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7 Steps to Starting a Successful Online Business

Making good decisions early can help you connect with customers

spinner image a couple sits at the table looking at a computer

Even before the coronavirus pandemic, many people were migrating online to look for deals and to make purchases. Now, with many consumers hesitant to shop in brick-and-mortar stores, online sales are expected to jump 18 percent this year, according to a report from digital research firm eMarketer.

That could be good news for aspiring entrepreneurs who are thinking about starting a home-based business. A host of accessible and affordable tools, marketing options and channels make it relatively easy to launch a small business online, says entrepreneur and start-up expert Ramon Ray, author of The Celebrity CEO: How Entrepreneurs Can Thrive by Building a Community and a Strong Personal Brand.

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Whether you're planning to sell products or services, you can create your own web-based business by following these seven important steps.

1. Start with the right product or service

spinner image entrepreneur lisa lane poses with her slip on shower hose product
Courtesy Lisa Lane

Lisa Lane, 55, founder of Clarksburg, New Jersey–based Lane Innovations, has turned her invention, the Rinseroo, into a best-selling product on Amazon. After developing her idea for the device — a faucet attachment that makes cleaning easier — Lane began to explore how to sell it. As she did more research into her market she soon realized she had a product with the possibility of mass appeal. All she needed was to find a way to both market it and showcase its potential. Selling her invention online gave her an effective way to do both.

Your business doesn't have to be centered on a physical product. Catherine Graham, founder of consulting firm The Financial Aid Shop in Redondo Beach, California, took her 25 years of experience in college financial aid and turned it into a business she promotes online. Graham offers her services to both institutes of higher education and families. She launched a website to help her connect with new clients throughout the United States.

"The most important thing you have to do when you start a business is to figure out what problem you're solving or what need you're fulfilling,” says small-business consultant Lonnie Sciambi, author of Secrets to Entrepreneurial Success. There's enormous opportunity out there for the right idea, he adds.

2. Understand what it costs to run an online business

While launching an e-commerce business doesn't require the overhead of an office or a physical store, you still need to have a good handle on your costs, Sciambi says. “Starting a website used to be a $10,000 to $15,000 proposition. Now you can build your own website for about a grand, if that.”

But as you're factoring overhead and other costs into your pricing, consider the bottom-line impact of transaction costs, returns, inventory management, fulfillment and shipping. More than 69 percent of online shopping carts are abandoned, and the number one reason is that extra fees, like shipping and taxes, were too high, according to Baymard Institute, a web-usability research organization. By having accurate cost estimates, you can set your prices so that your overhead expenses are covered without creating barriers to sales, Ray says.

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3. Choose the right shipping structure

spinner image anne renee timmons harris
Anne Renee Timmons courtesy Gus Bennett

How will you get products to your customers? Essentially, you have two options: Do it yourself or have someone else handle fulfillment. For Anne Renée Timmons-Harris of New Orleans, owner of custom jewelry business Bead Bear, in-house fulfillment works. Timmons-Harris, 64, ships the products herself, adding special touches like pretty packaging and handwritten notes to delight customers when they open their orders.

If you're selling products made by someone else, you may choose other models, Ray says. Drop-shipping is when the manufacturer or distributor sends the products directly to the customer after you transmit the order information. Other third-party fulfillment services can manage your inventory and handle shipping for you. Shopify published this useful guide to fulfillment services.

4. Make use of online marketplaces

Many online retailers choose to sell on third-party marketplaces in addition to, or sometimes instead of, on their own websites. Platforms like Etsy, Amazon, eBay and Walmart Marketplace give you access to vast audiences and offer fulfillment options, as well.

Early on, Lane decided to sell her Rinseroo on Amazon. “My goal was to have free time to develop and scale the business without getting burdened with shipping,” she explains. The platform offered her competitive shipping rates, and she says it doesn't cost more than her other options, even with the fees that the platform charges. “Once I shifted from fulfilled by merchant to [Fulfillment by Amazon], my sales started to skyrocket,” she says. Amazon's plans are priced at 99 cents per item or $39.99 per month. Both plans have additional fees, depending on the items sold, volume and other factors.

5. Build a community of customers

One strength of Timmons-Harris’ business is the community she's created. She primarily uses social media platforms like Twitter and Facebook to post images of her new jewelry. But she also shares information about the stones she works with, which adds compelling content to her posts. “People like jewelry but often have no idea what they're looking at,” she says. “I'm a jewelry historian. But deep down inside, I'm a rock hound. And, so, I want people to know mostly how cool rocks are,” she says of the semiprecious stones she uses.

That type of interactive community builds loyalty to your business, Ray points out. And there are several ways to approach it. You could create an email newsletter that delivers information directly to your audience or use social media platforms to engage with your customers and prospects. Even advertising or other content you create, such as YouTube videos or podcasts, can educate your clientele and be a form of community-building. The keys to success are relevance and frequency, so you strengthen the customer relationship, Ray adds.

6. Create a great consumer experience

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Courtesy Catherine Graham

Both Lane and Graham carefully researched the target market for their businesses to ensure that everything from the merchandise to the price point was right. For online businesses, those steps are critical to creating an overall plan, Ray says. Having a welcoming, easy-to-use website that isn't overly complicated will help you build your sales base. Depending on your plans to grow the business, you may settle on a popular, affordable option like Shopify or WooCommerce, which allows you to either build online stores on its platform or integrate its technology into your own website. Or you may hire a web development and consulting firm to manage your e-commerce site so you can focus on other areas of your business.

7. Use your analytics

One of the great strengths of online businesses is the ability to measure just about everything, Ray observes. Monitor what customers are buying, how they find your business (Google or Facebook, for example), why they abandon carts and other information about your website. Doing so allows you to tweak your offerings and marketing approach to be more effective. Depending on which online platform you use, you may be able to generate emails that reach out to shoppers who have abandoned carts or create special offers for loyal customers.

Launching an online business can be an affordable way to become an entrepreneur. And with the vast variety of e-commerce platforms and channel options, you have more ways than ever to get your products and services in front of vast audiences.

Watch: Daymond John’s Tips for Starting a Business

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