With 12.5 million people unemployed in the US as of September 2020, it’s no surprise many are starting their own businesses to gain income right now. Due to the rise of e-commerce during the pandemic (and well before it), starting an online store tops the list of business ideas. Even long-time business owners are thinking of moving their product lines online to increase revenue.
How hard can it be? Build a website, think of some products or services to sell online, and start raking in the money, right? Everyone’s doing it.
It’s a lot more complicated, expensive, and time consuming than that. What’s more, it’s not necessarily the right move for every business. Here’s what you need to know before you jump in feet first.
1. Overview of Running an Online Business
Just like starting any type of business, starting an online store requires a full-fledged business plan, complete with production, finance and accounting, legal, sales, and marketing.
You have to create your product, which means considering production. Since it’s an online store, you’ll also need to research and set up delivery.
When it comes to finance and accounting, you’ll need a streamlined way to keep a record of all transactions, revenue, and expenses.
On the legal level, you may need to get local, state, federal, and speciality licenses to legally run your business.
Arguably the most important aspects of running an online business are sales, marketing, and advertising. You may have such a killer product that it might sell itself, but you need people to find out about its existence first. You can only sell so many of them to your friends and family.
2. The Logistics of Selling Online
“Build it and they will come…” Yeah, right!
The reality is that you’ll have to build your product (and your website), market it heavily, maintain it to keep up with buyer behaviors and online selling trends, and optimize it to get a higher ROI.
Each product will need to be meticulously maintained, which means writing vibrant, informative descriptions, adding accurate details on the size or scope of the purchase, and adding warranty information, pricing information, options (color, size) and of course, SEO descriptions. We can’t forget the importance of photos and reviews, too.
Nope, that’s not all. Now think: how will people pay? You’ll need to set up a variety of payment methods, like credit cards, and keep up with new and evolving payment trends like e-wallets. Each payment will come with its own expenses, which you’ll need to consider in your budget.
Then there’s the order communication. People will want an email to confirm their orders, as well as communications when they cancel their orders, and when they’ve shipped. You should also have a workflow created to encourage people to go back to their abandoned carts, as well as emails to promote discounts, deals, and coupons. Speaking of communication, don’t forget to set up a toll-free customer service line, an email address, and even a chatbot for a good customer experience.
These are all things that will need to be set up before your website even goes live.
3. Is an Online Store Right for Your Business?
While many people will start and run successful online stores, the reality is it’s not the right move for everyone. For one thing, online stores tend to do better when you’re selling tangible goods rather than services.
You’ll need to consider whether this is the right timing for your business and whether you expect to get a decent return on your investment, particularly when you’re trying to scale your business. When calculating your ROI, consider all the time and effort you’ll need to put into getting every single one of your products set up online (description, keywords, price image). Every step in this product set-up process is necessary if you plan to run ads off Google Products and Google Shopping. This is the only way you’ll be able to compete with advertising.
Also consider the time it will take to keep your products up to date over the long term when you add more to your product line, discontinue items, or change their materials or prices.
4. It’ll Take Time to See ROI
It can take up to 3 years to start being profitable when you start a new business. Not only will it take you a considerable amount of time just to get ready to launch your website and your business, but you’ll need time to gather all the data you need to determine how things are performing and where you can improve. You also need to give your marketing and advertising time to work and time for your brand awareness to grow.
5. It Will Probably Cost More Money Than You Realize
We all know starting a business out in the “real world” takes a lot of capital. You’ll need to rent office space, pay for utilities and similar expenses, and pay staff to run the store. While starting an online store may seem a lot less capital intensive, you might not realize just how expensive it can be. You’ll need to pay more than just a yearly website domain fee.
Expect monthly maintenance of your website to take about 2 hours for technical updates and add another 10-30 hours for updates depending on how active your site is.
When it comes to your marketing budget, it’s a good idea to plan for a minimum of $500 a month to advertise locally, $3,000 a month to advertise statewide, and $20,000 a month for national paid media. Add another $2000 a month to drive SEO results by retaining a quality SEO firm. Fortunately, this investment should pay dividends by driving 40-60% page traffic from organic traffic sources.
Finally, you might think that you’ll be able to save money by managing social media on your own. You’ll probably soon realize that you’ll have very little time or inclination to do so when you’re busy running the business side of the company. Think about whether you need to just broadcast information or whether you want to spend more time to build an influencer campaign or start a conversation. Either way, it’ll probably make more sense to outsource it, too, which will run you another few hundreds (or thousands) a month.
The pros know that it takes time and money to start an online store the right way to see success. It’s about more than just posting products to a page; it needs to be set up correctly. Your new only business also needs to be backed up by a comprehensive business plan.
Ready to Start an Online Store?
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