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Everything You Need to Know About Starting an Online Business

08/09/2022 06:52:24 +0000
Starting an Online Business
If you plan to start your own online business, you are on the path to success. After all, there are many benefits to owning and running an online business—being your own boss and being in charge of your finances are just two.

When you run an online business, you get to work from home, on your own time and set your own terms.

However, although starting an online business is not the most challenging, it still takes knowledge. There are many steps to starting an online business, starting with coming up with a good idea and ending with marketing it to your target audience, with many steps between.

This article discusses what you need to know about starting an online business. There are quite a few steps and factors involved, so let's get started.
Everything You Need to Know About Starting an Online Business Step by Step
There are 11 steps to starting and running a successful online business.

1. An Idea for Your Small Business

The first step, and perhaps the most important, is coming up with an excellent online business idea, and there are thousands of ideas to choose from.
 
Next, although it may seem counterintuitive, it would be good to look at other businesses and what they have done, especially regarding their approaches.

If it is time-tested and proven to work, there is no reason why you cannot do the same; however, to stand out from the competition, you must differentiate yourself. Moreover, anything the competition does, you want to do better.

It's a good idea to start an online business based on something you enjoy, are passionate about, and are good at.

For instance, starting an online dog training business isn't your best bet if you are a certified nutritionist and fitness trainer.

It helps if you are familiar with the business you want to start. We recommend doing a bit of research on the most profitable business ideas for people who want to work from home.

2. Create a Business Plan

Once you have a good business idea, the next step is to create a business plan. This is essential to your success because it outlines all facets of the business in detail. Generally, you do not want there to be any unknowns, whether it has to do with competition, marketing, finances, licensing, or anything else.

Your business plan should follow a specific structure. It should start with the idea; then you need a company name and description, followed by market analysis, management, organization, the products or services you will offer, your target audience, a marketing plan, your logistics, and your financial plan. Let's look at a few of these factors.

Choosing a good business name is essential, especially for marketing. You want a business name that is simple, concise and focused. You want people to be able to know what your business does simply by reading the name. Therefore, it should be short, uncomplicated, and memorable. In addition, you should register the business name, and you may want to consider trademarking it.

Market research is next. You need to know everything there is to know about your target market and audience. You also want to know what the competition is doing, how they are doing it, and how well they are doing it. The more you know about the niche and market you are entering, the better.

Pay attention to the opportunity size. Small markets are not always the best, but if a big space is not filled in a small market, then small markets work well. It depends on how much competition there is within a given area.

Of course, you also need to determine who your target audience is. Who are your products and services geared toward, and how will you market your products or services to that audience?

3. Secure Funding

No business can get started without funding, and you will need money to start your online business, no matter what that business is. If you have an inheritance or savings, you could use those.
However, most people don't have the money to cover the cost of starting a new business. Therefore, you will need to secure funding. So, what are some of the options?

One option is a personal investor. Maybe you have friends or family who want to help or know someone looking for a decent investment opportunity.

Another modern method is crowdfunding. There are many crowdfunding platforms where you can ask a group of people to invest in you.

Getting business grants is another method. Grants are nice because they usually never need to be paid back. Think of a grant as a donation for your business; however, they typically have requirements that must be adhered to.
The other option is to get a loan, such as a small business loan.

4. Choosing a Business Structure

The next step is to choose the type of business you want to create—the structure of the business. This is important for financial and legal reasons. Different business structures will have varying benefits and drawbacks, and this is one of your most important decisions.

The business structure you create will partly depend on your country, as different countries have different business structures. You then also need to consider the type of business you are starting.
Some businesses are better run by individuals, whereas others may benefit from being incorporated. Also, consider how many people are involved in the business: Are you a single person? Are you working with a partner? Do you have employees?

If you are the only person in the business, you may go for a sole proprietorship. This structure requires the least effort and is the most cost-effective. However, the downside is that you will be liable for your business and all undertakings with a sole proprietorship. With this structure, you may hire employees but need an EIN or employer identification number.

You can also start a business as a partnership, which means working with one or two partners. This is more or less the same as a sole proprietorship in terms of being legally responsible for the business. Here, the partners share liability equally.

Next is the LLC, or limited liability corporation, which is a business structure in the US that is very common. Here, you have liability protection for your business, which means that you as the owner are not legally or financially responsible if there are claims against your company. An LLC can be formed by one or more people.
Finally, there's the corporation, where the owners are taxed separately, not as a part of the greater entity. Some shareholders own a part of the business, and there are stocks to be sold. Not being financially responsible as an owner is a benefit, although forming a corporation is usually reserved for larger entities.

5. Tax ID Numbers

Your business will need state and federal tax identification numbers so your business can pay taxes and you can prove that your business is paying taxes.

First, you will need a federal tax ID number, an EIN, or an employer identification number. This number has 9 digits and is provided to businesses by the IRS for tax purposes. It's like the social security number for your business.

You will need an EIN if:

• You have employees other than yourself
• You have a corporation
• You have an LLC
• You inherited or purchased an existing business
• You have retirement plans
• You want a business bank account
• You need to file for bankruptcy
 
An EIN will help with filing taxes; it provides legal protection, protects personal info, and helps get good credit with banks.

You will also need a state tax ID number, which is assigned by the state your business is based. Each state has different laws, but generally speaking, this is more or less the same as the federal EIN, but for state-level purposes.
Starting an Online Business
6. Business Licenses and Permits

Now that you have the basics of starting an online business, you should look into the legal side. You will need various federal and state licenses to legally operate a business.

We recommend consulting a business lawyer for advice. Remember that different states have different laws in this regard, as do various industries.

For instance, an online accounting business will have different license and permit requirements than if you are selling food and consumable goods.
At the very least, you will likely need a business permit and a seller's license. Once again, we recommend researching the requirements in your state and consulting a small business lawyer.

7. Business Bank Account

One of the biggest mistakes many business beginners make is not keeping their personal and business finances separate. Having the two intertwined is a recipe for disaster. You need your personal finances separate from your business assets.

Some states require a business to have a separate and dedicated bank account for insurance and legal purposes. Getting a credit card just for your business is also a good idea

Moreover, doing taxes, payroll, etc., is much easier if you have a dedicated business bank account. However, to open a business bank account, you'll need the EIN that we discussed above.

8. Business Insurance

You will also need business insurance if you are starting your own business. Business insurance will help protect you financially if something goes wrong. Some states don't require this, but most do.
However, even if you aren't legally obligated, it's always a good idea to be covered.
 
Before we talk about the types of insurance, we recommend looking into the financial and legal risks your business may be liable for. This will help you decide what kind of insurance you will need.

So, what are the different types of business insurance that you might need?

• You can get liability insurance to protect your business from legal actions that may be taken against you due to injuries, negligence, or accidents.

• If you have company vehicles, commercial auto insurance will protect you financially from legal actions taken against you due to accidents and injuries caused by the vehicle.

• Commercial property insurance is recommended to protect you from financial ruin due to damage by accident, fire, theft, and storms.

• Worker's compensation insurance will cover employees who lose wages due to injuries on the job. Most states require companies to have this if they have employees.

• Product liability insurance will protect you if a product you make or sell comes with a risk of somehow causing injury. This helps protect everybody in the production and distribution chain from financial liability.

• Professional liability insurance should be considered if you are starting a business with employees who provide services to customers. This may also be called errors and omissions insurance.

• You need cyber-liability insurance if you have a business that uses online data. For example, if you have a data breach that affects your clients, this type of insurance will cover your costs.

• You may also want to invest in business interruption insurance, which covers you if your business has to close or move. Relocation, rent payments, and payments for employees will be covered.

• Umbrella insurance will cover anything that exceeds policy limits on the other types of insurance we discussed.

9. Software and Tools

When it comes down to it, starting an online business involves much more than you can do on your own. You may be able to do it all on your own, but not without the right tools and software. Good software programs can help keep things organized, streamline operations, save money, and prevent costly errors.

At the very least, these tools will help make your life easier, especially when it comes to repetitive tasks that can be automated. So, what kind of software can you use?

• Every business needs to do some marketing, and email marketing is a great way, so you should consider email marketing software. It will help you create and manage email marketing campaigns.

• Accounting software will help budget your money, track expenses and income, etc. Keeping track of finances is essential.

• Project management software can help you keep track of projects and goals, essential tasks, etc. Half the battle is staying organized.

• Marketing software will enable you to create and test marketing campaigns and track progress. Of course, you still have to pay for advertisements, but paying for those that work is vital.

• A website builder and e-commerce platform will provide easy management of all business-related tasks, especially when it comes to sales. A good website showcasing and selling your products is crucial to your success.

10. Hire Employees, If Needed
You may not need to hire employees to start a small online business. However, you have web design, web development, sales, marketing, finances, and so much more to take care of, and at some point, you will likely need to hire professionals to take care of essential jobs.

You may need a social media manager, customer service coordinator, inventory manager, advertisement expert, graphic designer, marketer, accountant, etc. Think of your business needs, what jobs will need doing, and go from there.

11. Branding and Marketing

Once everything else has been set up, you need to get the word out. After all, you aren't going to sell anything if nobody knows you exist. So, how do you brand and market your business?

• Build your brand by creating a brand logo that really sticks out yet also makes it clear what your business is all about. Make sure you use fonts and colors that suit the theme of your business.

• The voice and tone of your writing, mainly your slogan, are important too. You also want your voice or messages to be consistent. Be sure to tell your target audience why your brand is the best.

• Use various methods to market your business, including
o Email marketing
o Social media influencers
o Paid advertisements
o Television and radio advertisements
o Physical advertisements (signs, billboards, etc.)
Final Thoughts

This article has discussed 11 steps to get your online business off the ground and make money. At the very least, these steps can be a starting point for further research into the business aspects you need to develop.

About the Host
Sophie Howard is the founder of Aspiring Entrepreneurs, a community designed to help people develop the skills and confidence to build a business and a life that serves them. Sophie began online in 2013 with an Amazon firm, which she sold for more than $1 million in 2015.

Sophie has lectured on stages all around the world, encouraging and teaching other ambitious entrepreneurs. She has established instructional programs educating thousands of students how to sell online, in addition to releasing over 1000 products.

Sophie has also written a book titled "Aspiring Entrepreneurs: A Guide to Finding Your Best Path to Financial Freedom."
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