How To Start An Online Business: A Complete Guide

by Barbara Hadden

Launching a successful online business can seem daunting, but there’s actually a proven formula to it. Follow these 13 steps and you’ll profit in no time.

Starting an online business may seem daunting at first. There’s stiff competition, you’ll have to design a site, and you’ll finally have to figure out how the heck SEO works.

But don’t fret! Now that the Internet is nearing its 30th birthday, the process of launching a successful online business has been refined to a science. Nowadays, there’s actually a proven formula to getting up and running. Here are the 13 steps I’ll cover today:

  1. Find a need within a niche.
  2. Perform some competitive analysis.
  3. Estimate your upfront costs.
  4. Register your domain and LLC.
  5. Write engaging sales copy.
  6. Choose a website host.
  7. Design and build your website.
  8. Drive buyers to your site using SEO and PPC.
  9. Start building an email list.
  10. Become the expert on social media.
  11. Start upselling.
  12. Consider filing as an S corporation.
  13. Collect feedback and keep growing!

By the time you reach the end of this guide, you’ll know exactly how to turn your passion into profit. 

How To Start An Online Business: A Complete Guide - Find a need within a niche

According to an old marketing expression:

“There are riches in the niches.” 

The first step to maximizing your chances of success is to find a niche, and then to fill a need within that niche. 

For example, “people who own Mazda Miatas” is a niche (one that I’m proud to be a part of). A need within that niche could be: 

  • Affordable spare parts.
  • Mobile repairs.
  • Video maintenance lessons.
  • Track day driving lessons.
  • 3D-printed custom parts.

And so on. Another example of a niche is “local parents of teenagers who are on a budget.” Needs within that niche could be:

  • Affordable online tutoring.
  • Summer job opportunities.
  • College essay help.
  • Onsite driving lessons.

First, consider niches that you’re already a part of, and communities you regularly interact with. It’s not impossible to serve a community you don’t already understand; you’ll just have a steeper learning curve ahead of you before you can truly connect with your buyers. 

Once you have a niche in mind, start exploring the needs within that niche. I recommend heading to Reddit to find a subreddit (aka forum) that serves your niche, and see what folks are talking about. Subreddit allow you to collect the following business intel while remaining 100% anonymous: 

  • See what people within your niche are complaining about.
  • Ask questions and conduct polls.
  • Discover what products and services are already popular.
  • Discover what products and services failed, and why.
  • Post your business idea outright and collect feedback.

Once you’ve found your niche, and a need within your niche, your next step is to see what the competition looks like. Check-in with Dr. Google and find the answers to questions like these:

  1. Is anybody else doing what I’m trying to do?
  2. Has anybody else tried what I’m trying to do?
  3. Is there a reason why nobody else is doing this? Legal, logistical, or otherwise?

Now, time for an unpleasant pill to swallow: there are over 30 million small businesses in the U.S., which means the chances that someone else is doing what you’re doing are high. 

But that’s okay! Right away, discovering a direct competitor is a good thing because it means you have proof of concept. You were right – your idea is solid!

Plus, competitors provide a goldmine of information, greatly focusing your research and accelerating your planning process. You’ll want to spend plenty of time investigating your competitor(s) to find the answers to these questions: 

  1. What are your competitors doing well? 
  2. What are their customers complaining about?
  3. What are they offering? What are they not offering? 
  4. How did they design their site? How does their site copy read to you? 
  5. Do they have an email list opt-in on the homepage? What kinds of things are they sending their email list? 
  6. How are they marketing (Reddit, Facebook, Adwords, YouTube, Instagram, etc.)
  7. How are they not marketing? 

And so on. By asking these questions, you’re probing for gaps in their business model. 

How To Start An Online Business: A Complete Guide - Estimate your upfront costs

Before going any further, it’s worth considering the financial commitment of launching your online business. 

Here are some common costs associated with launching an online storefront, according to HostGator

  • Professionally designed eCommerce website: $3,000 – $10,000.
  • Domain name registration: $5 to $20 per year.
  • Business cloud hosting: $10 to $50 per month.

Other online business expenses with variable costs may include:

  • LLC registration with the state ranges from $40 – $500.
  • Physical inventory purchasing and storage.
  • Virtual assistants.
  • Shipping supplies (boxes, labels, tape, etc.).

And more. 

As you’ve surely noticed, the lion’s share of the upfront costs comes from the initial site design. There’s a perennial debate among entrepreneurs whether you should design your site yourself or just hire a pro, and I’ll discuss that below. 

The key takeaway from this step is just to be sure you can afford to start your business and ensure you won’t be hit by “gotcha” expenses later. 

Next, as soon as you’ve settled on a business name, I strongly recommend you go ahead and register your domain name and (optionally) register your business as an LLC with the government. 

Registering your domain

This means purchasing a site address. Domains are cheap – usually around $5 to $20 a pop, so don’t hesitate to buy a few if you have a few names in mind. You might find that your first choice of domain is taken; that doesn’t necessarily mean it’s tied to an existing business – it could mean someone bought it and never used it, or intended to scalp it. Nevertheless, you can often find a simple variant that’s available.

Registering your business as an LLC

This is an optional step you can always take later, but registering your business as a Limited Liability Company with the state provides a few benefits:

  • It lends legitimacy to your business.
  • It protects you from getting sued personally, since someone would have to sue the LLC before suing you (some would call this invaluable personal bankruptcy protection).
  • Registering as an LLC allows you to convert your business to an S-Corporation, which can save you thousands on self-employment taxes. (More on that in a later step). 

You can register your LLC on your state’s .gov website. The process takes around 15 minutes and costs between $50 and $400, and most are approved within two weeks. 

Before you start building your website, it’s actually worth writing up your site copy first. For the uninitiated, “copy” is short for copywriting (not to be confused with copyright), and is shorthand for the text on your website. 

The reason it’s a good idea to write your copy early is that it serves as a sort of “final exam” of your first few steps. To write effective site copy, you need a clear vision of the following: 

  • Your niche.
  • The need you’re filling within that niche.
  • How your product or service fills that need.

9 times out of 10, the process of writing your site copy will send you back to the drawing board in some way. That’s a good thing; you want to poke holes in your business idea early and often, as each time you do it you’re refining your overall messaging just a little more. 

There’s an endless amount of online resources to help you write effective site copy, but a great place to start is on your competitors’ websites. Go back and ask yourself the same questions listed in step two, but this time with a focus on their site copy. If you connected with individuals on Reddit or Facebook, you might also ask them to skim your copy for feedback. 

Copywriting comes naturally to some and not others (I’m in the latter category), so take your time on this step. 

How To Start An Online Business: A Complete Guide - Choose a website host

Once you have a business, a product, or service that fills a need within a niche, and some copywriting to help sell it, it’s finally time to design your website. 

There’s lots of ground to cover when it comes to site design, but your first step is a bit simpler: choosing a host. 

Website hosts are like virtual landlords. When you start a brick-and-mortar business, you need to rent a physical space from a commercial property owner. Depending on what you’re selling and to whom, that could be anything from a tiny shop to a Costco-sized warehouse. 

Now, virtual space isn’t measured in square footage, but in bandwidth. When customers visit your site, watch your videos, and buy stuff, that all takes processing power. Your website host handles all that processing and data on a server somewhere, basically facilitating your web traffic like a real space handles foot traffic. Thankfully, small business hosting is much cheaper than a brick-and-mortar lease. For around $50 per month (or less) you can get a virtual hosting plan with a dependable provider like HostGator or GoDaddy. 

So how do you choose a host?

Since nearly everyone offers unlimited bandwidth and storage these days with even the most basic of business hosting plans, consider these factors when choosing a host:

  • Customer service. You’ll inevitably have to reach out to your host for site support, billing questions, and general technical guidance. So does your host have a good reputation for quick and thorough service?
  • Promotions and bonuses. Does your host include free domains, SSL certificates, and other goodies in your hosting plan? These extras can save you around $50 or more over time.
  • Website building platform. What platform (WordPress, etc.) does your host use to build websites? Is it a software you’re familiar with, or at least one that gets good reviews?
  • Long-term billing. Most hosting services will offer promotional pricing, like 70% off for your first year. But if you stay with your host for five years, what will the long-term pricing look like?

Maybe you’ve never built a website before. Or maybe you have, but it’s been years, and you still have sour memories of screaming at lines of HTML code.

Either way, don’t be intimidated by the prospect of building a site in 2021. Speaking as someone who’s built and maintained a half dozen websites over the years, DIY website builders have only gotten better and significantly easier to use, even since the 2010s. You’ll never have to look at a single line of HTML code if you don’t want to; in fact, most modern site-builders use slick drag-and-drop systems. The point being, it’s never been easier to build your own website. 

As hinted above, most major website hosting platforms will have site-building tools that you can access and use for free. From what I’ve seen, there’s not a whole lot of difference between them. You can typically access them from your account or “domains” page, and most have built-in tutorials and templates to get you started and slash your learning curve.

Here are some best practices to consider when building your online business website:

Start with a proven structure

While it’s decidedly uncouth to borrow copy from another site, borrowing structure is common practice. Most online shops feature the same layout of pages in the upper menu, like How It Works, Products, About, Contact, Blog, etc. Spend some time on some competitors’ sites roleplaying as a prospective buyer. What did you like about their structure, and what’s missing?

Keep it simple

It’s better to create a plain site than a visually busy one that’s hard to use. Consider using black or dark text against a white background; it’s what Amazon and Google use for a reason.

Make a strong first impression

According to a study published in Behavioural and Information Technology, it takes users less than 50 milliseconds (0.05 seconds) to form an opinion about your website, and thus your entire business. To lower your bounce rate, ensure that what you do and what you sell is crystal clear within milliseconds of landing on your homepage.

Use audiovisual (A/V), but only if it enhances your message

Nobody is going to watch a five-minute video of you explaining your business – and you don’t want them to, anyways – you want them to buy! Instead of using distracting A/V, get your value statement out in big, bold text.

Follow the two-click rule

Online shoppers are extremely fickle; put too many clicks between them and their PayPal purchase and they’ll click away, costing you a sale. Instead, ensure that your product listings are never more than two clicks away.

Consider hiring a pro (if it makes sense financially)

Now, if you’re still concerned about designing your own site, or you’re struggling to make a homemade site look professional, you might consider hiring a professional freelance web designer. You can connect with freelancers on contracting sites like Upwork and Fiverr, describe your needs, and get a quote before committing to any payments. 

However, while the process of finding a freelance web designer may be quick and convenient, the costs are high. Web developers worth their salt will charge several thousand dollars to design a professional-grade site for you. Plus, custom designs can require custom maintenance, so you might be at the mercy of whatever your designer wants to charge to create additional pages or make changes. 

What you may consider doing, and what many first-time online business owners do, is designing the first version of your site yourself. Then, when you have the capital to spend, they offload site optimization and maintenance to a part-time pro. 

How To Start An Online Business: A Complete Guide - Driver buyers to your site using SEO

A common mistake that first-time online business owners make, and I myself am guilty of this, is that we design a site, let it sit, and wait for buyers to arrive. After all, that’s sort of how brick-and-mortar businesses work, right? 

The difference between a website grand opening and a brick-and-mortar grand opening is that nobody simply stumbles upon new websites. There’s no natural foot traffic passing by your online shop, and nobody’s going to randomly type your site URL into their search bar. So until you do some search engine optimization (SEO) work and outward marketing, your business might as well exist on the far side of Jupiter. 

Thankfully, getting your first foothold in SEO doesn’t have to cost a dime, and can be done in a single, focused afternoon. Here are five steps you can take to start generating traffic!

  • Help Google find you. Google sends out “crawlers,” like little AI robots, to scour the web and index new websites. Only sites that have been indexed will start appearing in search results. It can take a while to get indexed, but you can accelerate the process by submitting your “sitemap” to Google. Here’s how .
  • Add search keywords to your site. You may be the best vocal performance coach in the world, with the slickest website and best prices. But if your target buyers are Googling “singing lessons” and not “vocal performance coaching,” they’ll never find your website. That’s why it’s worth spending some time tinkering with the Google Keyword Planner. With this free tool, you can discover what terms people are Googling to find the product you’re selling. When you bake a mix of them into your site copy, Google will send more traffic your way.
  • List yourself on social media. Create a page for your business on LinkedIn, Instagram, Facebook, and Twitter. Just having a fleshed-out presence on each platform, with links, contact information, and plenty of crisp, high-res photos is enough to layer legitimacy on your company, improve your SEO, and send a trickle of traffic your way.
  • Tell everyone you know. Be sure to let your extended network know exactly what you’re doing and who your target buyer is. You’ll be surprised who comes out of the woodwork to become your first clients. For example, some early clients I’ve gotten just by letting my network know what I was doing include: my freshman year roommate’s current roommate, my high school girlfriend’s sister, two women from my mother’s book club, my stepfather’s old business consultant, and more.
  • Consider a pay-per-click (PPC) campaign. Earlier I mentioned how baking popular keywords into your site copy can increase your rankings in search results. However, you can also “cut the line,” so to speak, through pay-per-click advertising. By launching a PPC campaign with Google, you’ll appear at the top of search results as a sponsored ad. Getting listed is totally free; you only pay Google every time someone clicks on your ad, hence pay-per-click. PPC is expensive, however, ranging from $0.50 to $2 per click.

Once you’ve implemented these steps, start monitoring your site traffic using your host’s proprietary monitoring tools or Google Analytics . It can feel disheartening to do all this work and only see four visitors in your first week, but think of it like four people walking into your physical shop. Not bad! Plus, as Google indexes you and the word spreads, your traffic will increase. 

As internet marketing legends like Tim Ferriss and Neil Patel will tell you, your email list is your lifeblood. According to McKinsey , you want to focus on collecting emails, not social media followers, for a few reasons:

  1. 91% of Americans check their emails daily, while only 22% check multiple social media sites per day.
  2. Americans are three times more likely to make a purchase through an email than a social media post.
  3. Email is 40 times more effective overall at customer acquisition than Facebook and Twitter combined.

So how do you start collecting emails? 

You might initially be tempted to add all of the emails in your address book to your online business email list. I’ve also had people add me to their mailing list just because I gave them my business card, or because we connected on LinkedIn. 

To my knowledge, there are no Internet bylaws governing when it’s OK to add someone to your email marketing list. But I will say this: when it comes to building an email list that actually converts, you’re going for quality , not quantity . I’d rather have a list of 100 people who actually expressed interest in my products or services and opted into my mailings than a list of 1,000 people who said “yeah, sure” or worse, got added simply because I know their email. 

Not only are people who never opted into your mailing list likely to unsubscribe, but they may also even mark your emails as “spam”, which can absolutely crush your reputation with Google. 

My strong recommendation is to build a list of targeted buyers who actually opted into receiving your emails. You can do so by simply adding an opt-in message to your homepage. These can come in the form of a popup or a static call-to-action. 

The masterstroke of an effective email opt-in message is a value proposition. What will your customer get in exchange for sharing their email? 

Popular and effective opt-in bonuses may include: 

  • A promo code for their first order.
  • A semi-monthly newsletter with valuable tips and tricks.
  • A free e-book.

For inspiration, see what your competitors are offering, and in general how they’re collecting emails on their sites.

How To Start An Online Business: A Complete Guide - Become the expert on social media

Your next step to online business success is to build a personal brand around your business. You want to become known within your circle of buyers as “the guy or girl who does XYZ.”

Becoming known as the go-to person for the need within your niche is extremely valuable. It effectively plants a little flag in your audience’s memory so that next time they hear one of their friends lamenting about the problem you solve, they’ll say “oh, reach out to [your name], she does that.” 

The most common and effective way to establish yourself as a go-to person is to become the expert in your topic on social media. Here are three concrete methods:

Find out where your target buyers are congregating

Where do your ideal buyers spend their time online? Specifically, where are they most likely to complain about the problem you solve? You might already have a solid idea from your early research; buyer watering holes may include LinkedIn, Facebook groups, or specific subreddits.

Establish a presence here and spend a week just listening in on what these groups are saying and how they’re saying it. Get a vibe for the tone and language so you’re more likely to fit in when you start posting. A quick note about Reddit; unlike on other platforms, you can use whatever username you want. Using an account named after your business can be an effective way to market yourself without marketing yourself, if you get my drift.

Start posting content, answering questions, and engaging with your buyers

Become a highly active member of these online communities by posting brief, high-impact blog posts, starting engaging discussions, and replying to questions and comments. All three forms of interaction will serve to establish you as an expert, and soon, the go-to person for the need within your niche.

DO NOT SELL IN FORUMS – just be authentic and helpful

These days, most Facebook groups and subreddits have strict rules limiting or outright barring solicitors. Remember that the internet can be a sales-y place, and these forums serve as an escape from all of the exhausting capitalism around us. So to barge in and say “20% OFF TODAY ONLY” will likely get you insta-banned and unable to access the community ever again.

Besides, a better approach to connecting with your buyers is to just be friendly, authentic, and helpful. When you appear to these communities as an expert and not a salesman, you’re much more likely to get referrals and organic traffic to your site, which they can always access by clicking on your user profile. 

Upselling is the invaluable process of selling an upgraded or premium version of your product or service. Here are some powerful stats surrounding online upselling, according to Sumo

  • Upselling increases revenue by 10%-30% on average.
  • 70%-95% of revenue comes from upsells and renewals on average.
  • Upsells are 68% more affordable than acquiring a new customer.

Upselling comes in two forms – you can upsell add-ons and premium subscriptions to your existing customers through your mailing list or to new customers during the checkout process. 

Upselling can be a delicate art – you don’t want to come across as pushy, but you also don’t want to miss out on a sales opportunity. 

So what should you upsell, and how? 

The best upsells should elicit one of the following responses from your buyers:

  • “Yes, please!”
  • “Oh, definitely – I hadn’t even thought of that!”
  • “Oh, good, I’m so glad you offer this!”

Here are some common and hugely effective examples of upsells:

  • A tax software offering state returns or CPA advice.
  • A massage parlor offering hot stones or monthly subscriptions.
  • A freelance web designer offering SEO or social media packages.

And so on. For ideas on what you can upsell, start simple: ask yourself what products or services you offer can be bundled together into a package or monthly subscription. At the risk of sounding like a broken record, head to your competitors’ sites and see what they’re upselling!

Once you start making a healthy amount of sales, it’s time to consider a boring, yet critical money-saving technique for small businesses. 

[FYI this is not tax advice. Please consult your CPA.]

According to the National Small Business Association , roughly half of American small businesses are registered as either LLCs or sole proprietorships. An unknown percentage aren’t even registered as businesses at all. 

Earlier on I nudged you to consider registering your online business as an LLC because it’s cheap, it layers on legitimacy, and it protects you from personal bankruptcy. If you did, great! However, you should know that all of the business entities I listed above are subject to a 15.3% self-employment tax on their annual revenue. 

For that reason, many small business owners choose to convert their LLC to what’s known as an S corporation with the IRS. With their business incorporated, they become a salaried employee of their own business. Then, they only have to pay the 15.3% self-employment tax on the portion of their revenue they pay themselves; whatever stays in the business isn’t subject to the tax. 

As long as you pay yourself a normal wage for your role and industry, the IRS is totally accepting of this setup. 

How To Start An Online Business: A Complete Guide - Collect feedback and keep growing

Small business owners are like athletes; they can’t afford to get complacent! They gotta stay sharp, fit, and keep a keen eye on the competition to stay afloat. 

The #1 most common way small businesses improve upon themselves is by simply asking their existing customers for feedback. It’s humble, disarming, and can lead to some seriously valuable business intel. 

For example, one of your long-time customers might tell you that they’re considering switching to a new competitor you didn’t even know existed, which gives you a fresh source of intel (and time to erect defenses). 

Your customers might also tell you what items or add-ons they’d like to buy from you. You can collect this info by simply asking “what additional products or services can we offer?”

On that note, what are some of the best methods for collecting feedback?

Before collecting new feedback, dig around the Internet to see what people are already saying about your business. For example, users can create a Yelp page for you and leave your first review 100% without your knowledge!

If you discover negative feedback about your business, here are three steps you can take to ameliorate the issue:

  • Learn from it. It’s OK to feel angry and frustrated with irate customers, but once the feeling subsides, see what you can learn from their negative review. Is something on your site broken? Did you miss a request for customer service?
  • Respond, if you can. Some sites like Trustpilot and BBB actually let representatives of the business respond to customer reviews and complaints. The best responses to negative reviews are ones that apologize, try to remedy the issue for the customer, and express how the business will prevent the issue for others moving forward.
  • Ask your happy customers to publish reviews. Some say it’s inappropriate to ask customers to write positive reviews, but it’s totally OK to ask customers to write reviews in general. This is subjective, but I also think it’s OK to nudge them towards specific sites where you could use a few 4- and 5-star reviews to bring your average up. 

When it comes to collecting feedback of your own, SurveyMonkey is your friend . Design an anonymous, lightning-quick, three-question survey and include a link in your next email blast:

  1. What do you like best about [business]?
  2. How can I improve your customer experience? 
  3. What else can I offer? 

You might choose to include other queries like “how would you rate me” and “would you recommend me to a friend,” totally up to you!

Still struggling with step one? Here are some online business ideas to noodle on! 

  • Online dating consultant. Anyone who’s been on a date in the last year probably knows there’s a massive need for dating coaching within Gens X, Y, and Z. Plus, there are infinite niches within that need, such as “25 to 30-year-olds in my city.”
  • At-home fitness trainer. There are thousands of personal trainers who will meet you in a gym, but with work-from-home rates skyrocketing, a need will rise for trainers who teach you how to work out from home (plus, you can upsell them at-home gym equipment!).
  • Zoom-based interior designer. Interior designers typically charge between $2,000 and $5,000 because they require plenty of time to fill a large home. But what about an interior designer who charges Millennials and Gen Z just $400 or thereabouts to decorate a small apartment, even remotely? Plus, one day when your clients buy a bigger home, you can upsell them the full $3,000 package!
  • WFH massage therapy service. Corporate, in-house massage therapists are a smash hit, so why not launch a service that sends massage therapists to home offices? It’s not a unique idea, but you could take a unique approach: market yourself as a solution to the aches and pains brought on specifically by working at your home office all day. You don’t have to become a massage therapist yourself – just lasso together a few existing LMTs and coordinate them!
  • [Your passion] trainer. What are you already passionate about? What do your friends already know you for, or ask your input on? Maybe it’s welding, dog training, carpentry, fashion… whatever it is, build a virtual business around it! If you already love teaching others about something, monetize it and offer Zoom lessons.
  • Replacement for the AirBnB referral program. In a massively controversial move, AirBnB recently canceled its online referral program , leaving thousands of writers and bloggers frustrated and financially stranded. I’m not exactly sure how to fix it, but if you’re creative, see if you can find a way to fill the clear and present need within that niche!
  • Tutor your favorite subject. What was your favorite subject from high school? If the need exists, considering launching an online business tutoring students in specific subjects of interest to you. Skip the uber-competitive tutoring sites that take a commission, and build your own site and mailing list. Just be sure you teach what’s in the current AP study guides!

An online business is simply a business that performs most of its operations and transactions virtually. Online businesses typically don’t have a brick-and-mortar location, but if they do, it’s often not their main focus. 

In my experience mentoring online business owners, the most common “surprises,” shall we say, are nobody showing up to your site (pre-SEO work), the 15.3% self-employment tax (always an unpleasant shock to W-2 employees) and the fact that nobody buys from social media posts. 

My 100% subjective, totally personal recommendation is that you build and maintain the first iteration of your site yourself. You’ll learn a valuable skill, save thousands of dollars, and will be able to make quick changes yourself to your design and copywriting as your business develops. 

This one isn’t easy to answer, because everyone’s financial situation and comfort level is different. Before putting in your notice, remember that your existing job benefits (income, job security, experience, training, health insurance, 401(k) matching, and more) may not be so easily replaced by your online business. But if your online business shows years of stable income and consistent growth, and you’re able to replace all of your most critical job benefits, it may be time to consider taking the leap!

Same as regular small businesses. If you’re registered as a sole proprietor, LLC, or not registered at all, your small business income will be filed alongside your personal income and similarly taxed. See IRS.gov for details. 

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