A Beginner's Guide to Starting an Online Business

So you think you’re sitting on top of the next great entrepreneurial idea, huh? Well, thanks to the power—and reach—of the Internet, you now have a ticket to the largest shopping audience in the world. 

In fact, thanks to the Internet’s ability to reach a worldwide audience, starting an online business has never been easier. And recent years have seen more people discovering their online entrepreneurial spirit than ever before. Heck, some guy wearing sweatpants in Delaware has customers in Indonesia thanks to the power of the web. It’s incredible.

And if you’re here now, chances are you think now’s the time to make your move. Luckily, we’re here to help. And to make sure we cover every nook and cranny of starting a business, we spoke with Dave Hermansen, a 14-year eCommerce veteran, for some expert insider tips on starting an online business. So, let’s get this ball rolling. 

Pros and Cons of Starting an Online Business

While making money at home without a boss breathing down your neck seems like rainbows and kittens, like any endeavor, there are pros and cons of starting an online business, too.

Like we said, any new endeavor is gonna come with its share of pros and cons. So it’s important, first of all, to identify what they might be and think long and hard about each and every one. Like they say, success favors the prepared. Or maybe no one says that, but they should. Starting now.

What You Need to Start an Online Business

One of the first things you’ll need to do when you start an online business is determine your entity. Your type of entity says how the government will view your business and ultimately how you’ll be taxed. Here are the most common entities and what they mean:

• Sole proprietorship: A business owned by one person. A sole proprietorship doesn’t require any forms or legal work to obtain.
• Partnership: A business owned by two or more people. You’ll be required to register your business with your state and establish an official business name.
• Limited partnership: A version of the general partnership, but limited partnerships are great for businesses with investors.
• Corporation: An independent business that includes multiple shareholders. The most common is “C Corporation,” which allows you to deduct taxes like an individual. 
• Limited liability company (LLC): A blend of a sole proprietorship and a corporation. You must have a managing member, and LLCs are taxed as separate business entities, unlike corporations. 

If you’d like to learn a bit more about each of these entities, we recommend spending some time on the Internet, especially at your local Secretary of State’s website.

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Basic Steps to Starting a Business

An online store is great for a number of reasons, and the Number One reason is the ease of getting it all started. Whether you’re a newbie or an expert entrepreneur, there are a few basic steps you can follow to start any online business. Different markets will require different steps and extra research, but you’re pretty much looking at 7 simple steps.

These steps are just the beginning of starting a business from home. Depending on the type of business you want to start, there are additional things to keep in mind.

Let’s take a look at some of the most popular online industry niches. 

How to Start an Online Beauty Products Business

You can create a thriving business in this niche, but there are some unique things you need to know to see success:

• Carefully name your product: The beauty industry may be the one of the most critical niches for properly naming your products. When it comes to beauty products, the FDA cares what you call things.
  • “I learned from the FDA that language is important when naming a beauty product,” said Diva Samai, owner of Tevia Rose Products. “For example, the word 'balm' implies a chemical or drug substance so even though many cosmetic companies have the word 'lip balm' in their name, it’s technically not supposed to be there.” 
• Protect your product and brand: Trademark your business with an intellectual trademark or property protection.
• Find a manufacturer: Look for a manufacturer who will work with you on shipping, either directly to you or to your clients.
• Get the proper legal documents: You'll need a ton of legal documents.  Here are some of the basic ones to run an online business in the US.
  • Certificate of Incorporation
  • Business License
  • Tax Payer ID/Tax Identification Number
  • Non-Disclosure Agreement
  • Copy of license for the service support facility and/or a recent inspection report
  • Operating Agreement for LLCs
  • Insurance Policy
  • Online Terms of Use
  • Online Privacy Policy Document (basically for online payment portal)
  • Memorandum of Understanding (MoU)
  • Building License
  • Franchise or Trademark License (optional) 

How to Start an Online Clothing Store

The online clothing industry is a saturated one, but that shouldn’t discourage you from following your dreams. We spoke with Brian Lim, CEO of online clothing store, iHeartRaves, to get his tips on seeing success. And he said:

• Know what designs you want to sell: Choose a design that's unique and will make your clothes stand out.
• Create samples and get your designs printed on actual garments: Before you order bulk clothing, or offer it to others, see if it’s something comfortable enough that you’d wear it.
• Choose an online store: Consider Shopify, Etsy, or Amazon to help sell your clothing.
• Decide on your shipping: Determine whether you want to hold inventory or use the print-on-demand model. 
• Have a good return policy: You’ll most likely be dealing with more returns than other industries. Having a good return policy is important, and setting proper pricing can help you be successful.

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How to Start an Online Home Goods Business

Home goods is an all-encompassing niche that opens the door to a variety of products: furniture, home decor, kitchenware, power tools, and more. It’s also a competitive market, so you’ll want to do a few things to help yourself stand out.

• Pick a niche within your niche: Try to sell unique products that a customer couldn’t easily find in a brick-and-mortar store. 
• Research your target audience and competition: Know what your competitors are selling so you can properly price and sell different products.
• Set up an eCommerce website: Integrate with eCommerce software and apps like shopping cart solutions and third-party selling sites.
• Get visual: Use professional imagery and videography to highlight the benefits of your products.

How to Start an Online Service Business

If you’re selling a service rather than goods, the most important thing you can do is create a brand and reputation. After all, you’re selling a feeling, not a product. These tips from the Entrepreneur web page can help you be unique in the online space:

• Be creative with your title: Which title stands out more, public relations manager or mistress of propaganda? 
• Forget who you are, talk about what you can do: It’s great if you love dogs, but it's more important that you can solve your client’s problems.
• Sell yourself: Don’t be afraid to toot your own horn.
• Make every client feel important: Just like in a romantic relationship, if you don’t make someone feel special, someone else out there will.  
• Use guest posts and blogging: Establish yourself as an expert in the industry.

How to Start an Online Electronics Business

Business owners in the electronics industry not only face notoriously low margins and fierce competition, but are also more vulnerable than other industries. 

"In addition to being a low margin of profit niche, electronics are also prone to fraud."

This isn’t to say you should avoid the electronics industry. If you’re up for the challenge, just make sure you do these things.

• Use good fraud protection: Look into services like NoFraud.
• Know your necessary profit margin: If you’re not making $100 profit per sale, Dave recommends considering a different niche.
• Take advantage of discounts and freebies: Everyone loves a good discount!
• Partner with distributors: Decide whether you’ll buy American or foreign and build a good relationship with your distributors.
• Properly store your electronics: Consider working with fulfillment companies like ShipWire or FulFilltopia that will take care of the dirty work for you.
• Determine where you’ll sell: Leverage third-party sites that offer electronics like Amazon, eBay, and Gazelle.

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Choosing the Best Insurance for Your Online Business

Not all online businesses are required to have insurance, but it’s always, always, always recommended. Insurance protects you and your assets in the event that you’re sued personally or professionally. When it comes to starting an online business, there are a few types of insurance that we recommend:

• General liability: Protects you against liability from third parties suing you for a number of reasons. 
• Hired and non-owned auto insurance: Can be added to general liability and sometimes to an auto policy, covering you if you use your vehicle for business errands. If you’re in an accident while running a business errand, this protects your business from being sued.
• Cyber liability: Designed to protect you if customer information is compromised: credit card info, social security number, and other personal information. Plus, you may be subject to federal fines and penalties for every customer affected.

If you have questions about the right kind of insurance for your business, our independent insurance agents are always here to help. They work with multiple carriers to help you find the right insurance at the perfect price for you.

Final Things to Keep In Mind

At its core, starting a business begins with the steps we’ve just gone over. However, depending on your niche, you’ll need to do additional research regarding the laws, regulations, insurance, and business license requirements. Plus, it’s always a good idea to chat with other successful owners in the industry to learn from them.

If you’re feeling ready to take the online business plunge, Dave has a few final tips to keep in mind:

• There is no such thing as free shipping.
• You need certain skill sets.
• Your product matters.
• Search engines rank individual pages, not websites.
• SEO matters.

“If you have the right products, the right profits, and the right supplier(s), it’s almost impossible to lose money,” said Dave. 

So what are you waiting for? You don’t even need to get out of bed to get your business up and running—how comfy does that sound?