How to start an e-commerce business

The economy has become tight lately. Rent prices keep going up, and incomes haven’t been keeping pace. What people used to do for hobbies, they now do as side hustles. For many, it’s the only way to make ends meet. 

But what sort of side hustle is best? Of the many options, food delivery and driving services are popular choices, but when you factor in wear and tear on your personal vehicle, it’s not as great an opportunity as it seems. And at the end of the day, you’re still working for somebody else. 

A better option that will give you more control is going into business for yourself. And if you do it right, creating an e-commerce business will provide a way to earn money passively. That means that no matter what you’re doing, you’ll always be earning money — even while you’re asleep.

Starting your own e-commerce business will take time, but if you think you can stick with it, the rewards  include more freedom, a better quality of life, and independence from the corporate working world.

Planning your e-commerce business

If you found this article by searching for information on how to start an e-commerce business, you may still be undecided about what kind of business you want to start. Fortunately, you have come to the right place. There are a number of businesses you can start in your spare time with very little upfront cost.

Before you get started, it’s probably a good idea to know what it is you’re going to be doing and how you plan to do it. Planning means spending some time thinking. Go somewhere without distractions, put your phone on silent, and sit and think for a while.

Focus on your dream. Visualize the kind of business you want to create and the kind of lifestyle that will come about as a result of your hard work. Thinking about your business will help you move forward, and envisioning your potential lifestyle will help motivate you.

Choose the products you’re going to sell

The first thing you should think about is what you plan to sell. Do you already own a business and want to start selling your inventory online? Maybe you have a talent for creating arts, crafts, and other goods. Or maybe you only have a vague idea of what it is you want to sell.

If you have an existing inventory, then you’ve already done a lot of the hard work. Now you just need to create an online shop and possibly leverage your sales with a secondary presence on Amazon. You’ll make more money per transaction selling on your own shop, and you should incentivize your customers to go there instead of Amazon. But selling through Amazon will help you establish a customer base.

If you want to create something like jewelry, shoes, artwork, fabricated goods, or fine furniture, sites like Etsy and eBay might be better suited to help you gain that leverage. Once again, you should still have your own shop, but it will be a lot easier to gain traffic if you also go through a major outlet at first.

If you just want to open a shop and have little or no clue about what kind of shop it might be, that’s fine too. You can pick a category that you understand and create a catalog of items you believe are the best fit for that category. 

For example: If you really love and know a lot about tools, you can open a tool shop featuring the best hammers, screwdrivers, and power tools available. You can get supplies from wholesalers like Alibaba and dropshippers like AliExpress. Then you can use Amazon to store and/or sell your inventory.

Start brainstorming

Now that you know what kind of business you want to create, you probably have a lot of ideas. Brainstorming is a productivity technique to help you get those ideas out of your head and start organizing them.

Use tools you’re comfortable with so you can get those ideas out of your head and record them as fast as possible. Once you have those ideas somewhere safe, they’ll stop bugging you — and new ones will likely start popping up.

If you prefer a hands-on approach, use a pencil and paper, a stack of index cards, or a whiteboard to tackle your brainstorming. If you prefer a high-tech method, there are thousands of options, ranging from simple text editors all the way up to advanced productivity programs.

Whether you prefer the hands-on way of doing things or a more modern approach, mind mapping is one of the best techniques you can use to brainstorm.

Mind mapping is an activity where you write down a thought, circle it, and draw a line from that thought to a related thought. 

You can do it on paper, but a whiteboard may provide more space. There are also several software options available. One of the best options is Whimsical.

Whimsical has a very slick user interface that helps reduce the friction between thinking and planning. It includes several planning tools like wireframing, flowcharts, and, of course, mind maps.

Organize your plan

Now that you’ve managed to record all the thoughts rattling around in your head, it’s time to give them some structure. The Kanban technique is a great way to help organize your initial ideas. Write your ideas on index cards, then move them between stacks labeled “Planning,” “Doing,” and “Done,” for example. 

There are many tools online, like Trello, that make organizing with the Kanban method easy.

Create a professional business plan

Now that you’ve done just about all the planning you can do for your business, it’s time to formalize your results. That means creating a clean and professional business plan.

Mind mapping, the Kanban method, and other organizational techniques are great for personal use, but for professional purposes — like showing your plan to a banker or investor — a business plan is the industry standard.

There are many different resources out there that can help you write your business plan. TheSmall Business Administration has a great guide that walks you through the process step-by-step.

Seek out advice and mentorship

Like many others, you may have a hard time finding people in your circle of friends and family who will always be supportive of your dreams. That’s OK. We often believe that a well-paved path is the safest, and your loved ones want the best for you. Unfortunately, traditional employment may no longer be the safest path for you.

It helps to have somebody you can share your hopes and dreams with and get support from — and if they can provide helpful advice and guidance, that’s even better. That’s why finding a mentor or advisor is extremely helpful.

You may know people who’ve successfully started their own businesses. Maybe they were even the inspiration for you to create a business of your own. But it’s understandable if no one comes to mind. It’s the path less taken, after all.

Fortunately, the Small Business Administration also offers the SCORE program, which can help connect you to a well-suited mentor.

Creating a web and social media presence

You want to create an online store. Great, but what are you going to call it?

You may already have a great name for your business in mind, but don’t get too attached to it. Because you’re creating an internet-based business, your domain name is going to be more important than your actual business name. And getting the perfect domain name can be a huge challenge in itself.

So, let’s start by picking the perfect domain name, and we’ll come back to the business name later.

Domain names

You can use Google Domains to try any options that you come up with. You’ll probably see that people have already claimed most of them.

Here are a few pointers to help guide you in your search:

1. Keep it short and sweet. It’s hard enough to find a .com domain that you like. But you’ll have to push even harder to find one that works well for your business. A domain name that’s long, hard to spell, or confusing may actually hurt your business. Find one that’s easy to say, spell, and share.
2. Find a .com domain if you can, but check out alternatives if you can’t. The .com extension has been around for a long time, but a few years ago, a few new extensions were added that you may not know about. Instead of bobsbooks.com, you might be able to get bobsbooks.store, .exchange, or .discount.
3. Get creative. You might have been able to get books.com back in the ’90s, but people snatched up all of the one- and two-word domain names a long time ago. These days, businesses have to either pay big bucks for the perfect domain name or get creative. For example, think of companies like Shopify and Lyft. Those are nonsense words, but they still lend themselves to good domain names because you can tell what service they’re offering.

Social media

Now that you’ve done the hard work of choosing a domain name, choosing a social media name may be much easier. Thanks to search algorithms, people won’t need to type in your social media name every time they want to find you, so you can choose something that’s a little bit more abstract. Just don’t make it too garbled. If it looks like a random collection of letters and numbers, people may think you’re running a spam account.

Business name

Finally, we’ve gotten to selecting your actual business name. After coming up with your domain and social media names, this step is a no-brainer. You can call your business whatever you want, but your company name still needs to be unique. Think of a few options that are close enough to your domain name that it won’t confuse people, but think of a few alternatives as well in case you need them.

Funding your venture

One of the best things about creating an e-commerce business is the low barrier to entry. A lot of e-commerce businesses are easy to start up with little or no money.

It’s possible to start selling goods without having any inventory. And since you’re selling online, even if you do need inventory, you need much less than if you were selling in a brick-and-mortar store.

However, if your specific business requires special manufacturing equipment — like clothing printers, jewelers’ tools, or leatherworking supplies — you might need a leg up. You may also need funds to hire employees, but it’s a good idea to get as far as possible on your own before taking on the extra responsibility of managing a team.

If you absolutely  need money to start your business, here are five pointers:

1. Know your numbers. If you’ve been treating this article like a to-do list, this step is already done. All the numbers an investor would need to know should already exist in your business plan. You don’t need to memorize your plan, but you should at least have a good working knowledge of all the moving parts.
2. Be realistic about your goals. As we discussed in the intro to this section, it’s better to start off doing things yourself or with a friend before hiring employees. More things can go wrong with more people. Unless you have a lot of experience managing a team, don’t go overboard with everything you’ll need for a major enterprise. Aim for a year of funding with a little bit of wiggle room.
3. Be prepared to answer tough questions. When a potential investor or banker wants to make sure that their money will be safe by investing in your business, they’ll ask you hard questions. Just like knowing your numbers, all the answers should be in your business plan.
4. Be patient. If a baby was trying to take their first steps and they fell down, you wouldn’t throw your hands up in the air and say, “Well, this baby will never be able to walk.” You’d help them back up and encourage them to keep trying over and over again. The same should go for you and your search to secure funding for your business.
5. Have a backup plan. OK, we’ve covered this in a few different ways, but it bears repeating: Be willing to start small. You should also be willing to change your plans. No matter what, you’ll need to be flexible and able to adapt to changes in order to start and run a business.

Financing sources

Please be aware that nothing you read here should be considered as professional financial advice. The information provided here may not be the same as what you’d get from an actual certified financial advisor, so also consider talking to a professional.

Hopefully this article will give you a rough idea of what’s involved in acquiring financing to help you get started on the right path. Here are five ideas:

1. Bootstrapping and savings: If all you need is a few essentials, you may have enough money in the bank already. You might also be able to scrounge up a few extra dollars from a side hustle like food delivery, which can make you a little extra scratch to help get you to the next level.
2. Friends and family: Perhaps you have a rich uncle who thinks the world of you; consider approaching him for a small loan. Or you might have a good friend who’s willing to go halves with you and help you run the business as a partner.
3. Grants: If your business is going to support underrepresented communities, help a charity, or serve a higher purpose, you might be eligible for a grant. Grants are like loans that you don’t have to pay back, but they’re only meant for certain purposes. You can find grant information online through government and corporate websites. Keep in mind that you should never have to pay for that information.
4. Bank loans: Bank loans are usually better suited to more traditional businesses. What they consider to be a microloan may be much more than you need. But if you decide this really is the path you want to follow, make yourself presentable, grab your business plan, and schedule an appointment.
5. Crowdfunding: If the business you want to create involves bringing something new and exciting to the world, you may be able to spark enough interest through a crowdfunding campaign to get all the funding you need.

Getting a handle on the legal matters

Remember what we covered in the financial section and apply it here as well: You shouldn’t consider anything you read in this article as actual legal advice. Take everything you read as a suggestion and inspiration only and speak to a professional to sort everything out.

Running an e-commerce business doesn’t feel like running a traditional business. When most people think of a business, they think of a huge office with dozens of stressed people running around. However, your e-commerce business is mostly going to consist of you, the chair, and a laptop.

But if you’re taking money from people, you’re still running a real business. Get your legal and financial ducks in a row from the beginning to establish a good foundation.

Here are eight ways you can do that:

1. Incorporation: Doing business by yourself is very common and, for most e-commerce businesses, not too risky. But if, for some reason, someone decides to take you to court, you’ll be personally responsible for any liabilities. You can offer yourself some protection by creating a corporate entity. A corporate entity keeps your business and personal affairs separate when it comes to finances and law.
2. Federal ID: Whether you have a corporation or not, you’ll have to pay taxes as both employer and employee. In order to keep your business and personal expenses separate, you can open a business checking account. In order to open a business account, you’ll need an Employer Identification Number (EIN). An EIN works like a Social Security number for your business. You’ll also need it to pay taxes as your business and sometimes even to interact with other businesses.
3. Local licenses and permits: You’ll always need a vendor’s license to physically sell merchandise to the public. However, depending on where you live, you may need licenses or permits to run an online business as well.
4. Intellectual property: There are three primary ways to protect your intellectual property: copyrights, trademarks, and patents. Copyrights protect your creative work, trademarks protect business branding assets, and patents protect inventions. Talk to your mentor to get more information on when you should use each.
5. Taxes: Business taxes, just like personal taxes, are unavoidable. Maintain excellent records of your finances to keep you and your business safe from the IRS.
6. Insurance: You might not need to worry about insurance when you’re running an e-commerce business, but if you’re going to set up a physical shop or facility where people could possibly get injured, insurance is a must.
7. Contracts: If you decide to go the route where you’re actually manufacturing, shipping, and selling goods, you should have contracts with every member of your supply chain.
8. Employment law: If you’re only ever going to work by yourself, you probably won’t need to worry about employment law, as you’re unlikely to get into an altercation with yourself that requires HR to intervene. But if you do hire people, make sure that your business follows all guidelines and regulations. It’s in your best interests to hire a freelancer, firm, or online service to help you with your HR needs.

Marketing your business

Marketing is a huge subject to tackle and an important skill to learn, and the fact that many sources of information will cost you money makes the learning curve that much steeper.

In order to market your business, you need to think like a marketer. Thirty years ago, advertisements were king. Today, people have more access to information, can research on their own, and are less taken in by ads. If you want to attract customers these days, you’ll need to get creative.

Here are three tips to start moving your mind in the right direction:

1. Understand strategy vs tactics. Think of a strategy like a vehicle. It needs a lot of parts and pieces to work effectively. You can put four wheels and a body on a frame and call it a car, but it won’t go anywhere without an engine. Tactics are like car parts. It takes a collection of them working together in the right places to make the strategy work. Announcing a sale, dropping a press release, and, yes, even placing ads are all examples of good marketing tactics. You should have a collection of such tactics that work together to form a unified strategy.
2. Find your people and lead them. Advertisements are only so effective — you need to create a presence for your business that resonates with people. For your marketing to succeed, you need to find the people who say, “I’m this kind of person, and I’m the kind of person who uses these products.” Make your brand and your products central to those people — your target audience.
3. Get out on the long tail. The long tail is a strategic concept that is essentially about finding your niche. Nike is in the niche of athletic shoes and equipment. That’s a huge niche. If you get into the business of selling athletic shoes and equipment, you’ll be competing with Nike. To avoid that, you need to drill down to a much tighter niche. So instead of selling running shoes, try selling glow-in-the-dark dinosaur shoes. Find an area where you’ll have little or no competition and dominate it.

You can learn all three of those concepts and many more from Seth Godin. So far, he’s written 20 bestsellers, and he publishes great advice on his excellent blog. The best book to get you started is This Is Marketing. Even if you’ll be hiring marketers, it’s a good book to help you understand this critical aspect of your business.

Do the actual work

To fire up your business marketing, focus on what you know. If you’re an Instagram junkie, focus on your business’s Instagram account. If you find yourself tweeting 10 times a day, leverage your knowledge of that platform to build your business’ brand and online presence.

Now, those are just tactics. But you have to start somewhere. If you try to create a full-blown marketing plan before you know anything about marketing, you might find yourself stuck. Getting started is always better than not starting at all simply because you can’t stop planning.

Fortunately, online education is affordable and universally accessible. You can give yourself a solid educational foundation from sites like Udemy.

Leveraging the right software

If you’re working alone, it doesn’t matter what tools you choose, but as soon as you start working with other people, make sure they’ll be able to learn and use those tools with minimal difficulty.

Here are three of the best, most flexible tools available:

1. Google Docs, Gmail, and Meet: Google’s cloud-based suite of tools will let you and your team communicate and work together in real time. And when your business grows, you can use Workspace, which is designed for companies of every size — from tiny mom-and-pops to massive enterprises.
2. Jotform: Jotform is the premier data collection and automation tool. Its versatility means that you’ll constantly find places in your business processes where it’s the perfect match.
3. Notion: Notion is a knowledge management tool with a collaborative editing environment that gives you smart tables and lets you embed other software into your pages. You can even embed Google and Jotform tools into your Notion pages, making it a great center for all your business processes.

Managing your business processes

It may just be you wearing every hat in your business, but there are still traditional business processes you’ll be following, even if they don’t look like the processes you’d see in a larger company. Use established systems for things like accounting and customer service, and come up with streamlined systems for your own business-specific practices.

Keep records of everything that you find yourself doing more than once. Then figure out how you did it, think about the most efficient way to do it in the future, and create a checklist that lets you repeat that process the same way every time.

The E-Myth Revisited by Michael Gerber is an excellent book that will teach you how to work on your business, not just in your business. The 4-Hour Workweek by Tim Ferriss is another outstanding book that will teach you how to automate and outsource much of your business.

Here are some common processes and some tools for managing them:

1. Accounting: This involves bookkeeping, payroll, and taxes. QuickBooks is the most popular choice for small businesses and the self-employed.
2. Human resources: This department handles hiring, firing, managing benefits, and more. You can take care of most of your HR needs with Jotform. You can use it to receive resumes, fill out legal documents, manage employee lists and information, and much more.
3. Customer service: Keeping your customers happy is probably the most important part of your business. This is another area where Jotform is your friend. You can create forms to collect service requests, return requests, product feedback, and more.
4. Research and development: You’ll constantly need to innovate to keep your customers excited about your brand. You can track all of your research using Google Docs. It’s also great for collaborative work.
5. Marketing: As mentioned earlier, Google Docs can help you manage your campaigns. Jotform has many marketing templates you can use to collect email addresses, do market research, and much more. Buffer can help streamline your social media marketing by automating posts. And Mailchimp will help you launch professional email campaigns that won’t get flagged as spam.
6. Quality assurance: It’s vitally important to make sure your end product meets the highest standards possible. Jotform can help you streamline the inspection process, and Jotform Approvals can automate your policies and procedures for decision-making.
7. Shipping and receiving: You don’t need a huge warehouse to store all of your products these days. There are many fulfillment services available. They’ll store your product, pack it, and ship it. They’ll also handle returns and a certain amount of customer service. Amazon is one reliable provider of fulfillment.
8. Manufacturing: You’ll need a lot of records and documents to manage your manufacturing, if you have any. Google Docs can provide everything you may need.
9. Storefront: Jotform can make setting up an online store one of the easiest parts of building your business, thanks to the Jotform Store Builder.

Making the dream a reality

There’s a lot involved in starting a business, but the most important thing is to start. Don’t overthink it. Don’t overplan it. Don’t psych yourself out. Roll up your sleeves and get to work.

We discussed earlier that you’ll have to do a lot of upfront planning, and that’s true. But it’s mostly to get the ideas out of your head and somewhere safe. Once you’ve done that, get back to building your business.

We covered a lot of ground in this article. When you need more information, come back here to figure out your next steps.

Whatever success looks like for you, here’s hoping you’ll see it. And here’s to you for taking the first steps!

Photo by AS Photography