How to start a business online in 6 steps (e-commerce)

Starting an e-commerce business can be highly lucrative if executed properly. This blog outlines the critical steps—from choosing a niche to scaling your operations—ensuring you have the strategies and tools needed to succeed in the online marketplace. 

Imagine making decisions that directly benefit you, crafting a flexible work-life balance, and growing at your own pace—it’s all possible with an online business. 

And the best part? 

An online business doesn’t require a degree or formal educational background, a fancy office, or a huge investment to get started. 

Take Jeff Bezos, for instance, who started Amazon in his garage with a small investment and no background in retail. His journey began with an idea to sell books online, and through determination and innovation, he transformed Amazon into a global e-commerce giant. 

Needless to say, starting a business online comes with its own set of challenges—from setting up your e-online store to carving a niche in a bustling digital marketplace. Yet, the freedom and satisfaction of being your own boss are unparalleled. 

Moreover, in a world where digital is the new main street (especially after the COVID-19 pandemic, where we saw a major shift to online shopping with online transactions increasing to 19.6% of total retail sales by the end of 2021) this decade offers the perfect backdrop to rethink the traditional 9-5 grind. A study shows that between 2019 and 2023, the number of e-commerce sites worldwide grew from 9.2 million to 26.5 million.

Clearly, individuals in the US are leveraging the power of the internet to carve out their own business paths that match their passions and schedules rather than following a monotonous routine. 

Did you know?

With nearly 14 million ecommerce sites, the U.S. now accounts for about 53% of all websites, far more than any other country.

~ Research from Markinblog.com

If you have a great idea and the drive to succeed, you too can start your own online business. This guide will walk you through six essential steps to get your business off the ground and onto the path of success. 

From choosing the right business model to scaling your operations, we’ve got you covered!

Step 1: Market research 

Market research is the foundation upon which you can build a business that precisely meets your customers’ needs. It involves identifying and analyzing your target market’s challenges, decision-making processes, and preferences regarding your product or service. 

Successful e-commerce entrepreneurs don’t just stumble upon success; they meticulously research to gain an in-depth understanding of their market and competitors. Market research for an e-commerce business is particularly crucial because the online retail landscape is vast and highly competitive, with nuances that can significantly impact your business.

Market research for an e-commerce business involves identifying and analyzing your target market’s challenges, decision-making processes, and preferences regarding your products. Here’s how market research for e-commerce can differ from traditional business research:

  • SEO and keyword research: Unlike traditional businesses, e-commerce heavily relies on online visibility. Conducting SEO and keyword research can provide insights into what potential customers are searching for, the language they use, and the demand for specific products. Tools like Google Keyword Planner, Ahrefs, and SEMrush can help identify high-volume search terms and trends within your niche.
  • Online behavior analysis: E-commerce market research focuses on understanding online shopping behavior. Analyzing data from website analytics, social media interactions, and online reviews can reveal customer preferences and pain points.
  • Competitor website analysis: For e-commerce, it’s essential to study competitors’ websites. Look at their product listings, pricing strategies, customer reviews, and SEO practices. Tools like SimilarWeb or SpyFu can provide insights into their traffic sources and keywords they rank for.
  • Geographic targeting: If your e-commerce business operates in a particular area or location, use local SEO techniques to gather market information. This includes analyzing local search trends, using Google My Business, and optimizing your site for local keywords.

Key aspects to consider:

  • Challenges and needs: Identify specific problems your target market faces that your e-commerce products can solve. For instance, if you’re selling eco-friendly products, understanding your audience’s environmental concerns and the specific issues they face (like finding affordable, sustainable products) can help you tailor your offerings.
  • Information sources: Determine where your target audience typically gathers information about products like yours. This might include social media platforms, e-commerce review sites, or influencer recommendations on platforms like Instagram or YouTube.
  • Pricing sensitivity: Understand your audience’s expectations regarding cost and what price range they are willing to consider. Use tools like Google Trends and keyword planners to gauge the pricing trends within your niche.
  • Purchase influencers: Identify factors that influence your audience’s buying decisions. This could include product quality, price, brand reputation, or peer reviews. For example, product reviews and ratings on your e-commerce site or third-party review sites like Trustpilot can be critical.
  • Competition: Analyze your direct and indirect competitors. Look at their product offerings, pricing strategies, marketing tactics, and customer reviews. Tools like SEMrush or Ahrefs can provide insights into your competitors’ digital strategies.

To gather this information, consider employing various research methods such as:

  • Surveys and interviews: Use surveys to gather quantitative data on customer preferences and interviews for qualitative insights.
  • Focus groups: Engage with a small group of potential customers to discuss their needs and preferences in detail.
  • Competitive analysis: Use tools like SimilarWeb or SpyFu to analyze competitors’ traffic sources, keywords, and digital marketing strategies.
  • Social listening: Monitor social media platforms and online forums to understand what your target audience is saying about your niche and competitors.

After collecting data, analyze it to understand how best to position your e-commerce business in the marketplace. This step is crucial for setting actionable strategies tailored to your findings.

Selecting the right niche and deciding on your product are critical steps in starting your e-commerce business. These decisions determine not only who your customers will be but also how you position your brand in the competitive online marketplace.

What to sell

Once you’ve pinpointed your niche, the next step is to decide what products to offer. Consider the following:

  • Market demand: Research what potential customers in your niche are looking for but aren’t finding. Look at search trends, social media discussions, and market reports. Use tools like Google Trends, Amazon Best Sellers, and social media analytics to gauge demand.
  • Profitability: Evaluate the cost of sourcing or producing your product versus potential selling prices. Higher-margin items may offer more financial flexibility. Websites like Alibaba and AliExpress can help you estimate sourcing costs.
  • Scalability: Think about how easily you can scale your product line. Can you broaden your product offerings or easily increase production if demand grows? Assess your supply chain’s ability to handle increased volume.
  • Uniqueness: Offering something unique can help differentiate your business from competitors. This could be an innovative product, a new take on a common item, or unique bundles and packages. Unique products often perform well on platforms like Etsy or through niche-focused social media marketing.

Identifying and understanding your target audience is crucial for the success of your e-commerce business. Defining who your customers are allows you to tailor your marketing strategies, product offerings, and overall business approach to meet their specific needs and preferences.

Key aspects to consider

  • Demographics: Determine the age, gender, location, income level, and education of your potential customers. Use tools like Facebook Audience Insights to gather demographic data.
  • Psychographics: Explore your audience’s interests, values, and lifestyles. What are their hobbies? What values do they prioritize? Understanding these can help you connect on a more personal and emotional level.
  • Buying motivations: Identify what drives your audience to make a purchase. Are they looking for convenience, quality, cost-effectiveness, or something else? Knowing this helps you position your product effectively.
  • Challenges and pain points: Pinpoint the specific problems your target audience faces that your product or service can solve. This not only helps in product development but also in crafting compelling marketing messages.

Once you have a clear picture of who your target audience is, use this information to:

  • Customize your marketing messages and campaigns: Speak directly to their needs and desires, highlighting how your products can solve their problems or enhance their lives. Tailor your advertising copy, social media posts, and email marketing to resonate with your audience.
  • Design your website and product offerings: Align with their preferences to create a user-friendly shopping experience. Ensure your website is easy to navigate, visually appealing, and optimized for conversions.
  • Choose marketing channels: Focus on platforms that are most likely to reach them effectively. For example, if your target audience spends a lot of time on Instagram, prioritize visual content and influencer collaborations on that platform.

Step 2: Set up your business

Setting up your online business involves critical steps that lay the foundation for your brand’s identity and ensure its legal standing. From choosing an attractive brand name to navigating the maze of legal requirements, each step is crucial in crafting a strong presence in the digital marketplace.

The first step in making your mark is choosing a brand name that resonates with your target audience and reflects the essence of your products or services. This name will be your first impression, your identity, and a potential customer’s introduction to your brand. It should be catchy, easy to remember, and distinct.

How to choose a winning brand name

  • Relevance: Make sure your brand name relates to your offering in some way, sparking interest and providing insight into what you do.
  • Uniqueness: Stand out from the crowd with a unique name to avoid being confused with competitors.
  • Simplicity: A name that’s easy to spell and pronounce will be more likely remembered.
  • Future-proof: Consider future expansion; the name should be adaptable and not limit your business growth.

Once your name is decided, develop your brand assets. These include your logo, color scheme, typography, and any other visual elements that will consistently appear across all platforms and materials. These elements should convey the personality and values of your brand, creating a visual language that speaks directly to your audience.

With your brand identity shaped, the next step is to solidify your business’s legal structure. This includes registering your business name, obtaining the necessary licenses and permits, and considering the implications of various legal structures (like sole proprietorship, partnership, LLC, or corporation).

Key steps to legally secure your business:

  • Business name registration: Ensure your business name is not already in use by checking with your local business registry. Once cleared, register to protect and officially claim it.
  • Obtain licenses and permits: Depending on what you’re selling and where your business is based, different licenses and permits may be required. Check with your local and state governments to ensure you comply.
  • Choose a business structure: Select a structure that best suits your needs for liability protection, tax obligations, and operational complexity. It might be beneficial to consult with a legal expert to make the best choice for your circumstances.
  • Tax registrations: Apply for an EIN (Employer Identification Number) for tax purposes, which is especially useful if you plan on hiring employees or opening a business bank account.
  • Protect your brand: Protecting your brand name, logo, and other distinctive elements through trademarks prevents others from using your established identity.

Choosing the right e-commerce platform, developing a functional and attractive website, and determining a reliable shipping strategy are essential components in launching your online business. Each element plays a significant role in how your products are presented and delivered, impacting customer satisfaction and operational efficiency.

Selecting an e-commerce platform is one of the first technical decisions you’ll make, and it’s pivotal because it affects everything from inventory management to sales analytics. Here’s how to choose the best platform for your needs:

  • Scalability: Ensure the platform can grow with your business, handling increased traffic and sales without hiccups.
  • User-friendliness: Look for a platform that is easy to use and manage, even if you’re not technically savvy.
  • Customizability: Consider whether you can tailor the platform to fit your brand’s look and functionality needs.
  • Integration capabilities: Check if the platform integrates easily with other tools, like email marketing services, accounting software, and payment gateways.
  • Support and security: Opt for platforms known for robust customer support and strong security measures to protect your and your customers’ data.

Popular choices include Shopify, WooCommerce (for WordPress users), BigCommerce, and Magento, each offering different features and levels of customization.

After choosing your platform, the next step is to build and optimize your website. This involves creating a design that reflects your brand, is easy to navigate, and converts visitors into customers. Consider the following:

  • User experience (UX): Ensure that your site is user-friendly, with intuitive navigation and a seamless checkout process.
  • Mobile optimization: With more consumers shopping on mobile devices, your site must perform well on smartphones and tablets.
  • SEO best practices: Optimize your website for search engines to improve visibility. Use relevant keywords, meta tags, and high-quality content.
  • Speed optimization: Enhance your website’s loading speed to improve user experience and boost your search engine rankings.

Shipping is a critical aspect of your online business. Your shipping strategy should balance cost-efficiency with prompt, reliable service. Consider these elements:

  • Shipping options: Offer a range of shipping options, from standard to expedited shipping, to meet different needs and budgets.
  • Shipping costs: Decide whether to pass the full cost of shipping to the customer, offer a flat rate, or provide free shipping over a certain order amount.
  • Logistics partners: Choose reliable logistics partners with a good track record for timely deliveries. Compare different carriers for the best rates and services.
  • Packaging: Ensure that your packaging is not only sturdy and protects your products but also aligns with your brand. Consider eco-friendly packaging to appeal to environmentally conscious consumers.

Step 3: Operational framework

Establishing a solid operational framework is crucial for the smooth functioning and long-term success of your online business. Effective management of inventory and customer service, along with a compelling Unique Value Proposition (UVP), are key components that set your business apart and ensure customer satisfaction and loyalty.

  • Inventory management: Efficient inventory management is vital to ensure that your products are in stock, orders are fulfilled on time, and storage costs are minimized. Consider implementing the following strategies:
  • Automated Inventory Systems: Use software that updates product levels in real-time and alerts you when stock is low.
  • Just-in-Time (JIT) Inventory: This approach minimizes storage costs by keeping inventory levels closely aligned with demand patterns.
  • Dropshipping: If applicable, dropshipping can eliminate the need to hold inventory altogether, as products are shipped directly from the supplier to the customer.
  • Customer Service: Exceptional customer service can differentiate your brand in a competitive market. Implementing robust customer service processes ensures that customer inquiries and issues are addressed promptly and satisfactorily.
  • Multi-channel support: Offer support across various platforms (email, phone, live chat, social media) to make it easy for customers to reach out.
  • FAQs and self-service options: Develop a comprehensive FAQ section and consider tools like chatbots to help customers resolve common issues independently.
  • Training and standards: Regularly train your customer service team on your products and company policies. Set high standards for customer interaction to ensure a consistently positive experience.

Your UVP is a clear statement that describes the benefit of your offer, how you solve your customer’s needs and what distinguishes you from the competition. Crafting a compelling UVP involves:

  • Identifying customer pain points: Understand what problems your customers face that your competitors are not addressing effectively.
  • Highlighting your strengths: Pinpoint what you do better than anyone else in the market. This could be anything from unique product features, superior customer service, innovative technology, or cost efficiency.
  • Communicating effectively: Ensure that your UVP is prominent on your website and in your marketing materials. It should be concise, memorable, and clearly explain the value customers will gain from choosing your brand.

Step 4: Marketing and promotion

Effective marketing and promotion are essential to attract customers and grow your online business. Developing comprehensive digital marketing strategies, launching impactful marketing campaigns, and utilizing a variety of online marketing tactics can significantly increase your visibility and sales.

Creating a digital marketing strategy involves outlining your goals, understanding your audience, and determining the best tools and platforms to reach them. Start by:

  • Setting clear objectives: Define what you want to achieve, whether it’s increasing brand awareness, generating leads, or boosting sales.
  • Audience analysis: Dive deep into understanding who your customers are, what platforms they use, and what type of content engages them.
  • Budget planning: Allocate your resources wisely across various channels, ensuring you maximize ROI while staying within budget.
  • Choosing the right tools: Invest in marketing tools that help automate tasks, provide analytics, and streamline your campaigns for efficiency and effectiveness.

When you’re ready to launch your marketing campaigns, the key is to make a memorable entrance that captivates your target audience.

Consider these steps:

  • Campaign kickoff: Launch with a strong promotional offer or an exciting event that draws attention to your brand.
  • Cross-platform promotion: Utilize multiple channels — such as social media, email marketing, and your website — to spread your message widely.
  • Engagement tactics: Encourage interaction through contests, live sessions, or by asking questions to involve your audience actively.

There are several online marketing strategies you can employ to reach and convert customers:

  • Content marketing: Create valuable content that educates, entertains, and informs your audience to build brand trust and authority.
  • Search Engine Optimization (SEO): Optimize your website and content to rank higher in search engine results, making it easier for potential customers to find you.
  • Social media marketing: Engage with customers, share content, and promote your products on platforms where your audience spends their time.
  • Pay-Per-Click (PPC) Advertising: Use targeted ads on search engines and social media to drive traffic to your website. This method allows you to reach potential customers quickly and precisely.
  • Email marketing: Develop relationships with your customers through regular updates, promotional offers, and personalized communications.

Influencer marketing: Partner with influencers who can authentically promote your products to their followers, extending your reach and credibility.

Step 5: Finances

Navigating the financial aspects of starting an online business is crucial for laying a solid foundation without overspending. Understanding the initial capital required, exploring options for starting with minimal investment, and leveraging cost-effective tools can all help in managing your startup finances efficiently.

The amount of capital needed to start an e-commerce business can vary widely depending on the business model, products, and market. Here are some key expenses to consider:

  • Website development: Costs can range from minimal (using platforms like Shopify or WooCommerce with pre-designed themes) to significant amounts for custom development. Monthly subscription fees for e-commerce platforms can vary, typically from $29 to $299.
  • Inventory: Initial product stock can be a major expense unless you opt for dropshipping, which minimizes this cost. Budget for inventory management tools as well.
  • Marketing and advertising: Essential for launch and ongoing customer acquisition. Budget for both initial campaigns and sustained marketing efforts. Expect to spend anywhere from a few hundred to several thousand dollars depending on your marketing strategy.
  • Legal and administrative fees: Including business registration, licenses, and potentially consulting with a lawyer or accountant.
  • Technology and tools: Subscriptions for e-commerce platforms, marketing tools, and other software needed to operate your business, such as email marketing services, CRM systems, and analytics tools.

Managing your finances effectively involves more than just tracking sales. Here are key financial aspects to focus on (it’s better if you can hire an accountant on a low, transparent monthly price to take care of these for you):

  • Budgeting: Create a detailed budget that outlines all your expected expenses and revenue. This helps you manage your cash flow and plan for growth.
  • Bookkeeping: Keep accurate records of all financial transactions. Use accounting software like QuickBooks or Xero tailored for e-commerce to track expenses, sales, and profits.
  • Payment processing: Set up a reliable payment processing system. Consider options like PayPal, Stripe, and Square, which are popular in the US for their ease of integration and security features.
  • Tax obligations: Understand your tax obligations, including sales tax collection and reporting. Different states have different requirements, so ensure compliance to avoid penalties. Refer to resources like the U.S. Small Business Administration (SBA) and IRS guidelines for specifics.
  • Cash flow management: Monitor your cash flow regularly to ensure you have enough funds to cover expenses and invest in growth opportunities. This includes managing your accounts receivable and payable effectively.
  • Profit margins: Calculate and monitor your profit margins to ensure your pricing strategy is sustainable. Consider all costs, including shipping, marketing, and production, when setting your prices.
  • Financial forecasting: Use financial forecasting to predict future revenue and expenses. This helps in making informed decisions about scaling your business, hiring staff, or expanding your product line.
  • Cost management: Regularly review your costs and look for ways to reduce expenses without compromising on quality. This might include negotiating with suppliers or finding more cost-effective shipping solutions.

Creating a detailed budget early on can help you understand your financial needs and prepare for the expenses of starting and running your business. Starting an e-commerce business with a very limited budget, such as $100, is challenging but not impossible.

Consider low-cost business models like:

  • Affiliate marketing: Sell other people’s products and earn a commission without handling the products yourself.
  • Dropshipping: Sell products without stocking them, as suppliers ship directly to your customers.
  • Print on demand: Create custom products (like t-shirts or mugs) that are produced and shipped by a third-party provider only when an order is placed.

These e-commerce models can be particularly attractive as they often require less capital for inventory and initial setup.

Leveraging cost-effective tools is essential for keeping expenses low while maximizing productivity and efficiency:

  • Website platforms: Use affordable e-commerce platforms like Shopify, WooCommerce, or BigCommerce that offer free or low-cost starting plans.
  • Marketing tools: Utilize free or low-cost options like Mailchimp for email marketing, Canva for graphic design, and Hootsuite for social media management.
  • Operational tools: Google Workspace or Microsoft Office 365 offer cost-effective solutions for document management, email, and more.
  • Educational resources: Take advantage of free online resources and courses from platforms like Coursera, Udemy, or Khan Academy to enhance your business and technical skills.

Step 6: Launch and grow your business

Launching and growing an e-commerce business requires careful planning, execution, and ongoing adaptation to scale successfully.

Here’s how to effectively launch your e-commerce business and ensure it’s poised for growth and scalability.

Launching your e-commerce business is a critical moment that sets the tone for its future.

To ensure a successful launch, consider these steps:

  • Final preparations: Double-check that all aspects of your website, from functionality to content, are fully operational. Ensure that your checkout process is smooth, secure, and that customer service channels are ready to address any inquiries.
  • Launch promotion: Plan a launch event or promotion to create buzz. This could include special offers, discounts, a launch event webinar, or collaborations with influencers who can help reach a larger audience.
  • Announce widely: Utilize every channel available to you—social media, email newsletters, search engine marketing, and even offline methods like local press or events—to announce your launch. Consider leveraging platforms like Google Ads and Facebook Ads to target your ideal customer demographic.
  • Monitor closely: On launch day, be on high alert to manage any technical issues, respond to customer inquiries quickly, and handle any unexpected challenges smoothly. Use analytics tools to track site traffic, monitor sales, and gather customer feedback.

Once your business is up and running, the focus shifts to growth and scalability.

Here are key strategies to help your e-commerce business expand:

  • Analyze and optimize: Use analytics tools to track website traffic, customer behavior, and sales patterns. This data is invaluable for understanding what works and doesn’t, allowing you to optimize your offerings, improve the user experience, and refine your marketing strategies.
  • Expand your product line: As you understand your market better, consider expanding your product line to include complementary products or services. This not only increases your market share but also helps in customer retention.
  • Enhance marketing efforts: As your business grows, reinvest in more sophisticated marketing strategies. Consider segmented email marketing, retargeting campaigns, and expanded social media advertising to reach a broader audience.
  • Explore new markets: Look for opportunities to reach new customer segments or geographic areas. This could involve localizing your website for different regions, offering international shipping, or expanding into new demographic segments.
  • Improve customer experience: Continuously look for ways to enhance the customer experience, whether through faster shipping options, improved customer service, or a more user-friendly website. Consider implementing loyalty programs to encourage repeat business.
  • Automate and delegate: To scale effectively, automate repetitive tasks where possible and consider delegating responsibilities. This might involve hiring new team members or using software solutions to manage tasks like inventory, customer service, or marketing.
  • Sustain and innovate: Long-term growth depends on your ability to sustain current operations while innovating for the future. Keep abreast of market trends and technological advancements that could affect your business, and be prepared to adapt.

The bottom line

Starting an e-commerce business is indeed an exciting endeavor that can open doors to financial freedom and personal fulfillment.

However, as your online store grows, managing the financial complexities can become overwhelming. From optimizing operational costs and streamlining multichannel revenue streams to ensuring tax compliance, the financial demands of an e-commerce business require meticulous attention and financial expertise.

With expertise in areas like operational cost optimization, centralized revenue management, and seamless tax compliance, CoCountant offers specialized financial services for e-commerce that are tailored to meet the unique needs of e-commerce businesses with clarity and efficiency.

Join the hundreds of e-commerce business owners who trust CoCountant to manage their financial operations.

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Disclaimer

CoCountant assumes no responsibility for actions taken in reliance upon the information contained herein. This resource is to be used for informational purposes only and does not constitute legal, business, or tax advice.  Make sure to consult your personal attorney, business advisor, or tax advisor with respect to believing or acting on the information included or referenced in this post.