Starting a business online
With minimal start-up costs and the potential to reach millions of customers, there has never been a better time to setting up an online business – and what a great way to begin life as an entrepreneur!
In this article, we will be looking at some of the most important things you need to do to start an online business from having that fantastic business idea, choosing a name and business structure, building your website and registering with HMRC.
Many of the things we are talking about here should form part of a rounded business plan and we would always suggest writing out a formal document, even if it is only for your own use as it will encourage you to think about what you are doing and how you will go about it. In addition, if you are applying for funding or looking to get investors on board then you will need to show them a well-produced and thought-out plan for your new enterprise.
There is no definitive list of what you should do or what order you should do it in. If you read about how well-known entrepreneurs started their own online business, you will notice they will have all approached it a little differently. But from our experience working with many start-up online businesses, we have pulled together a comprehensive list to get you up and running!
Your business idea
As with any business, the first step in starting an online company is to decide on a business idea and create a business plan. If you believe you have a great product there is a great demand for, or a niche service which will fill a gap in the market then there are a number of factors that you need to consider. As a business, you will either offer a product or service, and you need to carry out extensive market research to decide if your business is viable. Having a target audience and clear objectives firmly in your sights will help get your online business up and running quickly.
Market research can help you plan and map out how to set up your online business, give you an idea into the start-up costs and the type of funding that could be available to you.
Doing your research
You have chosen your niche, so the next question to consider is one around research as this makes up a great deal of your business plan.
Doing market research will help you establish:
- Who your competitors are?
- How they do business
- Who are their customers?
- What is their pricing structure?
- How you can provide something different or be able to do it better.
If, whilst doing your research, you find you do not seem to have any competitors, you need to ask yourself why this could be? Does it mean that you are the only person who has ever come up with this bright idea, or does it mean there is no market for it?
All of these questions (and more) form a vital part of your offer and if you do not get your research right then you could end up making a costly mistake.
Hubspot has a great guide and template you can download for free to help you research your online market.
If you have a very limited budget to put towards your research, there are a few ways of achieving it on little to no budget:
- Use social media to engage with interested parties or ask trusted followers for advice/feedback on the idea. Responses will generally be refreshingly honest – so be prepared for some eye-opening honesty!
- Attend industry related events to see what is trending and use it as an opportunity to sound out other similar entrepreneurs/start-ups to get invaluable tips and advice.
Different types of online businesses
There are a number of popular business models’ entrepreneurs can use for a successful online business to make money instantly.
Online store – This is probably the most popular ‘go to’ option. Instead of buying or renting a physical premise, you sell your products or services direct to customers via an ecommerce website. Physical goods can be delivered to customers. An online store puts you in direct contact with potentially millions of customers and has fewer overheads compared to a traditional shop. You can take payments via credit cards or use banking systems such as PayPal to handle transactions.
Advertising – Advertisers will pay to place their advertisements on your website. You will need to be receiving large traffic visitor numbers for this to be profitable. This model works best if your website is either an online magazine that has popular blogs or help and advice sites. The aim is to attract as many visitors as possible in order to make money from advertising.
Subscription – This business model is used by websites offering information, entertainment, or a specific service but you charge a subscription fee. Current popular trends include beauty; books & magazines; arts and crafts and health and fitness. Great examples of this include Dollar Shave Club, Hello Fresh, Netflix, Able & Cole and Britbox.
How to choose a business name
When it comes to naming your business, make sure that both your business name and the domain for your business website are available. It is easier for customers to find your website when the website domain name is the same as the business name. If they are not, it will lead to confusion and it could even lead to a loss of business as many potential customers may click elsewhere instead.
You also need to choose a name for your business. You may want to do this in conjunction with registering a domain name for your website, as the best solution is for the two to match exactly. The right name needs to be short and easy for customers to remember, the domain address for your website be available, and not be too similar to the name of another company.
If you are starting an online business from scratch, spend some time brainstorming a list of potential names and then whittle this down to just three or four. One approach is to register a domain name – or web address – that contains the keywords that people will use to find a business such as yours.
Find your niche
This is the starting point for any business and many people already have a general area that they would like to trade in. It also forms the backbone for your business plan that everything else hangs off.
We often find that people tend to start with too wide an area and instead of being great at one thing their business starts being just ‘OK’ at lots of things.
Understand that the internet marketplace is full of companies that are really great in their field and so the trick is to really find that one niche where you can excel.
Instead of being an OK shoe retailer why not be the best on the web at selling ladies formal shoes? Or instead of being an OK graphic designer why not be the very best at designing science fiction book covers?
Being a specialist gives you a much smaller market to aim for (which makes your marketing more focused) and means that when you come up against general graphic designers or so-so shoe stores then you should win every time.
Take time over this stage and be prepared to have a couple of false starts because choosing and understanding your niche is really important to everything that follows.
Find your suppliers
Firstly, consider is what you are offering actually available as goods you can import, or do you need to do some manufacturing yourself? In some cases, it does not make sense to reinvent the wheel so you can simply buy in what you need and maybe even re-label it with your own branding.
In other situations, the fact that you manufacture it yourself is all part of your unique selling point but whichever way you go, finding reliable reasonably priced suppliers is going to be important.
It is a good idea to start looking around and engaging with people early on, because in many industries suppliers will actually help new businesses get going. They may give you help and advice about marketing, provide assets for you to use or give you links through from their site. Building a strong relationship with quality suppliers right from the early days of your business is vital if you are to get off to the best possible start.
For service providers, you may become a preferred partner or a specialist consultant for their brand.
Choose your channels
How will you communicate with your customers? Some channels are more suitable than others, depending upon the type of product or service that you are providing.
Entrepreneur magazine wrote that start-ups actually have a distinct advantage in the social media marketing realm, since users love what is new – and start-ups are new by default.
If you are selling craft tools then you are likely to find your buyers on the more ‘visual’ social media platforms like Instagram, Youtube or Pinterest but for a cleaning service specialising in corporate offices, you may be better off targeting certain Facebook groups, Twitter or Linkedin.
The important point here is to make sure you match your channel to your customers and then make sure you are really good at it. You will be able to engage far more quickly with customers, build instant relationships, answer their questions; promote any new stock or offers to them and deal with any complaints.
Investors and funders will want to see that you have really thought about how you connect with your customers so make sure this is clearly featured in any business plan that you do.
Finance your business
So far, most of the things you have done will have been free or very low-cost but as you approach your start date you are going to need to think about money. Start by deciding how your business will grow and what it needs to do to survive.
If you are providing services, then you will probably not need much in the way of stock or equipment and so your financing needs are really only going to be down to advertising and marketing.
But if you are manufacturing to sell, then you may need to buy in machinery, packaging and even a van to transport your goods.
If you are an online retailer then you may need money for stock and as working capital the finance section of your business plan must be as detailed as possible. It should have an analysis of your start-up costs, a profit and loss and a cash flow forecast for the first couple of years and clearly show your funding requirements.
Build your website
Following on from the marketing designs (we discussed above) regarding finalising the look and feel of your logo, colours, fonts and tone of voice, you can now create an attractive, functional website yourself, with no need to spend money on web developers or hosting, by buying an off-the-shelf solution from reasonably priced platforms such as WordPress, WIX, 123-reg, or Shopify without having to have any knowledge or design or coding.
You could use a free theme or pay for a premium theme that may offer more features such as SEO add-ons which will help you to be found. Do worry about getting all of your functionality in place from day one though. You may decide that to start with you only what you need to have a basic site where you can showcase your ideas and include some blog content. When you get nearer to launch day then you can start to switch on the extra functionality.
Alternatively, if you do not have the time, hire a website designer to create one for you. If you choose to outsource this, make sure you still have some money set aside for marketing your business.
Decide on pricing
A really important part of launching your new business is to decide what you are going to charge. Essentially the main methods of setting the prices for your business are:
Market pricing – This is particularly relevant if you sell products online on platforms like eBay or Amazon as it essentially sets your price at what the market as a whole is charging. If everyone is charging £10 for a phone charger then you can choose to sell for £10 to maximise your profit or £7.99 to maximise your sales but you are unlikely to sell many if you price them at £11. The problem is that if the market is buying at a price that is lower than you then you are going to find it difficult to make a profit.
Value pricing – This is particularly important if you are selling services online and what value you are adding for the client? If a customer is facing a business-critical issue that you can solve, then your price goes up and if you have limited time to provide the solution then your service becomes even more valuable. Some companies even go so far as to set their price at a percentage of what they make or save their customers. This can be a very attractive offer for customers but as a service provider you do need to be confident in what you do, otherwise, you could be doing a lot of work for no money.
Start your marketing plan
Once you have successfully set up your business website, got your pricing in order, it is time to invest in some social media activity. If you already have an existing ‘personal’ social media account, you may want to create new ones that promote your business services separately.
Your marketing plan should have some pre-launch ‘teaser’ activities (EG: coming soon …etc) set competitions and incentives to get followers to visit your website to generate early interest in your product or service so that your business gets off to the best possible start.
Register your business
Once you are ready to go then you should register your business. Are you going to be a .co.uk or .com?
Firstly, check if the name has been registered at Companies House – just type into the box at the top, and click the link below. If you believe you have a trademark you can search at the Intellectual Property Office website. If you would like to talk through your options and processes, please do contact us for assistance.
Online business regulations
Overall, the act lays down conditions that goods sold must meet. For example, they must be as described, of satisfactory quality, to an agreed price, and be fit for purpose. If the goods do not meet these conditions, the buyer should have the right to a refund. This applies to both online and offline purchases, ensuring that work must be carried out to a standard or price agreed beforehand and that the professional has a duty of care towards you and your property.
The Consumer Contracts Regulations: Amongst other things, sets out:
- Information a trader must give to a consumer before and after making a sale.
- The right for consumers to change their minds when buying at a distance or off-premises.
- Delivery costs and arrangements, and exchange details
- Where goods are faulty or not fit for purpose, consumers have different rights depending on where and how they purchased the goods.
- An accurate description of goods and services including description of your goods or services and prices including VAT.
- Payment details
- Cancellation rights and relevant time limits
- Costs of returning an item.
The Data Protection Act 1998: Designed to protect personal data stored on computers and laptops etc, into an organised system where it is safe. You can find more information on the Government website about the types of regulations that affect starting an online businesses in the UK.
For example, you will need an official company address that needs to be the same as your registration location, where communication will be sent. Some people choose their accountant’s address or sign up for a ‘virtual office’ that will deal with post for you and looks more professional. Speak to us if you would like to us to set up a registered office address and mail forwarding service.
Cost of starting an online business
The costs you need to consider for your online business will vary depending on the type of business you are starting and the scale of it. Here are some of the costs you will need to consider when starting your online business in the UK:
- Company formation costs – if you decide to go with a limited company structure.
- The costs of the actual products or services you will be selling.
- Cost of building the website, whether you hire a web designer or use a website building tool.
- The cost of the domain, which will likely be an annual fee.
- The equipment you would use, for example, you would need a laptop, an internet connection, camera (if needed).
- Marketing costs – will you by doing the marketing yourself or outsourcing it?
If you need further assistance
Being in business is a great learning experience and opening up your online store can be a vibrant and exciting time so above all make sure you enjoy yourself! We are experts in helping ecommerce start-up businesses and can help you with all aspects including setting up your systems, registering your company and outsourcing your bookkeeping and payroll. Having the opportunity to play our part in helping your business grow is something we would really enjoy doing so please give us a call and let us see how we can help with you start your new online business