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Back in the day, only the privileged few could start their own businesses. Starting capital had to be significant, while outside funding was scarce (unless you had a ‘commerce-savvy family).
Granted, in 2021 that’s no longer the case. Today anyone can start and scale an online business, regardless of their professional background or past entrepreneurial experience.
Yet, while the entry-barrier got lower, it’s not fully gone either. You still need to come up with a viable product idea, figure out your sourcing or manufacturing strategy and then your sales model.
But all of the above should not discourage you from starting an online business!
Reasons You Should Start an Online Business
You may be wondering why start an online business in the first place. Why not go with a brick-and-mortar one instead?
Because starting an online business has several advantages.
Here are the three main ones:
1. It is fairly inexpensive to start.
A lot want to start a business but are deterred by the investment required to get it off the ground. You have to pay for a lease, purchase inventory and budget for employee salaries. What if you invest all that money in your business but it doesn’t work out? This can ruin you financially.
However, with an online business, all you need is:
- Computer. You probably already have one.
- Domain name. You can get one for less than $10/year.
- Website builder: Monthly plans start for $29.90/mo.
In other words — it’s feasible to launch an online business with $100 as a starting capital.
Of course, the more starting money you have, the more online business ideas you can pursue.
But the point is that you don’t need to risk your life’s savings to become a (successful) online entrepreneur.
2. Major potential and growth.
When you have a brick-and-mortar business, you have to deal with the limitations of the “real world.”
Renting in prime locations is expensive, there may not be enough foot traffic some days and the local crowd just doesn’t need stuff all the time.
But guess what? When you run an online business, none of these limitations apply. You can sell to anyone, no matter where they live.
And with each passing year, your pool of potential customers expands because more people are getting comfortable with the idea of online shopping. By 2023, ecommerce will account for 22% of global retail sales.
On top, the global Internet population is growing too. For example, between 2009 and 2020, the number of Internet users in North America alone has grown by 73.3 million people.
But that’s nothing compared with the regions that are still developing!
The number of Internet users in Asia went from 764.4 million to 2.5 billion, which means that an additional 1.76 billion people started using the Internet.
More people online — more potential exposure for your online brand. Especially, if you don’t mind taking your online business across the border.
3. Can run 24/7.
Another advantage online businesses have over brick-and-mortar businesses is that they can stay open 24/7 (even through lockdowns and other disruptions).
Once your online business website is online — you are always “on” to make a sale. Shoppers can order from you at any time.
Since you don’t need to be physically present to make a sale, your business can generate revenue with less day-to-day involvement.
5 Examples of Online Businesses to Test Out
With so many business opportunities and tons of ultimate guides out there, it can be difficult to decide which one to pursue. It’s understandable because you also don’t want to risk too much.
We did some research from you and narrowed it all down to just five online business ideas.
1. Start an ecommerce store.
Ecommerce has been around for nearly four decades, but there was never a better time to launch an online store than now.
According to “The Future of Retail 2019” report, a third of US consumers (32%) now receive one or more Amazon packages per week. Meanwhile, 10% of consumers receive three or more Amazon packages per week.
It’s probably safe to say that this reliance on Amazon also leads to people feeling more comfortable with online shopping in general.
According to the same report, 46% of consumers say that they are more open to purchasing a big-ticket item like a car or a grill online than they were a year ago.
Once you have decided on your product categories, select an ecommerce platform (BigCommerce, Magento, Shopify, WooCommerce, etc.), set up your online store and start driving traffic to it. Alternatively, you can start selling on online marketplaces such as Amazon, eBay and Etsy.
While ecommerce has all three online business advantages that we have discussed earlier, you should keep in mind that online commerce profit margins can be thin for some types of products.
2. Get into dropshipping.
Dropshipping is an online fulfillment method that allows you to sell physical goods without keeping inventory yourself.
Here’s how it works:
- The customer orders a product on your ecommerce website.
- You forward the order to the manufacturer.
- The manufacturer then ships the product directly to the customer.
Dropshipping is an attractive option for those who want to get into ecommerce without assuming the financial risk that comes with carrying an inventory. So no wonder that the dropshipping market is growing! The revenue forecast for the year 2025 is $557.9 billion.
Although dropshipping is appealing, it has some disadvantages too. These include low-profit margins, slow shipping speed and lack of control over the supply chain among others.
3. Become an affiliate.
Affiliate marketing is worth considering if you want to start an online business but aren’t interested in creating your own products.
It’s a popular way to make money online. According to the SaaS Scout, the annual affiliate marketing spending by brands is estimated at $12 billion. The figure is expected to grow by 10% in the next few years.
Here’s how affiliate marketing works:
- First, sign up for an affiliate program.
- Then, select someone else’s product to promote to your audience. This can be any digital product (an ebook, an online course, an app, etc.) or physical goods.
- You then get paid a commission for each sale generated through your referral link.
You can promote affiliate products on your blog by creating SEO content around relevant keywords and then optimizing it to get organic traffic from Google. Or you can promote affiliate products on social networks.
Affiliate marketing can be extremely lucrative when done right. For example, Adam Enfroy made $812,718 in 2020. $601,698 was passive income from affiliate marketing.
You can also promote affiliate products to your email list subscribers by allowing your affiliate partners to host webinars for your audience.
Affiliate marketing is a great business model that has an extremely low startup cost. You only need to pay upfront for a domain name, web hosting and email marketing software.
That being said, successful online businesses that start out selling affiliate products tend to eventually release their own goods. You can make much more money from the same amount of traffic that way.
4. Offer web design services.
You can learn the basics of web design via eLearning platforms and experimentation. Then create a portfolio website to start attracting clients. Or register with a freelance marketplace such as Upwork or 99Designs. By the way, you don’t have to be a full-time freelancer, but do web design as a side hustle.
Freelancing can be challenging at times, though. While you benefit from location independence and a flexible schedule, you also have less predictable income and financial stability at first. So set up an emergency fund before you go all in.
That being said, once you have web design skills, you can then expand into creating and selling your own products (e.g. WordPress templates). This can help mitigate financial instability.
5. Create a note-worthy blog.
Do you have a knack for writing? Then blogging might be an online business idea worth considering.
While having a blog is not a business model in and of itself, it allows you to build an audience.
Once you have an audience, you can sell your own products or services, promote affiliate products, run sponsored campaigns with brands, etc. Popular bloggers also get speaking gigs and book deals.
Source: First Site Guide
How to Start Your Online Business In 10 Steps
Now that you have decided on the business model, let’s zoom in on the operational aspects of starting an online business. Here’s a step-by-step overview:
- Determine your niche and business idea.
- Conduct product research.
- Learn about online business laws.
- Conduct market research.
- Define your target audience.
- Source products to sell online.
- Evaluate product viability.
- Define your brand and image.
- Launch your online store.
- Grow your business.
Determine Your Niche and Business Idea
A business niche stands for your “focus area” — a market segment and target audience you primarily cater to. This can be anyone from sports enthusiasts (e.g. gymnasts) to hobbyists (e.g. post stamp collectors) to professionals (e.g. software developers).
You need to pick a niche for your new business. How do you find a good one? Check that your target audience has:
- A problem no-one else is solving well-enough.
- Willingness to pay for a solution to that problem.
- Sufficient discretionary income to afford the solution.
Avoid niches that don’t meet all three criteria. Because building an online business is already hard. When you go after people who don’t need your products, can’t afford them or aren’t interested, you make things even harder for yourself.
Conduct Product Research
You can sell three main types of ecommerce products online. Each has its own pros and cons.
1. Physical goods.
As the name implies, these are material objects that need to be manufactured, stored in a warehouse and shipped to customers. Selling physical goods can be lucrative, but the profit margins can be low if you don’t manage your operational costs well.
2. Digital downloads.
You can also sell digital products — anything a customer can download to their device such as
eBooks, audio courses, online courses, etc.
Digital products have higher profit margins (compared to physical goods). But pricing them can be tricky because they are often perceived as having a lower value than physical products.
Almost any service available remotely can be sold online. Selling services is the fastest way to starting an online business (and turning a profit). But it’s a business model where you are selling your time. This means that your earning potential is limited since you have a finite amount of hours each day. That is unless you scale into an agency.
Learn About Online Business Laws
Small business owners may assume that because they are running an online business, traditional business laws don’t apply to that. That’s not true.
While an online business requires fewer licenses and permits compared to a brick-and-mortar operation, you still need to sort out several important legal details. Specifically:
- What kind of business license (if any) do you need to start operations?
- What legal structure makes the most sense (a sole proprietorship, limited liability company or a corporation)?
- Are there any permits that you need to obtain?
- Are there any inspections that you need to pass?
- Do you need a sales tax license?
- Are there any specific regulations applicable to online businesses only?
- What are the laws regarding hiring contractors and hiring employees?
Learn more about online business laws and regulations for ecommerce companies.
NB: Each state and country has its own laws. Always verify information with local authorities. Also, seek professional legal help if you can afford to.
Conduct Market Research
Learn what your target audience wants, needs or lacks by conducting online market research.
Market research is an essential step in starting your own online business. It helps determine the depth, competitiveness and profitability of the selected business vertical. Because the last thing you want to do is launch an offer no one’s keen on buying. Also, market research helps validate your product idea, pricing and demand.
Here’s how you can get started with market research:
1. Check the SERPs.
Look up the variations of your product/service keywords and analyze the search engine result pages (SERPs) for them. What type of content is currently ranking on the first page? What businesses are paying to advertise on top of organic search results?
Doing so will help you pre-assess your competition. Plus, get information for a preliminary SEO and digital marketing strategy, based on the content your target audience prefers.
2. Research competitors.
You also want to take a closer look at your main competitors (beyond SERPs). What are the biggest business ventures in your niche? How much money are they making? What are their strengths and weaknesses?
By putting a microscope over other players you can figure out what could give you a competitive edge over them.
3. Track high-performing keywords.
Analyze how the demand for different products is changing in your niche and what content ranks best by monitoring niche-relevant keywords.
The good tools for that are:
Define Your Target Audience
To solicit sales and then scale your business, you need to perfectly understand who’s your target audience. To learn about their needs and preferences, research both demographics and psychographics data.
Demographic data includes basic socioeconomic characteristics such as age, gender, ethnicity, income, job title, etc.
Psychographic data includes various psychological characteristics such as values, beliefs, interests, opinions, etc.
When combined, these insights help develop a thorough understanding of your ideal buyer needs, preferences and purchase triggers.
Source Products to Sell Online
You can’t run a successful online business if your products are meh. Because you’ll then hit the trending pages on social media…for all the wrong reasons. Thus, spend extra time considering your product sourcing strategy.
1. Make your own products.
This option is relatively easy if you plan to sell digital products. But physical product manufacturing involves a lot of hard work in terms of design, interactions, material selection, etc. Also, the financial costs are higher too. But manufacturing will always give you an advantage over competition quality, product range and brand-wise.
2. Find a dropshipper.
You can find a manufacturer that allows you to dropship their products. Many small business owners negotiate dropshipping deals with overseas manufacturers (mainly Asia-based) to offset the business costs.
3. Work with a wholesaler.
Or you can find a wholesaler to provide you with a range of products to purchase and curate in your online store. Also, you can find a wholesaler to distribute your products for you too (if you plan to manufacture them).
Evaluate Product Viability
You want to holistically evaluate your product(s) viability before purchasing or manufacturing a big order. To do that, ask these questions:
- Is there a successful online business already selling products like that?
- Is the demand for this product sustainable? Or is it temporary?
- Does the math behind this product make sense? Can you sell it at a profit?
Remember, it doesn’t matter how cool the product seems. What’s important is that it’s viable from a business perspective!
Define Your Brand and Image
A brand is the overall “vibe” of your business. You want everything from your business name to your web design and copy to convey a consistent visual image and ideas. The same also applies to your off-site presence — social media, email newsletter and even packaging.
As you work on your brand identity, pay attention to your:
- Color scheme.
- Page layouts.
- Graphics and photos.
Your brand image should be a result of all these elements working together.
Launch Your Online Store
The next step in your business plan is preparing for the launch. This means setting up and configuring your ecommerce website.
1. Choose your ecommerce platform.
An ecommerce platform is a technical backbone for selling online. Such software provides you with all the features you need — from a product catalog to payment processing.
Here are a few popular options:
- BigCommerce. An open-SaaS platform, providing a wide range of native commerce features, yet poses no limits on extensions or customization. The out-of-the-box functionality of BigCommerce can save merchants roughly $5,800 – $30,000+ per year in app subscription costs, compared to Shopify.
- WooCommerce. An open-source platform you can mold into any type of store you need.
WooCommerce has hundreds of extensions you can install to facilitate shipping, accounting, marketing and much more. But, you’ll have to purchase hosting separately, plus pay a developer to set up and design your store.
- Shopify. Shopify is a SaaS platform with a good range of native features and over 4,100 integrated apps (separate subscription fees apply). It also has over 70 professional and responsive themes to design your website.
Select a platform that provides all the features you need for a price you can afford.
2. Add your products.
Once you have chosen a platform and a store theme, add products to your catalog. As you, do pay special attention to:
- Product images. Provide high-def visuals, featuring the product from different angles. Check this guide to ecommerce photography for more insights.
- Product descriptions. Don’t line up features — focus on benefits the customer will get. This post provides a quick formula for writing compelling product descriptions.
Product images and product descriptions have a huge impact on the conversion rates of your product pages. So take the time to get them right!
3. Choose how you will do your shipping.
Fast and free shipping is the number one driver for making an online purchase and has been for six years in a row!).
Ensure that all the products will get to your customers without any delays. You have several shipping strategies for that:
- In-store pickup
- LTL freight carriers
- Same-day or next-day delivery
- Free shipping
4. Make sure everything works.
Finally, once your ecommerce store is live, triple-test all the facets. Verify that:
- All pages look good across devices (desktop, tablet, mobile).
- The website functions well in multiple browsers (Chrome, Brave, Firefox, etc.).
- All buttons are clickable/connected to the correct apps.
If you have a budget, hire a QA specialist to run the test for you and report on the findings.
Grow Your Business
Once everything is set up, it’s time to start driving traffic to your ecommerce store. Prioritize the following channels:
- Paid ads. Allocate an ad budget for PPC (pay-per-click) ads on social networks and in search results. That’s the quickest way to improve brand awareness for a new store.
- Influencer marketing. Partner with social media influencers to promote your products. This is another quick way to get them in front of your target audience.
- Social media marketing. Complement paid campaigns with organic traffic by building audiences on Instagram and Facebook.
- Search engine optimization (SEO). Ensure that all your website pages are SEO-optimized. Then create a content marketing strategy for your blog.
- Email marketing. Build an email list by capturing the email addresses of the people who visit your ecommerce store. You can then promote your products to your email subscribers.
Successful Online Businesses You Can Learn From
One of the best ways to “learn” ecommerce is to understand what other ecommerce businesses have done to get to where they are today.
Here are three “success stories” you can reverse-engineer.
1. Selling furniture online.
When Burrow co-founders were attending business school, they were faced with a dilemma: get cheap but disposable furniture or get proper furniture but then risk waiting for it for up to 12 weeks?
They realized that this was a business opportunity. What if they could improve the process of buying furniture online? That’s how the idea for modular furniture was born. Kabeer and Stephen’s vision resonated with their target audience.
It’s a great example of how everyday annoyances often are lucrative business opportunities in disguise!
2. Selling t-shirts online.
Source: The Mountain
In the early 1970s, two friends from New Jersey moved to New Hampshire. Their dream was to sell belts and buckles at local fairs and festivals. Their merchandise was popular, so they opened a retail store called “The Mountain.”
Since then, The Mountain grew to 30 retail locations across the mid-Atlantic states, as well as a thriving online store. The retailer also discovered their niche of hand-dyed and printed t-shirts. Interestingly, they are a company that is recognized for producing the most popular t-shirt in the history of the internet.
It’s an inspiring story that shows that you can make money by selling products that you are passionate about.
3. Selling candies online.
Source: Lammes Candies
Since 1885 Lammes Candies has been run by the same family. As the name suggests, the company sells various confectionery products. Interestingly, the recipe for their Pecan Pralines hasn’t changed since 1892 (and it’s still top secret!).
Despite being a brand with a legacy, Lammes Candies saw potential in ecommerce back in 1992. That year, they launched a static website with their product catalog and have been selling online ever since.
Lammes Candies provides a valuable lesson: you need to keep up with technology if you want to stay competitive!
Starting an online business doesn’t have to be overwhelming. Take it one step at a time. First, research an ecommerce niche and in-demand products. Next, figure out your business model and fulfillment strategy.
Afterward, start setting up your online business. Choose an ecommerce platform, configure its design and add products to your catalog. Focus on driving traffic to your online store.
Once your business is up and running, make sure to collect as much data as you can. Then analyze that data to better understand what works and what doesn’t. Adjust your business strategy accordingly.
And don’t worry that you don’t know everything that there is to know about ecommerce. No one does. We are all learning as we go!
How to Start an Online Business FAQS
1. What is the best type of online business to start?
Depends on your professional background and personal preferences. The popular options include online service-based businesses (as an evolutionary step from a freelance side-hustle) and product-based online businesses such as online stores. The two require the least starting capital and can be effectively scaled over time.
2. What is the best online business to start from home?
The three best online businesses to start from home are an online service business, digital product business or dropshipping business. Both can be effectively run from a home office with low-to-no investment in extra equipment or space.
3. How do I start a small online business?
To start a small online business you’ll need to first determine your business type — B2B or B2C, services or products. Then set up a website. You can create a simple one for under $100 using a SaaS website builder (no coding skills required). Populate your website with content, images and products, connect a payment method and start selling.
4. What kind of online business is most profitable?
Ecommerce is one of the most profitable online business types since you have limitless potential for scaling. You can start a small niche store and then grow it into a cross-country or even cross-border operation, servicing customers worldwide.
5. What can you sell online?
Today you can say virtually any type of product online as long as there’s a demand for it on the market. To determine product viability analyze the target market size (the estimated number of people who may want to buy from you) and possible profit margins (the amount of money you can earn from selling a product for a price that the target market is ready to pay).
6. Can you start an online business with no money?
Technically, you can start an online business without any capital investment. But there still will be a few minor startup costs such as domain name (under $10), website builder/platform (under $30/mo) and website content creation. If you DIY your business website creation and setup, you can start an online business without spending too much money.
7. Do you need marketing to help your business launch?
You don’t necessarily need “marketing” as a business function to launch an online business, but you’ll have to invest in some promotional activities during launch. Unless you are launching to a pre-warmed audience, acquired earlier (e.g. your existing fans on social media or blog readers). A strategic marketing campaign for the launch will pay itself off in hours.
8. Is dropshipping a good online business?
Dropshipping is a good online business idea for newbie entrepreneurs who don’t want (or have the means) to invest in inventory or deal with logistics. A dropshipping partner is responsible for those two tasks, while you focus on marketing and brand building. The con is that profit margins with dropshipping are often lower while differentiating your products from the competition is harder.
9. How do you find ecommerce business ideas?
The best ecommerce product ideas present themselves in existing industries, where either digital commerce penetration is still low (because the competition mostly sells offline) or existing product(s) don’t fully meet the customers’ needs. The market for reusable water bottles is incredibly large and the interest in them is high. But there is only one brand that sells a self-cleaning water bottle that most people find more convenient than the regular (and cheaper) ones.
10. Do you need a business plan for your online business?
Absolutely! Starting an online business is like driving without a rearview mirror: you can get where you need to be but may miss a huge obstacle heading your way. While you don’t need a formal, business school-style plan for a small ecommerce business, it’s best if you prepare at least a short roadmap document, charting your main steps before the launch.
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