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Start-up Costs That You Can’t Avoid When Launching an Online Business

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The internet has dramatically leveled the playing field for small business owners who want to compete with larger corporations. Today it is possible for just about anyone who desires to start an eCommerce business to do it for a fraction of the cost of starting a traditional store.

Although online businesses may be cheaper to build, it is still impressive how fast bills can pile up. There seem to be endless ways to drain start-up capital. While overspending is not a smart business strategy, there are some products and services that new online business owners simply can’t or shouldn’t skimp on.

Start-up Costs That You Can't Avoid When Launching an Online Business

1. Forming a company

S Corps, LLCs, sole proprietorships, partnerships, there are many ways to form a company, and the process for each of them is confusing. With significant advantages and disadvantages for each type of entity, business owners need to choose what is the best to meet their needs. That is why business owners need to consult with an accountant as early as possible during the start-up process.

When it comes time to fill out the paperwork and file, many businesses choose to avoid all the headaches and hire a service to do it for them. Most of these services offer reasonable rates far below what an accountant would charge.

2. Consulting a lawyer

Trying to save money by navigating the legal waters without a legal professional is dangerous. In today’s litigious climate, failing to speak with an attorney specializing in online business law can cost far more than legal fees. An attorney is indispensable when creating legal and binding terms of service and other policies to writing employee contracts.

A good business lawyer isn’t cheap, but a subscription-based legal service is one way to limit costs. Subscription-based legal services can offer basic legal advice for a recurring monthly fee may be appropriate for some businesses, especially in the beginning.

3. Consulting an accountant

Accountants may seem stuffy and boring, but they are necessary for starting and owning a business online. Accountants do more than deal with taxes. They can advise on corporate structure, payroll issues, and other financial topics.

Not all accountants are familiar with small or online businesses, so getting recommendations from other business owners is smart. Accountants charge by the hour or have a fixed fee for their services.

4. Buying the proper coverage

All online businesses should have a business owner’s policy (BOP) that bundles the most critical insurance policies, including liability, commercial, and income protection. Since eCommerce businesses deal with sensitive and private information, data breach insurance coverage to protect a company from the consequences of hackers is essential.

Some online businesses may also want to consider:

  • Product liability coverage
  • Workers compensation coverage

Shopping around for business insurance is an excellent way to find discounts since prices for coverage vary widely.

5. Designing a logo 

A logo is more than just something pretty to put on a website; it serves a real purpose. In a world where people are bombarded with marketing messages almost every waking minute, a unique logo can cut through the noise and capture the attention of a potential customer, or it can turn them off immediately.

The immense power of a logo is why it is worth paying a graphic design professional to create one that is both memorable and encapsulates the foundational principles and culture of a company. Most professional graphic designers will charge hundreds, if not thousands of dollars for a logo design, so if budget is a concern, you can also go for the DIY approach with a logo maker. or find freelancers willing to create a logo for a few bucks.

6. Paying for your website

There may not be any physical properties like storefronts or office buildings with an online business, but that doesn’t mean you won’t have to pay for virtual ones. A beautiful, well-performing website is essential for a successful online business. Prices for creating and maintaining a quality website vary widely, ranging from a few hundred to hundreds of thousands, depending on what you need. Here’s a breakdown of the essentials:

Getting a domain name

A domain name is more than what customers type into the address bar at the top of their browsers. It helps to shape the identity of a business. There are many suggestions for choosing your domain name online, but registering it isn’t free, whatever you wind up selecting.

The cost to register a domain name varies depending on the domain registrar. However, in most cases, it is cheap. Most companies charge well under twenty dollars, sometimes as low as 99 cents for basic registration. Additional services such as protecting the domain name from poaching and providing extra privacy can quickly raise the price but may be worthwhile.

Hosting a site

A website needs plenty of storage space and a way for users to access it. A web host provides this to website owners for a fee. This fee can be as low as a few bucks to hundreds or even thousands of dollars a month.

Choosing a host is often the first place where a new online store owner makes a mistake. Since there is such a huge range of fees for hosting, start-ups looking to save money tend to go with lower-priced hosting packages. But these basic hosting bundles might offer poor security and more extended downtimes which are bad for business. Small sites can get decent hosting for between 25 and 75 bucks a month.

Designing a website

Website design is more than just a way to promote a brand. It is a critical part of an overall business. Even if a company offers the most incredible products in the hottest niches, if the business’s website is confusing to navigate or the ordering process is too complicated, no one will want to buy anything from the site.

Many profitable e-commerce sites choose to use premade website templates. The low initial cost of this option makes it attractive to those on a limited budget, but there are trade-offs. Templates restrict a site’s functionality and may not fit the brand’s look. That is why some businesses opt to go for customized websites even though they are much more expensive. Since many successful eCommerce stores will eventually upgrade to a custom site, spending the money now for a better experience for the customers and site owners may be money well spent.

Creating sales copy

Even an ugly website can earn money if the content, and most importantly, the sales copy, is good. Just like a great salesman in a brick and mortar store, sale copy is what takes a reluctant browser through the sales process to become a paying customer. Traditionally, sales copy included just text, but today online businesses are discovering that videos and interactive presentations can be even more effective at driving sales.

Website owners can create their own content, but taking this route requires a lot of time and often delivers disappointing results. Despite the additional cost, outsourcing content creation and sales copy is often the best option.

Implementing an eCommerce platform

Running an internet business requires more than just listing products and prices. A good eCommerce platform helps the owner by providing an easy way to list products, control inventory, automate shipping costs, add correct taxes to the charges, and complete many other small but crucial backend tasks.

There are several kinds of eCommerce platforms, from all-in-one options that provide turnkey storefront solutions to shop cart plug-ins that are easy to add to almost any existing site. Some platforms are available as SaaS, while others are one-off purchases. Prices can vary widely.

Setting up a payment processing solution

A payment processing solution allows customers to make purchases through credit cards, bank accounts, and third-party wallets like PayPal and Apple Pay. Many eCommerce platforms include payment processing options, but almost all require business owners to have their own accounts with processors.

When comparing the cost of several payment processors, business owners need to be aware of all the charges. Not all companies charge the same way. Some have high monthly fees and lower costs per transaction, while others have high transaction fees and low or no monthly costs. Online companies can save a lot of money by choosing a fee structure that matches their business model.

7. Customer service infrastructure

One of the biggest customer complaints about online shopping is poor customer service. Not getting a quick answer to a simple question may prevent a potential customer from committing to a purchase.

Deciding how to engage with customers is a critical step and expense that many new online business owners fail to consider during the start-up process. There are many options to interact with customers, including telephone, online chatting, or email support. Each of these methods has benefits, drawbacks, and costs.

8. Promoting the business

What would happen if a business opens and no one notices? That is not a question many business owners want to learn the answer to firsthand. While marketing doesn’t have to cost thousands of dollars, savvy business owners know that advertising is a necessary cost.

Trying to save a little money by taking a do-it-yourself approach to advertising can be a mistake. There is nothing like marketing to prove that the old saying, “it takes money to make money,” is correct. Skilled marketers who are knowledgeable when it comes to promoting an online store can offer businesses an impressive return on their investment.

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