Check back every Thursday in August for an in-depth look at how to start an online business, where we'll be going over everything you need to consider to get your online business off the ground.
Many entrepreneurs and business owners are attracted to the idea of starting an online business.
The popularity of starting an e-commerce business is driven by the low barriers to entry, the ability to sell to anyone from anywhere, and the flexibility it can offer to business owners. Much like starting any business, it's important to have a plan in place for the e-commerce business you want to launch. The plan will be a useful tool for providing you with a pathway to online success.
Where to Begin: Planning
1. Establish your product or service offering
Without knowing what you want to sell, or which service you want to offer, it would be very difficult to start any business. You most likely already have a product or service in mind if you're planning to start a business, so be sure to determine the specific details of what you want to offer people. The strength of your offering is the base of your business, so it's important to ensure there is a market for what you're offering and that you're providing value to people or solving a problem.
2. Determine where you will source the product
Figuring out what you're going to sell or offer is just the first step. If you're selling a physical product you're going to need to know where to source it from. Even if you're selling a product that you create yourself, you will most likely need to source supplies for the product from somewhere.
Selecting a good supplier is important for managing your budget and supply chain, as well as providing a product that is going to delight your customers. Luckily there are lots of resources for new entrepreneurs and business owners to explore that can connect them with a manufacturer or distributor. See if there are any tradeshows in your industry that you can attend, check out trade magazines that might mention resources, and be sure to network with the trade or industry associations that can provide you with valuable contacts.
3. Determine your target customer
Once you know what you're selling and where you are going to get it from, you need to determine who you're selling it to. If you're just starting your business, you won't have a customer base to reference, but you can look at your competitors or people who are selling similar products to see what their customers are like. When you're determining your target customers, include factors like demographics (age, location, gender, income level) and their psychographics (values, interests, lifestyle) to create a detailed customer profile.
Once you know who your customer is, you can better evaluate whether your product aligns with who they are and whether they will see value in it or not. If you have friends or family who fit within your customer profile, you can test your product or service on them to get their feedback and ensure that you've developed an accurate customer profile.
4. Understand your competitors and your industry positioning
Once you know what you're selling and who you're selling to, it's time to look at the marketplace and see where you stand compared to your competitors. Depending on what your product or service is, you might already have an idea of who your competitors are going to be. Be sure to identify who your biggest competitors are, as well as who your smaller competitors are.
It's important to take an objective look at your competition and compare your products to theirs in terms of quality, cost, and value. It's not necessarily a negative thing if your product is more expensive, but it's important to be aware of any cost differences. If your product is more expensive than your competitors, then your marketing and value proposition can address this, so customers know why they should be paying more for your product.
5. Put together a marketing plan
Now that you know what you're selling, who you're selling to, and who you're competing against, it's time to put together a marketing plan. Referencing your target customer profile when creating your marketing plan is important because all your marketing efforts should be targeted at reaching your potential customers.
To develop your marketing plan, you will need to decide how you want to reach your customers. Are you going to use traditional advertising, social media, sponsorships, networking, promotions, or media to get the word out about your e-commerce business? Most likely, you are going to select several of these methods in conjunction with each other to begin getting the word out about your e-commerce business and to drive traffic to your site.
Because you're launching an e-commerce business it will be important to set up a website that you can link back to, in addition to utilizing social media channels, and potentially a blog so you can begin sharing details about your company with your customers. Using paid ads through AdWords, Instagram, Facebook or other social sites will be a great way to introduce your product to your customers. To ensure your ads are effective, spend some time doing keyword research so you know what your customers are searching for. This will allow you to better optimize your advertising budget.
6. Analyze your current budget and develop a financial plan
Chances are you want to start an e-commerce business to generate an income. However, in the beginning, you will need to spend money to make money. Creating a budget and financial plan for your business will help ensure you have accounted for any potential costs that your e-commerce business will be facing while it's getting started.
Knowing which expenses you need to cover to get started with is important. Understanding your costs with regards to building and launching your website, establishing an inventory, and implementing your marketing strategy will allow you to either save the money or get a loan for the amount needed to get your business off the ground. The amount of upfront investment needed for e-commerce businesses can vary drastically, but it's important to have a plan in place to cover your expenses until your business begins to generate revenue.
7. Develop a business plan
Once you have a clear idea of what you want your business to look like, it is beneficial to formalize everything in a business plan. Having a written business plan gives you a great reference point for your goals and products which makes it easy to explain your business to customers, friends, family, and potential investors. If you've never written a business plan before it might seem like an intimidating endeavor, but don't worry, there are lots of simple, easy-to-use templates that you can find online to help you. We recommend the One-Page Business Plan from the book $100 Start-up to get you started. As your business launches and begins to grow, your business plan will be a helpful tool in ensuring you're on the right track or letting you know if you need to make some adjustments to your goals and strategy.