How to Start an E-commerce Business

By Joshua Botello 

Starting an e-commerce business seems like a simple proposition because it’s so easy to start selling in a simple online store. However, many new prospective business owners are unaware of the principles of business. In this video, I'll cover what you need to know to start an e-commerce business.

We continue our business start-up series with one of the most common businesses clients approach us for help with. Starting an online business that sells products seems pretty straightforward but quickly gets complicated when clients need to make it legitimate with licensing, taxes, and accounting. So let's take a look at 5 areas you need to know about before starting an e-commerce site.

Business Concept

The first area we need to look into before you start is the concept of the business, specifically, what you are planning to sell. Is it going to be a product you will make? Then you will probably need some equipment or supplies. Or is it a product you are going to buy? If this is the case then there are some permits you will need to look into. And Is this a product you can even sell online? All this research is what you are going to need to have to do before you even think about grabbing a domain for a website.

Costs and Revenue

Now that you have your concept research down now we need to figure out what it's going to take to start up. This means costs. If you have the equipment to make products, you're already ahead of the game but if you don't, what's it going to take to get it? If you are going to sell products, how are you going to purchase them and what are you paying? This will play into your revenue in just a bit. But the other costs you need to consider are the paperwork associated with getting your business legal. I'll touch on it briefly here but there will be a whole section coming up next on the licenses and permits you will need to get you up and running. 

Finally, for costs, what’s it going to take to get your website up and running? This means domain and hosting, web development, payment processing, shipping, and storing products. Depending on what service you plan to use, they may charge listing or monthly fees. The most important thing about revenue will be what are you going to charge for your products? Is it comparable to other sites or online retailers?

Now that you have your products ready and what it's going to cost to start up, let’s figure out you need to be legit.

Business Planning

If you are going to start an e-commerce business, you will most likely need to set up a business name. This will require a DBA as a sole proprietor or an LLC if you are looking for more legal protection. Check out our video on filing a DBA to reserve a unique name for your business. Once you have a name or business entity, you will want to set up an EIN to make filing taxes a little easier and to set up a business account later. You can find that tutorial on our youtube channel as well.

Because we want to be an e-commerce company we will need to collect taxes on those products, so as a business you need a sales permit from the State of California and a resale certificate if you want to buy items tax-free and charge it to your customer.

Record Keeping

Keeping records of sales and fulfillment will be vital to your success. You will definitely want to set up some kind of accounting system like QuickBooks to keep track of sales and costs within your business. Fulfillment is the other system you need to set up to make sure products get to your customers. Sites like Wix and Squarespace can keep track of customer information to ship products but there are also stand-alone services with more features to make scaling a bit easier.

Marketing

Our last area of consideration when starting up an e-commerce business is: how are customers going to find you? Depending on your products and sales process your options will vary when it comes to marketing. Here are a few you can use: 

Social Media has become a standard with digital marketing, but simply posting your products online is not a strategy. You have to plan content and follow this simple funnel: Build awareness of business, get customers to consider your product over the competition, and get customers to trust you enough to buy.
Social media is easy and cheap but if you want to up your game you may want to integrate blog articles or video into your system. Let me explain. Customers want to feel comfortable about their purchases.

So providing information that answers questions and or objections about your product will make them more comfortable about purchases. This includes explainer videos on what the product does, product reviews on how to use the products effectively, and testimonials on how customers have benefited from your product. If you have the money to spend advertising your product on social media or other sites will definitely spread that wide net, providing you know who your ideal customer is.

Starting up an e-commerce website is not just setting up a website and getting customers. Your e-commerce site is a business and should be treated as such. If you are looking to start any business of any kind you can always contact your local SBDC like at the University of La Verne to help plan your business for success.

Funded in part through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, conclusions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.