How to start an online business in 6 steps
Starting an online business allows you to sell goods or services without a brick-and-mortar location. Even if the concept is fairly simple, it takes a little work to ensure it’s viable and set up properly. These important steps will propel your business onto a path toward success:
- Choose a type of online business.
- Name your online business.
- Choose a business structure.
- Register the business name with your state.
- Launch a web presence for your online business.
- Study the competition.
1. Choose a type of online business
Decide what your online business will offer, as this also helps determine what type of online presence to build for it. For instance, if you sell print-on-demand tote bags and plan to do this through third-party websites, your business may not need a site of its own in the beginning, or even a registered business name. However, if you sell a service where your skills are the service, such as writing or web design, a website with a professional appearance is important.
Also consider whether your business idea is viable. Does it provide a good or service that customers are willing to pay for? This is important to the survival of any business.
2. Name your online business
Naming your online business is more than just picking suitable words to fit it. The ideal name is available as a domain and as a business name in your state. Find out if the domain name is available by typing the name into any domain registrar, such as GoDaddy. To determine availability and requirements to register your business name in your state, visit your secretary of state’s website.
Search the United States Patent and Trademark Office’s trademark electronic search system (TESS) to ensure the name isn’t already registered. Also do a quick Google search with your business name in quotes to ensure no one else is using that moniker, as you don’t want your business to be confused with another.
3. Choose a business structure
The structure of an online business determines its legal liabilities and how it is taxed. By default, your business is a sole proprietorship as soon as you start it by yourself without setting up any other type of business structure. This may be enough, especially when it’s new.
A sole proprietorship puts all responsibility on you as the business owner, while a partnership balances it out between you and a business partner. You could also start a limited liability corporation (LLC) as your business expands. Registering as an LLC protects your personal assets from financial blows to your business, such as a lawsuit or even bankruptcy. LLC filing requirements vary by state. Other common business structures to consider starting are an S corp or a C corp.
4. Register the business name with your state
If you’ve already chosen and registered your business as an LLC, S corp or C corp, you registered your name when you registered your business. However, for the simplest business, such as a sole proprietorship reselling items on eBay, you don’t necessarily need to register a business name, but for a more complicated business model, it’s a good idea.
Visit the secretary of state’s website for your state to determine the registration requirements and general information. For instance, in Ohio, you don’t need to register a business name if you’re running a sole proprietorship using your own personal name as the business name. However, you would register a doing-business-as (DBA) name in most states if the name does not match the owner’s name. This might be the case for a service business such as one that offers graphic design, or any work done solely by you.
5. Launch a web presence for your online business
With the exception of selling items exclusively on a third-party site such as eBay, most online businesses benefit from a website. Social media accounts matching the domain name are also a huge plus. Even if you don’t update the business website regularly, you can inform customers of specials or new goods through social media.
Once your website and/or social media accounts are live, use them. Spread the word about your business by telling your friends online and by sharing posts through social media. Create posts that potential customers can relate to. Show them how your business offering benefits them.
6. Study the competition
Chances are, there are others with online businesses similar to yours. Seek out the successful ones and study what makes them good. Pay attention to the competition’s social media activity and which types of posts get a lot of engagement from their potential customers. These posts could offer clues to boost your own online business.
Why you should start an online business
If the transaction portion of your business can be handled online and there’s no need to meet clients or buyers at a physical location, an online business makes sense. Some businesses, such as those selling digital templates, web design or writing, are suited to becoming online businesses. It’s also a viable option for people who enjoy working from home and being their own boss.
Benefits of an online business
- Transactions can occur any time, any day. Running your business through a website means potential clients and buyers can find you and order goods or services even while you sleep. This is extremely convenient if you offer fixed-rate goods or services, such as T-shirts you designed or downloadable business templates.
- You’re free to travel or conduct business anywhere. If you’re a writer, editor or graphic designer, for instance, there’s no need to sit in a physical office as you do your work. As long as you have internet access and respond to business requests in a reasonable amount of time, you’re free to work poolside, from a resort hotel or from your favorite coffee shop.
- Costs could be lower. A business requiring a physical location, such as a bakery, also has a slew of overhead costs such as rent, utilities, insurance and cleaning bills. An online-only business usually doesn’t require renting space, unless you’re selling physical goods that you make or buy and don’t have space at home to house them.
Potential drawbacks of an online business
- It’s hard to stand out. For a business with a physical location, such as a coffee shop, yours may be one of just a few in your community. The reach of the internet is much greater. Chances are, there are numerous businesses offering goods or services similar to those of your online business. Standing out could require extra amounts of work posting to social media or getting your business name out into the world.
- Website hosting and renewal fees. While some brick-and-mortar businesses can get away without a website, posting only to social media to inform the community of the latest news and offerings, it’s hard to thrive with an online business without a website. Your website’s domain name and hosting must be renewed, typically annually, or your site will no longer be accessible.
- You’ll need a web designer or skills to design. Having a website also requires either a web designer, or building up your skills to use website builders such as Squarespace or WordPress to design your site. Such services are designed to be fairly easy to use without coding knowledge, but there’s still a learning curve.
What is affiliate marketing?
Affiliate marketing involves promoting another company’s goods or services and getting a commission each time a customer purchases something through the affiliate links on your website.
This business model is ideal for someone that doesn’t wish to carry inventory or offer their own goods or services. For instance, a blog about swimming pools could post affiliate links to pool filters, pool toys or tools for pool cleaning.
Affiliate programs exist for more than just physical goods. Some companies offer programs to promote downloadable materials, memberships to specialty websites or even workshops teaching special skills or knowledge.
Earning money through affiliate programs works best if you have some knowledge of what you promote. Whether you blog or create a simple website of just a few pages, your words help sell whatever you’re promoting. Unless you already have a popular site, newsletter or social media presence, you’ll have to find ways to bring web traffic to your affiliate links. This could involve posting videos about the offers or creating an email newsletter to create growing interest in your site and your affiliate offers.
Tips for starting a business online
Starting an online business could be the key to an ongoing opportunity that brings in both funds and fun. These tips help ensure your online business starts off on the right track.
1. Pick a topic you enjoy. If you’re interested only in the potential to make money and not in the actual niche of your business, you may lose interest before your business thrives. It takes time to build an online presence, so make sure you enjoy spending time on it.
2. Be clear. Whether your business involves selling on a third-party site, running a blog or making videos on YouTube, your purpose should be clear and on topic. For instance, if you design logos for businesses, your online business presence should largely be about design and logos, and not random topics such as pet beds or vacation rentals.
3. Use social media. Social media is like a form of free advertising. Use your business’s social media accounts to discuss its goods or services. Share tips or information your potential customers may find useful. Engage with others who ask questions or leave comments on your posts.
4. Fulfill a need. For your business to succeed, it needs customers seeking whatever it is you’re selling.
“At the core of every online business is solving other people’s problems,” said Nick Loper, online business owner and the mastermind behind the Side Hustle Nation website and newsletter as well as the podcast.
“When you’re thinking of ideas, keep in mind what problems you can solve,” Loper said. “On the other side of those pains and problems is a potential business, and it’ll usually take one of three forms (or a combination):
- A service that solves the problem: People pay you to make their problem go away.
- A product that solves the problem: People buy your product — physical or digital — to make their problem go away.
- Content that solves the problem: People consume your information to make their problem go away.”
Potential online business ideas to get you started
The land of opportunity is online. Some business ideas that work well online are:
- Web design.
- Affiliate marketing.
- Video editing.
- Social media management.
- Print-on-demand apparel and decor.
- Selling spreadsheet templates or digital art files.
- Selling handmade goods.
- Reselling anything from clothing to collectible toys.
Doing a little research on products or services you’re already interested in will likely turn up a few business ideas that are ideal for you.
Frequently asked questions (FAQs)
In some cases, you can start a business online for free. If you sell on Etsy or eBay, for instance, it’s easy to get started, provided you already have goods to sell. If you offer a service such as social media management, it costs no money until you decide to register a business name or purchase a domain name.
“You can start a YouTube channel or social media presence with just your phone, and you could begin offering freelance or consulting services with almost no overhead as well. It’s free to upload print-on-demand designs to Amazon and Redbubble,” Loper said.
“Services like Wix even allow you to get a basic website online for free, but if you’re at all serious about your business, it’s worth it to buy your own domain name and hosting. It’ll set you back $100 per year or less,” he said.
The most successful online business is “the one you’re most excited to take action on,” Loper said. It’s crucial to choose an online business you’re interested in and willing to invest time into to continually improve, expand and streamline it.
“The days of blogging as a personal journal are over, but the days of building out a helpful library of content are still alive and well,” Loper said. “Take Shelley Marmor’s TravelMexicoSolo.com as an example. Started in 2020, she’s grown it (and a small portfolio of other Mexico-themed travel sites) to $50,000 per month in revenue, all by answering people’s questions.”
The easiest online business is reselling items you already own, as it involves no shopping, no special skills and no website to get started. Sites such as Etsy, eBay, Poshmark and Mercari are ideal. All you need to do is set up an account, take pictures of your items and describe them accurately in your listings. Use your earnings to purchase similar items to resell.
Loper says that email newsletters, drop servicing, selling digital products and artificial intelligence (AI) are all popular business ideas.
Email newsletters involve building an email list by attracting subscribers through your website and social media posts. Use the newsletters to discuss your business’s niche and to promote special offers to the newsletter subscribers. Drop servicing means serving as the middle man between a customer and the actual provider of the service. For instance, if graphic design was the business, you’d find customers willing to pay a certain fee, then hire designers to do the work for less than that fee. What’s left is for your business.
Selling digital products is quite popular on sites such as Etsy. Search Etsy for the term “downloadable” to get ideas for the vast array of digital products to sell. Some of them are even AI prompts to use with popular AI writing and art programs.
Whether you choose a popular online concept or one rooted in your creative interests, an online business offers more flexibility than a traditional brick-and-mortar business. It also offers the option to expand into a physical location should the need arise.