How to Start an Online Business with Little Money
The Internet has given us more than convenience; it has created avenues for anyone to become an entrepreneur without the large capital required for traditional brick-and-mortar establishments.
This is because the Internet itself is the market; a world with a population of more than three billion inhabitants scouring the virtual market place every day. Instead of investing in a physical location, all you need is to set up your business online. Thus, even if you have little money, you can start an online business. Here’s how:
- List down your skills
One of the biggest mistakes entrepreneurs make is to start a business just because it is trending. If the concept does not fall within your core competencies you will be better off abandoning the idea.
When starting a new business, the first few months are crucial. You do not want to spend the first quarter learning new skills when you should be allocating valuable time getting the business moving. If your background and expertise is accounting, then consider putting up an online back office service offering bookkeeping, payroll preparation and employee benefits management. If your specialty is sales and distribution then an e-commerce website should be your primary option.
- Make a Business Plan
You will not know the amount of capitalization required for your online business until you make a business plan. Once you’ve identified your industry, now you have to determine if there is a market for your product and services and how to reach them. Finally, the business plan will give you an idea of your initial investment, the amount of working capital for the first six months and how your money will flow in and out of your business.
- Identify your sources of funds
After reviewing your Business Plan, list down the sources where you will get funds to capitalize your online business.
It is very important that when preparing a budget for your business, your cash flow should not impact your day-to-day expenses. If it will, you will be in a worse bind because it may take awhile for your online business to gain traction. You may end up in a mountain of debt which may dampen the returns of your business.
You need to make sure you have working capital for at least six months. If you are currently employed, it may be a good idea to maintain work until such time that your business is regularly generating stable income. If your cash flow allows it, consider getting a working capital or business loan from a bank.
- Determine your business structure
Although an online business operates in the virtual world, you still have to register your business to make it a legal entity. Otherwise, you will not be able to enter into agreements or contracts with clients and suppliers.
There are three types of business structures: sole proprietorship, partnership or corporation. Generally, a corporate structure has more advantages and gives your business more credibility. There are more expenses involved in setting up a corporation but it offers you more protection and tax benefits versus a proprietorship or a partnership.
- Buy a domain name and secure a good web host
Your domain name is your Internet address; it is how your customers will find you. Domain name registration fees will vary from as low as $5 to as high as $30 a month depending on the features. You will also have to pay for hosting services which enable your website to be available to Internet users. Again costs for hosting services will vary from $5 per month to as high as $12 depending on the features.
- Invest in good equipment
As a proprietor of an online business, your computer and Internet provider serve as your bread and butter. If your PC is two years old, either have it upgraded or buy a new one.
Another option is to look for computer retailers who have a lease-to-own arrangement. Since most PC’s being to show signs of wear and tear after two years, under a lease to own arrangement, you can replace the existing unit with a new one. Your only cost would be to pay for the unexpired portion or any remaining balances for the previous PC. This way, you are guaranteed your PC will always be in good condition.
As for your ISP, for an online business, it would be advisable to secure a minimum bandwidth of 3mb. If your resources allow, get a second ISP in case the primary ISP experiences downtime.
- Invest in a Website
Your first important investment in an online business is the website. You simply cannot have an online business without a website because that is your virtual place of business in the Internet.
There are several types of websites and your choice will depend on the nature of your business. If you are in retail, an e-commerce website should your choice. If you are offering consultancy services, you can opt for an informative website and incorporate some features of an e-commerce website should you decide to sell products and services.
Generally, your website should have the following qualities:
Highly accessible by multi-browsers
Fast download speed
Aesthetically pleasing design
- Fully functional
These qualities will not be possible if you scrimp on the cost of a website. You need to hire the services of a professional website designer. Costs will start at $500 for standard features and escalate according to level of design and function.
- Build your supply chain
If you decide on becoming an e-Commerce retailer, your first order of the day is to get suppliers for your products. You simply cannot launch an online business if you cannot guarantee inventory of merchandise.
Getting suppliers can be very tricky because there are many businesses that present themselves as distributors. The best approach is to look for the manufacturers of the products you plan to retail and ask them to connect you with their accredited distributors.
Once you have made contact with an accredited supplier or distributor, you will have to be accredited as a retailer. Accreditation will entail you to submit documents to prove the legality of your business. This is why it is important to register your business beforehand.
To save up on warehousing costs, enter into a drop-shipping agreement with your wholesaler. With drop-shipping, the retailer does not store the goods in a warehouse but only orders the merchandise from the wholesaler when needed. The wholesaler will be responsible for shipping and delivering the merchandise to the address of the buyer.
It doesn’t matter what size, scale or level of success your business is. Networking is an activity that should not end. This is how you find new markets and opportunities in the industry and is crucial during the first quarter of your business. There are two (2) ways to network:
Traditional Networking. Also referred to as “leg work”, traditional networking requires you to attend seminars, forums and community events. You will need to spend for calling cards and marketing brochures. Having a website will spare the need for producing too many brochures.
- Digital Networking. This primarily uses social media networks to establish connections to important people and companies in the industry. There is no cost to opening social media account. But if you are not confident of your ability to maximize social media, you should consider outsourcing this task to an experienced virtual assistant.
All told, your initial cash outlay for setting up an online business will only cover:
Domain name and hosting
- Calling cards, brochures
Of course, there is the intrinsic value of time spent on the venture. But these should not be seen as expenses but rather as investments on which you expect a return in the future.