how to start a small online business

How to Start a Small Online Business in 6 Easy Steps

Belle Wong

Do you have a business idea you just can’t get out of your head? Starting an online business can be quite daunting for people who are new to business startups. But if you’ve been wondering how to start a small online business, there’s good news: it doesn’t have to be daunting at all.

We’ve set out six easy steps to starting your new online business below. It doesn’t matter what your business idea is. These steps apply to all types of businesses that can be run profitably online. Follow these steps to join the ranks of small business owners everywhere.

1. Does Your New Small Business Fill a Need?

To start your business, you need to make sure your business idea is viable. In order to build a successful business, you must meet and deliver on a specific need. And it’s not enough for that need to exist. There should be enough of a need for your product or service to sustain your business over the long term.

You can answer these questions through market research. In fact, doing market research is the most essential of the steps to start a small business. The following are three ways you can find out if there’s a strong enough need for your product or service:

  • Keyword research. Using a free keyword tool like Google’s Keyword Planner, you can find the search volume for keywords that are related to the need you’re researching. Search numbers will tell you whether people actively seek answers to the particular problem your product or service solves.
  • Online forums. Online forums where people gather together to discuss subjects related to your business idea can help you answer the following questions: What solutions are people looking for? What issues are they encountering in their search for solutions?
  • Keyword search results. Finally, check out the search results for keywords targeting the need you’re addressing. There should be some competition for these keywords, as this indicates a need people have. You can also check out your competition, which can provide you with further insights into what is working.

2. Create a Business Plan for Your Small Business

So you’ve done your research, and it’s clear that there’s a large enough market for your product or service. The next step to starting an online business is to write a business plan. A business plan creates a solid foundation that sets your business idea apart from other online business ideas.

You don’t need a book-length business plan to start an online business, although detailed plans can be quite effective. Your business plan should contain the following sections:

  1. Executive summary. This section summarizes the highlights from the rest of your plan.
  2. Business description. You’ll describe your business in this section, including an outline of your business structure.
  3. Market analysis and strategy. This is where you’ll discuss the market research you did in the previous step and the marketing strategies you’ll use to promote your business.
  4. Management and staff. Since you probably won’t be hiring employees for a while, the focus of this section will be on you. Fill this section with your bio, adding emphasis on the strengths that will help your business succeed.
  5. Financial section. This is where you’ll include any documents you have that project the economic future of your business.

A great way to begin is by checking out online resources that help you create a business plan.

starting a small online business

3. Decide on a Business Structure

No matter your business idea is, you will need to decide what business structure will work best for you. Whether you’ll be setting up an online store or another type of online business, your choice of business structure will affect your long-term growth. It will also have tax and legal implications. Because of this, it’s always a good idea to consult with a tax or legal expert about the best ways for you to set up your business.

Sole Proprietorship

A sole proprietorship is the simplest business structure you can choose. In most states, all you’ll need to do is register your business as a sole proprietor. And instead of paying taxes through your business, you pay taxes on your business income through your individual tax return.

There are disadvantages to this structure, though. The following are some of the downsides of a sole proprietorship:

  • No limited liability. As a sole proprietor, you’re personally on the hook for your business’s liabilities.
  • Impact on funding. Sole proprietorships can run into problems obtaining funding, like bank loans.
  • Growth challenges. If long-term growth is one of your objectives, it might be better to start off with a structure that better accommodates growth.

Partnership

If you’re creating your business with another individual, a general partnership is the simplest way to form your new business. Like a sole proprietorship, registering your business as a partnership is usually all you need to do. And rather than paying taxes through the partnership, each partner accounts for partnership income through their individual tax returns.

You’ll also face the same disadvantages as you would in a sole proprietorship. For example, you and your partner won’t have limited liability protection, and obtaining bank loans can be more challenging.

Limited Liability Company (LLC)

Setting up a business as a limited liability company (LLC) is one of the most popular options for small business owners. One of the main advantages is the limited liability protection an LLC offers.

From a tax perspective, an LLC operates as a “pass-through entity.” This means the IRS won’t tax your LLC as a separate tax-paying entity. Although LLCs need to file a separate tax return, the income your LLC earns is taxed as income in the hands of its members.

One of the disadvantages of an LLC is that it costs more to run than a sole proprietorship or partnership. There are also more legal requirements that need to be met, and different states have different restrictions on who can set up an LLC.

Corporation – S Corp

An S corporation is another popular choice for small business owners. Like an LLC, an S corporation offers you limited liability protection. And when it comes to taxes, an S corporation is also a pass-through entity.

Setting up an S corp is a bit more challenging than setting up an LLC, as it generally involves registering as a C corporation with your state, and then filing a form with the IRS that establishes your business as an S corporation. But for many small businesses, the additional cost of setting up an S corporation is outweighed by its advantages. These advantages include the ease of transferring ownership and better potential for attracting outside funding.

4. Protect Yourself from Risks

The startup journey isn’t without its risks. As with any adventure, knowing what obstacles and problems can surface lets you put into place safeguards to help protect you from the risks you might face.

Cover Yourself Legally

It’s essential to comply with any applicable legal requirements. Depending on what type of business you’re running, certain local, state, and federal requirements might apply.

  • Tax requirements. You should check your tax requirements at both the federal and the state level. For example, depending on your business structure, you may need to apply for state and federal tax ID numbers.
  • Licenses and permits. Different types of businesses are subject to different license and permit requirements. Make sure to check with all levels of government to see what licenses and permits requirements must be met.
  • Business registration requirements. It’s important to check with any governmental authority that oversees your industry or type of business for any registration requirements that might apply to your business.

Failing to meet legal requirements can have devastating consequences for your fledgling startup. If you’re at all unsure about your legal requirements, it’s a good idea to consult with an experienced legal expert.

how to start a small business

Get the Right Insurance

Business insurance for startups is essential for protecting your business from risks. Business insurance options for the small business startup include:

  • General liability insurance. This type of insurance helps protect you from lawsuits that might arise if your customers or their property sustain injury or damage as a result of using your business.
  • Business property insurance. Obtaining property insurance coverage protects your business’s physical property, such as building, inventory or equipment.
  • Flood insurance. The typical property insurance policy usually doesn’t cover flood damage. Even if you don’t live in a flood-prone area, flood insurance might be a good idea if you have any unexpected flood event risks.

5. Launch Your Small Businesses Website

The next step to starting a small online business is to build and launch your website. This might be a simple brochure-type site, or it might be a complete e-commerce solution. Different web designs work for different types of businesses.

You’ll first need to choose and purchase a domain name for your business. Your domain name should be based on some variation of your business’s name and, if possible, give potential customers an idea of the products or services you provide.

While looks are important when it comes to websites, functionality and speed are components that also shouldn’t be overlooked. Unless you’re proficient with building websites, it’s often a good idea to contract with a web design company. Web designers are experienced in creating fully functional websites that are also pleasing to the eye.

6. Market Your Small Business to the Right Audiences

You’ve followed through on all of the previous steps on how to start a small business. Now comes the final (and fun!) part of starting a small online business: marketing your business.

Every small business owner needs a solid marketing plan. Overlooking marketing is often a recipe for business failure. The good news is that digital marketing uses technologies such as search engines, social media and email that have leveled the playing field for small business owners.

Search Engines

Search engine results are what drive traffic to your website. The higher up in the results you are, the more people will come to your site.

There are two types of search traffic that you can make use of:

  • Organic search traffic. With organic search traffic, you draw traffic to your site by appearing in the top search results for your target keywords. You can do this by optimizing your website pages for search (a process known as SEO, or search engine optimization). Organic traffic has longer-lasting results and can drive more traffic. However, it will take a longer time to see these results.
  • Paid search. Paid search marketing, also known as SEM, or search engine marketing, provides quicker results than organic search. With paid search, you place ads on search engines like Google for specific keywords. Unlike organic search, paid search is more costly, and you only get results when your ads are running.

Paid and Organic Social Media

While most people use social media in their personal lives, many people don’t realize how social media marketing can be used to attract potential customers. Like marketing through search engines, there are two ways to use social media to market your online business:

  • Organic social media. With organic, or unpaid, social media, you set up a profile for your company on a social media platform. By posting regularly to this business profile, you can capture the attention of potential customers. Organic social media posts help build your brand and establish your authority.
  • Paid social media. Social media platforms also give business owners paid options to market their businesses. Depending on the platform, you can purchase ads that will show up in your target market’s feed, or boost the power of your organic posts to reach a wider audience.

Email Marketing

Email marketing is a vital component of a successful marketing plan. If your small business isn’t capturing customers and potential customers’ emails, you need to start now. Whether your small business makes money through affiliate marketing, consulting, or an online store, you can use email marketing to your advantage.

Your email campaigns don’t have to be complicated, either. Email marketing can be as easy as sending out weekly or bi-weekly emails to your list. You can also take advantage of more detailed email marketing options like drip campaigns, which send out a sequence of targeted emails whenever a customer takes a specific action, like signing up for your newsletter.

Now that you know the steps to start a small business, you’re well on the road to running a successful business. And remember, you’re not on your own on this journey. Small Biz Ahead is here for you through all of the steps and stages you’ll be taking to start your online business. Sign up for our newsletter today and let us help you on the road to success.

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