If you’ve ever thought of starting your own online business, there’s no better time than the present to get started.
More people than ever are shopping online and the global online shopping market hit nearly 4 trillion in 2020. According to Insider Intelligence forecasts, it is predicted to grow to $6 trillion by 2024. This means that with each passing year, your pool of potential customers expands because more people are adapting the habit of online shopping.
It’s a lot easier to start an online business than a brick and mortar shop. All you need is a computer, which you probably already have. The rest is figuring out the logistics, including your target market, your sourcing, your sales model and more.
In this article, we’ll outline 11 steps you’ll need to take while building a profitable online business from home.
Note: This article focuses on building a business that sells physical products, rather than a service-based business.
Benefits of Running An Online Business From Home
What are some of the perks of running your own online business from home?
- It requires less capital to get started than a brick & mortar business. There’s no need to sign a lease, hire employees or buy furniture.
- Selling online is cheaper than physical selling. You’ll have very few overhead expenses, utility bills, maintenance costs or salaries to pay.
- You can sell your products to customers anywhere in the world, so you have potential for huge growth.
- You can operate your business 24/7, without the need to be physically present. (Making money while you sleep feels pretty great!)
- You’ll be able to operate your business from anywhere, whether that’s a tropical island, or from your own comfy couch. You can use your work to live a fulfilling life and travel the world.
11 Steps to Starting An Online Business
1. Finding Your Niche
The first step to starting your online business is to figure out what type of business you’ll be the best at running. If your business is related to your passions, strengths and interests, you’ll have more sustained motivation over time because you’ll care more about what you’re doing.
A great way to get started is to ask yourself the following questions:
- What do you care deeply about?
- What could you keep learning about for years and never lose interest in?
- What brings you joy and excitement?
- What is something you already have a deep understanding about?
- What are you really good at?
Of course, it’s possible to run a successful business selling any type of product. As long as you get the strategy right, your product doesn’t have to be something you really care about.
However, since you’ll spend so much time and energy building your business, it really helps if it’s something that will continue to stir your interest over the long term. Many of the most successful businesses started with a mission and a purpose behind them.
2. Define Your Target Audience
Another important step when starting a business is to define your target audience. A major mistake many business owners make is assuming they can sell a product that “everyone” will want to buy.
However, trying to appeal to everyone is a surefire way to spread yourself too thin and fail. Instead, focus on a specific target audience so that you can really get to know and understand your customers.
During this stage, it’s helpful to create a customer avatar. This is an imaginary person who represents your ideal customer. Here’s a really simple five minute video you can follow along with to create your customer avatar.
3. Find a Problem to Solve
Many people starting a business make the mistake of looking for a product first, then looking for a market for that product. Instead, it makes much more sense to think about how your product is solving a problem or fulfilling a need for your target market.
When you offer a product that will solve a problem for your customers and make their lives better or easier in some way, they will be willing to part with their precious cash to get their hands on it.
How can you find out which problems are in need of solving? Here are some ideas for how to research this:
- Check out the online forums your audience uses and see what questions people often ask. You’ll get an idea of the obstacles they are facing and the problems they are trying to solve.
- Do keyword research to look for keywords related to your niche. Answer the Public is a great place to start. You can enter a keyword and see what questions are being asked in online searches related to that keyword.
- Take a look at what other existing competitors in your niche are offering to fill demands and solve problems. Then, assess the weaknesses of their product and offer something that solves the problem even better.
The most important thing to remember is that the customer should always be the hero of the story, and the product should be designed around their needs.
4. Conduct Market Research
Thanks to the internet, it’s never been easier to conduct market research before starting an online business. There are so many useful resources at your fingertips, including online questionnaires, web searches, forums, blogs and more.
One of the important steps is to make sure your product has market viability. If a market is “viable” that means it will continue to be profitable for a long time.
For example, if you are selling merchandise related to a specific event, you might find that demand dies down after that event is over. But if you’re selling something timeless that your customers will always want, you’ll have a viable business for many years.
How do you find out what people are looking for? You can start by checking SERPS and keywords, as well as conducting online surveys. Here are some useful tips on research tools and techniques.
5. Analyse Your Competition
When you’re developing your business idea, you’ll also need to think about your competition. After all, you’ll likely not be the only business providing products like yours. So, you’ll need to think about what makes you unique.
Who are your competitors? Are there a lot of them? If there are many other businesses out there like yours, you might struggle to compete unless you find a way to stand out among them.
What are they offering? How much money are they making? What are their strength and weaknesses? What can you offer that is different than them and sets you apart?
This differentiation can be something you highlight in your marketing. Point out the cons of choosing your competitors, and how your product offers an advantage compared to theirs.
6. Source Your Product
The next step in the process is to decide how you are going to source your product. A product that you sell online can be produced locally, or it can be imported from another country. Some of the options for sourcing include:
- Finding a manufacturer who can produce custom products. This will suit you if you have a unique idea for a product that needs to be custom built. The downside is that you’ll need to invest money upfront in your inventory.
- Use a wholesale supplier for third-party goods. This can be a great way to get up and running quickly. You can order in bulk and get a lower cost per unit (therefore a higher profit) on products that have already been proven to have demand in the market.
- Or, you might use a dropshipping model which means you won’t hold or manage inventory or ship orders yourself. You market products in your store and once a customer places an order, the source ships the product for you.
The decisions you make at this stage might mean you need to address the legal compliance of your product in the location where you are selling it. (We’ll get into that in more detail later!)
7. Figure Out Which Platform To Use
It is possible to build and host your own eCommerce site, but you don’t need to do that to start an online business from home. You may choose to use a third-party eCommerce marketplace such as Amazon, eBay, Alibaba or Etsy.
Building a business through one of these platforms can be a lot simpler, as the system is already set up for you and you don’t have to start from scratch. You’ll need to pay some fees to use the platform, but it will also be easier for your customers to find you.
Of course, these business platforms are not created equal and they all have their own pros and cons. Some of the factors to consider when choosing an online marketplace platform include:
- What are the fees involved in using the platform? Do you need to pay a monthly fee, or a processing cost for each product you upload?
- What payment methods does the platform accept? Will those methods be convenient for your customers?
- How does the platform handle scaling? Will it be able to accommodate your business as it grows?
- Is it easy to create product categories and connect them together?
- Are you able to create different shipping options based on the needs of your customers?
- How easy is it to customise your storefront with your unique logo, imagery and product variations?
- How mobile friendly is the platform?
- Can you integrate other tools (such as Google Analytics) into your online store?
These are just a few of the many questions you should ask when choosing a platform. But the bottom line is that you’ll have the most success with the platform that serves the needs of your customers.
8. Make Sure You’re Legally Compliant
No one wants to end up in legal trouble. One of the most important steps of starting a business is to understand the laws and regulations involved in selling your product. If you are selling products in another country, you’ll need to be aware of how the law applies there.
For example, if you sell certain products into the EU, you will need to appoint an Authorised Representative. The Authorised Representative acts as a liaison between the manufacturer outside of the EU, and other competent national authorities within the EU.
This person is responsible for making sure that the products being sold are safe and of good quality, which reduces the risk of accidents, injuries and product recalls. Without appointing an Authorised Representative for your business, you could be putting yourself at risk for your products not being allowed to enter the EU.
Of course, whether or not you need an authorised representative and whether they are legally responsible for defective products depends on the particular industry you are in.
In fact, there will be a lot to figure out that will be specific to your location and your industry. You might want to consult with an expert to make sure you are setting up your business correctly from the beginning, so you don’t face legal obstacles on the way.
9. Develop Your Brand Identity
Branding is much more than simply choosing a name and a logo for your business. It’s about building a story around your company that your customers will connect with emotionally.
Why is it so important to develop an identifiable brand for your business?
- You’ll be more recognizable and memorable to your customers.
- You’ll build trust by looking more professional and polished.
- A well-crafted brand helps you stand out from your competitors.
- A strong brand identity will attract your ideal customers, and repel the ones who aren’t a good fit.
- If your brand image evokes the values of your target customer, they will WANT to be seen wearing/using/owning your products.
This may be something you want to hire an expert to help you with. A talented designer can help you develop a strong “visual signature” for your brand that can be easily recognised and remembered by your customers.
10. Create a Marketing Plan
You’ve put lots of thought and time into choosing your product and building your business – but you won’t make any sales if no one knows your product exists! So, the next step is to think about how you will promote your business.
The key here is to go back to the customer avatar you created and think about how you could best reach that person. When you picture your typical customer, where do they usually find out about this type of product? Research the online behaviour of the demographic you’re marketing to, so you can decide which channel is the best way to reach them.
For example, do they often purchase products recommended by Instagram influencers? Or do they look to friends and family? Which social media channels do they use? Do they read blogs related to your niche?
- If you sell cosmetics you might discover that your Gen Z audience likes to watch Tik Toks by beauty influencers. You could partner with a popular influencer so that they will recommend your products in their videos.
- Perhaps you are selling high tech cameras and you realise that passionate photographers often do a lot of research before making a purchase. You can develop a PPC ad campaign that will show text-based ads on search engine results pages that they will see while researching.
- Or, you could create a hyper-specific Facebook ads campaign that will target a specific audience. Let’s say your product is astrological-themed jewellery. You can create a Facebook ads campaign targeting people who are interested in astrology and whose birthday is in a specific range. Then, create a specific ad that targets their star sign, such as “All you Scorpios out there will love our new range of bracelets…” etc. Ad a photo of a specific Scorpio product, and it will feel highly personal and increase the likelihood of conversion.
Every time you design a marketing campaign, be sure to pay close attention to the results to assess whether or not it’s doing it’s job. Which leads us to the next point step: monitoring your business metrics.
11. Measure Your Success
And last but not least, it’s essential to track the performance of your business so you can measure your growth and identify what needs tweaking. As the great management thinking Peter Drucker said, “You can’t manage what you can’t measure.”
But what metrics should you be measuring to track the success of your small business? Of course you should be keeping a close eye on your profits, but that doesn’t tell the full story. You should also be looking at:
- Your “income statement” (also known as a “profit and loss statement”) which shows how much money is going out as well as coming into your business. (Here’s a helpful guide on how to create an income statement)
- Your “balance sheet” which also includes all the assets your business owns, as well as any debts you owe and investments in the company. (Here’s a helpful guide on how to prepare a balance sheet.)
- A “cash flow statement” which will show you how many of your assets are liquid at any given time. So for example, if you’ve made a lot of profit in the last quarter but you are still waiting for payments from your customers, you can’t actually use the money you’ve earned yet. Knowing the liquidity of your money is important, so you’re aware of how much you have available to invest in marketing, inventory, etc. (Here’s a helpful guide on how to prepare a cash flow statement.)
- You’ll also want to look at how many repeat customers you have. You don’t want your customers to buy a product once, be unhappy and then never come back again. Ideally, you’ll keep them coming back because it’s always easier and cheaper to attract repeat customers than acquire new ones.
- Your Customer Acquisition Costs are also an important metric to measure. That’s the average amount of money you spend to acquire a single customer.
- It’s also important to solicit customer feedback, so you can pinpoint any issues with your products and find out how to improve.
Keep in mind that looking at these business metrics isn’t something you’ll only do once. You’ll need to assess them again and again on an ongoing basis, so that you understand how your business is performing and what your next move should be.
Ready to Start Your Online Business?
Starting an online business might seem overwhelming at first. But as long as you take it one step at a time and plan things out, things will start to take shape.
It might take a bit of time for your business to gather momentum and begin making significant profits, so be patient and don’t give up! Once you start to establish your brand and build a loyal customer base, you’ll be able to enjoy all the benefits of running a profitable online business from home.
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