Estimated reading time: 6 minutes
Since the beginning of the pandemic, business formation has surged—and the largest category by far is e-commerce.
The good news is that developing an online business can be extremely easy. In addition, these types of businesses tend to be cost effective, especially compared to the upfront startup cost required to build a brick and mortar business. When creating an online business, there are certain steps that must be taken. Below, we outline step by step for you:
1. Choose a strong business concept: Many entrepreneurs jump into their own online business without completely considering its potential or target market, as well as the various pros and cons. To avoid this costly mistake, it is important to ensure you are choosing a strong online business idea and do your market research. The best way to do this is to consider the following questions:
Will the new business leverage your strengths and interests?
Numerous successful entrepreneurs build a business around their strengths, such as a hobby, skill, or expertise. This is a very good idea so that you are familiar with the business and know you have the expertise needed to find success on the e-commerce platform.
What problem does your business idea solve?
It is vital to ensure there is a market for your business. Without this, your business will likely fail before it even gets off the ground. Keep in mind that not only do you need to solve some type of problem for your target audience, you also need to ensure there are potential customers who will search for this solution.
Are other companies already solving this problem?
If the answer is yes—how will you differentiate your startup business to compete? Be sure to conduct a market analysis to confirm that a problem exists and there is plenty of room for your business. This will ensure that you are not wasting your time with an already crowded business concept.
Can your business function solely online?
While some e-commerce businesses require a physical infrastructure for shipping and distribution , others do not. For example, an company with online courses or an e-commerce store with digital products or drop shipping business does not need a physical presence. Consider these factors if you plan to operate your online store from home.
2. Develop a comprehensive business plan: Even if you don’t plan on obtaining funding for your new business, it is important to create a business plan to help you strategize for future growth and profitability. An effective plan will clarify your objectives and develop a marketing roadmap, which can help you achieve success.
The Small Business Administration recommends that every business plan include the following information:
–Executive summary – a snapshot of your business
–Company description – describes what you do
–Market analysis – research on your industry, market and competitors
–Organization and management – your business and management structure
–Service or product – the products or services you plan to offer
–Marketing and sales – how you will market your business and develop your sales strategy
3. Select a business name: Since your business will primarily function online, the name must be available for registration as a business name in your state. Consequently, you must verify whether the name you want is available as a business name. In addition, it’s important to check that your name and domain name are not encroaching on any registered trademarks.
4. Decide on a business structure: The business structure you pick will dictate the legal and tax requirements your business needs to satisfy. It’s a good idea to consult with an attorney to determine the appropriate business structure for your new business. And because each structure has very different tax requirements, you may want to consult a tax professional as well. Most small business owners choose one of the following structures:
-Sole proprietorship: This is the simplest form of business structure, but it provides a lack of limited liability.
-Partnership: If you intend to develop your business with a partner, your liability is unlimited, like a sole proprietorship.
-Limited liability company (LLC): An LLC provides limited liability without the complexity of incorporation, which makes it one of the most popular small business structures.
-Corporation: Similar to an LLC, a corporation provides limited liability; however, it can be more complicated to setup and maintain.
5. Understand your legal obligations: You must file the appropriate business formation paperwork to ensure your new business has a solid legal foundation. This includes:
–Registering your business with the appropriate government authorities
–Obtaining the required permits and licenses
–Meeting all federal and state tax requirements, such as applying for state and federal tax ID numbers
6. Grasp the importance of website marketing: According to eMarketer, digital ad buyers in the U.S. will spend $191 billion in 2021, which is a 25% increase over 2020. With stats liked these, it is vital to tap into website marketing, social media marketing, and influencer marketing for your small business model. Some important things to consider:
–Registering a domain name should be one of your first steps to starting a new business. This name represents your organization’s space on the Internet, as well as a customer’s or subscriber’s first impression of your business.
–Create a company-branded email address. The web address can also be used as an email address. A company-branded email address gives your business a professional channel for communication with customers when you begin email marketing campaigns.
–Develop a website. Web development is one of the best tools to grow your business because it provides numerous online marketing opportunities and credibility. Today, easy do-it-yourself tools and templates enable business owners to create their own web design. It’s crucial as well for your search engine optimization (SEO) strategies.
–Promote your domain name. Add it to social media platforms and apps that your customers frequent and online directories where your business is listed to drive traffic to your website.
In today’s digital world, most customers consistently use the Internet and various search engines to look for and research products/services. So establishing a digital presence is essential in building your brand and establishing credibility with your own website.
7. Launch your new online business: Make your e-commerce website live and announce to the world that you’re open for business. Use a marketing strategy for your announcement which can be made in several different ways, includingsocial media platforms, your email list, online ads, and traditional ads.
It is important to follow these steps in order to lay the groundwork for your online business venture. Once these tasks are complete, you can devote your time to running and marketing your new business—and finding professional success.
Still have questions? Our Business Formation Experts are ready to assist you on your business dreams and provide you with peace of mind that your business needs are in the right hands .
So, start your business with confidence, knowing that Inc Authority is here to answer all your questions. Form your free LLC today!