How To Start an Online Business in 5 Steps

By Indeed Editorial Team

Updated February 25, 2021 | Published February 4, 2020

Updated February 25, 2021

Published February 4, 2020

Online businesses are a byproduct of the digital era and have transformed nearly all industries for consumers and business owners alike. They have unique business models and structural elements that differ from in-person businesses. Starting an online business is an exciting and creative endeavor that requires thoughtful planning and preparation.

In this article, we share five helpful steps to help you successfully start an online business yourself.

What is an online business?

An online business, or "e-business" as it was coined in 1996, is any business whose primary activity occurs through the Internet. Like in-person businesses, online businesses can reflect a variety of business models that fall under the categories of buying and selling or providing a service. Sample online business services include information sharing, drop shipping, affiliate marketing or blogging. Understanding the unique benefits of an online business as well as the steps to effectively start one is an important part of the process.

Why are online businesses important?

Besides the entrepreneurial and creative benefits of running a traditional business, online businesses offer unique financial, personal and consumer benefits.

Financially, online businesses save money because they avoid the costs of operating a physical space, and you also do not have to stock a store with inventory that might not sell. Reliance on email and electronic marketing also saves the expense of traditional, paper-based communications.

Personally, business owners appreciate the flexibility of working from home or remote locations, often at more flexible hours. Customers will also appreciate the global, unlimited access to your business 24 hours a day, seven days a week.

How to start an online business

Regardless of your specific product type and business goals, these steps will help ensure you successfully start and maintain a thriving online business:

  1. Establish a clear vision.

  2. Conduct market research.

  3. Solidify your business plan.

  4. Create an effective website.

  5. Take care of all legal requirements.

1. Establish a clear vision

Often seen as the most fun part of developing a successful online business, this step is critical and entails more than just creative brainstorming. Establishing a clear vision requires identifying the product or service you will offer and the preferred format for your business operations. For example, will you operate an information-sharing blog or a buying and selling business? Additional things to consider include:

  • What are your goals?

  • What is your mission statement?

  • What is the scope of your product offerings?

  • Who is your target market?

  • What unique considerations apply to the online aspect of this business?

Related: Guide To Company Culture

2. Conduct market research

After solidifying your vision, you will need research to inform your planning process. Specifically, you will want to identify your target market, confirm that a need for your services exists and analyze consumer buying patterns to inform your business model. Essential questions to think about include:

  • Who are your intended customers?

  • What do they currently buy?

  • Why do they make these purchases?

  • What will motivate them to buy your product?

Market research is split into primary and secondary categories that reflect varying research methods. When planning your research, you will want to consider research costs, accessibility of information and intended outcomes.

Related: Creating a Successful Social Media Marketing Strategy

3. Solidify your business plan

Establishing your vision and completing market research will serve as the introduction to your more detailed business plan, which is a critical component of ensuring a successful online business. Regardless of your business' format and product type, the following are critical components of an effective business plan:

  • Clearly defined goals and interim metrics

  • Timeline for review

  • Summary of staff qualifications and responsibilities

  • Financial summary outlining existing capital, monthly costs, projected revenue and accounting systems

  • Clear marketing strategy

Your business plan will help support your success to the degree that it balances structure and flexibility. Structure will help you stay organized and focused on your goals, and flexibility will allow for unforeseen circumstances and responsiveness to the online market. While it is critical to developing a thoughtful and comprehensive business plan, don't be afraid to change it as needed. As your business grows, so too will your marketing strategy, your finances and your goals.

Related: Ultimate Guide To Strategic Planning

4. Create an effective website

Creating a functional and enticing website is essential for starting an online business. Fortunately, there are simple and cost-effective options for setting this up. When you are developing a website, you want to plan for the structure and logistics of operating the site and the site's content.

Structurally, you will start by securing a domain name, which is the name and address of your website. To maximize traffic, you'll want to choose your exact business name or something similar. Then you have to confirm that the domain is not already in use, and if it is, you can substitute the .com ending for .org or .net.

After that, you'll choose a hosting platform, which stores your website and displays it to website visitors. There are several hosting platform providers to choose from, so it is a good idea to research all of your options and pick the one that best suits your needs.

Your website content represents the substance of your business, so you want it to be simple, easily accessible and straightforward. Easy accessibility requires mobile optimization, meaning that the content adjusts to accommodate digital devices of all sizes. Some hosting providers offer website builder services that help with mobile optimization and website layout overall. Whether you hire a company or a freelancer or choose to build the website yourself, you will want to include these components:

  • Homepage

  • Products or services

  • About us

  • Blog

  • Contact us

The final step is choosing the aesthetic details, like font color and size, quick navigation features, logo placement and supporting visuals.

5. Take care of all legal requirements

Similar to in-person businesses, starting an online business requires compliance with certain legal guidelines. These include registering your business name, obtaining an employer identification number, registering with state labor agencies and, depending on your state, getting a sales tax permit.

Online business owners can sometimes avoid a sales tax permit since the business does not have what is known as a "physical presence." However, you will want to verify this. Lastly, you'll want to confirm if a home occupation permit is required and research any digital privacy laws unique to online businesses.

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