Long before choosing the perfect website design, e-commerce entrepreneurs have some legwork to do if their online business is to succeed and make money.
Whether taking an existing business online or launching a new e-commerce idea, entrepreneurs must plan carefully to receive the best return on their investment. Forrester Research estimates that online sales could climb to $156 billion in 2016. Businesses can increase sales, generate increased exposure and facilitate customer service by building a successful web presence.
It may seem that starting an online business is easier and quicker than launching the same concept in the brick and mortar world. Operating online can cost less in overhead and staffing. However, the research and planning phase is still an important one. Self-employment expert and small business coach Karyn Greenstreet lists “poor planning” as the second reason small businesses collapse in her article (Why Small Business Fail (or Fail to Thrive).
Spend time on the following five steps in the planning stage of launching an online business:
Market and Competition Research
Online business requires that the entrepreneur knows who they are competing with on a much broader scale. Investigate businesses selling the same or similar products and services; their pricing, marketing, customer service, reputation and business processes.
Try to identify opportunities to differentiate the new business from its competitors. For example, if most companies are shipping within the U.S., there could be a largely undiscovered market in Europe or Asia, if demand and shipping costs allow coverage of those areas.
Creating a Business Plan
A business plan can be a simple five page document, or a lengthy plan forecasting all kinds of scenarios and outlining methods of dealing with them. Regardless of the depth of the plan, cover at least the following sections:
- Executive Summary
- Business Information
- Market Analysis
- Marketing and Advertising
- Information on Owners and Management
- Plan for Growth and/or Expansion
A Google search brings up several helpful, free tools to help new e-commerce entrepreneurs create a professional business plan. This is an important document in securing financing and attracting investors.
Finding Products and Services
There are several ways to sell and make money online. Some e-commerce entrepreneurs already have a product or service and want to expand into the online market. Many businesses are interested in drop shipping or wholesaling. Others still are happy with affiliate marketing, where they recommend the products of others and earn a commission.
Try not to be everything to everyone. Finding a niche product to target a specific market. E-commerce businesses should keep product and service offerings limited to that they can do well and make the greatest profit.
Applying for a Merchant Account
E-commerce business owners need to decide whether they will use a true or third-party merchant account. Each offers specific benefits and has its own limitations. Generally, third-party merchant accounts are sufficient for new, smaller online businesses, while larger operations may need the customization of true merchant accounts. Click here for more information on these two different types of accounts.
Obtaining Accounting and Legal Advice
Even a small online business should seek the advice of accounting and legal professionals before launching. Spending this money to get set up properly can save thousands of dollars in headaches later on. An accounting professional can help with tax planning, payroll, choosing bookkeeping technology, internal controls and more. Legal guidance is necessary for help incorporating, creating contracts, hiring employees, arranging financing, etc.
Spending the time required to complete these critical first steps helps ensure the success of a new e-commerce business. When the goal is to make money online, the time spent planning is a smart investment with immeasurable returns.