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How to Start an Online (E-Commerce) Business

Updated on July 3, 2016

E-Commerce

Making money from the convenience of a home computer is appealing to many but it isn't as easy as it sounds. Many factors are involved in starting an online (e-commerce) business and it's important to research the idea thoroughly to increase chances of success.

While running an online business allows you to be your own boss and set your own hours, it will also be very demanding at times and can require additional hours and finances. Careful research and planning mixed in with reasonable expectations will help reduce the risk most businesses face.

Compose a Business Plan for Your E-commerce Business

A business plan is the backbone of a business and good business plan will help to ensure the business' success. Keeping in mind that circumstances do change and business plans are often modified to reflect those changes.

A good business plan will include detailed information on:

  • Products & Services
  • Market Analysis
  • Strategy & Implementation Summary
  • Management Summary
  • Financial Projections
  • Risks

There are many free business plan services available online and templates for use. Depending on the business owner's expertise, accountants and financial advisors may be required to assist in the financial section of the plan.

Evaluate and Acquire the Products and/or Services for Your Online Business

Deciding on what products and/or services to offer for an online business is the next step. It is important to also understand any legality issues or limitations with the products or services and to ensure the online business will be able to provide them.

Once you have decided on the products and/or services you wish to offer, you will have to decide:

  • Will you keep product in stock or drop ship the orders
  • Are you importing/exporting and will there be any extra cost or legal issues in doing so
  • Can the services you are providing cause any liability issues for you and if so, do you have adequate insurance coverage in place
  • What is your competition like and how will you get people to buy from you rather then from them
  • Are there any time limitations to products you may stock and if so, how much will you keep in stock at one time so you don't end up with expired/obsolete product
  • What price will you offer your products and/or services to maintain a good profit

Determine the Medium You Will Use to Run Your E-commerce Business

With business plan in hand and products and/or services to sell, now all you have to do is decide on what medium you wish to sell them on. Many businesses do a combination of mediums to gain maximum exposure. Each option has its own cost attached and most businesses will experience heavier expenses during start-up. Work with one medium and slowly add more and evaluate them for return on investment (ROI) to decide if it's working or if you need to choose another medium.

Some common mediums for an online business are:

  • Private/Dedicated Hosting: Attached to your own domain and completely your own store, you will have control over design of the storefront and all traffic received will be yours (eg.GoDaddy.com, Volusion.com, BigCommerce, 3DCart)
  • Shared Storefronts: Larger established storefronts with many sellers in which you share traffic (eg. eBay, Shopping.com, Amazon, Yahoo)
  • Simple Website: Your own simple website with "add to cart" buttons which can be integrated with 3rd party applications like PayPal.
  • Social Network Sites: Use of free social network sites can promote your products and/or services though it may be a bit harder to integrate shopping carts or payment options with them. (ex. Facebook, Twitter, Blogs, MySpace).

Starting Your Online Business

There are many considerations to take into account once you are thinking about starting your own e-commerce business. Making sure to carefully plan and evaluate your decision will help increase the chances of success and reduce the odds of business failure.

A carefully constructed and accurate business plan for your online business will help you stay on track and see how the business is doing compared to predictions. Understanding the products and/or services you wish to offer online as well as any limitations or even liabilities will help avoid possible setbacks. Deciding on a medium to sell your products and/or services online will take some research and evaluating but putting in the extra time now will save you time and setbacks later.

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