How to Start an Online Startup: The 15 Vital Steps


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Starting a startup? The appeal of the Internet as a platform to promote and sell products or services is irresistible. Your place of business, your marketing literature and your communications hub are all in one location, and best of all, it costs relatively little. It’s like inheriting an empty business premises from a rich uncle plus enough money to get you up-and-running. That kind of luck would give any smart entrepreneur a competitive advantage, were it not for the fact that with an online business, everyone has a rich uncle.

Compared to a bricks and mortar business, there are less headaches in setting up online. Yet, in no respect can you be less professional than you would be if you were opening on the high street. Here are fifteen of the most important factors to consider carefully when setting up an online startup business. The list is divided into two categories: A) The Business Plan and B) The Website.

The Business Plan

Every kind of business needs a business plan. In a way, creating a business plan is like looking into the future and establishing where you expect the business to be in, say, a year. Based on that answer, you devise a strategy to enable you arrive there. However, one important operation must be carried out first: market research.

1. Market Research

Market research is vital. It establishes two facts. First, whether or not there is a viable market for your products or services. Second, whether or not you can compete in the market and still make a profit. Unless your research determines that there is such a market, there is little point in setting up the business.

2. Legal Entity

Will you operate as a sole trader, partnership or a company? Incorporation brings benefits and problems. The main benefit is that your personal liability for the company’s debts is limited to the amount of capital you invest in the company. Creditors have no claim on your personal assets outside the business, unless you sign personal guarantees for some of the company’s debts. Incorporation has disadvantages too. These include more paperwork, additional auditing bills, additional legal bills, extra filing requirements and less privacy of the business’s financial affairs. Make sure you get good legal advice before deciding on the trading structure you adopt.

3. Name of the Business

The name of a business can have a direct impact on its success or failure. Choosing it should never be rushed. Carry out online market research on the name to ensure no competitor already uses it or something similar. Since it will be an online business, research the availability of the related web domain name (see next item). Get it right first time. Once the business is up and running, changing the name is extremely disruptive and costly.

4. Internet Domain Name

Many big organizations such as Microsoft offer free websites with addresses that are sub-domain names of theirs. This means that your website is not just a location on their server, but your web address is part of their address. For relatively little cost, you can have your own unique domain name. For any serious business, this is a requisite, simply because it looks professional. The sub-domain option may give quite the opposite impression.

5. Paid Staff

Make sure you are fully aware of all the costs of employing someone, as well as your legal obligations to them.

6. Premises

If you intend to rent a premises, make sure you have legal advice on any contracts you propose signing.

7. Running the Business from Your Home

If you intend to operate the business from home, remember that it’s a business like any other except you save on rent. Allocate the room or rooms to your business and use them for nothing else. There are many downsides to working from home. They include: interruptions from family and friends. It takes time to convince them and yourself that, though you’re at home, you’re actually at work. On workdays, always be at your desk on time. Don’t linger over breakfast or coffee breaks just because your office is a few yards away from your breakfast room. Don’t waste work time on the phone with friends; tell them you’ll meet them after work. Don’t do household chores during working hours. Write out these rules and pin them over your desk. If you have family living at home, give each a copy: they need to respect your rules and support you.

8. Cash Flow Projections

Every business plans its cash requirements: its cash flow. Based on conservative projected sales, establish when you will be paid and that you’ll have enough cash to purchase new raw material or stock, as orders come in. Estimate your projected sales and outgoings (costs) for each month for at least six months. This way you’ll have a very good idea what your bank balance will be at the end of each month. For this exercise, it doesn’t matter where the money comes from: sales, borrowings, or investments; or what the money going out is spent on: raw materials, wages, utility bills, legal fees, accounting fees, courier services, rent, etc. The principal reason for doing cash projections is to have advance warnings of possible cash shortfalls long before they happen.

9. Working Capital Need

If your cash-flow projections indicate that you are likely to need extra working capital, you can raise it from your own resources, a business partner, investor, or the bank. If it comes from the bank, they may ask for collateral or that you sign a personal guarantee.

10. Unforeseen Customer Demand

Apart from normal working capital determined by initial cash-flow figures, circumstances sometimes require the emergency injection of capital. Unexpected demand for products or services is one common reason. It’s a serious problem if there isn’t enough ready cash to fund the additional stock or raw-materials needed to satisfy the sudden demand. This predicament is sometimes called “overtrading,” and strategies should be devised to deal with it. This problem is caused by sales outstripping product availability. It is usually only a problem if you give credit to customers. If you insist on pre-payment, overtrading is usually not an issue.

11. Dispatching Goods

If you sell physical products, careful consideration must be given to their delivery, insurance, postage and packaging. New business owners often pay scant attention to these basic questions. Before you start selling, make a parcel of each individual item you expect to dispatch. From the Post Office, find out the cost of sending them to different locations and from a courier service the cost of their various delivery services.

12. Returns and Refunds Policy

Establish a clear policy for returns and refunds. Check what your competitors do and establish the industry norm. To avoid ambiguity, information about your terms should be posted clearly on your website and attention should be drawn to it during the customer’s buying process.

The Website

13. Website Design and Development

This is a crucial and potentially hazardous area. It’s crucial because your entire business hinges on it. It’s potentially hazardous because it’s easy to set up a website and many people do it themselves. That’s often the beginning of the end for many businesses. For an online business, the website is the business. It performs the functions of store, brochure, advertising, public relations and contact point. No one should contemplate setting up their own website, unless they’re professional graphic designers with experience in web design. If not, employ a professional. Even if you are a professional graphic designer with web experience, unless you have expert technical knowledge of web development: html, Flash, online store technology, online payment systems, search engine optimization (SEO) etc., you should engage a professional with that expertise to work with you.

14. Copywriting

Once the visual and technical aspects of the website are taken care of, there is another area of expertise of vital importance: copywriting. A visually attractive website built on the solid foundation of a professional technical “backroom,” initially will impress visitors to your site, but only excellent copywriting will hold them there, get them to look at many different pages and guarantee their return. As is the case with graphic design, many online start-ups believe they can write the content of the website themselves. The majority can’t. There are many ways to obtain good copywriting. There are specialist companies that do nothing else; they bring together some of the best online writers. They supply top-quality writing at surprisingly reasonably rates to all kinds of websites. That’s what good copywriters do, and they’re well worth the money.

15. Online Shop and Payments

If you intend to receive payment from customers via the website, there are many methods to enable you to do that. “Shop, checkout and pay” services like PayPal, which are free to setup, are satisfactory solutions for most websites. Generally, these online payment services charge a commission based on the value of the sale. The commission is relatively small and justifies its cost, unless your site is very specialized, or processes such a large number of transactions that a customised payment facility would be more cost-effective. By using such services as PayPal, customers can pay with their credit cards without you having to have a merchant’s account with the card company.

Regardless of how good your products or services may be, if you adopt an amateur approach to starting up and running the business, you’re virtually guaranteed to fail. A common trait of successful business people is that they acknowledge their limitations and let experts look after the specialist jobs. If you approach your new online business in this professional way, are willing to work hard and follow the steps outlined above, your business is likely to be a success.

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