Loading

How to Start an Online Business

The internet has revolutionized business — it has broadened
marketplaces, made products and services available to everyone
and lowered the barriers to starting a successful company.
With the right approach and understanding, anyone can
become a successful online entrepreneur.

But turning your idea into a successful business
is about much more than launching a website, writing a couple
of blog posts and using social media. Just like traditional
businesses, business success online requires hard work and
dealing with rapidly changing tools and processes. The low
barrier to entry in owning an online business means that
competition is intense; if you want to be a success, you
need to plan carefully and execute well.

The internet has revolutionized business — it has broadened marketplaces, made products and services available to everyone and lowered the barriers to starting a successful company. With the right approach and understanding, anyone can become a successful online entrepreneur.

But turning your idea into a successful business is about much more than launching a website, writing a couple of blog posts and using social media. Just like traditional businesses, business success online requires hard work and dealing with rapidly changing tools and processes. The low barrier to entry in owning an online business means that competition is intense; if you want to be a success, you need to plan carefully and execute well.

The question is, just where do you start? Here at Incfile, we know the answer, and we’ve shared it with more 100,000 people who we've helped in forming their business. Since 2004, we’ve supported online entrepreneurs just like you to get into business online, and we’re proud to have been a part of the internet business revolution.

Here is our simple guide to starting up a successful online business. From exploring the types of business you can go into through validation and research, to the legalities of setting up your business and the realities of your day to day operations, this guide is here to help.

Read on for some insight into creating your own online business and becoming an internet entrepreneur.

Why You Should Start a New Online Business

The internet has opened up new frontiers, created amazing technologies and helped us connect with others around the globe. It’s made everything more accessible, allowing us to easily research and compare ideas, products, services and more. Entrepreneurs who can take advantage of these trends can do extremely well — here are some statistics on the power of online businesses in the U.S. :

$300B

Spent on online in the U.S. every year

$100K

Fifth of full-time independent workers
earnings a year.

  • Online retail is expected to grow by between 8% and 12% year-on-year, compared to just 4% for traditional retail
  • Over a third of Americans are now involved in the "gig economy,” providing independent, freelance and contract work through on-demand services
  • Online businesses are typically less expensive to start than traditionalbusinesses
This is why online businesses are so exciting — how can you be part of that success? We're here to help you figure that out.

What Type of Online Business Should You Start?

When it comes to starting an online business, you have plenty of choices. Here are the main areas where online businesses can be successful:

Price
Freelance Entrepreneurs

This is a great field if you can provide services other businesses and individuals are willing to pay for. From freelance writers and designers to editors and virtual assistants, the internet is a fantastic way to sell your skills far and wide. You have the option of promoting yourself or joining a freelance marketplace like Upwork, Freelancer or Fiverr.

Quality
Creative Online Entrepreneurs

If you have a flair for the creative, then the internet can help you develop a following for your work. Whether you’re a photographer, videographer, musician, designer or artist, there are plenty of ways to monetize your skills. From the Etsy shop to Cafepress and DeviantArt to Smashwords, there are lots of ways to reach your audience.

Speed
Software Coders and Application Developers

For those with a more technical skillset, developing mobile and online applications can be a great business to get into. Software as a service (SaaS) and smartphone application development are rapidly growing fields with plenty of opportunities for the right people.

Reviews
Marketing and Social Media

If you’re great at building connections, marketing could be for you. Whether you start up your own agency, promote yourself as a social media expert or get involved in affiliate marketing, there are some awesome opportunities if you can learn to stand out.

Speed
The Gig Economy

The gig economy has created business owners of many of us. Whether it’s AirBNB, TaskRabbit, Lyft or something else, there are lots of opportunities for people wanting to make an income on the side. With commitment, these can even become full-time ways to earn an online living.

Reviews
Blogging and Publication

If you can build up a huge following, blogging and publishing articles could be a lucrative business idea. You sell ads alongside the articles through services like Google AdSense and take a cut of the money earned.

Speed
Ecommerce and Online Retail

This is perhaps the biggest sector of all, and you have plenty of choices when it comes to being a successful ecommerce entrepreneur:

  • Starting up your own store on a service like Shopify, Volusion or Bigcommerce
  • Starting an independent ecommerce store
  • Selling through third-party marketplaces like Amazon <link to Amazon page> and eBay
  • Starting as a traditional retailer and adding in an ecommerce function
  • Getting involved in specialist online retail like dropshipping or selling digital products and services

Validating Your Online Business Idea

These areas are just starting points — there are hundreds of different types of online businesses. Once you’ve identified the areas you’d like to go into, you need to validate your online business idea.

Start by checking you have the right skillset. For example, if you’re going into freelancing, do you have a marketable skill you can sell? If you want to be an ecommerce entrepreneur, do you understand all about product marketing, profit margins, working with suppliers and getting customers?

Don’t assume that just because it’s online, it’s easy. Every online business will have dozens or hundreds of competitors, and you need to stand out, deliver superior products and services, and excel in your chosen area.

Getting started in an online business is easy, but becoming a success is harder. Before committing too much time, energy and money into your new internet business, it’s important to test the marketplace.

  • Identify your online business’s unique selling points (USPs): Whether you’re competing on features, price, quality, speed or something else, your USPs set you apart from competitors and encourage customers to come to you.
  • Look at who your competitors are in the space: Having competitors is a good thing as it shows there’s a market, but if there are too many, you’re likely to struggle without a really good USP.
  • Talk to clients: Speak with potential customers to understand what they want from your products and services, and validate this by asking if they would commit to spending real money on them.
  • Get involved with business communities and discussion groups: One of the great things about online business is that there are thousands of great communities and discussion groups. Get involved in them and learn the ins and outs of your chosen market before committing.
What Are the Main Challenges for an Amazon Seller Entrepreneur?

The thing to learn here is that it’s okay to say “no” to your first, second or third online business ideas. Very few entrepreneurs get it right first time. In fact, getting it wrong is often a badge of honor in the online world! Still, you don’t want to waste too much time, energy or money on the wrong initiatives, so ask and answer these questions honestly to find the right way forward.

Your Online Business Needs a Plan

Business plans are easily overlooked by online businesses — after all, if you’re taking advantage of a third-party website, you don’t need a business plan, right? Wrong.

You need to define how you’re going to run your internet business, market yourself, get sales, make a profit and grow. This can only come about through creating a watertight business plan. It will help you get your thinking in order and show your commitment to your online business.

Business plans do vary slightly, but they should cover the following areas:

Here’s what you can expect in an average day
  • 1 An executive summary with the most important points from your business plan
  • 2 Your goals and what you hope to achieve with your online business
  • 3 A description of your online business, background information and context
  • 4 A market analysis and likely demand
  • 5 An overview of how your online business is structured
  • 6 Your online business model
  • 7 How you will market and sell your offerings
  • 8 Financial projections, revenue and profitability
  • 9 Appendices

Choose the Right Business Structure and Register Your Internet Business

Now that you have all the background information for your internet business, it’s time to make it into a reality. That starts by choosing the right structure or “legal entity” for your business. In the U.S., there are four main business structures. They are:

Choose the Right Business Structure and Register Your Amazon Business

Sole Proprietorship

This is the "default" business
structure and is what your
business will be if you decide
not to create a more formal
structure. We don't
recommend this type of
business as it doesn't give
you the legal protections you need.

Limited Liability

Limited Liability
Company or LLC

The most common type of business entity. An LLC is fast, simple and inexpensive to setup and maintain. It protects your personal finances and assets and is a great way to start your online business

Series LLC

Series LLC

This is a special type of LLC entity that's only available in certain states. It allows you to create "mini" LLCs, each with their own limited liability and separate assets, under the umbrella of a master LLC.

S Corporation

S Corporation

This is a more complex type of
business and isn't generally
recommended for smaller
organization.

C Corporation

C Corporation

These are the largest and most
complex types of businesses
and are far more than the
average entrepreneur or
business owner will need.

For more information on the advantages and disadvantages of different types of businesses, please see our in-depth guide. If you’ve still got questions, we’ve answered them to help you choose the right business structure.

In most cases, our recommendation for an online business would be to create an LLC. We’ve got a complete guide to everything you need to do, and we can even set one up for your business. LLC formation does vary from state to state, but we’ve got you covered, wherever you are.

Setting Up Your Business and Business Operations

Once you've legally created your business, you’ll need to get some other things in place.

Location of your business

Almost all internet entrepreneurs can work from home or a shared working space. This is great as it reduces your office costs considerably. Don't forget that if you work from home, you can write off part of your utility and housing costs against your taxes.

Equipment

It’s likely that the only equipment you will need to run your online business is a computer, laptop, tablet or smartphone.

Marketing

Marketing will be a huge part of your online business. Naturally, you will need an awesome website, but you'll also need to get branding, newsletters, digital ads, social media accounts and other channels in place.

Software and processes

Online entrepreneurs make extensive use of software; see our great list of the top apps at the end of this article.

Employees

To begin with, you probably won’t need to hire anyone else for your online business, especially if you’re a good administrator.

Finances and taxes

You will need a separate business bank account for your online business. You might also want to consider a business credit card. Additionally, you will also need to keep careful bookkeeping records and file business and personal taxes. Here at Incfile we can even help you file your taxes.

Our Start a Business Checklist will get your business going in the best possible way.

Conclusion

The internet has made online entrepreneurship available to everyone. If you can find a great niche, understand your competitors and put together a solid business plan, you will have every chance for success