
Your domain name is the most important aspect of your online presence. It’s the defining string of characters that will allow customers to find you easily.
Domain names are relatively cheap to acquire if you’re the first person to register that domain. Registration prices start as low as £5 per year for a .co.uk domain, and .com domains can be snapped up for approximately £15 per year.
Domain names can be acquired through a number of ‘registrars’ who may offer introductory discounts or pricing on the first year to encourage you to sign-up. A domain name is a long term purchase so it’s worthwhile looking at the recurring price rather than being swayed by a free or heavily discounted first year.
If you want to purchase a catchy domain name that has already been registered, it may be possible for you to acquire the domain from the current owner if it isn’t currently being used. Domain broker services will act as the middle-man in such transactions, with escrow accounts being popular to ensure that ownership of the domain is only transferred after a neutral third party receives payment from the buyer.
Pick a web host & design your website
Your website will be a virtual home for your online business, but it will actually have a physical location – the servers of your chosen web host. A web host is responsible for keeping the website live and accessible online.
Cheap shared server options cost less than £10 per month but will see your website share a single server with tens or perhaps hundreds of other websites. Page load speeds can suffer as a result.
Faster solutions include dedicated private servers or virtual private servers, but you can expect to pay three times as much for these services. Hosting companies usually encourage you to upgrade your server solution at any time, so there’s little harm in starting with a basic offering and upgrading only if you feel it is necessary.
Web hosts will offer a website builder package that can make building a pretty and slick website a piece of cake. Pre-made templates will mean you won’t be starting from scratch, and premium web hosts will provide plenty of live chat web support to help you achieve the look you set out to achieve.
Choose a payment processor & checkout function
If you’re selling products, services or subscriptions directly to your visitors, you’ll need to consider the e-commerce needs of your website.
The coding of a payment system is vastly more complicated than cosmetic web design, but payment providers have done all the work for you. Accepting payments on your website is as easy as ‘installing a plugin’ on your website and configuring some settings. There’s no longer an excuse; your business should accept payment services online and what’s more; you may not have to pay any fees to get all the digital infrastructure set up.
Payment processors generally charge transaction fees on each customer sale, rather than charging an upfront amount (unless they’re providing physical hardware like a card reader). This reduces the cost of getting your online business up and running.
The best payment processors will allow your customers to pay through a variety of methods, such as debit cards, credit cards, online payment wallets and perhaps even cryptocurrency!
Drive visitors through marketing
You could have the most beautiful website on the internet with effective sales funnels to encourage visitors to buy, but it won’t count for a thing unless people are landing on your website.
This is why online marketing becomes one of the most important ongoing activities for any online business. The profitability of an online business is often directly connected to how well its marketing efforts translate to visitors, and at what cost.
Cost is a key consideration when deciding how to attract traffic because almost unlimited traffic is available if you’re willing to pay £10 per visitor, but few online businesses could remain profitable at that cost.
You’ll have to measure how well you convert visitors into customers to determine what budget per visitor you can afford to spend while still generating a reasonable profit per sale.
Starting an online business isn’t all-or-nothing – start today
By tackling one step of starting an online business at a time, you can do so with a part-time effort of just a few hours per week.
When starting an online business, you shouldn’t feel any immediate pressure to quit your job and focus on the project full-time. In fact, this is a mistake that many make.
Many online businesses don’t succeed, and the fear of this can put many off trying.
The best strategy is to reduce the cost of failure by keeping your job and giving yourself a risk-free trial at a small scale to test the water before you switch off the reliable income from your job or profession.