How to start an online business in 8 steps
Starting an online business requires the same diligence as starting a brick-and-mortar business, plus some unique steps.
This article is for informational purposes. This content is not legal advice, it is the expression of the author and has not been evaluated by LegalZoom for accuracy or changes in the law.
In many ways, the internet has leveled the playing field for small business owners everywhere. Online businesses are relatively easy to start, without the kind of up-front costs a brick and mortar business demands. However, this relative ease doesn’t mean that you can simply jump in and hang out your shingle.
As with any business, you need to establish a strong footing for your online business. While the steps outlined below don’t necessarily have to be completed in order, their objective is to provide you with a foundation that’s solid enough to bear the weight of your future business growth and success.
1. Assess the viability of your new business idea
Just because it’s easier to start an online business doesn’t mean no costs are involved. As with a physically based business, the first step to take with your online business is to assess your idea’s feasibility.
The most brilliant business idea can be unsuccessful if your product or service has no market. Even if you’ve hit on the solution to a problem that plagues many people, you’re just throwing money away if the problem turns out to be one that most people don’t care enough about to spend time or money solving.
With this in mind, you need to evaluate your idea. The following are just a few of the questions you need to ask yourself:
- Does your product or service solve a problem that enough potential customers have?
- Does your product or service provide a cost-effective solution to that problem?
- Are people willing to spend money to solve the problem?
- How costly will it be to reach the people in need of the solution your product or service offers?
2. Develop a business plan
Once you know your idea is feasible, it’s time to put together a comprehensive business plan. Even if you don’t plan on obtaining funding for your business, at least not initially, having a business plan is valuable because it lets you spot any potential bumps down the road and plan for future growth and profitability.
The work you did in step one gives you a good base from which to develop your business plan, and multiple resources are available online to help you put together the core elements of a solid plan.
An effective plan will help you to identify your market further, clarify your objectives, provide a marketing roadmap, and assist you in making the kinds of decisions that may mean the difference between success and failure.
3. Choose a business name
Choosing your business’ name is an important step in the startup process. Because your business will primarily function online, your chosen name must be available for registration as a business name in your state and within the digital space.
This means you will need to check whether the name you want is available as a:
- Business name in your state
- Domain name
- Username on each of the social media platforms you plan to use
If your chosen name isn’t available as a domain name or social media username, consider different permutations of the name, and remember that many domain name extensions beyond the original “.com” are available. Additionally, it’s important to check that your name and domain name aren’t impinging on any registered trademarks.
4. Decide on your business structure
The business structure you choose will dictate the legal and tax requirements you need to meet. Most small business owners choose from the following structures:
- Sole proprietorship. This is the simplest form of business structure, but its lack of limited liability offsets its simplicity.
- Partnership. While this form of business structure might appeal to you if you are embarking on your venture with a partner, your liability is unlimited like a sole proprietorship.
- Limited liability company (LLC). An LLC offers limited liability without the additional complexity of incorporation, making it one of the most popular small business structures.
- Corporation. Like an LLC, a corporation provides limited liability, and while it’s more complicated to both setup and maintain, it may be a good choice depending on your circumstances.
It’s always a good idea to consult with an attorney to determine the appropriate business structure for your new business. Because each structure has different tax requirements, you may also want to consult a tax professional.
5. Take care of all the legal tasks
Like a brick-and-mortar business, you will need to file all the appropriate business-formation documents and other paperwork to ensure your new business has a solid legal foundation. This includes:
- Registering your business with the appropriate government authorities
- Obtaining all the required permits and licenses
- Meeting all federal and state tax requirements, such as applying for state and federal tax ID numbers
Since these requirements vary on a state-by-state basis and the nature of your business, it’s important to do your research so you meet any applicable requirements. Again, it’s often helpful to consult with an attorney with experience in business startups in your particular industry to make certain you’re on the right track.
6. Build your website and choose your sourcing and fulfillment methods
An online business’s website is as important as the physical location of a brick-and-mortar company, and you should put as much care into this part of the startup process as you would if you were location and lease shopping.
When looking at how you will build your website, consider available payment processors. For many online businesses, hiring a website developer to help build your site makes sound business sense.
The web host you choose is an important consideration as well. You can have a top-notch website, but it will do you no good if your host has too much downtime or if the speed of browsing your site is too slow.
In addition to checking out reviews online, consider asking your personal and business network contacts. Other online business owners in particular, can provide invaluable information about a web host’s reliability.
Depending on the products or services you’ll be offering, you will also need to evaluate and choose your sources of supply and inventory, as well as how you will deliver your product or service to your customer. Again, a number of options are available. Given the importance of having inventory on hand—or a good on-demand provider—and a reliable method of fulfillment, spending adequate research time on this aspect can mean the difference between success and failure.
7. Develop and implement your prelaunch marketing strategies
It’s important to market your online business while you’re working on each of the previous steps. Your business plan will have provided you with the information you need to develop effective marketing strategies for your potential market. No matter what strategies you go with, it’s important not to skimp on implementation.
By building up your target market’s anticipation of your launch through social media and various advertising methods, you will be paving the way for a successful launch.
8. Launch your new business
While you won’t actually be “cutting the ribbon” the way you might with a physical business, you’ll be doing so metaphorically when you make your website live and announce to the world that you’re open for business.
This announcement can be made in a variety of ways, including:
- Social media platforms
- Your email list
- Online ads
- Traditional ads
During the launch phase, you will reap the benefits of the work you did during your prelaunch marketing.
Of course, your work will have only just begun, but by going through these eight steps, you will have built a solid foundation for your online business.
Laying the groundwork in this manner means you can devote your time to running and marketing your new business, rather than dealing with the various fires that might arise if you’d neglected any of these important steps along the way.
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