Start an ecommerce store by following these 9 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your ecommerce store. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening an ecommerce store?
This business requires the creation of a website, the use of servers, inventory, relationships with shipping companies, employees and marketing. Building a polished ecommerce store website that is secure enough to permit the safe transmission of bank account and credit card information will cost several thousand dollars. Plan on spending thousands more on marketing to increase the public's awareness of the ecommerce store. Computers, servers, and inventory will likely cost tens of thousands of dollars. Employing web experts to launch the store will require paying salaries in the range of $30,000 to $50,000 or more.
What are the ongoing expenses for an ecommerce store?
The business requires computers, a high-speed web connection, printers, servers, office supplies, employees, insurance, a space to operate, a space for inventory and marketing. Plan on spending $30,000 to $60,000 per year for website designers, user experience designers, marketing gurus and other professionals. Office administrators who handle clerical duties and customer service will likely make $10 to $15 per hour. The cost of your office and warehouse for inventory will hinge on the economics of your particular location. Budget in at least several thousand dollars to pay for the monthly rent and utilities of these spaces. Budget another $500 to $1,000 each month at a bare minimum for marketing. Plan on spending the same amount for servers, computer-related equipment and office sundries.
Who is the target market?
The target market is those who are looking for specific products that can be purchased and delivered in an affordable manner. Just about everyone is willing to order products online from ecommerce stores. As long as your prices are at or below those of competitors and your delivery times are reasonable, people will consider shopping at your ecommerce store.
How does an ecommerce store make money?
This business makes money by selling goods or services on a website. Customers pay with credit cards, bank accounts, Paypal, Bitcoin or another means. The product is then delivered to the paying customer.
How much can you charge customers?
Customers can be charged anywhere from a couple dollars to thousands of dollars for goods and services purchased on your ecommerce store. The exact cost hinges on the product in question, the supply/demand and competitors' prices.
How much profit can an ecommerce store make?
The potential for profit ranges from a few thousand dollars per year to billions. Build your ecommerce store into a powerhouse like Amazon.com and your business will rake in billions of dollars per year. However, entrepreneurs should not lose sight of the fact that Amazon.com lost money for years before turning a profit. Be patient, perfect your ecommerce store and your business will eventually make good money.
How can you make your business more profitable?
Sell advertising space on your ecommerce store website. If you have a contract with shipping companies for product deliveries up to a certain monthly/weekly volume but do not reach this limit, consider charging other companies for deliveries with the remaining volume. Consider establishing a members' rewards club in which repeat customers receive price discounts or faster shipping. This style of offer encourages increased spending on your ecommerce store and further enhances customer loyalty.
What will you name your business?
Choosing the right name is very important. Read our detailed guide on how to name your business. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your ecommerce store is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
Form Your LLC
Read our Guide to Form Your Own LLC
Check out the Top Business Formation Services from our friends at StartupSavant.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Recommended: You can get $300 when you open a Chase Total Business Checking® account with qualifying activities. Learn More.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate an ecommerce business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Trademark & Copyright Protection
If you are developing a unique product, concept, brand, or design, it is prudent to protect your rights by registering for the appropriate trademarks and copyrights.
The nature of legal requirements in distance education is ever changing, especially in regards to copyright laws. Here is a frequently updated resource, which can help keep you aware of the legal requirements.
STEP 7: Get Business Insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market an ecommerce store
Promote your ecommerce store on the web through pay-per-click advertising, social media advertising, search engine optimization and traditional outbound ads on TV, radio, newspapers, magazines etc. Ecommerce stores typically sell products to a wide variety of people so try to reach the masses with your marketing efforts.
How to keep customers coming back
Customers flock to ecommerce stores with the lowest prices. Check your competitors' prices on a regular basis to ensure your prices are competitive. Do not sign a long-term deal with a shipping company. Gauge your shipping company's performance on a regular basis to determine if a competitor can deliver your items quicker or cheaper. Fast shipping at a low cost will certainly help your ecommerce store retain customers. Yet what matters most is price. Customers will return to an ecommerce store that offers competitive prices.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start An Ecommerce Store In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
If you are looking for a way to provide people with goods and services, an ecommerce store might be the right business for you. These online stores are especially helpful for customers who can't find the goods they need at local stores. Ecommerce stores really do make a meaningful difference in lives and even the success of businesses as they provide diverse goods at low prices. If you are interested in improving quality of life, making people happy and have an interest in business and/or the internet, an ecommerce store is worth your time.
What happens during a typical day at an ecommerce store?
Ecommerce store activities are centered on transactions. Everything from listing products for sale to altering prices, coordinating deliveries, ordering inventory, writing product descriptions and performing website maintenance is necessary. Employees often meet with one another to develop business strategies, select product offerings and improve the logistics of deliveries. There is also plenty of interaction with the product delivery companies who transport the products to customers.
What are some skills and experiences that will help you build a successful ecommerce store?
A knowledge of web design, marketing, internet security, and computer programming will certainly help an entrepreneur who launches an ecommerce store. The business owner should have a thorough understanding of supply and demand as well as other economic principles. Yet what matters most is expertise with the web. The ecommerce store website must look polished, have an intuitive user experience design and function without flaw.
What is the growth potential for an ecommerce store?
Ecommerce stores are rapidly growing in popularity. People are flocking to the web for purchases rather than shopping in traditional brick-and-mortar outlets. The bottom line is shopping at an ecommerce store is convenient, cheap, and easy. There is no need to pay for gasoline and spend time traveling to and from a traditional brick-and-mortar retail store when one shops online. This is precisely why ecommerce stores will continue to grow across posterity. Start your ecommerce store today and there is the potential for it to evolve into a highly successful business with rapid sales growth.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting an ecommerce store?
Find a niche in which there are few competitors but significant consumer demand. Do not attempt to try to sell a broad array of products. Establish relationships with product manufacturers and you will stand an excellent chance of bringing their products to market at the lowest possible price. Above all, invest in your website. Digital security is of the utmost importance. If your checkout process is not secure or if customer information is not stored in a secure manner, people will avoid your ecommerce store. Key in on the user experience design. If the website is easy to operate, intuitive and aesthetically pleasing, customers will be inclined to buy products from your ecommerce store.
How and when to build a team
Though you might be able to launch an ecommerce website on your own, if you have a background in web design and user experience design, you will likely need assistance sooner rather than later. Add a marketing expert, website design expert and customer service staff as soon as possible. These individuals will help you maintain a high-quality ecommerce store and resolve customer issues.