How to Start an Online Business: Best Practices

Entrepreneurs in any industry can use the internet to take their business online, allowing them to expand their audience or simplify their operations at an existing company or develop a new idea. Starting a small business online is relatively simple, especially if you use an existing online marketplace or e-commerce website at a platform to sell products on a small scale. A well-researched business plan, the right online tools and dedicated marketing efforts can get you on the right track to launching an online business.


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Benefits of opening an online business

Compared to opening a retail location, opening a business online comes with many financial, lifestyle and operational benefits. For first-time entrepreneurs, running a business through the internet is a great way to test their business plan without having to secure a costly physical location or immediately hiring employees. If you’re considering starting a business online, consider these key benefits:


Flexibility and freedom

As the owner of an online shop, you can set your own hours and work from anywhere. Due to the nature of the internet, you can choose any location as the headquarters for your business, giving you the personal freedom to travel around and arrange your schedule. Since you use the internet as the primary point of contact with customers, you can easily respond to alerts from a laptop or mobile device anywhere you have an internet connection. As your business expands, you may also be able to hire remote employees, giving you access to a wider talent pool.



Online businesses can be easier to scale than brick-and-mortar stores. You can choose to produce inventory based on orders at the beginning stages of your business, then move to bulk orders as you grow because you don’t need to fill display shelves with a certain amount of product. Instead of having to move to a larger store or opening new locations as you grow, you can simply upgrade your website and rent more storage or warehouse space.



Anyone who has an internet connection can find and use your online business. The best online businesses have customer portals that are easy to use, with simple navigation and an intuitive process for adding products to a digital cart, checking out and tracking items through the shipping process. Online businesses aren’t limited by geography, making them available to all kinds of different markets and types of customers. They also don’t have other barriers to purchase your goods or services, such as transportation, limited store hours or lack of cash-on-hand.


Passive income

Online businesses can make money for you even when you aren’t actively working. Your e-commerce site can accrue sales any time of day and don’t require salespeople to manage a store in order to receive orders. Online businesses are highly automated, allowing you to earn passive income as long as you take care of essential administrative tasks and arrange shipping processes.


Lower overhead

Opting to do business online can save you a significant amount of money, especially when it comes to real estate costs. While you may eventually need an office to house your employees and a warehouse to manage inventory, you can avoid paying for expensive storefronts and the costs associated with them such as electricity, cleaning and security to protect your assets. 

Businesses with a physical location have to pay for renovations, large amounts of inventory to fill their store and fund salaries for reliable sales staff all before they make a single sale. Online businesses can start generating profits even when they are still run by a single person.


Reduced waste

Selling your services and products online optimizes your efficiency and reduces waste. Because you don’t need to staff a physical location, you don’t have to pay employees to take care of an empty store. You can customize orders based on what each customer wants, producing small-scale runs of products to avoid having excess inventory that wastes space in your warehouse or creates a loss for the company.


Simplified distribution

With an online business, you can simply have products mailed directly from your warehouse or even use drop shipping to deliver products directly from the manufacturer to the customer. You can even sell digital products that can be directly emailed to a customer or downloaded from the website, eliminating complex distribution practices.

Related: 10 Steps to Starting A Business


Costs of starting a business online

Although starting an online business is generally cheaper than operating a business with a physical store, there are several costs associated with building your digital shop. The total cost of starting your online business depends on what kind of product or service you have to offer, but generally starts with a few thousand dollars to build a professional website and your initial investment in inventory. Here are the main costs associated with creating your online company:



To start making money online, you need something to sell. This can range from access to services or tools to physical products. Some types of products will require more overhead than others. For example, if your online business sells art prints, your inventory costs could be relatively low because you are mostly paying for paper and ink, so $1,000 worth of inventory could translate to a significant number of sales. If your online business sells furniture on the other hand, a single item could cost you hundreds of dollars to make.



Your website is the primary way customers will purchase products, so prepare to make a significant investment in its development. There are several costs associated with starting a website:

  • Web hosting: You need to pay to put your website on a server and support the activities of customers who visit your page. Basic shared servers can only cost a few dollars a month while powerful private web hosts for websites with a high volume of visitors can cost about $200 per month.
  • Domain name: Registering your website’s URL can start at about $1 each year.
  • Website designer: A common option for creating online shops is using an e-commerce website maker and paying for a pre-set theme, which can cost $50 to $200. To create a professional, customized e-commerce website, you’ll need to hire a website designer which could range from a few hundred dollars to over $10,000 depending on the complexity of your site.



While your website handles the front end of customer interactions, you may need additional computer software to help you manage your inventory, track shipping, send invoices and even handle payroll for your future employees. Software subscriptions usually vary from about $15 to $150 per service.



All businesses, including those that operate online, should have insurance to protect their assets. General liability insurance can be as low as $500 a year, generally increasing as you require more coverage for inventory, warehouse space or company vehicles.



While you don’t have to pay shipping costs up-front before you have orders, investing in shipping equipment can make it easier to process orders in the future. A few hundred dollars can outfit you with a label scanner, a printer and the packaging materials essential for shipping your products to customers.


Licenses and registration

Your business license and other operational permits also have associated fees that vary by state, starting at under $50 and sometimes reaching over $400 in filing fees. You may want to incorporate your business as an LLC or corporation, which will come with additional costs.


Office equipment

Even when you are your only employee and you work out of your home, you will need basic office equipment to oversee your business. This starts with a computer, a strong internet connection, a router and a modem to access your website. Filing cabinets, writing tools and paper ledgers are other kinds of office supplies you should invest in.


Selecting your niche

To run an online business you need to have something to sell. When deciding on the type of business you want to run, think about your natural talents and interests first. This can help guide you to a business that you can grow with. Then, perform market research to identify an unfilled need, helping you decide on a product or service to offer.  

It can be hard to gain traction online if you open a business in a saturated market with a large number of competitors. If you can solve a unique problem for customers, you have a better chance of attracting natural traffic to your website and making sales than if they have a range of companies already filling that need. Once you find a niche product or service to sell, you can focus on developing a business plan to start making sales.


Creating a business plan

Follow these steps to start building a business plan to guide your online business:


Plan your brand and identity

When running an online business, your company’s brand is an important part of attracting business and building a base of committed return customers. Think about your company’s core values and how you hope to accomplish them with your business. Decide on a voice to use online: do you want your website to have a professional tone or be more casual and relatable?


List resources and expenses

Make a comprehensive list of your one-time and recurring costs, plus your potential sources of income. Use this information to create a pricing model that will allow your business to become profitable in the desired amount of time.


Source vendors

After you decide on a product to sell, research the different manufacturers and vendors that can make your ideas a reality. Having a list of possible vendors and their costs is an important element of your online business plan because it ensures your supply chain won’t be interrupted even if you have to outsource certain elements of your business.


Make a plan to fulfill orders

Decide how you are going to connect customers with their products. You can start by manually checking customer orders, packaging items yourself and taking them to the post office, but as your business grows you will need to have a system to deliver products. Research different ways to integrate shipping into your website and set up a system for tracking your orders.


Set goals and measure them

Write down goals for your business in your business plan so that you can measure your online business’s growth over time. Your goals can be financial, cultural, operational or related to your customer base.


How to establish a web presence

Your online business’s web presence is an essential part of your marketing strategy and business plan. Because online businesses target customers who use the internet to shop, your company should have a strong presence in different areas of the web. You can start developing a reputation online by following these tips:


1. Select a great domain name

Your website’s domain name is the URL that customers click on or type in the browser when visiting your website. Having a simple but memorable domain name can help you create a comprehensive identity for your online business. If possible, include your business name or a variation in the URL so that customers can easily find you.


2. Build an interactive website

The easier your website is to use, the more sales you can make. Use attractive graphics, a memorable logo, interactive buttons and a simple navigation page to guide potential customers through the sales process. Register your website on search engines and integrate it with your company social media pages and a prominent contact number or email address to customers can ask questions.


3. Set up diverse e-commerce tools

When developing your website, set up as many payment options as possible. Giving customers different payment options helps capture customers who use different kinds of digital wallets. Shipping and tracking tools can also make your business appear more reputable and trustworthy to customers who are shopping around.

Related: An Introduction to Accepting Payment by Credit Card


4. Engage on social media

In addition to your website, set up pages on social media and regularly interact with your followers. Consider partnering with social media influencers who can use their social capital and large following to introduce your product to a wider audience. Engaging with people on social media strengthens your brand’s voice and creates loyalty among customers.


5. Use smart SEO strategy

Add engaging, research-oriented copy to your web page so that customers can find your website by searching online. When you include appropriate keywords in the copy on your website, you can give visitors to your web page valuable information and make your website more visible to people looking for solutions that your company provides.


Tips for hiring employees at an online business

As your sales volume increases, you may need to hire employees to help run your online business. Some of the roles you should consider hiring for include web designers, system administrators, content writers, social media specialists, advertisers and inventory managers. When you’re ready to hire your first employee, follow these steps:


Write a thorough job description

To find qualified candidates, you’ll need to craft a job description that explains exactly what kind of support you need. Talk about the company culture, benefits you can offer and what kinds of projects candidates can expect to work on. Be clear about whether the role is remote or in-person at a warehouse or office. 


Prominently post job ads

You can post your job ads on your website, on job boards and on freelancing websites. Make posts on social media explaining that you are looking to expand your team. You may find someone who is already invested in your brand and excited about the work you do that wants to apply.


Create an interview plan

Decide whether you want to interview candidates in-person or using phone calls or video conferencing. Prepare job-specific questions ahead of time and create a list of questions about company culture so that you can start intentionally building a team that aligns with your company values.


Best methods for marketing your online business

Marketing your online business is an important part of cultivating its growth and reaching your target market. Try using these strategies to develop a well-rounded marketing strategy that drives sales:

  • Email leads: Collect information about potential customers and send out regular emails that remind them of the services you have to offer. Create different email campaigns for previous customers, customers who abandoned their cart and checkout and other interested parties.
  • Start a blog: Starting a blog that produces useful, relevant content can help boost your website in search rankings. When customers search the internet for a topic related to your products and find your blog, it is easy for them to discover your shop and make a purchase.
  • Use web and print ads: Invest in your advertising budget to place targeted ads social media and other large websites that are frequented by your ideal customer. Even though your business is online, consider running print ads offline to get even more exposure.
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