subject: The Cost Of An Online Business [print this page] No-one can tell you how much to spend, or how much your particular online business will cost - there are simply too many variables involved. Your level of business and internet experience and the type of business you want to set up can make a big difference. While internet businesses can be relatively inexpensive to set up, you can't create one for nothing. Here's a list of things you'll need to spend money on.
Legal structure for your business.
For tax purposes it is always useful to keep your personal and business expenses separate. Setting up a legal structure for your business will involve both initial (one-off) and recurrent (yearly) expenses. Without a legal structure it is likely that legitimate wholesalers will not do business with you.
Market Research.
Research is the only good way to decide what to sell. There are software products which can help and directories of information, some of which charge a fee, but the most useful tool is probably Google's keyword search tool, which is free.
Product Sourcing.
There's no point in trying to sell a product you can't obtain. You may want to license a product from someone else or search for wholesale information or find a drop shipper, but finding the right product source will almost certainly cost you money. Using a reliable drop shipper can make a big difference to your budget. There will be no need to buy inventory you can't be sure of selling, no need for storage space and no need to pay staff to pick, pack and prepare for shipping.
Product Design/Creation.
Even if your product is something you have written yourself, consider having it professionally edited and laid out.
Packaging.
Whatever you sell, if it is physical you will need bags or boxes to send it in (unless it is drop shipped). If your product is virtual you will need to have graphics showing the concept on your website, perhaps in the form of box or cover shots if, for example your product was a course or e-book.
Domain Name.
Usually a low cost item, you will need a domain name for your main website and possibly another for one or more blogs. This is a recurring cost.
Web Hosting.
Another recurring cost. Paying for a year up front usually provides some sort of discount. If your plan is to sell on eBay or Amazon exclusively, you can avoid this cost, but a self-hosted store has the highest profit potential.
Software.
Blog software is free. There are free shopping carts, but most successful web stores use shop in a box e-commerce services who charge a monthly fee. You may also need software to communicate with your customers, such as newsletter software, and a programmable 800 number. All attract a monthly fee but again these will usually offer a discount if paid yearly rather than monthly.
If your product is information and you are planning to give seminars on the web there are a number of seminar software packages. These also charge a monthly fee.
Software setup and configuration.
If you have chosen to go the shop in a box route you may need help to design and set up your internet shop. This can be a significant cost and is usually paid up front before your website has a chance to start making money.
Credit Card/payment processing.
Companies which process credit cards are often reluctant to deal with new businesses. They may charge you a sign-up fee as well as a monthly fee, and there may even be a charge if you don't meet a set minimum in sales. Credit card companies also take a percentage of each transaction.
Web Site monitoring/tracking.
There are many free tools to allow you to do this, but if you do have the funds available you may choose to buy software to allow you to track visitors to your site as well as the progress of your site in the search engines.
Advertising.
You will need to bring traffic to your site somehow. The simplest way to do this is through pay per click advertising.
Search Engine Optimization and Marketing.
To make your website more visible to those looking for your product on search engines, you will need to blog and tweet. You may also want to post on other blogs, and write articles for article directories.
All this takes time and effort. You may have to outsource some of the articles to others via a freelancing service, in which case there will be a cost. You may also want to issue press releases. Although there are press release distribution sites which are free some of the largest and most successful charge a fee.
The major reason for failure of any business, on or offline is a lack of cash flow. With preparation this can be avoided, so take note of the list above and plan accordingly so you can create your own budget. Some are once only start-up costs, others have a recurring component. Many are both.
Remember that an online business can take a year to get going, so although the business will be able to cover it's monthly costs when functioning, during the run up period you will have to fund it yourself.
As long as you face these requirements realistically, you will soon be on your way to the freedom only an internet based income can provide.
