As the web master for a number of online business ventures, I
can say that there’s a lot that goes into opening any online
store – whether it’s selling DVDs, selling clothing,
or promoting other people’s products through affiliate programs
and links. There are a number of questions to ask oneself when creating
an online store or service:
- Will I make a cash outlay or obtain financing for products
of my own, or will I enter into an affiliate program and earn
a commission for driving traffic to another website?
- If I open a store of my own, where will I obtain merchandise
at wholesale prices?
How will I budget my spending?
- Will I design my web site myself, or will I hire someone to
do it for me?
- How will I promote my web site?
- How will I handle Customer inquiries, complaints and returns?
The first thing to consider when you start an online business is
whether to carry your own product, or to enter into an affiliate
program. If you do it yourself, you will need to invest capital
towards starting the business and obtaining merchandise. If you
have good credit, you can leverage most of the start-up costs on
credit. For the newbee business owner, the easiest and quickest
way to obtain credit is by applying for credit cards. The interest
is substantially higher than a bank loan, but if you follow the
proper steps for launching your business – registering a name
with local, state and federal agencies and possibly getting incorporated,
then you will get credit card applications in the mail on a daily
basis. Many of them offer 0% interest for 6 months to a year, so
be on the lookout. Just be absolutely sure that you can afford your
payments and that you don’t dig a hole you can’t get
out of. Calculate how much you make at your day job, and how much
of a monthly payment you can afford. At the time this article was
written, our personal experience has shown minimum payments equal
to about 2% of the total balance for any given card. Be conservative
though – if you can afford $100 a month, carry a balance with
a minimum payment of $50. As your online business starts to grow,
you should periodically compute your average profits from sales
per month, as well as your expenditures and loss due to purchasing,
theft, breakage etc. The best thing to do is to learn some skills
using spreadsheets like Microsoft Excel, where you can tabulate
all your dollar figures to see if you’re making – or
losing money.
If you decide to sign up for an affiliate program (selling for
other people to earn a commission), you have things much easier.
There is no cash outlay other than setting up your website, and
your focus is simply promoting your site. One drawback to affiliate
sites is that you are banking on people clicking through your site,
and immediately making a purchase. In most cases, if the person
signs up or buys something at a later date, you make no commissions.
Also, profits are much higher when you carry the product yourself
– if a typical affiliate structure pays out 25% of total purchase
price, carrying the same product in your own inventory might earn
you double, or more. However, your risk is much higher. If you can
sign up for a program where you get recurring income, go for it.
For example, if you sell rental subscriptions or monthly memberships
for a web site, you might earn a commission every month that the
person is a member – read the fine print though as some web
sites may only offer a one-time flat rate commission for new members
you bring in.
Another risk vs. benefits question is with regards to opening
a merchant account and accepting payments yourself, or letting an
affiliate site take care of that for you. With an affiliate program,
you need not worry about payment processing and will almost never
have to deal with any complications involved with financial transactions,
other than perhaps a chargeback, where you would lose your commissions.
With your own product, you can either open your own merchant account,
or sign up for a payment processing service. With a merchant account,
you have your own company name on the billing (be tasteful in choosing
your company name for billing purposes), and the fees you pay are
substantially lower than if you used another payment processor.
For mainstream sites, you should be fine, provided that you follow
standard protocol and use common sense when taking orders. Note
however, that with an adult site, you will have to keep chargebacks
(returns where the customer complains to their credit card company
about you directly) to a bare minimum – less than 1%. Otherwise,
you will pay extremely high fees and may lose your account.
If you decide to launch an e-commerce site, one of our first steps
after registering your business is to make contacts in the wholesale
industry. We found that searching the Internet yielded the best
results. Google searches for “wholesale + your product”
might be a good place to start. So, if you’re selling widgets
and need a supplier, try Googling for wholesale widgets. Compile
a list of wholesale distributors and contact them all. Many may
not answer you, but a few will. As you build these relationships,
you’ll pick a few you like most – for price, selection
and service. You might start out buying from 10 different suppliers
and eventually narrow the wholesale supplier list down to 3 or 4.
I’d always try to keep more than one in the loop, in case
your main wholesaler has difficulties providing your product. Buying
in bulk is a great way to save money. In addition, you might luck
out and find a wholesaler that does drop shipping, meaning that
there is no out-of-pocket expense and they take care of all the
shipping for you.
When you know where you’re going to be buying your merchandise,
it’s time to get your site designed. Some people think that
knowing a bit of HTML is all it takes, but a great deal more goes
into it. If you have the money, hiring a professional designer might
be your best option. For a basic store, this might cost a few thousand
dollars for a nice site with some promotional work included. For
more complicated web sites, it might cost tens of thousands of dollars
to produce, due to the complicated software. Naturally, if you are
on a shoestring budget, and have a few skills to get the job done
yourself, then go for it. This is a lot to take on though –
inputting data, scanning, purchasing, designing, search engine optimizing
- don’t even consider it unless you have a strong understanding
of both web design and interfacing with a database. You will also
need to understand how and when to use secure pages when obtaining
credit card and other sensitive information on your site (by way
of installing an SSL certificate), and how to store data so that
it can’t be easily hacked. For example, you should never store
credit card numbers on an online server. They need to be encrypted
and stored locally (in your office etc) where people can’t
get to them easily.
During, and not after the design process, you need to think about
how you will promote your website. There are a few ways to do it,
including: search engines, pay-per-click advertisements, banner
ads on other websites and conventional print and mail advertising.
You’ll have to sort these things out ahead of time and plan
a budget. If you’re on a shoestring and don’t have a
lot of time on your hands, pay-per-click advertising is a great
way to go. You might pay 6 cents per click, and if you target your
audience well, it might only cost a couple dollars to gain a subscriber
that sticks around for several months. You can also do banner advertising,
where you pay per impression – i.e. you might pay a fraction
of a cent every time someone views your ad. This is fine as long
as your ad is highly targeted – otherwise it will be a waste
of money. You can also try working the search engines, but it can
take many months before you start seeing results, and you’ll
have to do a lot of research (several hundred hours) to figure out
what makes them tick. Don’t waste your time or money on programs
that charge you to auto-submit your site to thousands of search
engines. You only need to worry about the major ones – Google,
Yahoo, MSN and maybe Alltheweb and Alta Vista. Many of the others
feed off of these results and you’ll find your way in. The
best advice I can give you here is to use common sense – do
things that make sense logically and keep your site organized, and
don’t swap links with sites that do not follow these basic
principles or that appear super spammy. If it looks shady, it probably
is. Do swap links with other quality web sites, particularly if
they are in the same field of interest that you are promoting.
One side of being a Webmaster that is often overlooked is the
customer-service aspect of it. Be prepared for questions from potential
buyers, and be professional, prompt, accurate and courteous in your
responses. If you have your own merchant account, many providers
request that you post a phone number on your site. This is a very
good idea, as some customers will want to hear a human voice to
reassure them that your company is legit. Don’t worry, you
won’t get many phone calls in the beginning, but when they
come, try to anticipate the questions, and make sure you have full
access to whatever information the person might need. Also, don’t
ever give out personal information about an account to someone that
calls unless you have verified their identity by asking them for
information first – it’s very unprofessional and could
get you into a heap of legal trouble. And never under any circumstances
read back their credit card number. Also, never ask your customers
to email credit card numbers to you – anyone can intercept
an email easily, and you may be held liable for damages. Get them
to give their credit card number to you over the phone or by using
a secure, online form.
That’s the long and short of what it takes to start an online
business. Putting together a profitable website takes a great deal
of work, discipline and thought. Before jumping into it, weigh your
options, check out the competition to see how saturated the market
is, and do things the right way. If you can afford professional
help (accountant, lawyer, web designer etc), get it. It’s
better to do things right from the beginning than to waste time
patching up mistakes down the road.
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