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• How to Start a Business

Starting an Online Business: A Step-by-Step Guide

Crafting a Winning Business Plan: Setting Goals and Strategies

Katie Miller is a consumer financial services expert. She worked for almost two decades as an executive, leading multi-billion dollar mortgage, credit card, and savings portfolios with operations worldwide and a unique focus on the consumer. Her mortgage expertise was honed post-2008 crisis as she implemented the significant changes resulting from Dodd-Frank required regulations.

If you want to get into the online business game, it’s a good time to start. The COVID-19 pandemic reshaped online consumer spending, including how people shop online and how they research products.

Today, 76% of Americans buy products online. Furthermore, roughly a third of people purchase items online weekly. From setting up an ecommerce business to offering web design services, there are countless avenues to explore as an entrepreneur.

Below, we’ll walk through each step to building an online business.

Key Takeaways

• When starting an online business, comprehensive market research is critical for identifying your target audience and learning how to resonate with your customers and understand their needs.
• Creating a business plan is an important step for outlining your business goals. It also includes your product description, target market, and financial projections, among other core components.
• Building your website involves setting up a domain name, finding a hosting company, and designing a strong website with consistent branding that allows your customers to navigate it intuitively.
• Choosing the right product or service to sell is essential. It’s important to think about how you’re addressing an unmet need.
• Several digital marketing strategies can be utilized, from content marketing to paid advertising, to help your business grow.

Successful online entrepreneurs study hard in order to have a thorough understanding of their market. This is important for knowing exactly how to reach your target market , because these are the people who will buy your products and drive your business growth.

At its core, market research is about understanding your customers’ needs, pain points, and solutions. It is designed to help your business better meet these needs.

Steps to Conduct Market Research

Market research involves understanding key aspects of your current and future customers. To get a clear sense of your target market, outline the characteristics of your audience—for example, age, location, gender, income, job title, and key pain points.

Once you have identified your target audience, conduct research on the following topics, which will tell you about how they make decisions and how you can better position your business:

• What are the challenges that your target market faces?
• Where do they research a given product or service?
• What are their views on pricing for this product or service?
• What factors influence their decision to make a purchase?
• Who are your competitors?

To put this market research into action, there are a number of different avenues you can take:

• Focus groups
• Competitive analysis
• Brand awareness research
• Market segmentation research

Consider the following questions that may be asked in an interview or focus group to learn more about your audience:

• “How do you search for that product?”
• “How useful was it?”
• “What words do you use when you search on Google?”

When you have completed your market research, identify what you have learned as well as your next steps based on these insights.

Creating a business plan is a key first step for all business owners . It is important for companies looking to secure funding resources. It also serves as a blueprint to summarize your key business objectives and goals.

To write a business plan , incorporate these eight main sections, which are often found in traditional templates:

• Executive summary : This is typically a one-page section that explains your objectives and includes your mission statement, core team, and why your company is positioned for success.
• Company description : This describes what you offer, your competitive advantages, and your business goals.
• Market analysis : This is where you explain your target market, market size, market trends, and competitive landscape.
• Organization and management : Explain who is working on your team and their professional background and experience.
• Service or product line : Describe the product or service you are offering, including any copyright or plans for patenting.
• Marketing and sales : Discuss your marketing and sales strategy. Discuss your pricing, key metrics, and sales plan.
• Funding request : If you are a company looking for funding, here is where you outline the capital you are requesting and where it will be allocated.
• Financial projections : Include projections for your company’s revenue and expenses. Consider including an income statement, balance sheet, and cash flow statement in this section.

A business plan is important because it helps clarify your action points, who you are, and what you offer, all in a coherent template.

Getting your business online is the next key step. In an ever-changing environment, it is important to know the tools, trends, and strategies for building a strong online presence to allow your business to grow.

Registering Your Domain

The first step is registering your name, or your website address. This can be in the form of your business name “.com.” To purchase your domain name, you can go to sites like GoDaddy or Namecheap . If you decide to build your website using WordPress, you will need to use a site such as these to host your website.

Web Hosting Companies

Alternatively, you can buy your domain name at a hosting company. These are companies like Shopify , Wix , or Amazon Web Services , that may also offer tools to build your website and release content on them. 

Website Design

A well-designed website is important for many reasons. Using a website builder, such as Mailchimp or Squarespace , can allow you to choose a theme, customize your pages, create relevant content, and set up a payment page.

Other key aspects of your website design include its functionality, simplicity, and ease of use. Allowing your potential customers to navigate the site intuitively will be key to their experience. Brand consistency—in your logo, colors, and typeface, for example—is also key to creating a unified brand.

Another essential part of website design is its mobile application. You’ll want to ensure that your website runs smoothly on mobile, that images load properly, that the text is legible, and that buttons are intuitive to click.

This step focuses on how to choose the right product or service to sell. At the heart of this choice is the goal of solving a customer’s problem. But there are a number of strategies you can use to identify your product idea.

For example, you might consider analyzing companies with high-profit margins, products that align with your passion, burgeoning trends, items trending on online marketplaces, and/or customer reviews.

With this in mind, analyze how this product will get to your customers. Additionally, you may consider products that are not available in stores in your local market but are offered in communities such as Europe or Japan, for example.

Marketing strategy and promotion is an essential driver of business growth. As the digital landscape evolves, it’s important to have an effective marketing plan that resonates with changing consumer preferences and needs.

Here are questions that companies can consider as they create their marketing strategy, navigating today’s environment:

• Impact, value, and growth : What are the goals and key performance indicators (KPIs) that will measure success for your business? How will you explain the value that the business provides to its customers and/or society? Create an “elevator speech”—a 30-second description of what you offer and why it’s special.
• Customer need and brand promise : How does the brand meet a customer’s need through its products and services?
• Customer experience : How will the business deliver the best experiences at each stage of the customer journey?
• Organizational model : How will the business operate to serve the customer with the most impact?

These will help you understand what types of strategies can have real impact.

Types of Marketing Strategies

Consider the following digital marketing strategies that can be used for your online business:

• Email marketing
• Social media marketing
• Paid advertising
• Search engine optimization (SEO)
• Content marketing
• Influencer marketing

Each of these presents a different way to reach your target audience, drive conversions, or build brand awareness, depending on your marketing goals.

You need to determine that for yourself. But before starting an online business, it’s important to assess the time, investment, and resources you’ll need to get it off the ground. While the barrier to entry can be quite low, it’s worth considering your goals and strategies for making it a reality.

However, compared with starting up a traditional brick-and-mortar business, the risks of launching an online business may be reduced due to lower upfront costs such as rent, staff, and materials, among others.

The short answer: yes. While it depends on the type of business you hope to pursue, there are many ways to set up an online business at very little cost. For example, you could offer your services doing freelance work, photography, bookkeeping, or personal training. The primary costs involved include setting up your business website, which can cost as little as $2 to $20 each year with companies such as GoDaddy.

There are a number of digital marketing strategies that online businesses can use, such as content marketing, email marketing, paid advertising, SEO, and influencer marketing. Each of these strategies can be useful, depending on your product and goals.

Starting an online business can be a powerful way to launch a new product or service while reaching a wider audience. With market research, a solid business plan, a strong website, and a digital marketing strategy, you can get started in growing your company effectively. As customers increasingly make decisions virtually, building an online business is vital to any business owner’s success.

Pew Research Center. “ For Shopping, Phones Are Common and Influencers Have Become a Factor—Especially for Young Adults .”

U.S. Small Business Administration. “ Market Research and Competitive Analysis .”

U.S. Small Business Administration. “ Write Your Business Plan .”

Ogilvy. “ Getting Future Ready with Marketing Transformation ,” Page 15.

GoDaddy. “ How Much Does a Domain Name Cost? Find Out! ”

• How to Start a Business: A Comprehensive Guide and Essential Steps 1 of 25
• How to Do Market Research, Types, and Example 2 of 25
• Marketing Strategy: What It Is, How It Works, and How to Create One 3 of 25
• Marketing in Business: Strategies and Types Explained 4 of 25
• What Is a Marketing Plan? Types and How to Write One 5 of 25
• Business Development: Definition, Strategies, Steps & Skills 6 of 25
• Business Plan: What It Is, What's Included, and How to Write One 7 of 25
• Small Business Development Center (SBDC): Meaning, Types, Impact 8 of 25
• How to Write a Business Plan for a Loan 9 of 25
• Business Startup Costs: It’s in the Details 10 of 25
• Startup Capital Definition, Types, and Risks 11 of 25
• Bootstrapping Definition, Strategies, and Pros/Cons 12 of 25
• Crowdfunding: What It Is, How It Works, and Popular Websites 13 of 25
• Starting a Business with No Money: How to Begin 14 of 25
• A Comprehensive Guide to Establishing Business Credit 15 of 25
• Equity Financing: What It Is, How It Works, Pros and Cons 16 of 25
• Best Startup Business Loans for May 2024 17 of 25
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• Partnership: Definition, How It Works, Taxation, and Types 19 of 25
• What Is an LLC? Limited Liability Company Structure and Benefits Defined 20 of 25
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• Starting an Online Business: A Step-by-Step Guide 23 of 25
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How to Start an Online Business in 5 Steps (2024 Guide)

Brian connolly.

December 16, 2023

Table of Contents

Step 1: research your product idea , step 2: build a financial plan for your online business, step 3: create compelling product listings , step 4: market your product, drive traffic, and build brand awareness, step 5: optimize your online business and plan for growth.

Aspiring entrepreneurs have looked for innovative ways to make money. Fortunately, Jungle Scout’s research has proven time and again that running an ecommerce business is a viable way to earn an income —and can generate enough profit to replace a full-time job. 

Ecommerce offers entrepreneurs the kind of flexibility a traditional retailer could only dream of. Online sellers set their own hours, pay what they want to launch and grow their businesses, and can work from anywhere in the world. They succeed at all ages and education levels , many with no prior business experience. 

Selling products online isn’t just accessible—it’s meeting an enormous surge in demand for online shopping. As more consumers shift to shopping on their phones, tablets, and even smart speakers, opportunities to launch ecommerce businesses will only grow. In fact, 57% of consumers shop online at least once a week. 

If you’ve been thinking about starting a business online, now is the perfect time to get the ball rolling. We’ll go over how to launch an ecommerce business in five detailed steps, plus how to plan for future growth—even if you have zero startup funds. 

The first step to launching your online business is often the biggest bottleneck: finding a profitable product to sell . 

Notice that step one of starting a business isn’t fundraising. You can start a business at virtually zero up-front cost—stay tuned to find out how. 

If you don’t have any product ideas yet, don’t worry! Thinking about how you want to sell online will inspire you. 

Choose a business model

There are all kinds of ways to sell products online, but here are seven tried-and-tested, profitable options:

• Private label : You rebrand or rename a product already in production under your own label. If you’ve bought a drugstore’s “generic” equivalent of a brand-name product, you’ve seen an example of a private-label business. It’s the most popular and profitable business model among Amazon sellers. 
• Wholesale : You purchase brand-name products in bulk from a manufacturer, supplier, or distributor and resell them online as individual units to the end customer. It’s the second most popular model for Amazon sellers, and among the easiest to launch.
• Retail arbitrage : You’ll purchase inexpensive or discounted products from a brick-and-mortar retail store, then resell them online. This is a relatively low-cost method—you just pay for the products the gas you burned driving to the store. 
• Online arbitrage : Similar to retail arbitrage, except you purchase products from other online marketplaces and resell them online. 
• Dropshipping : You’ll take online orders for a product on behalf of a manufacturer, supplier, or distributor. When a customer makes a purchase, you notify the supplier, who then fulfills and ships the order. Next to used items, dropshipping is the best business model if you want to start selling for free. 
• Handmade products: You’ll sell your hand-crafted wares on handmade-friendly platforms like Etsy and Amazon Handmade. 
• Used items : You’ll list still-functional items like furniture, video games, art, books, collectibles, and even cars for resale online. This model calls for virtually zero startup investment—the products are already sitting in your closet, garage, or bookshelves. You can also source hidden gems from yard sales, consignment shops, and estate sales for cheap.  

Your business model will help determine where you source your products, your marketing plan, and how much you stand to profit. Check out our guide to Amazon business models to learn more about each method’s popularity and profitability. 

Note that you can sell online in more than one way—for instance, you could start selling used items to earn enough money to develop your own private-label product. 

Validate your product idea with data

Here’s a gut check: Your product decision can’t hinge on a hunch. 

That’s right—you can’t just take the revolutionary idea you conjured in the shower and run with it. You have to validate its profitability through product research, even if your family, your friends, and your dog all think it’s a million-dollar idea.

Product research answers many of the necessary questions any ecommerce business owner should ask before launching their operations, such as the following: 

• Is my product idea original? If similar products exist, is there an opportunity to improve on those products?
• Will my product idea sell year-round, seasonally, or not at all? 
• Where should I source my product, and how much will that cost? 
• What fees will I have to pay to list and fulfill my orders? 

Product research estimates your dream product’s profitability before you seriously invest in selling it—a necessary, if time-consuming first step. Skip it, and you may end up building a business around inventory that will ultimately sit unsold in a warehouse (or your garage). 

Jungle Scout’s data-driven tools and free educational resources are here to handle the heavy lifting and guide you in your product research. While our software tools use data specific to Amazon, the product opportunities they reveal are transferable to virtually every ecommerce platform, whether it’s Walmart , eBay , Etsy , or Facebook Marketplace . 

With the Opportunity Finder , Chrome Extension , and Product Database , Jungle Scout users can examine competition and demand for specific product niches, forecast potential sales using real Amazon sales data, and ultimately uncover profitable product ideas they wouldn’t otherwise find. 

If you’re not a Jungle Scout user yet, you can still follow our free, in-depth guides to selling on Amazon, read about our data-driven ecommerce product ideas , and learn about how to discover niche opportunities . More guides will be linked throughout this article.  

We keep a finger on the pulse of the ecommerce industry through regularly-published data reports on consumer spending and seller behavior. You can view insights into what consumers are buying online in our quarterly-updated Consumer Trends Report . 

Data on how ecommerce sellers conduct their business can be found in our annual State of the Amazon Seller Report . Our seller guides draw from industry trends to give readers new opportunities to launch and grow their businesses. 

Find a supplier

Your supplier can be many things—a private-label product manufacturer , a wholesale distributor, or the local hardware store where you buy furniture-making supplies. Whatever your sourcing needs, the cost of procuring your product is a crucial aspect of product research. 

Reliability is important—you’ll want to develop a rapport with your supplier if possible, choose materials you can easily reorder, and stay within your inventory budget instead of banking on runaway sales to cover the cost of goods.  

• Private-label sellers can easily find high-quality suppliers using Jungle Scout’s Supplier Database and on Alibaba . 
• Arbitrage sellers looking for sourcing ideas can check out our guides to retail arbitrage , online arbitrage, and profitable seasonal products to sell. 
• Wholesalers can check out this article for tips on finding a distributor. 
• Our startup guides on eBay and Facebook Marketplace offer tons of ideas on where to find used items. 

Choose an ecommerce platform and fulfillment method

Thanks to ecommerce’s growing popularity, you can list your product on many different online marketplaces, where it can be viewed by thousands—if not millions—of potential customers.  

While online marketplaces tend to have some similarities, you’ll find that each one offers advantages depending on what kinds of products you’re selling. For instance, used items tend to do well on eBay and Facebook Marketplace, whereas private-label products sell well on Amazon and Walmart Marketplace .

Selling on Facebook Marketplace, or Instagram can also be lucrative; 54% of U.S. consumers have purchased products they first learned about on social media, and that figure is likely to grow.  

Each platform offers different fulfillment methods. “Fulfillment” includes all the actions that occur after a customer clicks “purchase”: picking and packing the order, labeling the package, and shipping it to the customer. Done right, and it feels like a magic trick to the end customer—it’s a key determinant of customer ratings and reviews. 

The best fulfillment method for your business will depend on your finances and time. You can self-fulfill by storing inventory in your home or a rented space, and pack and ship orders yourself. You may prefer to outsource these tasks to a third-party logistics provider or use Fulfillment by Amazon (FBA). 

Whatever you choose to do, make sure you can reliably fulfill orders on time and at a reasonable cost to the customer, using packaging that ensures the product arrives intact.  

To that end, it can be helpful to have some inventory on hand in case there’s a sudden disruption with third-party fulfillment services. When COVID-19 interrupted FBA shipping speed, many Amazon sellers temporarily pivoted to FBM (Fulfillment by Merchant), packing and shipping orders from their homes to avoid losing their rank and ratings on Amazon. 

Choose a memorable brand name 

Think hard about your brand name—it’s an important piece of marketing. Use it to evoke what you want your customers to feel about your brand. 

It should be distinctive, memorable, and original. Be sure to check whether your intended brand name is already taken before you use it.

Not sure what to call your brand? Try riffing on branding trends and archetypes , or tell a personal story with a family name. If you’re stumped, play around with an online brand name generator— this one even suggests fonts and logos to match. 

Once you’ve validated your product idea, it’s time to get real about the numbers game—namely, how much it’ll cost you to launch and maintain your business, and when you can expect to start earning profits. 

It is possible to start an online business for free . But if you want to make a significant investment in inventory, legally register your business right away, or develop your own private-label product, you’ll incur some up-front costs. 

Having a budget for your business is important. Try not to get overwhelmed by all the line items that can accrue—making adjustments here and there to stay within your spending limit is part of the process. An up-front investment can feel like a huge risk, but with a well-researched product and optimized operations, it’ll pay off.   

Let’s go over what items you should consider in your financial plan. Loosely, they include: 

• Cost of goods/sourcing costs
• Seller fees and/or fulfillment fees (varies by marketplace)
• Cost to form an LLC
• Business insurance
• Taxes 
• Your estimated time-to-profit
• Financing options

Seller fees, legal fees, insurance costs, and taxes

Depending on where you list your products, you may be subject to seller fees and insurance requirements . You’ll also want to think about legally registering your business as an LLC , as it comes with some tax advantages. 

Seller fees

On Amazon, sellers must pay “referral” fees—kind of like a commission—back to Amazon for each order. Typically, these fees come out to 15% of the product’s sale price. Amazon sellers also pay additional per-item fees or subscription fees (depending on their seller account type) and refund administration fees. And if they use FBA, there are fees for that, too. 

Not every ecommerce platform will charge as many fees. You can use a fee calculator to estimate your net profit—we recommend Salecalc . 

Here’s a rough breakdown of online seller fees outside of Amazon: 

• Walmart: referral fee for each product sold, typically 15% of sale price; no monthly subscription fees
• eBay: 13.25% of product sale price to list and sell most items; $0 monthly for a free seller account, $7.95+ per month for eBay Store subscribers 
• Facebook Marketplace: no subscription fees; no referral fee for local sales; referral fee of 5% of the sale price if the product is shipped  
• Instagram Checkout: selling fee of 5% per shipment
• Shopify : monthly seller subscriptions start at $29.99
• Etsy: listing fee of $0.20 for each item, plus a 6.5% of sale price transaction fee. Etsy Plus subscribers pay $10 per month
• Craigslist: listings are free , except for a handful of regional fees for vehicles, housing, and furniture

Keep in mind that platforms often offer advertising programs to their sellers, which come with their own fees. We’ll discuss marketing in Step 4, but for now, keep in mind that advertising costs need to factor into your overall budget. 

If you’re in the U.S., it’s a good idea to register your business as an LLC (a Limited Liability Company). While you don’t technically need a business license to sell products in most ecommerce marketplaces, LLCs offer business owners protection, flexibility, and a simpler tax reporting process—not to mention the credibility of a licensed brand name. While it costs money to create and maintain an LLC, we recommend it. 

You can form an LLC all on your own, or you can hire a lawyer to help you. The price of forming an LLC varies by state , but typically falls between $50-200. Naturally, you can expect to pay more for the help of an attorney. 

Once you have your LLC set up, you’ll want to protect it from unexpected costs like accidents and lawsuits. On certain ecommerce platforms like Amazon , you may be required to maintain some form of business insurance. 

The type of insurance you’ll need depends on where and how you run your business—there are policies to protect you from lawsuits, property damage, and defective products. You should shop around to compare rates and benefits. 

All U.S. businesses must file taxes, typically on a yearly or quarterly basis. Our seller calendar can help you stay on track with quarterly business tax deadlines. 

If you’re operating as an LLC, you’re eligible to write off a significant amount of business expenses through deductibles. We recommend that you hire a professional accountant to handle your taxes, as they can be tricky to decipher.   

Startup costs and time to profit

So, after all of these fees and taxes, what should you expect to spend at startup, and how quickly can you make a return on your investment? Once again, it depends. 

You can start selling online for virtually no money—dropshippers, Amazon Merch sellers, and used item resellers (if they’re selling their own stuff) don’t have to spend a dime on inventory. 

Our data on Amazon sellers indicates that sellers using the wholesale or arbitrage models will pay up-front costs in the neighborhood of $500-$2,000. Private-label sellers tend to spend more, because it costs more to develop your own product. 59% of private-label FBA sellers invest at least $2,500 at startup on inventory, Amazon fees and storage, and advertising costs.

On the whole, over half of all Amazon sellers spend below $5,000 at launch, and nearly one quarter spend no more than $1,000.  

Ecommerce isn’t a get-rich-quick tactic—it takes time to generate profits. While the majority of Amazon arbitrage, wholesale, and dropshipping sellers turn a profit within three months of launching their businesses, private label sellers usually take longer. 

But the outlook is generally positive: 63% of all third-party Amazon sellers achieve profitability within the first year of launching their business.

That said, if you’ve invested heavily at launch, make sure you’re ready to spend several months to a year before making that money back. While most Amazon sellers are profitable ( 89%, to be exact ), they didn’t get that way overnight. 

How to finance your online business 

There are many different ways you can fundraise the money you need to start an ecommerce business. 

Over three quarters of Amazon sellers funded their businesses using personal savings, a testament to ecommerce’s affordability for aspiring entrepreneurs. 

A third took out family or business loans, which can range from $500 microloans to tens of thousands of dollars paid back over several years. 

It can be difficult for new ecommerce sellers to qualify for loans from a bank or the government, because they tend to require tax and credit histories that new sellers don’t have. 

Fortunately, Amazon and fintech companies like AccrueMe are developing investment solutions for online sellers that offer more flexibility. You can read more about how to fund your ecommerce business in our guide to financing options . 

Customers can learn about a product many different ways—by viewing ads, seeing a suggestion on Google or Amazon, reading a review from a satisfied customer, scrolling through social media, and even via word-of-mouth.  

Ultimately, brand awareness starts with your product listing —it’s the single best piece of marketing in your arsenal. Use your listing to tell customers why they need your product, communicate your brand identity, and build credibility with your audience.  

Use keywords to boost visibility 

Your product listing should capture the relevant keywords and feature the data that customers use to find the products they want to buy. That way, it’ll actually show up in search results, instead of getting lost in a sea of competitors. 

Here’s how that works: when deciding what to display in search results, search engines like Google and Amazon check potential results for relevance—either by “crawling” text on a web page, as is the case for Google, or by scanning keywords and data associated with different products, as Amazon does with ASINs. 

One big difference between traditional search engines and ecommerce platform search functions is that the latter are product-focused. In other words, while Google seeks to answer questions with information (i.e. articles on the “best dog beds” or “top 10 dog beds”), Amazon wants to answer search queries with relevant products (i.e. the products most related to the customer’s search terms, like “dog bed”).

Because users come to Amazon to buy things, the search results need to facilitate a purchase, which means presenting the products most likely to satisfy the customer’s needs.   

In any event, this is true for both Google and Amazon: the more relevant your listing is to a customer’s search, the more likely it is to appear in search results.

A keyword-rich product listing boosts your product’s visibility to the millions of customers across the globe who shop online. A great keyword strategy can elevate your brand above your competitors, reach new audiences, and ultimately generate more sales for your business. 

You can do keyword research for free on ecommerce platforms and search engines. Here’s a great method to start: try searching Amazon for broad terms that describe your product, and see what its search algorithm suggests in the autofill drop-down box. For instance, if you’re envisioning selling a dog bed, type “dog bed” into the Amazon search bar, but don’t press “enter” just yet.  

Amazon will suggest popular keywords associated with “dog bed,” so you can see exactly what real customers have searched for, design your product to suit that demand, and include those keywords in your product listing. 

If you already have ideas about your product’s design or features, you can search for more specific keywords, too. Say you want to sell a pink, fluffy dog bed that heats up.  Make your search more descriptive (“pink dog bed” or “heated dog bed”), and take note of the suggested keywords for those specific niches. You’ll want to include at least some of them in your listing. 

Then, start browsing your competitors’ listings. Take note of how other sellers describe their dog beds: do they mention benefits for your dog, machine-washability, or other special features? Informative descriptions help convert customers, so be sure to include relevant details about functionality, advantages, and design features in your listing. 

You run a similar autofill search on Google. Be sure to also take a look at the “People also ask” feature to generate more keywords. This section pops up in Google search results and can offer details about how and why people are searching for a given product. You can translate those queries into keywords that indicate your product’s functionality or purpose.

For example, people who Google “dog bed” want to know about proper firmness, best use, and accessories, so you should include keywords in your listing like “soft” “for crate” or “with blanket” if they apply to your product. 

The best way to do keyword research is to use a paid tool like Jungle Scout’s Keyword Scout. This tool does the work for you—it pulls advertising data directly from Amazon and suggests thousands of high-converting, top-ranked keywords to include in your listing.

To learn more, check out our top keyword strategies .  

Take great product images

Different marketplaces will have different image requirements for listings and ads. One thing is true wherever you sell: having high-quality images of your product will boost sales. 

You should also consider including video content of your product. Amazon allows sellers to upload quick, informative videos for ads and product listings.   

So, you’ve built an informative, keyword-rich product listing with compelling copy and stunning visuals. Now it’s time to let the world know about it! 

You want to drive as much traffic as possible to your listing so you have more chances at conversion—that is, you want to get as many people as you can to click on, view, and purchase your product. 

The broader your online presence, the more likely you are to attract online shoppers. So make sure to establish a digital foothold in at least three areas: on your own ecommerce storefront or landing page, on social media , and in online ad space. Once you start making sales, keeping your review count and ratings high will boost your brand’s legitimacy. 

Build an ecommerce storefront

Your storefront is where customers can learn about your brand, and where you’ll convince customers that your brand is legitimate, with products worthy of their hard-earned cash. 

Essentially, you want to recreate the experience of visiting a physical store, but streamlined. Think about what a customer would want to know about your product or brand and what questions they’d have for the store clerk, and communicate that information somewhere within your storefront.

Typically, that means providing plenty of photos and videos of your products in action , links to product listings, and information about your return policy. You can include your brand story, customer testimonials, and even helpful tutorials on how to use your product. The goal is to gain the customer’s trust in your product—and ultimately, a purchase.

You can build a standalone website through hosting platforms like Shopify or Wix, or you can create a storefront on Amazon or eBay using their templates.   

Leverage social media

54% of consumers have purchased products they first learned about on social media, making a social presence a no-brainer for entrepreneurs looking to build brand awareness. 

Growing a following for your brand on Instagram, Twitter, Facebook, and TikTok exposes your products to millions of potential customers. 

You can link your storefront or individual product listings within your social media profiles so customers can easily navigate to your listings You can even sell products directly on Facebook and Instagram . 

Social apps also allow you to interact with viewers in ways that can feel more organic than with traditional advertising. For example, you can run polls on Instagram or Twitter to get feedback on your products, notify customers about sales and discount codes, or post engagement prompts to encourage comments. 

You can also use social media to notify customers about sales and other notable events. 

Even if you don’t yet have a social media strategy to promote your brand, it’s important to claim the social media handles you’ll want to use (like “@junglescout”) before someone else scoops them up. 

Create ad campaigns 

Ads generate clicks, which in turn lead to sales. And in today’s competitive ecommerce industry, you have to maintain a solid advertising strategy to get noticed.  

Fortunately, ecommerce sellers have a ton of options when it comes to advertising their products. Amazon offers a wealth of pay-per-click (PPC) ad options to its sellers, as well as other marketing programs to boost visibility. You can even track inbound traffic to your listing from your off-Amazon ad campaigns. 

Here are some helpful guides to advertising your products on and off Amazon:

• Amazon PPC Strategies – The Ultimate Guide for 202 4
• 2024 Amazon Advertising Guide for Sellers
• How to Use Facebook Ads for Amazon FBA (And Sell More Products)

Get reviews 

Product reviews matter more to your business’s long-term success than you might expect. 71% of U.S. consumers are influenced by products with the best ratings and reviews when shopping online, and 68% find reviews with photos or videos more compelling. On Amazon, getting a high volume of great reviews boosts your product’s ranking, which in turn affects sales. 

Getting great reviews starts with having a high-quality product. Ensuring timely fulfillment and returns processing, courteous communication, and beautiful brand help, too. 

We know getting reviews is hard, so we’ve published a few different articles about why reviews are important and strategies for boosting your review count.

Launching a business is a huge accomplishment that takes time, money, and patience. Congratulations on becoming an entrepreneur! 

Once you’ve gotten your business up and running, it’s important to regularly check in on its performance. You may need to make some changes in order to set yourself up for long-term success .  

Plan to check in on your business sometime in the first three months. But remember that while the majority of Amazon sellers get their businesses up and running relatively quickly, 23% take at least three months to launch their businesses, and over half wait six months or longer before turning a profit. 

Measure your business’s performance

Pull up your financial plan and start comparing it to how your business actually performed. Here are some questions to consider: 

• Are you meeting sales estimates, exceeding them, or falling short?
• Have you turned a profit? 
• Is your current fulfillment method working for you and your customers, or do you need to find an alternative? 
• Are you able to stay on top of your inventory, or do you regularly run out of stock? 
• Is your profit margin above 20-30%? If not, how can you raise it? 
• Are you getting plenty of positive reviews? Have you checked your reviews for helpful feedback or improvement opportunities? 

You’ll want to keep a close eye on performance metrics like sales volume, revenue, and ad spend, so you can spot trends and quickly identify hidden fees. Software tools like Jungle Scout’s Sales Analytics keep track of this for you, so you can focus on strategy instead of bookkeeping.   

If your product isn’t living up to your expectations, don’t panic. Investigate any changes you could make to improve its functionality, or try to get customer feedback on how it could be upgraded. If you’re selling multiple products, consider nixing one that isn’t selling well.  

Lower your fees and costs

If running your business is costing more than you expected, there are probably ways you can cut back. 

It’s easy for first-time ecommerce sellers to know they’re being overcharged for things like shipping fees, so we wrote a guide to help you get reimbursed . 

Here’s another way to cut back on overhead costs: try negotiating for better inventory costs with your supplier. 

Expand to other channels

Just because you start your business on one ecommerce platform doesn’t mean you have to stay there forever. You’ll be more competitive and attract a wider audience if you list your product on multiple ecommerce channels.

Hire freelancers or employees

Like any job, selling online comes with tasks you perhaps would rather not have to do. Thanks to freelancer hubs like Fiverr and Upwork, it’s easy to find high-rated, trained consultants to cover every imaginable aspect of running an ecommerce business. 

Start your online business today

Ecommerce is a rapidly growing industry with plenty of opportunities for newcomers with great product ideas. With a bit of product research and planning, you can join the ranks of profitable ecommerce sellers. In time, you may be able to replace your full-time job, like the 47% of Amazon sellers who are self-employed or earn income exclusively from ecommerce. 

If you’re ready to get started on your new business, check out our in-depth beginner’s guides to selling on different marketplaces: 

• How to Sell on Amazon FBA , Amazon Handmade , and Amazon Merch
• How to Sell on Walmart
• How to Sell on eBay
• How to Sell on Facebook Marketplace

If you need a product idea, get started here: 

• Top 20 Ecommerce Business Ideas
• Low Competition Niche Products to Sell on Amazon FBA

Do you have any questions about launching a business online that we didn’t cover in this post? Let us know in the comments!

Start your online business with Jungle Scout

Get everything you need to launch a profitable business on Amazon, including product research, competitive analysis, and more!

Ecommerce Expert & Writer at Jungle Scout

Brian Connolly is an Amazon seller, ecommerce expert, and writer for Jungle Scout. He lives in the New Jersey Shore area with his wife and cat. When he isn’t writing advice online for aspiring and experienced Amazon sellers for Jungle Scout, he spends his free time boating, fishing, and selling boating-themed items on his Amazon business.

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How to Start an Online Business Profitably From Home In 90 Days

Darren DeMatas

November 27, 2023

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In addition to receiving commissions generated through affiliate marketing, we are able to fund our independent research and reviews at no extra cost to our readers. Learn more.

If you have ever thought about how to start an online business of your own, now is a great time to finally roll up your sleeves. In the wake of COVID-19, the ecommerce world was flooded with new activity from all sectors. Although growth has slowed since then, there’s still plenty of room in the market.

How To Start An Online Business

• Research Business Models
• Decide Your Niche
• Conduct Competitive Analysis
• Define Your Brand And Target Audience
• Set Up Business Logistics
• Build Your Website and Marketing Automation
• Promote Your Business

People can make money online in lots of different ways. They can open an online store, write a blog, or become popular on social media. In this post, we will dive into the different models and guide you step-by-step to launching your own online business.

Why Start An Online Business From Home

Online businesses can be profitable with low startup costs. The ecommerce market is growing, especially due to COVID-19, offering many opportunities.

Some of the richest people in the world got their start with online businesses. With the right business plan and commitment, you can reach customers worldwide .

Types of Online Business Models

Online businesses come in all shapes and sizes. You don’t have to be the next Amazon ecommerce marketplace or Netflix to be successful.

When it comes to online business models there are a few major buckets to consider.

• Physical Products: Selling products like t-shirts through online retail
• Digital Products : Like courses, ebooks, or software
• Media / Publisher: Selling ads, affiliate marketing, or sponsored content
• Services : Exchanging time for money by providing services like logo design or marketing

We have hundreds of online business ideas you can start , but I wanted to highlight a few ones in each of those buckets.

Physical Products

An ecommerce store is likely the first thing you think of when it comes to online businesses. Instead of shopping in person, customers make purchases over the internet.

In essence, your website replaces the store. Customers browse and buy your products or services online, and then you ship the order to them.

Online stores offer advantages over brick-and-mortar. Customers anywhere in the world can shop with you regardless of location. Plus, a virtual storefront means lower overhead.

Dropshipping

A dropshipping business is great for its simplicity . To the customer, they operate just like any other ecommerce store. But in actuality, your internet business is just the middleman. 

When a customer places an order, you send the order to the drop shipper . The drop shipper fulfills and ships the order to your customer.

Digital Products

Selling digital products online is very low overhead, but it’s highly competitive. If you have unique skills or knowledge, create digital products to monetize your expertise.

If you have experience in graphic design or web development, create and sell online courses. Or, maybe you’re a talented writer who could create and sell ebooks, audiobooks, or other digital content.

The possibilities for digital products are almost endless. All it takes is some creativity and hard work to get started.

Launch An App Or SaaS Startup

In today’s digital era, launching an app can be a viable business online.

With an innovative app idea, you could tap into a potentially huge market. If you have the technical skill to create it, or the resources to hire someone to do it for you, it could be lucrative.

To successfully launch an app, identify a problem or need your target audience has. Then, address it with your app. Invest time and resources into promoting your app to get it noticed. In a crowded marketplace, marketing can make or break you.

Remember, developing an app is only the first step – you still have to market it.

Ebooks or Courses

Have a passion for sharing what you know with others? Create and sell ebooks or online courses. It can be a long-term viable business since you can create content on almost any topic. Ideas include cooking and fitness, entrepreneurship, and personal development.

For success, pinpoint your target audience. Create content that speaks to their needs and preferences. Spend time building your brand and promoting your products. Use social media, email marketing, and other channels.

Media Publishing Company

You can start a media company with almost no resources other than yourself. Again, a low barrier to entry means tight competition.

Starting a media publishing company involves creating content for your target audience. You can create written, video, or audio content. Then, you monetize it with advertising or other methods.

This business model is highly scalable. Healthline is a publishing company that generates $100M+ per year.

To compete in this space, focus on consistently producing high-quality engaging content. It will help you build a loyal audience. Learn about online advertising and marketing strategies to maximize revenue potential.

Affiliate Marketing

Affiliate marketing allows you to promote and sell without handling products. Your job is to promote affiliate products and drive traffic to the partner’s website.

You earn a commission when customers use your affiliate link to make a purchase . The company selling the product handles processing and shipping the order. You are responsible for encouraging the sale and directing traffic with referral links.

Blogging is a large and varied category for online businesses. There is a wide range of blogs and many ways to monetize them. For example, some people make blogs as a hobby, while others use them for affiliate programs.

Blogs can make money selling ad space, sponsored posts, or ecommerce. You can even work as a blogger by creating content for other companies’ blogs. Blogging can be great as a part-time job or full-time gig.

Launch A YouTube Channel

What are you passionate about? Create videos about what you love, and build a following of interested viewers. After you build a loyal audience, monetize your channel with:

• Advertising
• Product sales
• Sponsorships

Most full-time YouTubers make $60K per year. But people like Blippi make a ton more. In fact, his net worth is around his total YouTube subscribers.

Become an Instagram Influencer

These days anyone can become an influencer. That’s if you don’t mind being the “face” of your business. I prefer to pass on that. With that said, influencers can make a killing by putting themselves in the spotlight.

Trading hours for money is the basic idea behind selling services. If you have a particular skill set or expertise, you can offer your services online to those who need them. This includes things like:

• Social media management
• Content creation
• Virtual assistance

Use platforms like Fiverr or Upwork to find clients and build your reputation.

Web Design Services

If you have web design skills, leverage them to build websites for others . If you have software development experience, this is a lucrative business opportunity.

Many tools can help non-technical people build websites. But business owners don’t have the time to do it. Beyond websites, you can also create and manage social media accounts.

Marketing Agency

Have a background in marketing? Experience in social media, content marketing, or search engine optimization (SEO)? You can offer your expertise to help other businesses grow. These businesses tend to have a lot of overhead, but you can easily build and sell a marketing agency for seven figures.

Start With a Niche in Mind

Before starting your online business, you have to know what you will be selling . This could be a product, a service, or an idea.

For example, selling a cool t-shirt design differs from selling a website-building service. Once you know what you want to focus on (this can be many things), you can start developing your strategy.

Some questions you will want to ask yourself are:

• What am I selling?
• Do I need or want a website?
• What will my company (and website) name be?
• Will I have stock to manage?
• Do I need to hire anyone?

What you are selling will help answer most of these questions. And you’ll learn things along the way. But first, what are you selling, and how will you make money?

Conduct Competitive Research

Whatever it is you are selling, you will have competition. Before you get started, do some competitive analysis of the market as a whole.

Begin With Basic Keyword Research On Google

Start with basic keyword research on Google. Identify keywords that are relevant to what you’re selling and see who shows up in the search results. Note their website, pricing, products or services, and any unique selling propositions.

Next, delve deeper into their online presence. Visit their website, social media profiles, and any other online platforms they use. Pay attention to:

The design and user experience of their website

How they engage with their audience on social media

Any content they create

This will help you identify what’s trending and the competitive discovery process.

Conducting product research is important. Entering a highly competitive industry with established competitors makes a difficult battle. When it’s hard to carve out your market share, you stifle growth before you even start.

What is the competition doing well? Where could they make improvements? Exploit the areas of improvement for your own benefit.

Your market research could show competitors pricing products too high. It could show poor customer service. Ensuring you do better may determine product viability . If you cannot, it will point you to another business niche.

Define Your Brand and Target Audience

Think about what you want your brand to communities. Beyond the name, consider your color scheme, logo, and mission statement.

You might have an idea or starting point for defining your brand and company image, but you’re not stuck with it. Amazon grew from an online bookseller to a global marketplace. Your brand will likely evolve and settle into its niche.

Define Your Target Audience

What you are selling will also determine who your target audience is . Are you selling to other businesses or customers? Who are they? What social media platforms do they use?

Define and understand your target audience to shape your business and marketing strategy. Your target market will likely change over time. You may notice a difference between your ideal and actual customers, too.

Analytics tools help identify your audience and track what works and what doesn’t. Your customer demographics determine how you run your business (and make money.) It also impacts your social media marketing.

Trademark Your Brand Name

Once you have defined your brand name and image, it is important to protect them legally. Register a trademark for your brand name to ensure no one else can use it or create confusion in the market.

This important step helps establish your business and protects your intellectual property. It’s helpful to consult with an attorney to navigate the process. This ensures you don’t miss anything when securing your trademark,

Create Your Business

Creating your online presence isn’t enough to start your business. You must officially register your company . You can find original and distinctive names for your business with the use of a  business name generator .Generally, it’s okay to start working and make a few sales. But you’ll eventually need to make things official.

Take all Necessary Legal Steps

You will need to address some legal aspects when creating your company . A licensed and registered business provides personal legal protection.

First, make sure you choose the right business structure. Depending on your location, products, and services, you may need a business permit. You may also need a federal business license. In most cases, you will need a federal business license .

Here are the main legal hoops you will need to jump through:

Register Your Business

Don’t let the idea of registering a business scare you. It’s paperwork and paying fees.

You can expect to:

• Register your new business name and optional Doing Business As (DBA)
• Choose your business’s legal structure: limited liability company ( LLC ), partnership, etc.
• A Federal Tax ID (or EIN)
• Other licenses and permits

Opting for a sole proprietorship allows you to skip many steps. That’s why many people getting started take this route. However, this doesn’t legally separate you from your business. If something goes wrong, you put your personal assets at risk.

If you’re confident in your business, save time and register your business at the start. A DBA and Federal Tax ID can also provide other perks.

Get Tax IDs

After getting your federal tax ID and business license, get your state and local tax IDs. You may have more paperwork for taxes and permits.

Get All Necessary Licenses

Certain types of businesses have licensing requirements . Common business licenses you may encounter include:

• Federal business license
• Sales tax license
• Home occupation permit
• Specific industry licensing
• Permits for regulated products

Your needs depend on your business and the products or services you’ll sell. Your local government or the Small Business Administration can help you.

Remember that sole proprietorship can avoid a lot of these requirements.

You must abide by all regulations where you do business. This includes across state lines or international borders.

Open a Business Bank Account

A separate business bank account is crucial. It simplifies your accounting to keep your business revenue separate from personal income. You need a registered business tax ID to open a business checking account.

As a sole proprietor, you can still open a separate bank account to manage personal and company funds.

Choose a Payment Gateway

Whether you sell B2B or B2C, you need a system for handling payments. Popular ecommerce tools integrate with third-party services so you can collect customer payments.

You must connect your payment gateway to your business account to accept payments. Your location and the ecommerce tools you use determine available payment gateway options.

Set up Taxes 

As with any business, you must track your earnings and pay business taxes. Consider hiring an accountant to help you get started if you can afford one. Keep clear and accurate records to ensure you’re ready for tax time.

Build Your Website

Your website serves as your storefront and a direct representation of your company. Building an effective and attractive website is essential for a successful online business. Luckily, there are tools you can use to build a website without technical skill.

Choose the Website Platform

Thanks to many different ecommerce platforms , it’s easy to start an online business. If you’ve got general computer skills, you can build an ecommerce website yourself.

Popular codeless ecommerce platforms include:

There are others, though these make up the vast majority of websites that aren’t coded from scratch. In fact, WordPress powers roughly 40% of all websites on the internet!

The beauty of WordPress is it is free, open-source software . Developers can create custom plugins, so no matter what feature you need, you can find it. This makes it easy to build your website without technical knowledge.

With its popularity, you can find step-by-step guides for anything you may need.

Shopify is an easier website builder for creating a basic ecommerce store, though it will require a monthly fee. It uses simple templates for creating product pages to sell your goods online. This is a popular option among small business owners.    

WordPress may be free, but there are ongoing expenses , including:

• Domain name
• Web hosting plan
• Premium plugins

Find a balance between cost and service when you choose an ecommerce platform.

If you are selling digital products, consider using an online course platform.

If you’re not ready to build a website, use marketplaces like Amazon, eBay, or Etsy to sell your goods. The downside of this business plan is marketplace fees, which can eat into your profits.

Set Up Marketing Automation

Once you have your ecommerce platform set up, it’s time to start thinking about how to market your business. One of the most effective ways to do this is through marketing automation.

Marketing automation refers to software that automates repetitive tasks. This can include email marketing, social media posting, and advertising campaigns. This can save you a lot of time and effort while still achieving great results.

To start using marketing automation, create a customer database. Collect customer information through your website or social media accounts. Use the data to segment customers into different groups. From there, send them targeted messaging.

Email Marketing

Email marketing is one of the most important tools in your marketing arsenal. With it, you can reach customers directly in their inboxes. When done properly, it increases brand awareness and sales.

To start, build an email list. Offer something of value, such as a free book, discount code, or webinar. Subscribers get access to your offering in exchange for their email addresses.

After building your list, use an email marketing platform such as Mailchimp or Constant Contact to create and send emails.

Personalize and offer value to your subscribers with each email you send. Segment your list based on consumer behavior and interests to boost engagement.

Landing Pages

A landing page is a standalone page designed to convert visitors into customers or leads. Effective landing pages have:

• Clear and concise messaging
• A strong call-to-action
• A form for visitors to fill out to become a lead or make a purchase

When creating your landing page, keep in mind your target audience and what will appeal to them. Use eye-catching visuals and persuasive copy to convince visitors to take action. Tools like Unbounce or LeadPages make it easy to create landing pages without coding knowledge.

Funnel Set Up

To maximize your online business success, it’s important to set up a sales funnel. A sales funnel is a step-by-step process that guides potential customers toward buying.

Typically, it starts with the awareness stage. This is where visitors discover your brand. From there, you’ll move them to the interest and consideration stages. Here, they’ll learn more about your products or services. The end goal is to move them to the decision stage, where they make the decision to purchase.

Setting up your sales funnel involves:

• Identifying key steps customers take before they buy
• Creating content and offers to guide them through each stage

For example, you can offer a free trial or consultation.

Market Your Website

Marketing is crucial to help your business grow. To effectively market your online business, understand your target audience. Once you know who your ideal customer is, you can use various strategies to reach them.

Content Marketing and SEO

Using content marketing and SEO can attract potential customers and improve your search rankings. Creating high-quality, relevant content using keywords related to your niche can organic visibility.

Start by identifying topics and keywords relevant to your business. Then, create content around those phrases. You’re not limited to blog posts – you can also create infographics , videos, and more.

Optimize the content with proper headings and meta descriptions to improve ranking potential.

Facebook and Instagram Ads

To build a social media following and increase brand awareness, run ads. Facebook and Instagram make it easy to create targeted ads based on:

• Demographics

To get started, set up a Facebook Business Manager account and connect it to your website. Then, create your ad campaign with an objective that aligns with your business goals. You can choose from options such as brand awareness, website traffic, and conversions.

Create visually appealing graphics and compelling ad copy. Everything should speak directly to your target audience. Use A/B testing to refine your ads over time and achieve a return on ad spend.

Influencer Marketing and PR

Find influencers who have a following in your niche. Reach out about collaborations on content or promotions to tap into their audience.

Use PR tactics such as press releases and media outreach to gain exposure for your business. Focus on relevant journalists and publications because they’re more likely to feature your brand.

Building relationships with influencers and journalists takes time and effort. Don’t expect immediate results. With consistent outreach and quality content, you can establish yourself as an authority.

Retargeting

Retargeting involves showing ads to users who have already interacted with your brand. It reminds them of what they’ve viewed and encourages them to complete the purchase.

To set up retargeting, install a tracking pixel on your website. Then, you’ll create ads targeted at those who have interacted with your site. You can use platforms like Google AdWords or Facebook Ads to create and manage your retargeting campaigns.

Conversion Rate Optimization (CRO)

It’s not enough to drive traffic to your website. For success, that traffic needs to convert to customers. CRO is strategically editing your website design and content to increase conversions.

To leverage CRO, analyze your website data using tools such as Google Analytics. Find pages with high bounce rates or low conversion rates. Make adjustments to improve the user experience. For example, simplify navigation or make your calls-to-action clearer.

Use split testing to identify the changes that are most effective.

Successful Online Businesses You Can Learn From

While every online business is different, we can learn from those who paved the way. Here are some strong ecommerce examples :

We’ve already mentioned Amazon a few times, with good reason.

Why? Because Amazon is the be-all and end-all of ecommerce business . It started as a small operation selling used books out of a garage. It grew to control more than a third of all ecommerce in the United States. You can’t ignore Amazon.

Amazon followed many of the tips we’ve covered in this article. (You could argue that they wrote the book on successful online business).

But Amazon started with a focus on one product category: Books. Its target market was people who wanted to save money and enjoy the convenience of delivery.

They embraced their success and continued to grow the brand around those strengths. They expanded into other product categories and now offer countless products and services.

With them, we learn how to focus on our strengths and look for growth opportunities.

Etsy is another good example of a simple idea that turned into a huge success. Etsy started as a small online business that focused on the sale of homemade goods. This differed from marketplaces like Amazon, which sold mass-produced items.

Etsy stayed true to its concept. It is a popular platform for artists and crafters who don’t want to compete with factory-made goods. Their business model was a success, offering niche products you can’t find anywhere else.

EBay revolutionized ecommerce with its new business plan of online auctions. Rather than selling products, eBay built a business around allowing others to sell.

eBay inspired many other ecommerce websites to follow a similar approach.

Each of these ultra-popular websites started as a small ecommerce business before making it big. We can apply the same strategies to our own online business plans. 

Which business is best for online?

Some business concepts that benefit from being online are:

• Affiliate marketing
• Digital product sales
• Dropshipping (and Fulfillment by Amazon companies)
• Training and digital courses

What do these business models all have in common? You can start them with little to no money and with minimal overhead.

Basic ecommerce companies can be successful. But there is greater risk with physical inventory. You must rent warehouse space, buy the inventory, and pay other business expenses.

With the above examples, all you need to invest is your time, and you can start earning money online!

What is the most profitable item to sell online?

You can sell most things online, but digital goods have unique profitability. Unlike physical goods, you can create digital goods like games or online courses once and sell them forever. The same goes for ebooks, videos, and other digital content.

You must print, bind, sell, and ship a physical book. You can sell and download an ebook with no physical labor involved. This is what makes digital goods so profitable for online businesses.

What online services are in demand?

In-demand online services are those that help others get online. In the wake of the pandemic, companies rushed to build their online presence.

Service-based businesses related to website design and digital marketing are in demand. An example is email marketing software, especially email marketing automation.

What are the most successful small online businesses?

You can sell almost anything online, but fashion and beauty are among the most successful. Fashion was the largest ecommerce segment in 2022 . Countless boutiques , brands, and content creators are getting their slice of the pie.

Start Creating Your Online Business

Now you are ready to start planning your own online business endeavors. Chances are it won’t be quick, and it won’t be easy. With a bit of luck and persistence, you can launch a successful online business.

Before, it took specialized knowledge and big risks to make money online. N ow abundant opportunities for those looking to break into ecommerce . No matter your strengths or skill level, there is a solution for how to start an online business.

With a little bit of elbow grease, you can turn your side hustle into a profitable business.

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How to Start an Online Business in 2023

Starting an online business isn't easy. There are so many important decisions to make.  What should you sell ? Who should you sell to? How will you get customers?

If that's not enough, every other week there seems to be a new business trend online. There's chatbots, cryptocurrencies, Facebook ads, Instagram influencers, and many more. What should you pay attention to? What actually matters?

If you want to know how to start an online business in 2023, we've got you covered. In this quick and simple article, we'll take you through how to start a small business online, step-by-step. Consider this as a starting an online business for dummies guide, as we cover everything in plain English and list simple, actionable instructions to help you start. 

Start selling online now with Shopify

How to Start a Business Online (From Scratch)

#1: don't start building yet.

When looking to start a business , it can be tempting to jump into action.

So, if you're feeling the urge to build a website, choose a business name, or create a logo , hold off for now.

If you want to start a successful online business, first, you need a strategy. And steps two, three and four of this article will show you how to create your online business strategy.

#2: Choose a Business Model

When learning how to build an online business from scratch, it helps to know about some tried-and-tested online business models.

Here are six types of online businesses to consider:

• Affiliate Marketing : Promote other business's products and services online, and receive a commission for each sale you make with this passive income idea .
• Freelancing : Provide a service to other individuals and businesses using a skill that you have, such as advertising, writing, designing, or programming.
• Coaching and Consulting : Become a coach or a consultant and sell your expertise, advice, and guidance.
• Information Products : Package and sell your expertise in ebooks, worksheets, templates, and online courses .
• Software as a Service (SaaS) : Create a piece of software or application, and charge users a recurring subscription fee.
• Ecommerce : Use a service like Shopify to set up a website and sell physical products online.

Want more online business ideas to help inspire you? Check out our guide, "25 Small Business Ideas to Make Money".

#3: Identify Your Target Market

Next, you need to get clear on your target market. In other words, who are you going to serve?

This step is absolutely vital.

As the marketer Philip Kotler once said , "There is only one winning strategy. It is to carefully define the target market and direct a superior offering to that target market."

Here's the trick: Make sure you are part of your target audience.

Think about it. If you've been camping your entire life, you'll understand the problems, desires, and language of other campers. As a result, it'd be much easier to sell camping products online. 

Plus, your marketing will be more successful because you'll have a better understanding of how to communicate with other campers.

On the other hand, if you've never been camping in your life, you'd probably struggle – a lot – to sell camping products online.

So, when choosing a target audience, ask yourself:

• What are my hobbies and interests?
• Is there anything that I know a lot about?
• What do I spend most of my time thinking, talking, and reading about?

#4: Find a Problem to Solve

When learning how to start an online business, it's important to note one key thing: all businesses solve a problem.

Plumbers fix leaking pipes. Hollywood movies fulfill people's boredom, curiosity, interest, and the need to escape and relax. Clothing brands help people express themselves and feel attractive.

Here's the golden rule: The bigger the problem you can solve – and the better you solve it – the more money people are willing to pay.

For example, take healthcare services. They solve a big problem, which is why almost everyone is willing to spend a lot of money on it. 

On the other hand, not many people will pay you to stop their table from wobbling. It's not a big problem, and they don't need help solving it.

Bottom line: If you want to identify how to start an online business, you need to find a good problem to solve.

Here are three examples:

• Target market : Fashion-conscious teenage boys
• Problem : The fashion-conscious want to stand out from the crowd without spending too much money.
• Solution : Create a clothing line that's flamboyant and budget-friendly.

• Target market : Marketing managers at multinational software companies.
• Problem : Businesses need to drive traffic to their websites.
• Solution : Write articles that rank on the first page of Google to drive traffic.
• Target market : Working Moms with young children.
• Problem : Many moms want to work out regularly, but they don't have much time.
• Solution : Create a time-saving fitness program and schedule.

How can you find a problem to solve?

• Join Facebook groups and online forums and ask people what they need help with.
• Use Google Keyword Planner to find out what people are searching for.
• Find successful online businesses and identify the problem they solve, then look for ways to do it better.

#5: Analyze The Competition

Anyone learning how to open an online business shouldn’t sleep on competitor analysis .

Analyzing your competitors helps you stay on the cutting edge of what’s working in your niche, identify successful tactics and new trends, and anticipate shifts in the market. It also helps define your messaging, positioning, and overall business strategy.

So how do you conduct a competitive analysis? Here are some tips: Subscribe to your competitors’ blog

• Buy a product they sell
• Abandon a product in their shopping cart
• Sign up for their newsletter
• Follow them on social media

While taking these measures, make sure to document your findings with notes on each approach. You want to be able to find relevant insight when you need it.

By analyzing their customer experience and looking at how they engage people via content, you can identify tactics that your competitors are using to drive sales. 

Pro Tip: Consider doing a SWOT analysis to accompany the findings from your research. It’s a blueprint that leans into your competitors’ strengths and weaknesses to define areas of improvement. To learn more about this tactic, check out our guide, “ Everything You Need to Know About SWOT Analysis .”

#6: Cover Your Legal Bases 

Any business you start must be properly aligned with the laws and regulations in your region. So make sure to read up on online business legal requirements when starting a new internet business. 

Just some of the legal aspects you’ll need to consider include:

Business structure

Register as an LLC or sole proprietor for online business? You can research and decide on your own, but it pays to get input from a tax specialist.

Licenses and permits

Depending on what type of business you start, you may need a license to operate it. This varies depending on where you live, so contact your local state department to find out more.

Tax obligations

Most online business owners are required to pay income tax. Additionally, you might have sales tax obligations if you sell products to consumers in certain countries. So before starting your business, consider speaking to an attorney to learn about the applicable taxes and the list of online business documents you’ll need to file them.

Copyright, patent, and trademarks

You’ll want to cover these legal elements to avoid trouble down the road. For example, registering your trademark will prevent others from using your brand name, saving you the hassle and cost of rebranding. 

#7: Select Your Sourcing Strategy 

If you’re interested in starting an online ecommerce business, you’ll need to find reliable and trustworthy sources of inventory.

There are several ways to do this:

• Search for product manufacturers on websites like Alibaba or directories like Kompass , Sourcify , and ThomasNet. 
• Discover dropshipping suppliers on platforms like DSers .

The last option is highly accessible and gives you a chance to start your business without making a huge upfront investment. 

With dropshipping, your product supplier ships and fulfills an order only after a customer has made a purchase; they handle the storage and logistics part of the business while you handle marketing and customer support.

Check out this list of the best dropshipping suppliers to find valuable partners you can count on for order fulfillment. 

#8: Set Up Your Payment Methods

You’re almost there! Now is the time to decide how your business will accept payments and how you as business owner will receive payouts.

There are several online payment options available to you. The most popular ones include accepting credit cards, PayPal, Apple Pay, and Google Pay.

If you’re planning to use Shopify to start an ecommerce business, you can activate the provider’s integrated payment solution called Shopify Payments . It sets you up to accept all major payment methods and comes with 0% extra transaction fees.

For a service-based web business like freelance writing, be sure to check out Transferwise, Payoneer, Stripe, and 2Checkout.

Regardless of the payment method, you should be able to set your payout schedule. You can choose to receive your money daily, weekly or monthly — depending on your preferences when it comes to cash.

#9: Build Your Sales Platform

Once you've identified your business idea and covered your legal bases it's time to build your platform.

Well, if you plan to start an ecommerce business, build a website with Shopify and then find products to sell with DSers.

If you plan to start freelancing, coaching, or consulting, Shopify has the option of plugging in many popular tools like Digital Downloads to sell digital products online , ReCharge to sell subscriptions online, and SendOwl to sell videos online. 

Keep things simple.

At this point, your business is still in the realm of theory. So try not to invest too much money, time, or energy into building a perfect website.

Instead, test your business idea and make sure it works before you invest.

Eric Ries , the author of The Lean Startup, said, "We must learn what customers really want, not what they say they want or what we think they should want."

#10: Choose a Marketing Method

When you’re ready to start promoting your online business, you need to choose a marketing method.

There are many different online marketing methods out there. However, when it comes to learning how to start an online business, some are better than others.

Here are four online marketing methods that you can use to land sales relatively quickly:

• Social Media Marketing : Use social media to create and share content, engage with your target audience, and drive traffic to your website to land sales.
• Direct Outreach : Reach out to individuals at companies to pitch your services .
• Paid Advertising : Advertise on platforms like Facebook , Instagram , Google , and YouTube to increase brand awareness and drive sales.
• Influencer marketing : Team up with influencers to promote your products directly to their existing followings.

Summary: How to Start an Online Business?

Wondering how to start an online business in 2023? Here are 10 steps to starting an online business:

• Create a good business strategy before you start building things.
• Choose an online business model that suits your skills, interests, and preferences.
• Identify your target market – and make sure that you are part of it.
• Identify a problem that your target audience has, and find a way to help solve it.
• Study your competitors to identify opportunities for improvements.
• Fulfill the legal requirements, including getting a business license.
• Choose a sourcing strategy that streamline your order fulfillment.
• Set up your payment gateway and payouts to collect and receive payments. 
• Build a basic sales platform to test your business idea.
• Choose a marketing method and start promoting your business.

Finally, it can take a while to learn how to start an online business successfully.  So don’t worry if your first online business doesn’t take off immediately. Many of the most successful entrepreneurs failed multiple times before achieving success.

As the co-founder of Apple, Steve Jobs, once said , “I’m convinced that about half of what separates the successful entrepreneurs from the non-successful ones is pure perseverance.”

→ Click Here to Launch Your Online Business with Shopify

Bonus: additional resources to help you build and start your online business  .

• How to Build Your Own Brand From Scratch in 7 Steps
• 9 Best Shopify Tools for New Entrepreneurs
• How to Get Free Media Coverage for Your Business
• Decoding Product Life Cycle Stages (And Optimizing For Them)
• 15 Ways to Increase Social Media Engagement Quickly
• What You Need to Know About Pricing Before You Launch
• Ecommerce Shipping Solutions: Guide to Ecommerce Delivery
• Product Page Tune-Up: 9 Timeless Ways to Increase Conversions
• 10 Tips on How to Handle Customer Complaints
• 9 Ways to Earn Customer Trust When You Have Zero Sales

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Home > Business > Business Startup

The Complete Guide To Starting An Online Business

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Starting a business is sometimes scary and almost always challenging. It might seem overwhelming at first, but that is completely normal. And we owe you a massive congratulations. You have an idea good enough to share with the world, and that’s a big deal! You’ve officially gone further than most hopeful entrepreneurs. You’ve made the decision to get online and figure out how to turn this idea into a money-making business. So, let’s talk logistics. 

When I first started my own business, I panicked over taxes, finances, and marketing. I felt so behind that first year because I didn’t have anything figured out before launching my site. Then, when I did launch, I had to check all these boxes while I was knee-deep in the stress of maintaining my business. I had no idea which holes I hadn’t filled until they imploded and quadrupled my stress, since I had to put out fires that were completely preventable. 

To help you avoid the same mistakes I did when I launched my business, we've put together this guide to starting your small business online. Read through our eleven steps below to officially start your business off on the right track.

How to Launch a Small Online Business

• Vet your idea
• Identify your audience
• Choose your business name
• Write your business plan
• Sort out your branding
• Build your website prototype
• Test and validate your product
• Nail down your processes for delivering your product
• Make it legal
• Deal with your finances
• Launch your business

1. Vet your idea

First things first: you gotta vet your idea. 

Before jumping in head first, you need to be 100% confident (or at least 90%) confident that your idea is worth it—worth the time, sacrifice, stress, anxiety, frustration, and ego hits. 

It’s worth remembering that no matter what type of business you own (or how good your idea is), you’ll definitely experience ups and downs within the first 10 years. Some of these ups will be sky-high, and some of these downs will be depressingly low. 

But if you believe in your idea enough, you will persevere—you can absolutely come out the other side with an awesome business, which is an amazing way to spend your time and earn a living. On the other hand, if you’re shaky about your plans, this will be a tricky first decade for you. To make sure you’re on the right track, let’s talk about how to vet an idea:

While vetting your business idea, ask yourself these five questions: 

• How big is your potential audience? Are enough people interested in this type of product or service that you have a stable audience for sales? 
• Is your product or service something customers buy once and move on? Or is there a chance for building a repeat customer base? 
• Is your business idea going to be a passing trend like low-rise jeans, or does it have a long-term possibility like pencils? 
• What is your competition? For instance, if you are setting up a fry bread cafe, are there other fry bread cafes in the area? If there are, what unique element will set your business apart from the competition? 
• Will your business have any legal issues or limitations? For instance, are you creating something with strict regulations that make it trickier to market? Are you passionate enough about your idea that you’re willing to deal with the ups and downs and chaos of starting a business?

Once you’ve vetted your idea by asking yourself the questions above, getting advice from people you trust, and even speaking with an accountant or business banker about your business’s viability, it’s time to move on to the fun stuff—like choosing a name for your budding business.

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2. Identify your audience (or your target market)

Arguably, the most ignored aspect of building a business is identifying a specific audience. A lot of fresh entrepreneurs hesitate to hone in on one demographic because they believe their product or service can and should help everyone. Depending on the product, that might be true—but it still creates a watered-down, generic brand that doesn’t catch anyone’s attention of anyone. 

Our advice? Don’t fall for the trap of thinking everyone is your audience. There’s no way you can market to everyone and still have a unique brand. 

In contrast, if you are clear on who you are selling to, then you will attract people who actually want your product—which means your business is likelier to last. 

To take this a little further, remember that the best brands are aspirational. In other words, while you should start with the people who want your product, you should eventually expand into finding people who want to want your product. This means you will inherently cast a wider net than just your target market—but you will not catch much of anyone without a target market. Start there.

If you can really hone in on exactly who your dream customer is, you then know how to market your product to them. A good exercise to do here is to write your dream customer’s profile or buyer persona: 

• What is your ideal customer’s name? Age? Occupation? Hobbies? 
• What food do they like? What food do they dislike? 
• Do they have a family? 
• How much money do they make, and how much disposable income do they have? What are their hopes and goals? 

Now, ask yourself: Does a person like this actually exist? If so, now you know which social media platforms to target, where to buy ad space, and what tone your advertising should take. 

Having a hard time answering the questions above? Start by identifying who is not your audience. List the qualities of the person who is not your target audience, and narrow things down from there.

Again, you can have more than one target audience, but you should try to be as specific as possible for each one.

3. Choose your business name

Choosing a business name is where the fun starts. For one thing, your business’s name is the first point of contact between your business and your consumers. It also gives customers the first glimmer of your personality and is the place where your branding will shine. 

Remember, your name is also how the legal world will note your business. It also helps Google determine how to position your website when someone searches for your product or similar product on the internet. If your name is confusing, long or even too similar to other business names, you might be positioned at the bottom of the search results page. 

In other words, your business’s name is important. 

When it comes to business names, entrepreneurs tend to overthink, overthink, and, overthink some more. Sometimes, it feels like the trickiest part of starting a business, so here are some tips for figuring out the perfect name.

Keep it simple and short

Shoot for one to two words. You don’t want the name to be a chore for your customers to remember. Make it as easy as possible for your customers to think only of your service or product when they hear your name. You also want the name to fit neatly on a price tag or as a hashtag (always keep that social media marketing in mind)

For a good example of a short, simple brand name, consider Macintosh computers and Apple products. When someone says the word “apple,” most people now think of the computers before they think of the fruit. It’s a simple name, but with excellent marketing, the company completely co-opted the fruit.

Dare to get personal

Don’t be afraid to think of something quirky, weird, and maybe even a little kooky. For instance, many small online clothing businesses include the name of the owner’s grandmother in the title, or maybe of the owner’s children who inspired the clothing. 

Or if something from your hometown (or even a particular food) means something to you, consider including that as part of the name. This type of personality flair makes marketing the founder’s story even clearer (read: makes you more marketable). It’ll also provide an easy framework for storytelling within your marketing plans. 

These personal details will also help customers feel a sentimental connection to the brand. Sentimentality is an effective tool for building loyalty.

Be original

Make sure there are not other companies filed under the same name or an adjacent name.  You don’t want to confuse your potential customers or investors, and you also don’t want to confuse Google, which might pull up your company’s name and location while filling in product information from a completely unrelated company that happens to share your business’s name.

Search domain names, URLs, and social media handles for your would-be business name. Don’t forget to simply Google the name either. If you are dead set on your chosen name, consider tweaking it a little just to set it apart.

4. Write your business plan

Your business plan is a structured document that gets all your brilliant ideas down on paper. You’ll show it to investors (like angel investors or traditional lenders like banks) to demonstrate that your ideas are worth investing in. While you can modify your business plan from year to year, try to think about it as your business’s foundational document—this is how you design the path to making your dream work. 

You can create your business plan as early or late as you want before launching your business, but I highly recommend doing this early because it will reveal any flaws in your idea. The plan itself might feel redundant, but don’t speed through this. Consider it a proposition for the world to take your idea seriously.  

Executive Summary

This is your elevator pitch. Simply sum up what your business is, how it will function, and what success you anticipate. It should be brief and to the point. 

Company Description

This section should be a detailed description of what problems your company solves. It should also focus on who your company is serving and how you are serving that population.

Market Analysis

Who is your competition? Your investors will want to know you’ve done the research to find out that yours is a good idea, or that there is even a demand for this service or product. Along with showing that there is competition, this section of your business plan should point out what the competitors are doing better than you—and what you plan to do better than your competition.

Management and Organization

What kind of business is this? Is it an LLC, INC or DBA? How big is your business, and what is its structure? Most any business structure is fine—but remember: remember...stay away from pyramid schemes. (We say this mostly because they’re pretty similar to illegal pyramid schemes, but also because they can take advantage of women and marginalized populations.)

Products and Services

What exactly are you selling? List out each product, including each variation of your main product or service, as well as your pricing. Keep this portion of your business plan as clean and organized as possible (a spreadsheet will likely be a useful tool here). You will probably add to this list as you launch your business and continue to grow.

Marketing & Sales

How do you plan to let people know what you are selling? Many business owners use social media, local newspapers, radio ads, billboards, or even a combination of everything. The point is that you need to have a plan. 

Another angle to consider is what medium your audience primarily uses. For instance, if you’re focusing on a product that primarily serves older communities, you’ll want to focus on Facebook advertisements. If you’re focused on a younger population, TikTok ads will probably serve you better. Consider how you can use your audience’s preferred same media to get your message across. And what sort of posts or commercials will you create that both fit your brand and speak to your dream consumer? 

Funding Requests

Outline your funding requirements. This is where you get specific on how much you need and how each dollar will be spent. It’s also where you explain the lending and investment terms you would like and whether you are looking for debt or equity. The more specific you are, the better. Answer basic questions like how long you’ll need funding and how exactly you’ll use it. Most importantly, be overly detailed and incredibly tedious with this information—investors prefer more information when making a decision about whether or not your business is worth their time and money.

Financial Projections

Because you haven’t launched your business yet, this is where you will keep track of your monthly and/or quarterly projections. Throw in graphs, charts, and anything else that will tell your financial story as easily and quickly as possible. This section can be updated and added upon after you launch, but you should definitely keep track of your financial projects throughout the life of your business. Set routine goals to keep yourself motivated and on track.

Keep your business plan close by and allow it to remain a living document as you grow and learn new things. Even if you never end up presenting it to anyone, it will keep you focused and aware of when things are not lining up for you.

5. Define your brand identity

Last year, I taught a business class to high schoolers., These were Gen Z brilliant students who knew the internet forward and backward. They used the word “branding” casually, but they didn’t quite understand the ins and outs of branding a company. So we did what I like to call “the Starbucks exercise.”

I asked them to get out a piece of paper and write their answers to my questions: If Starbucks were a person, what gender are they? Do they smoke? What age are they? Do they have a family? A partner? Kids? A dog or a cat? What kind of outfit is Starbucks wearing? 

The majority of students had the same answers. To them, Starbucks was a white middle class lady who used to smoke cigarettes. She is a straight cis female with a couple of kids and a cat. She is stressed and she wears yoga pants a lot. 

These students were all from different homes and all had different relationships with the coffee brand— but they all had the same general understanding of what this brand was. And that’s the power of strong, consistent branding. 

If you can create a set understanding of what your company is if it were a person, you are golden. Creating a brand like this means you know exactly who you are marketing to. And having such a specific focus also means that you can attract the right customers. You will know which aspects of your company to negotiate in order to attract your target audience and expand from there.

What gender are they? Do they smoke? What age are they? Do they have a family? A partner? Kids? A dog or a cat? What kind of clothes do they wear? What is their income bracket? What type of music do they listen to?

Another helpful exercise is to try to describe your company with one word. Examples include: sleek, economical, efficient, retro, conscious, powerful, and rejuvenating. Practice this with your own business, and then make branding decisions based on that word. 

Now that you have an understanding of what your brand is, consider your unique selling point, words, colors, and logo.

Figure out your unique selling point

What makes your brand different from other brands? Why should people choose your service or product over others? Is there an emotional reason (for instance, you’re a local, naturally sourced brand), a practical reason (maybe you’re more affordable or offer higher quality products), or a combination of both?  Frankly, if there is an emotional pull, run with that—people love an emotional connection to the product they’re buying.

To put it simply, think about your origin story and what YOU bring to the table. Then go from there.

Colors are important! They should work together to make a good story. They should not be in a contest with each other. If you look at your branding and feel confused or disturbed, it means that the colors are not doing you favors. 

Not sure what we mean by that? Well, there is an area of study called color psychology. This is how our brain responds to certain colors. 

For example, yellow is a trigger for discomfort and red is a trigger for hunger, which is why most fast food places use red and yellow in their branding. These colors are intended to inspire patrons to come and eat a lot (red) and then leave quickly because the yellow is so glaring. Blue is calming which is why most therapy offices paint their walls blue. 

Consider what emotions you want your clients to feel and Google which colors best make that happen.

Red - enhances human metabolism, increases respiration rate and raises blood pressure; associated with energy, strength, danger, war, determination, passion, desire, and love -- it attracts more attention than any other color

Green - slows human metabolism and has a calming effect, associated with tranquility and calmness, symbolizes growth, freshness, rebirth, fertility and is associated with nature (all things organic). 

Blue - Peaceful, honest, compassionate, authentic and sympathetic 

Brown - reserved, dependable and resilient 

Yellow - joyful, happy, intellectual, a lot of energy, stimulates mental activity and muscle energy, can bring feelings of anxiousness when overused, and is definitely an attention grabber. Commonly used to mean loyalty and in other settings cowardice. 

Pink - calming and vulnerable. Signifies gentleness and youthful innocence, very sweet and tender feelings

Purple - power, nobility, luxury and ambition, wealth and extravagance. Reminds mystery, creativity, independence and magic 

White - signifies safety and cleanliness. Reminds of purity, light, faith, innocence and goodness

Black - power, death, formality, fear of the unknown, often feels negative and reminds of grief

Color theory also tells you which color combinations are most pleasing to our eyes. A fun resource is the Adobe color wheel . This site allows you to jump in and look at different combinations of colors that work within these theories of which colors are most compatible.

This is where you get to tell your story. Use words that fit the tones of the colors you choose (or vice versa). Words like sleek, organic, fresh, and honest all feel good with greens, light pinks, and whites. Words like powerful, strong, and forthright match the tones of reds and blacks. Consider which words best describe the mood you are trying to convey.

Unless you have a design background and are good with graphic design, consider hiring someone else to design your logo. Before hiring someone, your job is simply to figure out a basic idea of what you want. This will require you to look at different branding, websites, and fonts to think about what really resonates with you. 

When I was trying to sort out my own branding, I came across an Instagram profile that posted old Russian products with pre-1990 branding. My family comes from Eastern Europe and many of my family members speak Slavic languages, so seeing these unique logos and fonts felt familiar to me. I decided to hire a designer who created a font that could have come straight from old cheese cans from Moscow 1955, something with a Slavic touch and retro vibe. You never know where you will find inspiration.

• Old branding. Look at old magazines or old boxes and just study those fonts and how the logos were made.
• Notice t-shirts. 
• Whenever you find yourself in a waiting room or watching tv, jump on Pinterest and create different boards of ideas or tones.
• Start following different designers on social media. A popular one is Aaron Draplin, and from him you should be able to find an entire community that posts different design and logo ideas. This should inspire you as you figure out what you want. 
• Album covers. Go to a record store and sort through different old school album covers. You will see some of the best branding there has ever been. 
• Instagram, Instagram, Instagram. We love to hate it, but if you tap into the design community, you will be blown away by the options. 
• The grocery store. Andy Warhol found art in advertising and sold his Campbell’s Tomato Soup renderings for millions of dollars. He described the soup can as brilliant art and branding. Go to the grocery store, pretend to be Andy Warhol, and look for art in the mundane.

6. Build your website

Whether you’re offering a newsletter or a physical product, you need to start creating a site so you can fund your business and find customers. 

To start creating your ideal website, start by asking a few key questions. What is the purpose of your site? Are you selling or just giving information? Does your site include a call to action like signing up for a newsletter or service? Or do you need an e-commerce site to collect credit card information and shipping? 

A ton of different website building platforms are built for small online business owners like you. With services like Wix , Squarespace , and Weebly , you can create a site and keep it dormant before launching for testing. 

Not sure how to build a website from the ground up? Find other websites that are doing similar things to you and follow their lead. It is okay to gain inspiration from multiple sources. (Just don’t copy and paste an entire site. Plagiarism will not go well for you.) 

Start simple. You don’t have to have a perfect product right away. Create a basic website, then have a friend go through it and tell you what they would love to see or use. 

As you start creating your site, Just make sure you have these basics: 

• A site map 
• High-quality images 
• A call to action on each page (“sign up for our email,” “click to purchase,” etc.)
• A contact page

You’ll also want to use proper SEO ( search engine optimization ) for any blogs and sites you create. If you’re not sure what that means, no worries—most website builders include some sort of SEO recommendations that will help optimize your content. 

SEO is an acronym for “search engine optimization.” It is the method in attracting a higher quality and quantity of traffic to a site. 

The goal of SEO is to make it easier for Google to recognize what your site pages are about and then help users find the best solutions to their needs.

• Figure out where your site stands in terms of Google rankings. Use the Google toolbar or other monitoring tools (there are a lot). 
• Use keywords or phrases organically throughout your pages. Use keywords that people might be including in their searches. Feel free to Google your topic and see what other people are posting or searching. 
• Include these search terms in your URLs. 
• Attach descriptors to your images. 
• Use internal links to guide users to another page on your site. 
• Link to other sites or the site you are sourcing information from. 
• Make sure that your website is updated regularly and actually has high-quality information.

7. Test and validate your product

Test your product.

Before launching and advertising, you must test your product and see if it is actually meeting the needs it is setting out to meet. You can do this in the form of focus groups, which means sending the product to a few choice people who you know will be honest about their impressions. Then you can start sending and giving to others. Find a bigger audience by inviting people from your focus group to pass your product along to their friends and ask for their feedback as well.

Validate your product

Before really going crazy with scaling and production, you must validate the product . This means setting up pre-orders and selling in person (read: starting off small before you buy 6.000 scrunchy leopard print bracelets that will just sit in your garage). Produce a few items and try to sell them. If you can’t move those few, there is no way you will move 6,000. 

Validating your product tests whether your idea actually does have legs and whether you are the right person to move it forward. This can also be done by setting up pre-orders, launching a crowdfunding campaign, or selling person to person. Each of these tactics can act as a thermostat of where you are in meeting a need or want of your dream customer. 

If your product is not a tangible thing and is content– or service-based, start promoting it through advertising. Consider offering a free service to get feedback before you start to sell. See what happens. Once again, if no one bites, it’s time to find another idea for your small business.

8. Nail down your processes for delivering your product

By now, you should have a good sense of your business’s organization, branding, and purpose. Now, it’s time to dig deeper into the nitty gritty part of building a company. 

Let’s start by asking a few questions. 

If you are using an online store to sell a product, ask yourself:

• Where are you going to store your inventory? 
• Would you rather mail each product yourself, or should you outsource via dropshipping ? 
• Who is making your product? 
• Are ethics and sustainability a part of your brand?  
• Do you need design help and how long term do you need the help to be? 

If you are selling a service, ask yourself: 

• Exactly what service are you offering? 
• What are your price points? 
• What size of jobs are you accepting? 
• What are you willing to negotiate with clients? 

Whether you’re selling a product or service, we recommend getting support that can help you save time and money as you hammer out the logistics of running your business. Here are some of the most crucial tools to consider:  

• Accounting software. We live in a wonderful time when there are trillions of options for different accounting apps. Different programs are tailored to different needs and include different price points as you grow. Check out our  list of the best accounting software for small businesses . 
• Email marketing. Email marketing benefits your SEO and builds trust with your customers—potential, past, and current. This is the one chance you have to speak directly with the people you are hoping to impact with your service. This is where you can ask them questions and remind them that you exist.
• Project management. If you are anything like me, you tend to procrastinate and get frazzled when things get off track. Just like accounting apps and software, finding the right project management tool can make a huge difference. We all work differently, so find the tool that makes the most sense for your brain and also your company’s needs.

9. Make it legal

Research licensing and government regulations.

Different states have different laws on what’s legal to sell, where, and how. These regulations can be quite complex, and there may be legal problems if you make a wrong move. 

Go ahead and Google your state laws. If you find any regulations that might affect your business,  definitely reach out to your county officials and they can guide you. If you feel like your business is in a gray area, consider investing in a lawyer as you set up your business.

Pick a business structure

A business structure is integral both for filing your taxes and your own liability.

10. Get your finances in order

Dealing with finances is usually where first-time entrepreneurs start panicking. They have an awesome idea, but they didn’t major in accounting and have no idea what to do about money . 

The first move is to figure out what accounting software you want to use(hopefully you figured that out in step seven). 

Next, we need to draw the line between your personal self and your business self. Your business profile needs to stay distinct from your personal finances.  

How do you separate the two? Just like how you have a social security number, your business needs its own identification number (this is called an employer identification number , or EIN) and bank account. Not only does this make sure you are not going to get into a jam with the IRS, but setting up a business EIN and bank account helps prove that your business is, well, yours. You will get your business identification number when you register your business with your state. 

Next, you need to get a business bank account and credit card . Open an account that will work best for you, whether that is through using a high yield savings account or an account with limited fees. Make sure that you are checking your credit card statement and your bank account weekly so you can stay on top of cash flow. 

Go to your bank and speak with someone about opening the right account for your needs. Your business banker will be your best friend—they can offer much better advice on different accounts and their benefits than anyone else. 

Be mindful that most of your money will go quickly in the beginning. You will be spending it on building your inventory and trial and error with marketing. If those startup costs are too big for your pocketbook, consider finding angel investors or crowdfunding . 

Starting at $0/month, Lili offers a checking account with time-saving tax optimization and accounting features specifically built for entrepreneurs.

11. Launch your business

You’ve done it! You’ve gone through all the major steps to get your business off the ground, and now you’re ready to launch. Publish your website and start getting the word out by leaning into social media and other advertising methods-. Using your brand identity and chosen colors and logo, be liberal in sharing your new project with the world to find customers. 

Most importantly, be confident . There will undoubtedly be ups and downs, but remember—you are providing something that people want. You’ve been through vetting and product testing and you know yours is a good idea. Hold onto that while you are weathering these early storms because yes, the initial phases are hard, but you’ve got this! 

Phew, you made it to the end—nicely done! Thanks for sticking with us, and best of luck to you with your small business. We know you're going to do great.

Related content

• 7 Essentials to Know Before Launching a Dropshipping Business
• Cheapest Website Builders of 2023
• 5 Essentials to Know Before Marketing Your Startup
• Best Online Bank for Small Business in 2023

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How to Start an E-Commerce Business in 2023: A Step-by-Step Guide

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Table of Contents

1. Define your e-commerce business idea

2. set up your business, 3. source or develop your products, 4. set up your e-commerce website, 5. figure out order fulfillment, 6. market your e-commerce business, how much does it cost to start an e-commerce business, tips for starting an e-commerce business .

An e-commerce business sells goods, services and funds over the internet. Starting an e-commerce business is a lot like starting any company: You’ll need to create a business plan, get licenses and permits and set up dedicated finances. You’ll also need to choose an e-commerce website builder , source your products and market to online customers.

Follow these six steps to get your e-commerce business up and running.

The first step in starting any business is to hone your idea. Online business ideas can include selling physical or digital products as well as professional services. Whatever you choose, you’ll want to define your e-commerce business model and write a business plan that outlines your niche.

During this process, you’ll start to ask a lot of questions: How will you get your products or services to your customers? What sort of licenses or permits do you need? How much will it cost to get your business up and running — and how will you foot that bill? Your business plan should answer these questions and provide a road map for the coming months.

More resources to help shape your idea:

What is e-commerce? Understanding how it works  

Our picks for the best business plan software

Can your business idea actually make money?

Once you've solidified your e-commerce business idea, the next step is to set your company up for success.

This includes back-office steps like:

Choosing a business structure . There are benefits and drawbacks to each of these entity types, so talking to an attorney may be helpful as you choose the one that’s right for you.

Naming your business. Consult your local secretary of state's website as well as the U.S. Patent and Trademark Office to ensure that you're not choosing a name that belongs to another company. Check to see if your potential business domain name is available as well.

Applying for an employer identification number (EIN) . You can get an EIN from the IRS for free online or by mail, fax or phone. Not all businesses need an EIN, but having one can help you separate your personal and business finances.

Opening a business checking account . NerdWallet recommends all business owners have a dedicated bank account for their business.

Getting licenses and permits your city or state requires. This probably includes a business license, and if you perform services, you may also need an occupational license. Check your state or local government website for requirements for your area.

Answers as you set up your business:

Do you need a business license to sell online?

What’s the difference between an LLC and a sole proprietorship?

Our picks for the best free business checking accounts

Shopify Ecommerce

Next, you'll need to source the products you're going to sell. If you’re selling physical products, you may need to make them yourself or work with a manufacturer.

A key decision at this point: Are you going to order products in bulk and keep inventory in stock? If so, you’ll need to think about storage space and raising capital to order goods upfront. However, you’ll have the power to ship items yourself.

Other businesses choose to rely on dropshipping , in which products are manufactured or sourced at the time the order is placed. In general, dropshipping may keep your overhead costs lower, but it can be more difficult to manage since inventory levels and shipping will be out of your hands.

Other options for sourcing e-commerce products include:

White-labeling, or ordering items in bulk from a manufacturer and then branding them with your company’s identity.

Print-on-demand, or paying a third party to print your company’s designs on merchandise like T-shirts, mugs and posters. Print-on-demand normally functions like dropshipping, in that a customer places their order, then the manufacturer creates the product and ships it directly to the customer.

Retail arbitrage, or buying discounted items from retail sellers and listing them in your own store at a markup. 

If you're selling professional services, you might just have to describe and list what you offer on your business website. Still, you’ll need to figure out how much to charge and decide how many clients you can see each day or week.

More to help you develop products:

16 e-commerce business ideas

How to find products to sell on Amazon

How to make money on Shopify

Your e-commerce website will be your storefront. It’s where your customers will learn about you and your business, browse your products and make purchases.

The easiest way to set up a website is to use an online store builder . These platforms can walk you through the process of launching your website, from buying a domain name to managing your inventory to taking credit card payments.

Popular e-commerce website builders include Shopify , Squarespace , Square Online and BigCommerce .

If you’re a very small business or just experimenting with online sales, a free e-commerce website builder may be a good place to start. But to list unlimited products and access more robust suites of tools — which can help with things like shipping label printing, order management and sales analytics — you’ll typically need to spring for a subscription.

In general, many online store builders should be simple enough for someone without web development experience to navigate. But most offer the option to pay a professional designer or developer if you don’t want to build the website on your own.

The best e-commerce platform for you fits into your budget and is appropriate for your skill level.

Choosing the right website builder:

Our picks for the best e-commerce website builders

Wix vs. Squarespace: Head-to-head comparison

Shopify vs. Square Online: Head-to-head comparison

Order fulfillment is the process of getting customers’ purchases in their hands.

Most e-commerce website builders offer shipping label printing, which is the first step in the fulfillment process. Some also offer the ability to add shipping costs onto customers’ orders at checkout.

If you choose to handle order fulfillment yourself, research shipping rates so you have a sense of how much it’ll cost. Look for an online store builder that can help make the shipping process easier or research shipping software providers like Shippo .

Note, too, that e-commerce may connect you to customers across the world. If there are places you’re not willing to ship to, make that clear on your website.

If you don’t want to manage order fulfillment, you can outsource it to an e-commerce fulfillment center or use a service like Fulfillment by Amazon. Fees for fulfillment services vary depending on the size of your products, how far they’re traveling and how much you’re shipping.

More to help you manage orders and inventory:

Our picks for the best inventory management software

What is just-in-time inventory?

Shipping services that integrate with WooCommerce

Now that you've started your online store , you're ready to start serving customers — as long as they can find your products.

Your small-business marketing strategy might include:

Omnichannel commerce , in which you list your products on third-party marketplaces like Amazon and Instagram. Some e-commerce website builders can help facilitate this.

Influencer marketing, in which you pay popular social media creators to plug your products. 

Social media content or paid social media ads.

Optimizing your business website for search engines.

Sending email campaigns to past and future customers.

Many e-commerce website builders include some marketing features, which can help you do things like create social media ads or send emails to customers when they’ve abandoned their carts.

But if you want to develop more sophisticated campaigns, consider investing in marketing software . These tools can help you create email templates and campaigns, text customers, keep track of how individual customers are responding to your emails and more.

More help with marketing:

20 free marketing ideas for small businesses

Online marketing strategies and tips

Content marketing for small businesses

The cost of starting an e-commerce business can vary widely depending on what you’re planning to sell and in what volume. Your expenses may include:

Your e-commerce website. Subscription plans for online store builders generally start around $25 to $30 per month when billed annually. You may also need to spring for a domain name if your e-commerce website builder doesn’t include one — and make note of annual fees to keep your URL registered. 

Payment processing fees. In general, the company that provides your payment processing will take a cut of around 3% from each online sale. 

Stocking up. If you plan to order inventory in bulk, be prepared for significant upfront costs — even before you’ve started generating revenue. Inventory financing may be able to help you bridge the gap.

Order fulfillment. In general, you’ll pay a third-party service to fulfill each order, with rates varying depending on item size and weight. The more customers buy at once, the less you’ll have to pay per item. Order fulfillment services may also include warehousing, for which you’ll pay a per-item storage cost. 

Warehousing. If you’re buying more inventory than you can keep in your home or garage but not using an order fulfillment service that provides storage, you may need to spring for warehouse space of your own.

General costs of running a business. These could include monthly or annual fees for accounting software , business insurance , any employees or contractors you plan to hire and more. You may also need to set aside money for small-business taxes .

As with launching any business, starting an e-commerce business can feel overwhelming. Here are some tips for managing the transition.

1. Start simple

If you’re not certain e-commerce is the right path for you, set up an online store with low overhead first. This may mean starting with the free version of an e-commerce website builder, ordering a small amount of inventory or selling only one or two types of products. 

Starting small can limit how much startup funding you need and make it easier to pivot if your first idea doesn’t land. As your business starts to get traction, you can trade up to a more robust e-commerce platform and expand your product line.

2. Cultivate a loyal customer base

Your e-commerce business needs customers who appreciate your products enough to buy them more than once and, ideally, customers who will promote them to their networks.

Establishing a strong brand presence on social media can help you build a following. But the more information you can gather from your customers, the more you can market directly to them, whether that means creating an email marketing campaign, sending discount codes through text message or letting them know where your booth will be at an event in their region.

3. Invest in multichannel selling

Loyal customers may be willing to visit your website frequently. But to reach new ones, you might have to meet them where they are — which might be on Amazon, Instagram, TikTok or elsewhere. Start with the platforms where your customers are most likely to be, launch those integrations and then see how they perform. You can add platforms later if they fit into your business strategy. 

Keep in mind that selling in person is a channel, too. Craft fairs, local shops and industry or trade events may help you connect with new customers while generating some revenue.

A version of this article originally appeared on JustBusiness, a subsidiary of NerdWallet.

On a similar note...

How to start an online business

Find out what it takes to start and run an online business. With insights from experts and owners who’ve done it before.

Download guide

What goes into starting an online business?

Starting an online business is different to starting a traditional brick-and-mortar business. Yes, you need an idea, a plan, and a budget. But even those fundamental elements are done differently online.

We surveyed 171 experts who work with online businesses to find out what makes them tick. They told us the idea can be weirder, the plan can be shorter (whoop!), and the budget can be smaller (hooray, again!).

This guide combines their insights with quotes from online business owners and ecommerce consultants so you can see how to start an online business.

• Pros and cons of online business
• Online business ideas
• Writing an ecommerce business plan
• Creating a budget for a digital business
• Finance options for an online business
• Digital marketing 101
• How to set up an online shop, office or app

1. Pros and cons of online business

Xero surveyed small business advisors to see how ecommerce stacks up against traditional brick-and-mortar businesses.

Key findings

The accountants and bookkeepers who completed this survey prepare financial statements for 1,500 US small businesses. We asked them to compare the performance of online businesses vs brick-and-mortar operations. Here’s what they had to say.

• Profitability – 70% say online businesses have a higher net profit margin.
• Resilience – 69% say they’re less likely to fail (and 68% say owners lose less if they do fail).
• Innovation – 69% say they’re more likely to be based on a novel idea.
• Lifestyle – Online business owners are 2.5X more likely to hold down a day job as well.
• Stress – Just 4% say online owners are more stressed (49% say brick-and-mortar owners are).
• Costs – Most say it costs less to start and run (see full report for retail/service breakdown).
• Break even – Most say they break even sooner (see full report for retail/service breakdown).

That makes online look pretty good. So what’s the catch? Well, the experts say there are a few.

Common pitfalls

• Digital marketing – 41% say digital marketing is tricky to figure out.
• Time online – 37% say the quantity of hours spent on social and reviews can be tough.
• Transaction fees – 35% say online transaction fees catch out beginners.
• Website – 33% say businesses struggle to create a genuinely good website.
• Technology – 33% say owners can have a hard time understanding the tech.

The online and brick-and-mortar businesses in this study had comparable revenue so these differences were not likely due to scale. 51 US accountants and bookkeepers participated in the study, with an average of 30 clients each (equating to a collective clientele of 1,500 businesses).

Back to How to start an online business

2. Online business ideas

Online business ideas fall into four broad categories – retail (including those who make their own products), service providers, apps, and content producers. Catch our article on online business ideas for tips on what could work for you.

Making your idea the best it can be

While online businesses generally cost less to start up, our study found they chew through just as much energy and effort as a physical business. You don’t want to waste all that sweat on an idea that could’ve been better. A little research can help you tweak your product or service in just the right way.

Experts’ number one tip for better ideas

We asked business experts for their top tips for online startups. The most common reply was to “define your target market”. In other words – work out which people (or businesses) will end up buying from you. They might be local parents, fitness fanatics, thrill-seekers, restaurants, schools, hairdressers, or something else entirely. Figure this out before starting your online business.

Whoever your target customers are, make everything about them. Make the product or service perfect for that specific user. And pitch your marketing at them, too. One way to get inside their collective heads is to have a chat with a few of them. Ask if they like your idea, your packaging, your price point. While you’re at it, ask who they buy from now and use the opportunity to learn about your competitors’ strengths and weaknesses.

Related articles

• How to come up with online business ideas
• How to do market research
• How to do competitor analysis

3. Writing an ecommerce business plan

Writing a business plan for an ecommerce startup can feel strange to anyone who’s run a brick-and-mortar operation before. You may not need to put in as much detail. In fact, you may not be able to.

Why you don’t need a 20-page plan

Those big, buttoned-down business plans are great if you’re naturally a planner. But most people do them so they have a strong pitch to take to investors and lenders. Online startups don’t cost so much to run, which means you’re less likely to need outside cash. Besides which, institutional investors and lenders don’t generally back ecommerce startups anyway.

That frees you to write a business plan that works for you. It might still be 20 pages long but it doesn’t have to be.

Why you may only need a 1-page plan

When planning how to start your online business, you’ll probably find you don’t have all the information you’d like. Almost 60% of new online business owners struggle to forecast revenue for their first few months (Global eCommerce report, Xero 2019) after starting an online business.

That’s because so much depends on the success of your digital marketing, which is a massive rolling experiment in the early days. You’ll probably try lots of tactics on several digital platforms before you crack it. Only then will you have enough information to forecast sales and revenue.

Because online startups have to launch in the dark and learn on the fly, they tend to go with shorter, more fluid plans. Something that is easier to update as more information comes in.

Shorter plans doesn’t mean no plans

While the planning is dialed back a bit for online startups, it doesn’t go away and nor should it. Working through the steps of a business plan will help you think about your startup from lots of different angles. That process will help you build on your idea and make it better.

Related articles and templates

• Business plan template
• How to write a business plan

4. Creating a budget for a digital business

While it’s hard to estimate income when starting an online business, it’s still a good idea to have a rough budget. You need to know what the venture is going to cost you, and when it might start to pay you back. Accountants and bookkeepers generally agree that online businesses cost less to run, but they also say beginners often overlook some big costs.

3 common ecommerce budgeting mistakes

• 37% of experts say people starting an online business underestimate the cost of a good website: Off-the-shelf templates have made websites so much more affordable but creating a great user experience may require the help of freelancers who know what they’re doing.
• 27% say startups get caught out by digital marketing: Most digital advertising is sold on a cost-per-click basis. You pay for each site visitor. Only about 1 in 50 will buy anything (based on 2% conversion), so things add up quickly.
• 35% say online businesses don’t budget correctly for online transaction fees: When you take an online payment, up to 5% goes to the merchant service provider who processes the transaction. You need to factor that into your pricing.

How to do a budget

List all of your business costs and plot them on a calendar so you know roughly when they’ll hit. Then place some modest sales projections on the same calendar. You will be in the red a lot at the beginning, but that’s how starting a business goes. Just make sure you have a plan for paying bills in the meantime.

Online business consultant, Shahemen Farid of Boobooks Accountants says it will take a while for your long-term budget to become clear. “We suggest clients who are starting an online business go in with three months of working capital and base their forecasts on that first quarter.”

Experts’ pricing tip for online businesses

While online businesses are cheaper to run, they’re not expected to pass those savings onto customers. They can maintain prices similar to brick-and-mortar competitors, which leaves them with more margin between buy and sell prices.

Some of that extra margin will end up paying for things like shipping, which most customers expect to be free . But some will go into the business owner’s pocket, with our study confirming that ecommerce businesses have higher net profit margins.

• How to create a small business budget
• Create a cash flow forecast with this free template
• How to set prices

5. Finance options for an online business

Banks are unlikely to finance an online startup, unless you already have a strong business track record. Fortunately, plenty of people have figured out how to start an online business without that external support.

Lots of online service businesses grow out of small freelancing teams, who don’t have terribly high operating expenses. They can get started with a laptop and a few software subscriptions, which they’re able to pay for out of their own pocket.

Retailers have to fork out more, but they can manage the risks easier than a physical store. They can try a soft launch, with limited inventory, and ramp up only when they find that demand is solid. “You can start an online retail business for 20K now,” says Shaheman Farid of Boobooks Accountants. “So people are increasingly able to self-finance.”

Sources of extra cash

If you still find you need extra money to start your online business, there are still options like:

• credit cards – just be aware that interest rates will be high
• personal loans – you will have to offer something you own as security
• friends and family – they might lend cash or buy in as investors
• angel investors – maybe, just maybe, a friendly industry contact will buy in
• crowdfunding – your idea would need viral potential to excite the crowd
• grants – some cause-driven businesses are eligible for free money
• Guide to finance
• Learn about friends and family loans
• How crowdfunding works

6. Digital marketing 101

In the online world, people don’t walk by your business by chance. You need to earn each and every visit to your website, and only about 2% of those visitors will purchase anything.

If you’re buying all your traffic through pay-per-click ads, costs can spiral out of control. Online business expert, Shaheman Farid says he’s seen failed campaigns chew through thousands of dollars without getting a single sale.

It’s not a unique problem. 41% of accountants and bookkeepers in our study say digital marketing is a big challenge for anyone learning how to start an online business. So how do you avoid catastrophes and give yourself a shot at online success?

The unsatisfying secret to digital marketing

The truth is that there’s no digital marketing playbook that works for every business. You could be doing search marketing through Google, creating articles on LinkedIn, posting videos on YouTube, or telling stories on Insta. Most things won’t work the way you need them to.

There will be heaps of trial and error. You can take some smart guesses, for sure. But you need to try several options at the beginning because results can be wildly unpredictable.

“There’s no telling what will work and what won’t,” says Ben Charlton of Air8 Digital , an agency that helps small businesses navigate the complex world of digital marketing. “You have to experiment. But you can do that without spending a fortune.” Ben’s low-cost tips are in our guide to digital marketing .

How much to budget for digital marketing

Ecommerce consultant Marc McKeown of FortBrave , encourages clients who are starting an online business to keep 40% of their startup budget for marketing. “We’d spend that in the first three months to see what things work and make a plan from there.”

That may sound like a big chunk of money, but remember that digital marketing may be your only source of sales or leads. And that investment is offset by the money you don’t have to spend fitting out a shop or office.

• How to do digital marketing
• How to manage your online reputation
• Simple CRM for small business

7. How to set up an online shop, office, or app

Geography becomes irrelevant when you start an online business. You can sell to customers in other parts of the country or the world. Even people with super niche ideas can scrounge up enough customers from across the internet to make a living from it.

That may explain why 68% of accountants and bookkeepers say digital businesses are more likely to be based on a novel idea. But how do you actually interact and transact over the internet?

Creating an online shop

Retailers can use existing marketplaces like Amazon, Alibaba, Facebook, or dozens of others. It’s a fast and easy way to start because you just drag and drop pictures of your products into the shop and the marketplace processes payments for you. On the downside, you don’t have much control over how your shop looks and you pay a cut from each sale to the marketplace involved.

You can also create your own online shop using off-the-shelf templates from providers like Shopify, Square and BigCommerce. These usually cost you a monthly subscription fee and you will pay a cut on each sale in transaction fees, but you have more flexibility. However, that extra flexibility comes with the potential to make mistakes. Build your shop with care.

Setting up an online office

If you work in professional services, you probably already know how to work remotely. There’s tons of great software for creating, sharing and collaborating on projects. Online businesses have higher net profit margins than their brick-and-mortar equivalents which goes to show those remote working tools are perfectly productive.

Even complex group tasks like brainstorming are thriving online. Michael Yared’s app development agency, Echobind , has been using remote collaboration tools for years and says they’re better than in-person whiteboard sessions. “Digital brainstorming boards allow you to capture ideas from everyone – not just the loudest or highest-paid people in the room. Plus remote working encourages better documentation of your methods because so much information is exchanged in writing.”

Creating an online studio

Olivia Park Coaching delivers online physical and wellbeing training to clients across Asia. Olivia Park attracts customers by sharing free content on social platforms, then signs paying customers to self-serve courses. She also offers one-to-one calls and says the digital approach allows her to help twice as many clients. “It’s enabled me to create more products with different tiers of service.”

Building an app

Got an idea for an app? Of course you do. Now you just need to turn that inspiration into a piece of working software. There are some pitfalls to avoid along the way. We spoke to an app development company to get the lowdown on how apps are made and what they cost.

Find out what they had to say in our article: How to make money from an app

• Two quick ways to sell online (infographic)
• When and how to offer free shipping
• Tips for setting up a remote office
• An intro to online invoicing
• How to bill subscription customers

Go start your online business

Our expert survey found that online businesses are less expensive to run and reach break even faster. They’re also less likely to fail and, in cases where they do fail, their owners lose less of their own money. It’s not risk-free – no business ever is – but it may be lower risk.

So write down your plan. Test your idea and build on it. Then give it a go. You can get free tips and tools for your business journey from Xero’s small business resources .

Get help from an ecommerce pro

You know who knows how to start an online business? Accountants and bookkeepers do. They do this stuff for a living. Find someone to help in our advisor directory.

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Why Xero knows about starting an online business

Millions of small businesses use Xero’s software to run their finances and accounting. About 100,000 accountants and bookkeepers use us too. We asked some of those owners and experts how to start a business, then put their insights into this guide.

Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.

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How to Start an Online Business: 8 Steps to Follow

Bryce Warnes

Reviewed by

April 8, 2021

This article is Tax Professional approved

Starting an online business can set you up with a lucrative source of passive income, or even plant the seeds of your next career. It can also be a lot of work: Planning how to get your online business off the ground and making a profit is no mean task.

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Luckily, if you follow these eight straightforward steps, you’ll be well on your way to starting your own online business.

1. Consider low-cost small business ideas

Take some time to consider inexpensive business options. There are plenty of business models that let you get started for less than $1,000. Add a little elbow grease and a spark of inspiration, and you could well be on your way to a digital empire.

Traditional ecommerce

Certain ecommerce business models come with low initial investments and potentially massive payoffs. For instance:

• Vintage stores, which often resell inventory hunted down in thrift shops or at estate sales
• Online courses, consisting of self-produced instructional videos and live teleconferencing sessions
• Handmade jewellery, created using inexpensive materials and tools
• Stickers or enamel pins, which can be produced inexpensively in bulk using remote services
• Handmade pet treats, which you can make and sell without the use of a commercial kitchen

These are just a few ideas to get you started. When it comes to low-investment ecommerce, there are plenty of ideas waiting to be put into action.

Shopify, Amazon, Etsy, and eBay are four of the most popular platforms for operating an online store.

• Shopify : Highly customizable, Shopify comes with tons of plugins, and lets you run just about any type of ecommerce store you can imagine.
• Amazon : While it has more stringent limitations on what you can sell and how, Amazon also has a global reach. And their Amazon fulfillment plan can take warehousing and shipping off your hands.
• Etsy : A thriving marketplace for handmade and vintage items, Etsy is nonetheless host to many large scale ecommerce businesses—so there’s plenty of room for growth.
• eBay : An old mainstay of online stores, eBay is also a great place to sell vintage wares, and may potentially reach a wider audience than Etsy. That being said, eBay has less of a community focus—it may take longer for you to build credibility as a seller.

Further reading: Bookkeeping for Amazon Sellers

Drop shipping

The drop shipping business model completely outsources all your inventory and shipping. It’s up to you so set up a store and market products. The orders themselves are fulfilled by suppliers who you’ve established working relationships with.

So, as soon as a buyer clicks the checkout button, the sale is out of your hands. You collect your profit, and the rest of the money goes to the supplier. After that, you just need to be available to provide customer support if something goes wrong—like the package getting lost, or arriving late.

The drop shipping model is appealing because of its extremely low startup costs; with a laptop and less than a thousand dollars, you can start a business from a table in your favorite coffee shop.

But, because of that easy accessibility, drop shipping is competitive. And you’ll still need to jump through the usual hoops to set up your business, get your financials in order, and pay taxes.

Affiliate marketing

Similar to drop shipping, affiliate marketing lets you profit from selling products without ever handling a piece of inventory.

With this business model, you embed affiliate links on your website, blog, and social media posts, or else in a newsletter you send out to your email list. When customers click the affiliate link and make a purchase from the affiliate’s store, you get a cut—typically a 5-25% commission.

If your strong points are content marketing or social media, life as an affiliate marketer may be right for you. And if you’re already a blogger whose content appeals to a certain niche, you may be able to turn your WordPress pastime into a source of passive revenue.

So long as you’re putting out content your followers value—and attracting traffic through search engine optimization (SEO) and ads—you’ve got all the infrastructure you need to jump into affiliate marketing.

Startup costs are low—all you really need to get going is web hosting, a domain name, and a WordPress account, plus a little know-how when it comes to blogging for your target audience.

Keep in mind, though, the infrastructure you need may take time to build; search engine credibility, large follower counts, and archives full of high quality content don’t show up overnight. If you’re planning to start affiliate marketing, be prepared to invest time and energy building up your online assets.

Pay-per-click (PPC) ad revenue

PPC earns you money every time a visitor comes to your website and clicks an ad. It’s often used in tandem with affiliate marketing. And like affiliate marketing, you’ll need a strong base—such as a popular blog or website—to work from.

So, while PPC isn’t a business model per say, it can supplement your revenue from existing online content. That’s worth taking into account as your put together your business plan, mapping out revenue streams and creating financial projections .

Working as a freelancer

Ready to quit your day job? Online freelancing may be the answer. If you’re already doing work that can be handled remotely—coding, design, marketing, accounting, copywriting—then you’ve got a valuable asset that can earn you cash as an independent operator.

Even if your job is hands on, you can still use online freelancing platforms like Upwork.com or Fiverr.com to set up a consulting business . For instance, maybe you already run your own successful wedding photography business. You can earn side income by marketing yourself as a photography consultant, helping mentor other business owners.

Whatever you specialize in, be prepared to set up a website for your freelancing business, as well as profiles on any freelancer platforms you choose to use. Also, assets like an active social media presence, blog, or newsletter can help you build credibility and stand out from the crowd.

Finally, if you’re used to working for someone else, becoming a freelancer will change the way you do taxes. Our independent contractor’s guide to taxes has everything you need to know.

Starting a podcast

Podcasts brought in almost $500 million in revenue in 2018; by 2021, that number is expected to hit $1 billion. If you’ve memorized the weekly release schedules of all your favorite podcasts, and you figure you recognize the ingredients to an addictive program, then the microphone could be your path to stardom.

Podcasters typically earn their income through affiliate marketing. Obviously, embedding links isn’t the way to go—it’s up to you to promote businesses on your program. Podcasting platforms like Podbean and Buzzsprout connect you with affiliates from day one, so you never have to go hunting for a sponsor. They’ll also host your podcast, and help you promote it and track your progress.

Besides the cost of hosting, be prepared to spend most of your startup budget on promotion through ads and sponsored posts. There’s also the matter of your studio; entry level professional microphones range in price from $100 to $500.

2. Write a business plan

Your business plan is a roadmap for your online business. It describes where you are now, and where you’re headed. As your business grows, you can return to your business plan for help planning growth or anticipating future challenges.

Having a plan in place before you get off the ground is key to building a successful online business. It keeps you centered on your goals—so you know what’s important and what isn’t when it’s time to make important decisions.

A few questions your business plan should be able to answer:

• What need is your online business fulfilling for customers?
• Who will you be competing with?
• What assets will your business draw on? These can include startup funds, your professional skills, or intellectual property (like the exclusive podcasting rights to a juicy crime story).
• What will your financials look like in your first year? How about your second year?
• How long can your business go without making a profit?
• What sort of sweat equity will it take to get your business established?
• What will you need to earn each month to break even?

Your business plan can follow either the lean model (quick and dirty) or the traditional one (extensive and deeply researched). And don’t forget to include a cover page that can catch people’s attention.

3. Choose your business structure

How you elect to structure your business will determine how you will file and pay taxes. It also determines your liability—whether your personal assets are on the line in case your landscaping business can’t pay its debt or gets sued.

The five main types of business entity recognized by the IRS are:

• Sole proprietorship
• Partnership
• S Corporation
• C Corporation

As soon as you start earning money from your own business, the IRS considers you a sole proprietorship. Meaning, you and your business are identical for tax purposes.

In some ways, that makes life easy—you don’t have any extra paperwork to deal with. Partly for this reason, the sole prop structure is popular with freelancers. On the other hand, it doesn’t offer any liability protection—so your personal assets are on the line in case you get sued or default on a loan, for instance.

A single-member LLC structure is the next step up. It gives you liability protection, while still functioning much like a sole proprietorship. Many small business owners start out as sole props, then become LLCs .

Our guide to business structures lets you compare your options, and see the strengths and weaknesses of each. And even if you opt for the simple sole proprietorship, you may need a business license to sell online .

4. Register your business name

If you freelance under your own name as a sole prop, there usually isn’t any need to register a business name. But as soon as you begin operating under a different name—"Greg’s Graphic Design,” instead of "Greg Jackson”—you’ll need to register it. Also, if you’re using any business structure other than sole prop, you’ll probably need to register your name.

Here’s how you do it:

Make sure no-one else is using your name

Do some research online to make sure no-one else is using your business name. To be extra thorough, you may want to hire a patent and copyright attorney to check for you.

File a doing business as (DBA) form

To run your business as a sole proprietor under a name other than your own, you’ll need to file a DBA with your state.

LLCs, corporations, and partnerships register their business names when they elect their business structure for federal and state tax purposes. However, you’d like to operate under a name different than the one you’ve registered, you’ll also need to file a DBA.

5. Snag a domain name

Once you have your business name, it’s time to register a domain name. Even if your main marketing platform is social media, and you don’t need a website, it’s best to register a domain now. There’s always the chance that once your business takes off, someone else may try to register your domain for their own business, and that lower your standing on Google search results page.

Plus, while you may not absolutely need a website to run your business, even creating a small, simple one could benefit you in terms of SEO, helping you come out at the top of Google’s search results when someone searches for you.

Google Domains is a good one stop shop for your new domain. They make the process easy to navigate, without the upselling techniques used by other providers (“For just $9.99, add YourCompany.biz !”). Once you decide to build a site, you can automatically import your domain into Squarespace, Wix, Wordpress, Shopify, or Weebly.

6. Sort out sales tax nexus

If you’re running an ecommerce store, you may be required to collect sales tax in multiple states. If and when you do is determined by your sales tax nexus. Sorting that out can be a bit tricky, but our introduction to sales tax nexus makes it simple.

7. Launch your social media presence

Maybe you’re planning to use Instagram as your number one sales channel for your vintage clothing store. Or maybe you’re launching an online consultant business, and hadn’t considered using social media at all. Either way, one of the first steps you should take after launching your online business is to create a social media presence.

Even if you’re not selling through social media, having an active account shows potential customers the lights are on: It proves that you’re engaged and accessible as a business, and can serve as a point of contact for customers who have questions.

The most important social media platforms for marketing your small business are:

When it comes to younger demographics, like millenials and zoomers, Facebook has seen a decline in popularity. Nonetheless, on a global scale, it’s still the most popular social media platform overall. Maintaining a Facebook profile makes your business easier to find by improving your SEO score.

Especially among younger cohorts, Instagram has seen a surge in popularity for marketing products. Hashtags let you research and target specific groups of users, as well as seeing what your competitors are up to. And since it’s primarily a visual platform, it’s the perfect place to showcase new products.

If you offer your services as an online freelancer, Instagram may not be your first choice in terms of social media—after all, you don’t have any glitzy products to sell. But keeping a tastefully maintained personal account can help prove to people researching your services that you’re a “real person,” and trustworthy.

If you’re publishing blog posts, videos, or podcast episodes, Twitter can be an excellent platform to keep your followers updated. It may also give you the chance to network with other businesses in your industry. But unless you’re publishing regular content—or launching a quirky brand identity —you can probably skip it.

A visual platform similar to Instagram, Pinterest is a good fit for niche businesses, especially ones dealing with handmade products. It’s a popular source of inspiration for crafters, decorators, and hobbyists. Pinterest may be perfect for promoting your Etsy store, but if you’re starting a software company or hiring yourself out as a business consultant, you probably don’t need an account.

Even if you’re not much of a networker, having a LinkedIn page for your business is valuable. It proves you’re legitimate: You may be your company’s only employee, but it lets potential customers put a face to a name. If you’re running a drop shipping or affiliate marketing business, where fly-by-night operations are all too common, a simple LinkedIn profile can make you more trustworthy.

You already know the biggest search engine in the world is Google. The second biggest? YouTube. With one billion hours of video watched every day, YouTube has massive reach. And the sky’s the limit when it comes to what kind of content you can create: From educational mini-documentaries on your industry, to interviews with thought leaders, to step-by-step overviews of your products. Try entering search terms relevant to your business—"motorcycle parts” or "stain remover”— and see what’s out there. You may find a new fan base just waiting to be targeted.

8. Get bookkeeping right from day one

Organized bookkeeping means an organized business. When your financial records are in order, you’re able to anticipate the future and make smart business moves. And it’s especially important to have tidy books come tax time ; the more organized you are, the faster it is to file, and the easier it is to take advantage of tax deductions .

Bench is especially suited to online businesses. We automatically import your bank statements, and transaction records from payment services like PayPal. If you’re already operating a paper-free business —with all your financials online—then Bench integrates seamlessly.

The best part? You get a professional team of North American bookkeepers who handle your bookkeeping—so you don’t have to. Try one month of bookkeeping free .

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How to start an online business in 8 steps

Starting an online business requires the same diligence as starting a brick-and-mortar business, plus some unique steps.

Ready to start your business? Plans start at $0 + filing fees.

by   Belle Wong, J.D.

Belle Wong, is a freelance writer specializing in small business, personal finance, banking, and tech/SAAS. She ...

Read more...

Updated on: January 9, 2024 · 6 min read

1. Assess the viability of your new business idea

2. develop a business plan, 3. choose a business name, 4. decide on your business structure, 5. take care of all the legal tasks, 6. build your website and choose your sourcing and fulfillment methods, 7. develop and implement your prelaunch marketing strategies, 8. launch your new business.

In many ways, the internet has leveled the playing field for small business owners everywhere. Online businesses are relatively easy to start, without the kind of up-front costs a brick and mortar business demands. However, this relative ease doesn't mean that you can simply jump in and hang out your shingle.

As with any business, you need to establish a strong footing for  your online business . While the steps outlined below don't necessarily have to be completed in order, their objective is to provide you with a foundation that's solid enough to bear the weight of your future business growth and success.

Just because it's easier to  start an online business  doesn't mean no costs are involved. As with a physically based business, the first step to take with your online business is to assess your idea's feasibility.

The most brilliant business idea can be unsuccessful if your product or service has no market. Even if you've hit on the solution to a problem that plagues many people, you're just throwing money away if the problem turns out to be one that most people don't care enough about to spend time or money solving.

With this in mind, you need to evaluate your idea. The following are just a few of the questions you need to ask yourself:

• Does your product or service solve a problem that enough potential customers have?
• Does your product or service provide a cost-effective solution to that problem?
• Are people willing to spend money to solve the problem?
• How costly will it be to reach the people in need of the solution your product or service offers?

Once you know your idea is feasible, it's time to put together a comprehensive business plan. Even if you don't plan on obtaining funding for your business, at least not initially, having a business plan is valuable because it lets you spot any potential bumps down the road and plan for future growth and profitability.

The work you did in step one gives you a good base from which to develop your business plan, and multiple resources are available online to help you put together the core elements of a solid plan.

An effective plan will help you to identify your market further, clarify your objectives, provide a marketing roadmap, and assist you in making the kinds of decisions that may mean the difference between success and failure.

Choosing your business' name is an important step in the startup process. Because your business will primarily function online, your chosen name must be available for registration as a business name in your state and within the digital space.

This means you will need to check whether the name you want is available as a:

• Business name in your state
• Domain name
• Username on each of the social media platforms you plan to use

If your chosen name isn't available as a domain name or social media username, consider different permutations of the name, and remember that many domain name extensions beyond the original ".com" are available. Additionally, it's important to check that your name and domain name aren't impinging on any registered trademarks.

The business structure you choose will dictate the legal and tax requirements you need to meet. Most small business owners choose from the following structures:

• Sole proprietorship.  This is the simplest form of business structure, but its lack of limited liability offsets its simplicity.
• Partnership.  While this form of business structure might appeal to you if you are embarking on your venture with a partner, your liability is unlimited, like a sole proprietorship.
• Limited liability company (LLC).  An LLC offers limited liability without the additional complexity of incorporation, making it one of the most popular small business structures.
• Corporation.  Like an LLC, a corporation provides limited liability, and while it's more complicated to both setup and maintain, it may be a good choice depending on your circumstances.

It's always a good idea to consult with an attorney to determine the appropriate business structure for your new business. Because each structure has different tax requirements, you may also want to consult a tax professional.

Like a brick-and-mortar business, you will need to file all the appropriate business-formation documents and other paperwork to ensure your new business has a solid legal foundation. This includes:

• Registering your business with the appropriate government authorities
• Obtaining all the required permits and licenses
• Meeting all federal and state tax requirements, such as applying for state and federal tax ID numbers

Since these requirements vary on a state-by-state basis and the nature of your business, it's important to do your research so you meet any applicable requirements. Again, it's often helpful to consult with an attorney with experience in business startups in your particular industry to make certain you're on the right track.

An online business's website is as important as the physical location of a brick-and-mortar company, and you should put as much care into this part of the startup process as you would if you were location and lease shopping.

When looking at how you will build your website, consider available payment processors. For many online businesses, hiring a website developer to help build your site makes sound business sense.

The web host you choose is an important consideration as well. You can have a top-notch website, but it will do you no good if your host has too much downtime or if the speed of browsing your site is too slow.

In addition to checking out reviews online, consider asking your personal and business network contacts. Other online business owners, in particular, can provide invaluable information about a web host's reliability.

Depending on the products or services you'll be offering, you will also need to evaluate and choose your sources of supply and inventory, as well as how you will deliver your product or service to your customer. Again, a number of options are available. Given the importance of having inventory on hand—or a good on-demand provider—and a reliable method of fulfillment, spending adequate research time on this aspect can mean the difference between success and failure.

It's important to  market your online business  while you're working on each of the previous steps. Your business plan will provide you with the information you need to develop effective marketing strategies for your potential market. No matter what strategies you go with, it's important not to skimp on implementation.

By building up your target market's anticipation of your launch through social media and various advertising methods, you will be paving the way for a successful launch.

While you won't actually be "cutting the ribbon" the way you might with a physical business, you'll be doing so metaphorically when you make your website live and announce to the world that you're open for business.

This announcement can be made in a variety of ways, including:

• Social media platforms
• Your email list
• Traditional ads

During the launch phase, you will reap the benefits of the work you did during your prelaunch marketing.

Of course, your work will have only just begun, but by going through these eight steps, you will have built a  solid foundation for your online business .

Laying the groundwork in this manner means you can devote your time to running and marketing your new business rather than dealing with the various fires that might arise if you've neglected any of these important steps along the way.

Unlock the potential of your business with special offers from LegalZoom’s trusted partners . Discover a wide range of services, from business banking and insurance to websites and payment systems. Let LegalZoom’s partners help you turn your big idea into a big business.

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How to Write a Business Plan in 9 Steps (+ Template and Examples)

Every successful business has one thing in common, a good and well-executed business plan. A business plan is more than a document, it is a complete guide that outlines the goals your business wants to achieve, including its financial goals . It helps you analyze results, make strategic decisions, show your business operations and growth.

If you want to start a business or already have one and need to pitch it to investors for funding, writing a good business plan improves your chances of attracting financiers. As a startup, if you want to secure loans from financial institutions, part of the requirements involve submitting your business plan.

Writing a business plan does not have to be a complicated or time-consuming process. In this article, you will learn the step-by-step process for writing a successful business plan.

You will also learn what you need a business plan for, tips and strategies for writing a convincing business plan, business plan examples and templates that will save you tons of time, and the alternatives to the traditional business plan.

Let’s get started.

What Do You Need A Business Plan For?

Businesses create business plans for different purposes such as to secure funds, monitor business growth, measure your marketing strategies, and measure your business success.

1. Secure Funds

One of the primary reasons for writing a business plan is to secure funds, either from financial institutions/agencies or investors.

For you to effectively acquire funds, your business plan must contain the key elements of your business plan . For example, your business plan should include your growth plans, goals you want to achieve, and milestones you have recorded.

A business plan can also attract new business partners that are willing to contribute financially and intellectually. If you are writing a business plan to a bank, your project must show your traction , that is, the proof that you can pay back any loan borrowed.

Also, if you are writing to an investor, your plan must contain evidence that you can effectively utilize the funds you want them to invest in your business. Here, you are using your business plan to persuade a group or an individual that your business is a source of a good investment.

2. Monitor Business Growth

A business plan can help you track cash flows in your business. It steers your business to greater heights. A business plan capable of tracking business growth should contain:

• The business goals
• Methods to achieve the goals
• Time-frame for attaining those goals

A good business plan should guide you through every step in achieving your goals. It can also track the allocation of assets to every aspect of the business. You can tell when you are spending more than you should on a project.

You can compare a business plan to a written GPS. It helps you manage your business and hints at the right time to expand your business.

3. Measure Business Success

A business plan can help you measure your business success rate. Some small-scale businesses are thriving better than more prominent companies because of their track record of success.

Right from the onset of your business operation, set goals and work towards them. Write a plan to guide you through your procedures. Use your plan to measure how much you have achieved and how much is left to attain.

You can also weigh your success by monitoring the position of your brand relative to competitors. On the other hand, a business plan can also show you why you have not achieved a goal. It can tell if you have elapsed the time frame you set to attain a goal.

4. Document Your Marketing Strategies

You can use a business plan to document your marketing plans. Every business should have an effective marketing plan.

Competition mandates every business owner to go the extraordinary mile to remain relevant in the market. Your business plan should contain your marketing strategies that work. You can measure the success rate of your marketing plans.

In your business plan, your marketing strategy must answer the questions:

• How do you want to reach your target audience?
• How do you plan to retain your customers?
• What is/are your pricing plans?
• What is your budget for marketing?

How to Write a Business Plan Step-by-Step

1. create your executive summary.

The executive summary is a snapshot of your business or a high-level overview of your business purposes and plans . Although the executive summary is the first section in your business plan, most people write it last. The length of the executive summary is not more than two pages.

Generally, there are nine sections in a business plan, the executive summary should condense essential ideas from the other eight sections.

A good executive summary should do the following:

• A Snapshot of Growth Potential. Briefly inform the reader about your company and why it will be successful)
• Contain your Mission Statement which explains what the main objective or focus of your business is.
• Product Description and Differentiation. Brief description of your products or services and why it is different from other solutions in the market.
• The Team. Basic information about your company’s leadership team and employees
• Business Concept. A solid description of what your business does.
• Target Market. The customers you plan to sell to.
• Marketing Strategy. Your plans on reaching and selling to your customers
• Current Financial State. Brief information about what revenue your business currently generates.
• Projected Financial State. Brief information about what you foresee your business revenue to be in the future.

The executive summary is the make-or-break section of your business plan. If your summary cannot in less than two pages cannot clearly describe how your business will solve a particular problem of your target audience and make a profit, your business plan is set on a faulty foundation.

Avoid using the executive summary to hype your business, instead, focus on helping the reader understand the what and how of your plan.

View the executive summary as an opportunity to introduce your vision for your company. You know your executive summary is powerful when it can answer these key questions:

• Who is your target audience?
• What sector or industry are you in?
• What are your products and services?
• What is the future of your industry?
• Is your company scaleable?
• Who are the owners and leaders of your company? What are their backgrounds and experience levels?
• What is the motivation for starting your company?
• What are the next steps?

Writing the executive summary last although it is the most important section of your business plan is an excellent idea. The reason why is because it is a high-level overview of your business plan. It is the section that determines whether potential investors and lenders will read further or not.

The executive summary can be a stand-alone document that covers everything in your business plan. It is not uncommon for investors to request only the executive summary when evaluating your business. If the information in the executive summary impresses them, they will ask for the complete business plan.

If you are writing your business plan for your planning purposes, you do not need to write the executive summary.

2. Add Your Company Overview

The company overview or description is the next section in your business plan after the executive summary. It describes what your business does.

Adding your company overview can be tricky especially when your business is still in the planning stages. Existing businesses can easily summarize their current operations but may encounter difficulties trying to explain what they plan to become.

Your company overview should contain the following:

• What products and services you will provide
• Geographical markets and locations your company have a presence
• What you need to run your business
• Who your target audience or customers are
• Who will service your customers
• Your company’s purpose, mission, and vision
• Information about your company’s founders
• Who the founders are
• Notable achievements of your company so far

When creating a company overview, you have to focus on three basics: identifying your industry, identifying your customer, and explaining the problem you solve.

If you are stuck when creating your company overview, try to answer some of these questions that pertain to you.

• Who are you targeting? (The answer is not everyone)
• What pain point does your product or service solve for your customers that they will be willing to spend money on resolving?
• How does your product or service overcome that pain point?
• Where is the location of your business?
• What products, equipment, and services do you need to run your business?
• How is your company’s product or service different from your competition in the eyes of your customers?
• How many employees do you need and what skills do you require them to have?

After answering some or all of these questions, you will get more than enough information you need to write your company overview or description section. When writing this section, describe what your company does for your customers.

The company description or overview section contains three elements: mission statement, history, and objectives.

• Mission Statement

The mission statement refers to the reason why your business or company is existing. It goes beyond what you do or sell, it is about the ‘why’. A good mission statement should be emotional and inspirational.

Your mission statement should follow the KISS rule (Keep It Simple, Stupid). For example, Shopify’s mission statement is “Make commerce better for everyone.”

When describing your company’s history, make it simple and avoid the temptation of tying it to a defensive narrative. Write it in the manner you would a profile. Your company’s history should include the following information:

• Founding Date
• Major Milestones
• Location(s)
• Flagship Products or Services
• Number of Employees
• Executive Leadership Roles

When you fill in this information, you use it to write one or two paragraphs about your company’s history.

Business Objectives

Your business objective must be SMART (specific, measurable, achievable, realistic, and time-bound.) Failure to clearly identify your business objectives does not inspire confidence and makes it hard for your team members to work towards a common purpose.

3. Perform Market and Competitive Analyses to Proof a Big Enough Business Opportunity

The third step in writing a business plan is the market and competitive analysis section. Every business, no matter the size, needs to perform comprehensive market and competitive analyses before it enters into a market.

Performing market and competitive analyses are critical for the success of your business. It helps you avoid entering the right market with the wrong product, or vice versa. Anyone reading your business plans, especially financiers and financial institutions will want to see proof that there is a big enough business opportunity you are targeting.

This section is where you describe the market and industry you want to operate in and show the big opportunities in the market that your business can leverage to make a profit. If you noticed any unique trends when doing your research, show them in this section.

Market analysis alone is not enough, you have to add competitive analysis to strengthen this section. There are already businesses in the industry or market, how do you plan to take a share of the market from them?

You have to clearly illustrate the competitive landscape in your business plan. Are there areas your competitors are doing well? Are there areas where they are not doing so well? Show it.

Make it clear in this section why you are moving into the industry and what weaknesses are present there that you plan to explain. How are your competitors going to react to your market entry? How do you plan to get customers? Do you plan on taking your competitors' competitors, tap into other sources for customers, or both?

Illustrate the competitive landscape as well. What are your competitors doing well and not so well?

Answering these questions and thoughts will aid your market and competitive analysis of the opportunities in your space. Depending on how sophisticated your industry is, or the expectations of your financiers, you may need to carry out a more comprehensive market and competitive analysis to prove that big business opportunity.

Instead of looking at the market and competitive analyses as one entity, separating them will make the research even more comprehensive.

Market Analysis

Market analysis, boarding speaking, refers to research a business carried out on its industry, market, and competitors. It helps businesses gain a good understanding of their target market and the outlook of their industry. Before starting a company, it is vital to carry out market research to find out if the market is viable.

The market analysis section is a key part of the business plan. It is the section where you identify who your best clients or customers are. You cannot omit this section, without it your business plan is incomplete.

A good market analysis will tell your readers how you fit into the existing market and what makes you stand out. This section requires in-depth research, it will probably be the most time-consuming part of the business plan to write.

• Market Research

To create a compelling market analysis that will win over investors and financial institutions, you have to carry out thorough market research . Your market research should be targeted at your primary target market for your products or services. Here is what you want to find out about your target market.

• Your target market’s needs or pain points
• The existing solutions for their pain points
• Geographic Location
• Demographics

The purpose of carrying out a marketing analysis is to get all the information you need to show that you have a solid and thorough understanding of your target audience.

Only after you have fully understood the people you plan to sell your products or services to, can you evaluate correctly if your target market will be interested in your products or services.

You can easily convince interested parties to invest in your business if you can show them you thoroughly understand the market and show them that there is a market for your products or services.

How to Quantify Your Target Market

One of the goals of your marketing research is to understand who your ideal customers are and their purchasing power. To quantify your target market, you have to determine the following:

• Your Potential Customers: They are the people you plan to target. For example, if you sell accounting software for small businesses , then anyone who runs an enterprise or large business is unlikely to be your customers. Also, individuals who do not have a business will most likely not be interested in your product.
• Total Households: If you are selling household products such as heating and air conditioning systems, determining the number of total households is more important than finding out the total population in the area you want to sell to. The logic is simple, people buy the product but it is the household that uses it.
• Median Income: You need to know the median income of your target market. If you target a market that cannot afford to buy your products and services, your business will not last long.
• Income by Demographics: If your potential customers belong to a certain age group or gender, determining income levels by demographics is necessary. For example, if you sell men's clothes, your target audience is men.

What Does a Good Market Analysis Entail?

Your business does not exist on its own, it can only flourish within an industry and alongside competitors. Market analysis takes into consideration your industry, target market, and competitors. Understanding these three entities will drastically improve your company’s chances of success.

You can view your market analysis as an examination of the market you want to break into and an education on the emerging trends and themes in that market. Good market analyses include the following:

• Industry Description. You find out about the history of your industry, the current and future market size, and who the largest players/companies are in your industry.
• Overview of Target Market. You research your target market and its characteristics. Who are you targeting? Note, it cannot be everyone, it has to be a specific group. You also have to find out all information possible about your customers that can help you understand how and why they make buying decisions.
• Size of Target Market: You need to know the size of your target market, how frequently they buy, and the expected quantity they buy so you do not risk overproducing and having lots of bad inventory. Researching the size of your target market will help you determine if it is big enough for sustained business or not.
• Growth Potential: Before picking a target market, you want to be sure there are lots of potential for future growth. You want to avoid going for an industry that is declining slowly or rapidly with almost zero growth potential.
• Market Share Potential: Does your business stand a good chance of taking a good share of the market?
• Market Pricing and Promotional Strategies: Your market analysis should give you an idea of the price point you can expect to charge for your products and services. Researching your target market will also give you ideas of pricing strategies you can implement to break into the market or to enjoy maximum profits.
• Potential Barriers to Entry: One of the biggest benefits of conducting market analysis is that it shows you every potential barrier to entry your business will likely encounter. It is a good idea to discuss potential barriers to entry such as changing technology. It informs readers of your business plan that you understand the market.
• Research on Competitors: You need to know the strengths and weaknesses of your competitors and how you can exploit them for the benefit of your business. Find patterns and trends among your competitors that make them successful, discover what works and what doesn’t, and see what you can do better.

The market analysis section is not just for talking about your target market, industry, and competitors. You also have to explain how your company can fill the hole you have identified in the market.

Here are some questions you can answer that can help you position your product or service in a positive light to your readers.

• Is your product or service of superior quality?
• What additional features do you offer that your competitors do not offer?
• Are you targeting a ‘new’ market?

Basically, your market analysis should include an analysis of what already exists in the market and an explanation of how your company fits into the market.

Competitive Analysis

In the competitive analysis section, y ou have to understand who your direct and indirect competitions are, and how successful they are in the marketplace. It is the section where you assess the strengths and weaknesses of your competitors, the advantage(s) they possess in the market and show the unique features or qualities that make you different from your competitors.

Many businesses do market analysis and competitive analysis together. However, to fully understand what the competitive analysis entails, it is essential to separate it from the market analysis.

Competitive analysis for your business can also include analysis on how to overcome barriers to entry in your target market.

The primary goal of conducting a competitive analysis is to distinguish your business from your competitors. A strong competitive analysis is essential if you want to convince potential funding sources to invest in your business. You have to show potential investors and lenders that your business has what it takes to compete in the marketplace successfully.

Competitive analysis will s how you what the strengths of your competition are and what they are doing to maintain that advantage.

When doing your competitive research, you first have to identify your competitor and then get all the information you can about them. The idea of spending time to identify your competitor and learn everything about them may seem daunting but it is well worth it.

Find answers to the following questions after you have identified who your competitors are.

• What are your successful competitors doing?
• Why is what they are doing working?
• Can your business do it better?
• What are the weaknesses of your successful competitors?
• What are they not doing well?
• Can your business turn its weaknesses into strengths?
• How good is your competitors’ customer service?
• Where do your competitors invest in advertising?
• What sales and pricing strategies are they using?
• What marketing strategies are they using?
• What kind of press coverage do they get?
• What are their customers saying about your competitors (both the positive and negative)?

If your competitors have a website, it is a good idea to visit their websites for more competitors’ research. Check their “About Us” page for more information.

If you are presenting your business plan to investors, you need to clearly distinguish yourself from your competitors. Investors can easily tell when you have not properly researched your competitors.

Take time to think about what unique qualities or features set you apart from your competitors. If you do not have any direct competition offering your product to the market, it does not mean you leave out the competitor analysis section blank. Instead research on other companies that are providing a similar product, or whose product is solving the problem your product solves.

The next step is to create a table listing the top competitors you want to include in your business plan. Ensure you list your business as the last and on the right. What you just created is known as the competitor analysis table.

Direct vs Indirect Competition

You cannot know if your product or service will be a fit for your target market if you have not understood your business and the competitive landscape.

There is no market you want to target where you will not encounter competition, even if your product is innovative. Including competitive analysis in your business plan is essential.

If you are entering an established market, you need to explain how you plan to differentiate your products from the available options in the market. Also, include a list of few companies that you view as your direct competitors The competition you face in an established market is your direct competition.

In situations where you are entering a market with no direct competition, it does not mean there is no competition there. Consider your indirect competition that offers substitutes for the products or services you offer.

For example, if you sell an innovative SaaS product, let us say a project management software , a company offering time management software is your indirect competition.

There is an easy way to find out who your indirect competitors are in the absence of no direct competitors. You simply have to research how your potential customers are solving the problems that your product or service seeks to solve. That is your direct competition.

Factors that Differentiate Your Business from the Competition

There are three main factors that any business can use to differentiate itself from its competition. They are cost leadership, product differentiation, and market segmentation.

1. Cost Leadership

A strategy you can impose to maximize your profits and gain an edge over your competitors. It involves offering lower prices than what the majority of your competitors are offering.

A common practice among businesses looking to enter into a market where there are dominant players is to use free trials or pricing to attract as many customers as possible to their offer.

2. Product Differentiation

Your product or service should have a unique selling proposition (USP) that your competitors do not have or do not stress in their marketing.

Part of the marketing strategy should involve making your products unique and different from your competitors. It does not have to be different from your competitors, it can be the addition to a feature or benefit that your competitors do not currently have.

3. Market Segmentation

As a new business seeking to break into an industry, you will gain more success from focusing on a specific niche or target market, and not the whole industry.

If your competitors are focused on a general need or target market, you can differentiate yourself from them by having a small and hyper-targeted audience. For example, if your competitors are selling men’s clothes in their online stores , you can sell hoodies for men.

4. Define Your Business and Management Structure

The next step in your business plan is your business and management structure. It is the section where you describe the legal structure of your business and the team running it.

Your business is only as good as the management team that runs it, while the management team can only strive when there is a proper business and management structure in place.

If your company is a sole proprietor or a limited liability company (LLC), a general or limited partnership, or a C or an S corporation, state it clearly in this section.

Use an organizational chart to show the management structure in your business. Clearly show who is in charge of what area in your company. It is where you show how each key manager or team leader’s unique experience can contribute immensely to the success of your company. You can also opt to add the resumes and CVs of the key players in your company.

The business and management structure section should show who the owner is, and other owners of the businesses (if the business has other owners). For businesses or companies with multiple owners, include the percent ownership of the various owners and clearly show the extent of each others’ involvement in the company.

Investors want to know who is behind the company and the team running it to determine if it has the right management to achieve its set goals.

Management Team

The management team section is where you show that you have the right team in place to successfully execute the business operations and ideas. Take time to create the management structure for your business. Think about all the important roles and responsibilities that you need managers for to grow your business.

Include brief bios of each key team member and ensure you highlight only the relevant information that is needed. If your team members have background industry experience or have held top positions for other companies and achieved success while filling that role, highlight it in this section.

A common mistake that many startups make is assigning C-level titles such as (CMO and CEO) to everyone on their team. It is unrealistic for a small business to have those titles. While it may look good on paper for the ego of your team members, it can prevent investors from investing in your business.

Instead of building an unrealistic management structure that does not fit your business reality, it is best to allow business titles to grow as the business grows. Starting everyone at the top leaves no room for future change or growth, which is bad for productivity.

Your management team does not have to be complete before you start writing your business plan. You can have a complete business plan even when there are managerial positions that are empty and need filling.

If you have management gaps in your team, simply show the gaps and indicate you are searching for the right candidates for the role(s). Investors do not expect you to have a full management team when you are just starting your business.

Key Questions to Answer When Structuring Your Management Team

• Who are the key leaders?
• What experiences, skills, and educational backgrounds do you expect your key leaders to have?
• Do your key leaders have industry experience?
• What positions will they fill and what duties will they perform in those positions?
• What level of authority do the key leaders have and what are their responsibilities?
• What is the salary for the various management positions that will attract the ideal candidates?

Additional Tips for Writing the Management Structure Section

1. Avoid Adding ‘Ghost’ Names to Your Management Team

There is always that temptation to include a ‘ghost’ name to your management team to attract and influence investors to invest in your business. Although the presence of these celebrity management team members may attract the attention of investors, it can cause your business to lose any credibility if you get found out.

Seasoned investors will investigate further the members of your management team before committing fully to your business If they find out that the celebrity name used does not play any actual role in your business, they will not invest and may write you off as dishonest.

2. Focus on Credentials But Pay Extra Attention to the Roles

Investors want to know the experience that your key team members have to determine if they can successfully reach the company’s growth and financial goals.

While it is an excellent boost for your key management team to have the right credentials, you also want to pay extra attention to the roles they will play in your company.

Organizational Chart

Adding an organizational chart in this section of your business plan is not necessary, you can do it in your business plan’s appendix.

If you are exploring funding options, it is not uncommon to get asked for your organizational chart. The function of an organizational chart goes beyond raising money, you can also use it as a useful planning tool for your business.

An organizational chart can help you identify how best to structure your management team for maximum productivity and point you towards key roles you need to fill in the future.

You can use the organizational chart to show your company’s internal management structure such as the roles and responsibilities of your management team, and relationships that exist between them.

5. Describe Your Product and Service Offering

In your business plan, you have to describe what you sell or the service you plan to offer. It is the next step after defining your business and management structure. The products and services section is where you sell the benefits of your business.

Here you have to explain how your product or service will benefit your customers and describe your product lifecycle. It is also the section where you write down your plans for intellectual property like patent filings and copyrighting.

The research and development that you are undertaking for your product or service need to be explained in detail in this section. However, do not get too technical, sell the general idea and its benefits.

If you have any diagrams or intricate designs of your product or service, do not include them in the products and services section. Instead, leave them for the addendum page. Also, if you are leaving out diagrams or designs for the addendum, ensure you add this phrase “For more detail, visit the addendum Page #.”

Your product and service section in your business plan should include the following:

• A detailed explanation that clearly shows how your product or service works.
• The pricing model for your product or service.
• Your business’ sales and distribution strategy.
• The ideal customers that want your product or service.
• The benefits of your products and services.
• Reason(s) why your product or service is a better alternative to what your competitors are currently offering in the market.
• Plans for filling the orders you receive
• If you have current or pending patents, copyrights, and trademarks for your product or service, you can also discuss them in this section.

What to Focus On When Describing the Benefits, Lifecycle, and Production Process of Your Products or Services

In the products and services section, you have to distill the benefits, lifecycle, and production process of your products and services.

When describing the benefits of your products or services, here are some key factors to focus on.

• Unique features
• Translating the unique features into benefits
• The emotional, psychological, and practical payoffs to attract customers
• Intellectual property rights or any patents

When describing the product life cycle of your products or services, here are some key factors to focus on.

• Upsells, cross-sells, and down-sells
• Time between purchases
• Plans for research and development.

When describing the production process for your products or services, you need to think about the following:

• The creation of new or existing products and services.
• The sources for the raw materials or components you need for production.
• Assembling the products
• Maintaining quality control
• Supply-chain logistics (receiving the raw materials and delivering the finished products)
• The day-to-day management of the production processes, bookkeeping, and inventory.

Tips for Writing the Products or Services Section of Your Business Plan

1. Avoid Technical Descriptions and Industry Buzzwords

The products and services section of your business plan should clearly describe the products and services that your company provides. However, it is not a section to include technical jargons that anyone outside your industry will not understand.

A good practice is to remove highly detailed or technical descriptions in favor of simple terms. Industry buzzwords are not necessary, if there are simpler terms you can use, then use them. If you plan to use your business plan to source funds, making the product or service section so technical will do you no favors.

2. Describe How Your Products or Services Differ from Your Competitors

When potential investors look at your business plan, they want to know how the products and services you are offering differ from that of your competition. Differentiating your products or services from your competition in a way that makes your solution more attractive is critical.

If you are going the innovative path and there is no market currently for your product or service, you need to describe in this section why the market needs your product or service.

For example, overnight delivery was a niche business that only a few companies were participating in. Federal Express (FedEx) had to show in its business plan that there was a large opportunity for that service and they justified why the market needed that service.

3. Long or Short Products or Services Section

Should your products or services section be short? Does the long products or services section attract more investors?

There are no straightforward answers to these questions. Whether your products or services section should be long or relatively short depends on the nature of your business.

If your business is product-focused, then automatically you need to use more space to describe the details of your products. However, if the product your business sells is a commodity item that relies on competitive pricing or other pricing strategies, you do not have to use up so much space to provide significant details about the product.

Likewise, if you are selling a commodity that is available in numerous outlets, then you do not have to spend time on writing a long products or services section.

The key to the success of your business is most likely the effectiveness of your marketing strategies compared to your competitors. Use more space to address that section.

If you are creating a new product or service that the market does not know about, your products or services section can be lengthy. The reason why is because you need to explain everything about the product or service such as the nature of the product, its use case, and values.

A short products or services section for an innovative product or service will not give the readers enough information to properly evaluate your business.

4. Describe Your Relationships with Vendors or Suppliers

Your business will rely on vendors or suppliers to supply raw materials or the components needed to make your products. In your products and services section, describe your relationships with your vendors and suppliers fully.

Avoid the mistake of relying on only one supplier or vendor. If that supplier or vendor fails to supply or goes out of business, you can easily face supply problems and struggle to meet your demands. Plan to set up multiple vendor or supplier relationships for better business stability.

5. Your Primary Goal Is to Convince Your Readers

The primary goal of your business plan is to convince your readers that your business is viable and to create a guide for your business to follow. It applies to the products and services section.

When drafting this section, think like the reader. See your reader as someone who has no idea about your products and services. You are using the products and services section to provide the needed information to help your reader understand your products and services. As a result, you have to be clear and to the point.

While you want to educate your readers about your products or services, you also do not want to bore them with lots of technical details. Show your products and services and not your fancy choice of words.

Your products and services section should provide the answer to the “what” question for your business. You and your management team may run the business, but it is your products and services that are the lifeblood of the business.

Key Questions to Answer When Writing your Products and Services Section

Answering these questions can help you write your products and services section quickly and in a way that will appeal to your readers.

• Are your products existing on the market or are they still in the development stage?
• What is your timeline for adding new products and services to the market?
• What are the positives that make your products and services different from your competitors?
• Do your products and services have any competitive advantage that your competitors’ products and services do not currently have?
• Do your products or services have any competitive disadvantages that you need to overcome to compete with your competitors? If your answer is yes, state how you plan to overcome them,
• How much does it cost to produce your products or services? How much do you plan to sell it for?
• What is the price for your products and services compared to your competitors? Is pricing an issue?
• What are your operating costs and will it be low enough for you to compete with your competitors and still take home a reasonable profit margin?
• What is your plan for acquiring your products? Are you involved in the production of your products or services?
• Are you the manufacturer and produce all the components you need to create your products? Do you assemble your products by using components supplied by other manufacturers? Do you purchase your products directly from suppliers or wholesalers?
• Do you have a steady supply of products that you need to start your business? (If your business is yet to kick-off)
• How do you plan to distribute your products or services to the market?

You can also hint at the marketing or promotion plans you have for your products or services such as how you plan to build awareness or retain customers. The next section is where you can go fully into details about your business’s marketing and sales plan.

6. Show and Explain Your Marketing and Sales Plan

Providing great products and services is wonderful, but it means nothing if you do not have a marketing and sales plan to inform your customers about them. Your marketing and sales plan is critical to the success of your business.

The sales and marketing section is where you show and offer a detailed explanation of your marketing and sales plan and how you plan to execute it. It covers your pricing plan, proposed advertising and promotion activities, activities and partnerships you need to make your business a success, and the benefits of your products and services.

There are several ways you can approach your marketing and sales strategy. Ideally, your marketing and sales strategy has to fit the unique needs of your business.

In this section, you describe how the plans your business has for attracting and retaining customers, and the exact process for making a sale happen. It is essential to thoroughly describe your complete marketing and sales plans because you are still going to reference this section when you are making financial projections for your business.

Outline Your Business’ Unique Selling Proposition (USP)

The sales and marketing section is where you outline your business’s unique selling proposition (USP). When you are developing your unique selling proposition, think about the strongest reasons why people should buy from you over your competition. That reason(s) is most likely a good fit to serve as your unique selling proposition (USP).

Target Market and Target Audience

Plans on how to get your products or services to your target market and how to get your target audience to buy them go into this section. You also highlight the strengths of your business here, particularly what sets them apart from your competition.

Before you start writing your marketing and sales plan, you need to have properly defined your target audience and fleshed out your buyer persona. If you do not first understand the individual you are marketing to, your marketing and sales plan will lack any substance and easily fall.

Creating a Smart Marketing and Sales Plan

Marketing your products and services is an investment that requires you to spend money. Like any other investment, you have to generate a good return on investment (ROI) to justify using that marketing and sales plan. Good marketing and sales plans bring in high sales and profits to your company.

Avoid spending money on unproductive marketing channels. Do your research and find out the best marketing and sales plan that works best for your company.

Your marketing and sales plan can be broken into different parts: your positioning statement, pricing, promotion, packaging, advertising, public relations, content marketing, social media, and strategic alliances.

Your Positioning Statement

Your positioning statement is the first part of your marketing and sales plan. It refers to the way you present your company to your customers.

Are you the premium solution, the low-price solution, or are you the intermediary between the two extremes in the market? What do you offer that your competitors do not that can give you leverage in the market?

Before you start writing your positioning statement, you need to spend some time evaluating the current market conditions. Here are some questions that can help you to evaluate the market

• What are the unique features or benefits that you offer that your competitors lack?
• What are your customers’ primary needs and wants?
• Why should a customer choose you over your competition? How do you plan to differentiate yourself from the competition?
• How does your company’s solution compare with other solutions in the market?

After answering these questions, then you can start writing your positioning statement. Your positioning statement does not have to be in-depth or too long.

All you need to explain with your positioning statement are two focus areas. The first is the position of your company within the competitive landscape. The other focus area is the core value proposition that sets your company apart from other alternatives that your ideal customer might consider.

Here is a simple template you can use to develop a positioning statement.

For [description of target market] who [need of target market], [product or service] [how it meets the need]. Unlike [top competition], it [most essential distinguishing feature].

For example, let’s create the positioning statement for fictional accounting software and QuickBooks alternative , TBooks.

“For small business owners who need accounting services, TBooks is an accounting software that helps small businesses handle their small business bookkeeping basics quickly and easily. Unlike Wave, TBooks gives small businesses access to live sessions with top accountants.”

You can edit this positioning statement sample and fill it with your business details.

After writing your positioning statement, the next step is the pricing of your offerings. The overall positioning strategy you set in your positioning statement will often determine how you price your products or services.

Pricing is a powerful tool that sends a strong message to your customers. Failure to get your pricing strategy right can make or mar your business. If you are targeting a low-income audience, setting a premium price can result in low sales.

You can use pricing to communicate your positioning to your customers. For example, if you are offering a product at a premium price, you are sending a message to your customers that the product belongs to the premium category.

Basic Rules to Follow When Pricing Your Offering

Setting a price for your offering involves more than just putting a price tag on it. Deciding on the right pricing for your offering requires following some basic rules. They include covering your costs, primary and secondary profit center pricing, and matching the market rate.

• Covering Your Costs: The price you set for your products or service should be more than it costs you to produce and deliver them. Every business has the same goal, to make a profit. Depending on the strategy you want to use, there are exceptions to this rule. However, the vast majority of businesses follow this rule.
• Primary and Secondary Profit Center Pricing: When a company sets its price above the cost of production, it is making that product its primary profit center. A company can also decide not to make its initial price its primary profit center by selling below or at even with its production cost. It rather depends on the support product or even maintenance that is associated with the initial purchase to make its profit. The initial price thus became its secondary profit center.
• Matching the Market Rate: A good rule to follow when pricing your products or services is to match your pricing with consumer demand and expectations. If you price your products or services beyond the price your customer perceives as the ideal price range, you may end up with no customers. Pricing your products too low below what your customer perceives as the ideal price range may lead to them undervaluing your offering.

Pricing Strategy

Your pricing strategy influences the price of your offering. There are several pricing strategies available for you to choose from when examining the right pricing strategy for your business. They include cost-plus pricing, market-based pricing, value pricing, and more.

• Cost-plus Pricing: This strategy is one of the simplest and oldest pricing strategies. Here you consider the cost of producing a unit of your product and then add a profit to it to arrive at your market price. It is an effective pricing strategy for manufacturers because it helps them cover their initial costs. Another name for the cost-plus pricing strategy is the markup pricing strategy.
• Market-based Pricing: This pricing strategy analyses the market including competitors’ pricing and then sets a price based on what the market is expecting. With this pricing strategy, you can either set your price at the low-end or high-end of the market.
• Value Pricing: This pricing strategy involves setting a price based on the value you are providing to your customer. When adopting a value-based pricing strategy, you have to set a price that your customers are willing to pay. Service-based businesses such as small business insurance providers , luxury goods sellers, and the fashion industry use this pricing strategy.

After carefully sorting out your positioning statement and pricing, the next item to look at is your promotional strategy. Your promotional strategy explains how you plan on communicating with your customers and prospects.

As a business, you must measure all your costs, including the cost of your promotions. You also want to measure how much sales your promotions bring for your business to determine its usefulness. Promotional strategies or programs that do not lead to profit need to be removed.

There are different types of promotional strategies you can adopt for your business, they include advertising, public relations, and content marketing.

Advertising

Your business plan should include your advertising plan which can be found in the marketing and sales plan section. You need to include an overview of your advertising plans such as the areas you plan to spend money on to advertise your business and offers.

Ensure that you make it clear in this section if your business will be advertising online or using the more traditional offline media, or the combination of both online and offline media. You can also include the advertising medium you want to use to raise awareness about your business and offers.

Some common online advertising mediums you can use include social media ads, landing pages, sales pages, SEO, Pay-Per-Click, emails, Google Ads, and others. Some common traditional and offline advertising mediums include word of mouth, radios, direct mail, televisions, flyers, billboards, posters, and others.

A key component of your advertising strategy is how you plan to measure the effectiveness and success of your advertising campaign. There is no point in sticking with an advertising plan or medium that does not produce results for your business in the long run.

Public Relations

A great way to reach your customers is to get the media to cover your business or product. Publicity, especially good ones, should be a part of your marketing and sales plan. In this section, show your plans for getting prominent reviews of your product from reputable publications and sources.

Your business needs that exposure to grow. If public relations is a crucial part of your promotional strategy, provide details about your public relations plan here.

Content Marketing

Content marketing is a popular promotional strategy used by businesses to inform and attract their customers. It is about teaching and educating your prospects on various topics of interest in your niche, it does not just involve informing them about the benefits and features of the products and services you have,

Businesses publish content usually for free where they provide useful information, tips, and advice so that their target market can be made aware of the importance of their products and services. Content marketing strategies seek to nurture prospects into buyers over time by simply providing value.

Your company can create a blog where it will be publishing content for its target market. You will need to use the best website builder such as Wix and Squarespace and the best web hosting services such as Bluehost, Hostinger, and other Bluehost alternatives to create a functional blog or website.

If content marketing is a crucial part of your promotional strategy (as it should be), detail your plans under promotions.

Including high-quality images of the packaging of your product in your business plan is a lovely idea. You can add the images of the packaging of that product in the marketing and sales plan section. If you are not selling a product, then you do not need to include any worry about the physical packaging of your product.

When organizing the packaging section of your business plan, you can answer the following questions to make maximum use of this section.

• Is your choice of packaging consistent with your positioning strategy?
• What key value proposition does your packaging communicate? (It should reflect the key value proposition of your business)
• How does your packaging compare to that of your competitors?

Social Media

Your 21st-century business needs to have a good social media presence. Not having one is leaving out opportunities for growth and reaching out to your prospect.

You do not have to join the thousands of social media platforms out there. What you need to do is join the ones that your customers are active on and be active there.

Businesses use social media to provide information about their products such as promotions, discounts, the benefits of their products, and content on their blogs.

Social media is also a platform for engaging with your customers and getting feedback about your products or services. Make no mistake, more and more of your prospects are using social media channels to find more information about companies.

You need to consider the social media channels you want to prioritize your business (prioritize the ones your customers are active in) and your branding plans in this section.

Strategic Alliances

If your company plans to work closely with other companies as part of your sales and marketing plan, include it in this section. Prove details about those partnerships in your business plan if you have already established them.

Strategic alliances can be beneficial for all parties involved including your company. Working closely with another company in the form of a partnership can provide access to a different target market segment for your company.

The company you are partnering with may also gain access to your target market or simply offer a new product or service (that of your company) to its customers.

Mutually beneficial partnerships can cover the weaknesses of one company with the strength of another. You should consider strategic alliances with companies that sell complimentary products to yours. For example, if you provide printers, you can partner with a company that produces ink since the customers that buy printers from you will also need inks for printing.

Steps Involved in Creating a Marketing and Sales Plan

1. Focus on Your Target Market

Identify who your customers are, the market you want to target. Then determine the best ways to get your products or services to your potential customers.

2. Evaluate Your Competition

One of the goals of having a marketing plan is to distinguish yourself from your competition. You cannot stand out from them without first knowing them in and out.

You can know your competitors by gathering information about their products, pricing, service, and advertising campaigns.

These questions can help you know your competition.

• What makes your competition successful?
• What are their weaknesses?
• What are customers saying about your competition?

3. Consider Your Brand

Customers' perception of your brand has a strong impact on your sales. Your marketing and sales plan should seek to bolster the image of your brand. Before you start marketing your business, think about the message you want to pass across about your business and your products and services.

4. Focus on Benefits

The majority of your customers do not view your product in terms of features, what they want to know is the benefits and solutions your product offers. Think about the problems your product solves and the benefits it delivers, and use it to create the right sales and marketing message.

Your marketing plan should focus on what you want your customer to get instead of what you provide. Identify those benefits in your marketing and sales plan.

5. Focus on Differentiation

Your marketing and sales plan should look for a unique angle they can take that differentiates your business from the competition, even if the products offered are similar. Some good areas of differentiation you can use are your benefits, pricing, and features.

Key Questions to Answer When Writing Your Marketing and Sales Plan

• What is your company’s budget for sales and marketing campaigns?
• What key metrics will you use to determine if your marketing plans are successful?
• What are your alternatives if your initial marketing efforts do not succeed?
• Who are the sales representatives you need to promote your products or services?
• What are the marketing and sales channels you plan to use? How do you plan to get your products in front of your ideal customers?
• Where will you sell your products?

You may want to include samples of marketing materials you plan to use such as print ads, website descriptions, and social media ads. While it is not compulsory to include these samples, it can help you better communicate your marketing and sales plan and objectives.

The purpose of the marketing and sales section is to answer this question “How will you reach your customers?” If you cannot convincingly provide an answer to this question, you need to rework your marketing and sales section.

7. Clearly Show Your Funding Request

If you are writing your business plan to ask for funding from investors or financial institutions, the funding request section is where you will outline your funding requirements. The funding request section should answer the question ‘How much money will your business need in the near future (3 to 5 years)?’

A good funding request section will clearly outline and explain the amount of funding your business needs over the next five years. You need to know the amount of money your business needs to make an accurate funding request.

Also, when writing your funding request, provide details of how the funds will be used over the period. Specify if you want to use the funds to buy raw materials or machinery, pay salaries, pay for advertisements, and cover specific bills such as rent and electricity.

In addition to explaining what you want to use the funds requested for, you need to clearly state the projected return on investment (ROI) . Investors and creditors want to know if your business can generate profit for them if they put funds into it.

Ensure you do not inflate the figures and stay as realistic as possible. Investors and financial institutions you are seeking funds from will do their research before investing money in your business.

If you are not sure of an exact number to request from, you can use some range of numbers as rough estimates. Add a best-case scenario and a work-case scenario to your funding request. Also, include a description of your strategic future financial plans such as selling your business or paying off debts.

Funding Request: Debt or Equity?

When making your funding request, specify the type of funding you want. Do you want debt or equity? Draw out the terms that will be applicable for the funding, and the length of time the funding request will cover.

Case for Equity

If your new business has not yet started generating profits, you are most likely preparing to sell equity in your business to raise capital at the early stage. Equity here refers to ownership. In this case, you are selling a portion of your company to raise capital.

Although this method of raising capital for your business does not put your business in debt, keep in mind that an equity owner may expect to play a key role in company decisions even if he does not hold a major stake in the company.

Most equity sales for startups are usually private transactions . If you are making a funding request by offering equity in exchange for funding, let the investor know that they will be paid a dividend (a share of the company’s profit). Also, let the investor know the process for selling their equity in your business.

Case for Debt

You may decide not to offer equity in exchange for funds, instead, you make a funding request with the promise to pay back the money borrowed at the agreed time frame.

When making a funding request with an agreement to pay back, note that you will have to repay your creditors both the principal amount borrowed and the interest on it. Financial institutions offer this type of funding for businesses.

Large companies combine both equity and debt in their capital structure. When drafting your business plan, decide if you want to offer both or one over the other.

Before you sell equity in exchange for funding in your business, consider if you are willing to accept not being in total control of your business. Also, before you seek loans in your funding request section, ensure that the terms of repayment are favorable.

You should set a clear timeline in your funding request so that potential investors and creditors can know what you are expecting. Some investors and creditors may agree to your funding request and then delay payment for longer than 30 days, meanwhile, your business needs an immediate cash injection to operate efficiently.

Additional Tips for Writing the Funding Request Section of your Business Plan

The funding request section is not necessary for every business, it is only needed by businesses who plan to use their business plan to secure funding.

If you are adding the funding request section to your business plan, provide an itemized summary of how you plan to use the funds requested. Hiring a lawyer, accountant, or other professionals may be necessary for the proper development of this section.

You should also gather and use financial statements that add credibility and support to your funding requests. Ensure that the financial statements you use should include your projected financial data such as projected cash flows, forecast statements, and expenditure budgets.

If you are an existing business, include all historical financial statements such as cash flow statements, balance sheets and income statements .

Provide monthly and quarterly financial statements for a year. If your business has records that date back beyond the one-year mark, add the yearly statements of those years. These documents are for the appendix section of your business plan.

8. Detail Your Financial Plan, Metrics, and Projections

If you used the funding request section in your business plan, supplement it with a financial plan, metrics, and projections. This section paints a picture of the past performance of your business and then goes ahead to make an informed projection about its future.

The goal of this section is to convince readers that your business is going to be a financial success. It outlines your business plan to generate enough profit to repay the loan (with interest if applicable) and to generate a decent return on investment for investors.

If you have an existing business already in operation, use this section to demonstrate stability through finance. This section should include your cash flow statements, balance sheets, and income statements covering the last three to five years. If your business has some acceptable collateral that you can use to acquire loans, list it in the financial plan, metrics, and projection section.

Apart from current financial statements, this section should also contain a prospective financial outlook that spans the next five years. Include forecasted income statements, cash flow statements, balance sheets, and capital expenditure budget.

If your business is new and is not yet generating profit, use clear and realistic projections to show the potentials of your business.

When drafting this section, research industry norms and the performance of comparable businesses. Your financial projections should cover at least five years. State the logic behind your financial projections. Remember you can always make adjustments to this section as the variables change.

The financial plan, metrics, and projection section create a baseline which your business can either exceed or fail to reach. If your business fails to reach your projections in this section, you need to understand why it failed.

Investors and loan managers spend a lot of time going through the financial plan, metrics, and projection section compared to other parts of the business plan. Ensure you spend time creating credible financial analyses for your business in this section.

Many entrepreneurs find this section daunting to write. You do not need a business degree to create a solid financial forecast for your business. Business finances, especially for startups, are not as complicated as they seem. There are several online tools and templates that make writing this section so much easier.

Use Graphs and Charts

The financial plan, metrics, and projection section is a great place to use graphs and charts to tell the financial story of your business. Charts and images make it easier to communicate your finances.

Accuracy in this section is key, ensure you carefully analyze your past financial statements properly before making financial projects.

Address the Risk Factors and Show Realistic Financial Projections

Keep your financial plan, metrics, and projection realistic. It is okay to be optimistic in your financial projection, however, you have to justify it.

You should also address the various risk factors associated with your business in this section. Investors want to know the potential risks involved, show them. You should also show your plans for mitigating those risks.

What You Should In The Financial Plan, Metrics, and Projection Section of Your Business Plan

The financial plan, metrics, and projection section of your business plan should have monthly sales and revenue forecasts for the first year. It should also include annual projections that cover 3 to 5 years.

A three-year projection is a basic requirement to have in your business plan. However, some investors may request a five-year forecast.

Your business plan should include the following financial statements: sales forecast, personnel plan, income statement, income statement, cash flow statement, balance sheet, and an exit strategy.

1. Sales Forecast

Sales forecast refers to your projections about the number of sales your business is going to record over the next few years. It is typically broken into several rows, with each row assigned to a core product or service that your business is offering.

One common mistake people make in their business plan is to break down the sales forecast section into long details. A sales forecast should forecast the high-level details.

For example, if you are forecasting sales for a payroll software provider, you could break down your forecast into target market segments or subscription categories.

Your sales forecast section should also have a corresponding row for each sales row to cover the direct cost or Cost of Goods Sold (COGS). The objective of these rows is to show the expenses that your business incurs in making and delivering your product or service.

Note that your Cost of Goods Sold (COGS) should only cover those direct costs incurred when making your products. Other indirect expenses such as insurance, salaries, payroll tax, and rent should not be included.

For example, the Cost of Goods Sold (COGS) for a restaurant is the cost of ingredients while for a consulting company it will be the cost of paper and other presentation materials.

2. Personnel Plan

The personnel plan section is where you provide details about the payment plan for your employees. For a small business, you can easily list every position in your company and how much you plan to pay in the personnel plan.

However, for larger businesses, you have to break the personnel plan into functional groups such as sales and marketing.

The personnel plan will also include the cost of an employee beyond salary, commonly referred to as the employee burden. These costs include insurance, payroll taxes , and other essential costs incurred monthly as a result of having employees on your payroll.

3. Income Statement

The income statement section shows if your business is making a profit or taking a loss. Another name for the income statement is the profit and loss (P&L). It takes data from your sales forecast and personnel plan and adds other ongoing expenses you incur while running your business.

Every business plan should have an income statement. It subtracts your business expenses from its earnings to show if your business is generating profit or incurring losses.

The income statement has the following items: sales, Cost of Goods Sold (COGS), gross margin, operating expenses, total operating expenses, operating income , total expenses, and net profit.

• Sales refer to the revenue your business generates from selling its products or services. Other names for sales are income or revenue.
• Cost of Goods Sold (COGS) refers to the total cost of selling your products. Other names for COGS are direct costs or cost of sales. Manufacturing businesses use the Costs of Goods Manufactured (COGM) .
• Gross Margin is the figure you get when you subtract your COGS from your sales. In your income statement, you can express it as a percentage of total sales (Gross margin / Sales = Gross Margin Percent).
• Operating Expenses refer to all the expenses you incur from running your business. It exempts the COGS because it stands alone as a core part of your income statement. You also have to exclude taxes, depreciation, and amortization. Your operating expenses include salaries, marketing expenses, research and development (R&D) expenses, and other expenses.
• Total Operating Expenses refers to the sum of all your operating expenses including those exemptions named above under operating expenses.
• Operating Income refers to earnings before interest, taxes, depreciation, and amortization. It is simply known as the acronym EBITDA (earnings before interest, taxes, depreciation, and amortization). Calculating your operating income is simple, all you need to do is to subtract your COGS and total operating expenses from your sales.
• Total Expenses refer to the sum of your operating expenses and your business’ interest, taxes, depreciation, and amortization.
• Net profit shows whether your business has made a profit or taken a loss during a given timeframe.

4. Cash Flow Statement

The cash flow statement tracks the money you have in the bank at any given point. It is often confused with the income statement or the profit and loss statement. They are both different types of financial statements. The income statement calculates your profits and losses while the cash flow statement shows you how much you have in the bank.

5. Balance Sheet

The balance sheet is a financial statement that provides an overview of the financial health of your business. It contains information about the assets and liabilities of your company, and owner’s or shareholders’ equity.

You can get the net worth of your company by subtracting your company’s liabilities from its assets.

6. Exit Strategy

The exit strategy refers to a probable plan for selling your business either to the public in an IPO or to another company. It is the last thing you include in the financial plan, metrics, and projection section.

You can choose to omit the exit strategy from your business plan if you plan to maintain full ownership of your business and do not plan on seeking angel investment or virtual capitalist (VC) funding.

Investors may want to know what your exit plan is. They invest in your business to get a good return on investment.

Your exit strategy does not have to include long and boring details. Ensure you identify some interested parties who may be interested in buying the company if it becomes a success.

Key Questions to Answer with Your Financial Plan, Metrics, and Projection

Your financial plan, metrics, and projection section helps investors, creditors, or your internal managers to understand what your expenses are, the amount of cash you need, and what it takes to make your company profitable. It also shows what you will be doing with any funding.

You do not need to show actual financial data if you do not have one. Adding forecasts and projections to your financial statements is added proof that your strategy is feasible and shows investors you have planned properly.

Here are some key questions to answer to help you develop this section.

• What is your sales forecast for the next year?
• When will your company achieve a positive cash flow?
• What are the core expenses you need to operate?
• How much money do you need upfront to operate or grow your company?
• How will you use the loans or investments?

9. Add an Appendix to Your Business Plan

Adding an appendix to your business plan is optional. It is a useful place to put any charts, tables, legal notes, definitions, permits, résumés, and other critical information that do not fit into other sections of your business plan.

The appendix section is where you would want to include details of a patent or patent-pending if you have one. You can always add illustrations or images of your products here. It is the last section of your business plan.

When writing your business plan, there are details you cut short or remove to prevent the entire section from becoming too lengthy. There are also details you want to include in the business plan but are not a good fit for any of the previous sections. You can add that additional information to the appendix section.

Businesses also use the appendix section to include supporting documents or other materials specially requested by investors or lenders.

You can include just about any information that supports the assumptions and statements you made in the business plan under the appendix. It is the one place in the business plan where unrelated data and information can coexist amicably.

If your appendix section is lengthy, try organizing it by adding a table of contents at the beginning of the appendix section. It is also advisable to group similar information to make it easier for the reader to access them.

A well-organized appendix section makes it easier to share your information clearly and concisely. Add footnotes throughout the rest of the business plan or make references in the plan to the documents in the appendix.

The appendix section is usually only necessary if you are seeking funding from investors or lenders, or hoping to attract partners.

People reading business plans do not want to spend time going through a heap of backup information, numbers, and charts. Keep these documents or information in the Appendix section in case the reader wants to dig deeper.

Common Items to Include in the Appendix Section of Your Business Plan

The appendix section includes documents that supplement or support the information or claims given in other sections of the business plans. Common items you can include in the appendix section include:

• Additional data about the process of manufacturing or creation
• Additional description of products or services such as product schematics
• Additional financial documents or projections
• Articles of incorporation and status
• Backup for market research or competitive analysis
• Bank statements
• Business registries
• Client testimonials (if your business is already running)
• Copies of insurances
• Credit histories (personal or/and business)
• Deeds and permits
• Equipment leases
• Examples of marketing and advertising collateral
• Industry associations and memberships
• Images of product
• Intellectual property
• Key customer contracts
• Legal documents and other contracts
• Letters of reference
• Links to references
• Market research data
• Organizational charts
• Photographs of potential facilities
• Professional licenses pertaining to your legal structure or type of business
• Purchase orders
• Resumes of the founder(s) and key managers
• State and federal identification numbers or codes
• Trademarks or patents’ registrations

Avoid using the appendix section as a place to dump any document or information you feel like adding. Only add documents or information that you support or increase the credibility of your business plan.

Tips and Strategies for Writing a Convincing Business Plan

To achieve a perfect business plan, you need to consider some key tips and strategies. These tips will raise the efficiency of your business plan above average.

1. Know Your Audience

When writing a business plan, you need to know your audience . Business owners write business plans for different reasons. Your business plan has to be specific. For example, you can write business plans to potential investors, banks, and even fellow board members of the company.

The audience you are writing to determines the structure of the business plan. As a business owner, you have to know your audience. Not everyone will be your audience. Knowing your audience will help you to narrow the scope of your business plan.

Consider what your audience wants to see in your projects, the likely questions they might ask, and what interests them.

• A business plan used to address a company's board members will center on its employment schemes, internal affairs, projects, stakeholders, etc.
• A business plan for financial institutions will talk about the size of your market and the chances for you to pay back any loans you demand.
• A business plan for investors will show proof that you can return the investment capital within a specific time. In addition, it discusses your financial projections, tractions, and market size.

2. Get Inspiration from People

Writing a business plan from scratch as an entrepreneur can be daunting. That is why you need the right inspiration to push you to write one. You can gain inspiration from the successful business plans of other businesses. Look at their business plans, the style they use, the structure of the project, etc.

To make your business plan easier to create, search companies related to your business to get an exact copy of what you need to create an effective business plan. You can also make references while citing examples in your business plans.

When drafting your business plan, get as much help from others as you possibly can. By getting inspiration from people, you can create something better than what they have.

3. Avoid Being Over Optimistic

Many business owners make use of strong adjectives to qualify their content. One of the big mistakes entrepreneurs make when preparing a business plan is promising too much.

The use of superlatives and over-optimistic claims can prepare the audience for more than you can offer. In the end, you disappoint the confidence they have in you.

In most cases, the best option is to be realistic with your claims and statistics. Most of the investors can sense a bit of incompetency from the overuse of superlatives. As a new entrepreneur, do not be tempted to over-promise to get the interests of investors.

The concept of entrepreneurship centers on risks, nothing is certain when you make future analyses. What separates the best is the ability to do careful research and work towards achieving that, not promising more than you can achieve.

To make an excellent first impression as an entrepreneur, replace superlatives with compelling data-driven content. In this way, you are more specific than someone promising a huge ROI from an investment.

4. Keep it Simple and Short

When writing business plans, ensure you keep them simple throughout. Irrespective of the purpose of the business plan, your goal is to convince the audience.

One way to achieve this goal is to make them understand your proposal. Therefore, it would be best if you avoid the use of complex grammar to express yourself. It would be a huge turn-off if the people you want to convince are not familiar with your use of words.

Another thing to note is the length of your business plan. It would be best if you made it as brief as possible.

You hardly see investors or agencies that read through an extremely long document. In that case, if your first few pages can’t convince them, then you have lost it. The more pages you write, the higher the chances of you derailing from the essential contents.

To ensure your business plan has a high conversion rate, you need to dispose of every unnecessary information. For example, if you have a strategy that you are not sure of, it would be best to leave it out of the plan.

5. Make an Outline and Follow Through

A perfect business plan must have touched every part needed to convince the audience. Business owners get easily tempted to concentrate more on their products than on other sections. Doing this can be detrimental to the efficiency of the business plan.

For example, imagine you talking about a product but omitting or providing very little information about the target audience. You will leave your clients confused.

To ensure that your business plan communicates your full business model to readers, you have to input all the necessary information in it. One of the best ways to achieve this is to design a structure and stick to it.

This structure is what guides you throughout the writing. To make your work easier, you can assign an estimated word count or page limit to every section to avoid making it too bulky for easy reading. As a guide, the necessary things your business plan must contain are:

• Table of contents
• Introduction
• Product or service description
• Target audience
• Market size
• Competition analysis
• Financial projections

Some specific businesses can include some other essential sections, but these are the key sections that must be in every business plan.

6. Ask a Professional to Proofread

When writing a business plan, you must tie all loose ends to get a perfect result. When you are done with writing, call a professional to go through the document for you. You are bound to make mistakes, and the way to correct them is to get external help.

You should get a professional in your field who can relate to every section of your business plan. It would be easier for the professional to notice the inner flaws in the document than an editor with no knowledge of your business.

In addition to getting a professional to proofread, get an editor to proofread and edit your document. The editor will help you identify grammatical errors, spelling mistakes, and inappropriate writing styles.

Writing a business plan can be daunting, but you can surmount that obstacle and get the best out of it with these tips.

Business Plan Examples and Templates That’ll Save You Tons of Time

1. hubspot's one-page business plan.

The one-page business plan template by HubSpot is the perfect guide for businesses of any size, irrespective of their business strategy. Although the template is condensed into a page, your final business plan should not be a page long! The template is designed to ask helpful questions that can help you develop your business plan.

Hubspot’s one-page business plan template is divided into nine fields:

• Business opportunity
• Company description
• Industry analysis
• Target market
• Implementation timeline
• Marketing plan
• Financial summary
• Funding required

2. Bplan’s Free Business Plan Template

Bplans' free business plan template is investor-approved. It is a rich template used by prestigious educational institutions such as Babson College and Princeton University to teach entrepreneurs how to create a business plan.

The template has six sections: the executive summary, opportunity, execution, company, financial plan, and appendix. There is a step-by-step guide for writing every little detail in the business plan. Follow the instructions each step of the way and you will create a business plan that impresses investors or lenders easily.

3. HubSpot's Downloadable Business Plan Template

HubSpot’s downloadable business plan template is a more comprehensive option compared to the one-page business template by HubSpot. This free and downloadable business plan template is designed for entrepreneurs.

The template is a comprehensive guide and checklist for business owners just starting their businesses. It tells you everything you need to fill in each section of the business plan and how to do it.

There are nine sections in this business plan template: an executive summary, company and business description, product and services line, market analysis, marketing plan, sales plan, legal notes, financial considerations, and appendix.

4. Business Plan by My Own Business Institute

My Own Business Institute (MOBI) which is a part of Santa Clara University's Center for Innovation and Entrepreneurship offers a free business plan template. You can either copy the free business template from the link provided above or download it as a Word document.

The comprehensive template consists of a whopping 15 sections.

• The Business Profile
• The Vision and the People
• Home-Based Business and Freelance Business Opportunities
• Organization
• Licenses and Permits
• Business Insurance
• Communication Tools
• Acquisitions
• Location and Leasing
• Accounting and Cash Flow
• Opening and Marketing
• Managing Employees
• Expanding and Handling Problems

There are lots of helpful tips on how to fill each section in the free business plan template by MOBI.

5. Score's Business Plan Template for Startups

Score is an American nonprofit organization that helps entrepreneurs build successful companies. This business plan template for startups by Score is available for free download. The business plan template asks a whooping 150 generic questions that help entrepreneurs from different fields to set up the perfect business plan.

The business plan template for startups contains clear instructions and worksheets, all you have to do is answer the questions and fill the worksheets.

There are nine sections in the business plan template: executive summary, company description, products and services, marketing plan, operational plan, management and organization, startup expenses and capitalization, financial plan, and appendices.

The ‘refining the plan’ resource contains instructions that help you modify your business plan to suit your specific needs, industry, and target audience. After you have completed Score’s business plan template, you can work with a SCORE mentor for expert advice in business planning.

6. Minimalist Architecture Business Plan Template by Venngage

The minimalist architecture business plan template is a simple template by Venngage that you can customize to suit your business needs .

There are five sections in the template: an executive summary, statement of problem, approach and methodology, qualifications, and schedule and benchmark. The business plan template has instructions that guide users on what to fill in each section.

7. Small Business Administration Free Business Plan Template

The Small Business Administration (SBA) offers two free business plan templates, filled with practical real-life examples that you can model to create your business plan. Both free business plan templates are written by fictional business owners: Rebecca who owns a consulting firm, and Andrew who owns a toy company.

There are five sections in the two SBA’s free business plan templates.

• Executive Summary
• Company Description
• Service Line
• Marketing and Sales

8. The $100 Startup's One-Page Business Plan

The one-page business plan by the $100 startup is a simple business plan template for entrepreneurs who do not want to create a long and complicated plan . You can include more details in the appendices for funders who want more information beyond what you can put in the one-page business plan.

There are five sections in the one-page business plan such as overview, ka-ching, hustling, success, and obstacles or challenges or open questions. You can answer all the questions using one or two sentences.

9. PandaDoc’s Free Business Plan Template

The free business plan template by PandaDoc is a comprehensive 15-page document that describes the information you should include in every section.

There are 11 sections in PandaDoc’s free business plan template.

• Executive summary
• Business description
• Products and services
• Operations plan
• Management organization
• Financial plan
• Conclusion / Call to action
• Confidentiality statement

You have to sign up for its 14-day free trial to access the template. You will find different business plan templates on PandaDoc once you sign up (including templates for general businesses and specific businesses such as bakeries, startups, restaurants, salons, hotels, and coffee shops)

PandaDoc allows you to customize its business plan templates to fit the needs of your business. After editing the template, you can send it to interested parties and track opens and views through PandaDoc.

10. Invoiceberry Templates for Word, Open Office, Excel, or PPT

InvoiceBerry is a U.K based online invoicing and tracking platform that offers free business plan templates in .docx, .odt, .xlsx, and .pptx formats for freelancers and small businesses.

Before you can download the free business plan template, it will ask you to give it your email address. After you complete the little task, it will send the download link to your inbox for you to download. It also provides a business plan checklist in .xlsx file format that ensures you add the right information to the business plan.

Alternatives to the Traditional Business Plan

A business plan is very important in mapping out how one expects their business to grow over a set number of years, particularly when they need external investment in their business. However, many investors do not have the time to watch you present your business plan. It is a long and boring read.

Luckily, there are three alternatives to the traditional business plan (the Business Model Canvas, Lean Canvas, and Startup Pitch Deck). These alternatives are less laborious and easier and quicker to present to investors.

Business Model Canvas (BMC)

The business model canvas is a business tool used to present all the important components of setting up a business, such as customers, route to market, value proposition, and finance in a single sheet. It provides a very focused blueprint that defines your business initially which you can later expand on if needed.

The sheet is divided mainly into company, industry, and consumer models that are interconnected in how they find problems and proffer solutions.

Segments of the Business Model Canvas

The business model canvas was developed by founder Alexander Osterwalder to answer important business questions. It contains nine segments.

• Key Partners: Who will be occupying important executive positions in your business? What do they bring to the table? Will there be a third party involved with the company?
• Key Activities: What important activities will production entail? What activities will be carried out to ensure the smooth running of the company?
• The Product’s Value Propositions: What does your product do? How will it be different from other products?
• Customer Segments: What demography of consumers are you targeting? What are the habits of these consumers? Who are the MVPs of your target consumers?
• Customer Relationships: How will the team support and work with its customer base? How do you intend to build and maintain trust with the customer?
• Key Resources: What type of personnel and tools will be needed? What size of the budget will they need access to?
• Channels: How do you plan to create awareness of your products? How do you intend to transport your product to the customer?
• Cost Structure: What is the estimated cost of production? How much will distribution cost?
• Revenue Streams: For what value are customers willing to pay? How do they prefer to pay for the product? Are there any external revenues attached apart from the main source? How do the revenue streams contribute to the overall revenue?

Lean Canvas

The lean canvas is a problem-oriented alternative to the standard business model canvas. It was proposed by Ash Maurya, creator of Lean Stack as a development of the business model generation. It uses a more problem-focused approach and it majorly targets entrepreneurs and startup businesses.

Lean Canvas uses the same 9 blocks concept as the business model canvas, however, they have been modified slightly to suit the needs and purpose of a small startup. The key partners, key activities, customer relationships, and key resources are replaced by new segments which are:

• Problem: Simple and straightforward number of problems you have identified, ideally three.
• Solution: The solutions to each problem.
• Unfair Advantage: Something you possess that can't be easily bought or replicated.
• Key Metrics: Important numbers that will tell how your business is doing.

Startup Pitch Deck

While the business model canvas compresses into a factual sheet, startup pitch decks expand flamboyantly.

Pitch decks, through slides, convey your business plan, often through graphs and images used to emphasize estimations and observations in your presentation. Entrepreneurs often use pitch decks to fully convince their target audience of their plans before discussing funding arrangements.

Considering the likelihood of it being used in a small time frame, a good startup pitch deck should ideally contain 20 slides or less to have enough time to answer questions from the audience.

Unlike the standard and lean business model canvases, a pitch deck doesn't have a set template on how to present your business plan but there are still important components to it. These components often mirror those of the business model canvas except that they are in slide form and contain more details.

Using Airbnb (one of the most successful start-ups in recent history) for reference, the important components of a good slide are listed below.

• Cover/Introduction Slide: Here, you should include your company's name and mission statement. Your mission statement should be a very catchy tagline. Also, include personal information and contact details to provide an easy link for potential investors.
• Problem Slide: This slide requires you to create a connection with the audience or the investor that you are pitching. For example in their pitch, Airbnb summarized the most important problems it would solve in three brief points – pricing of hotels, disconnection from city culture, and connection problems for local bookings.
• Solution Slide: This slide includes your core value proposition. List simple and direct solutions to the problems you have mentioned
• Customer Analysis: Here you will provide information on the customers you will be offering your service to. The identity of your customers plays an important part in fundraising as well as the long-run viability of the business.
• Market Validation: Use competitive analysis to show numbers that prove the presence of a market for your product, industry behavior in the present and the long run, as well as the percentage of the market you aim to attract. It shows that you understand your competitors and customers and convinces investors of the opportunities presented in the market.
• Business Model: Your business model is the hook of your presentation. It may vary in complexity but it should generally include a pricing system informed by your market analysis. The goal of the slide is to confirm your business model is easy to implement.
• Marketing Strategy: This slide should summarize a few customer acquisition methods that you plan to use to grow the business.
• Competitive Advantage: What this slide will do is provide information on what will set you apart and make you a more attractive option to customers. It could be the possession of technology that is not widely known in the market.
• Team Slide: Here you will give a brief description of your team. Include your key management personnel here and their specific roles in the company. Include their educational background, job history, and skillsets. Also, talk about their accomplishments in their careers so far to build investors' confidence in members of your team.
• Traction Slide: This validates the company’s business model by showing growth through early sales and support. The slide aims to reduce any lingering fears in potential investors by showing realistic periodic milestones and profit margins. It can include current sales, growth, valuable customers, pre-orders, or data from surveys outlining current consumer interest.
• Funding Slide: This slide is popularly referred to as ‘the ask'. Here you will include important details like how much is needed to get your business off the ground and how the funding will be spent to help the company reach its goals.
• Appendix Slides: Your pitch deck appendix should always be included alongside a standard pitch presentation. It consists of additional slides you could not show in the pitch deck but you need to complement your presentation.

It is important to support your calculations with pictorial renditions. Infographics, such as pie charts or bar graphs, will be more effective in presenting the information than just listing numbers. For example, a six-month graph that shows rising profit margins will easily look more impressive than merely writing it.

Lastly, since a pitch deck is primarily used to secure meetings and you may be sharing your pitch with several investors, it is advisable to keep a separate public version that doesn't include financials. Only disclose the one with projections once you have secured a link with an investor.

Advantages of the Business Model Canvas, Lean Canvas, and Startup Pitch Deck over the Traditional Business Plan

• Time-Saving: Writing a detailed traditional business plan could take weeks or months. On the other hand, all three alternatives can be done in a few days or even one night of brainstorming if you have a comprehensive understanding of your business.
• Easier to Understand: Since the information presented is almost entirely factual, it puts focus on what is most important in running the business. They cut away the excess pages of fillers in a traditional business plan and allow investors to see what is driving the business and what is getting in the way.
• Easy to Update: Businesses typically present their business plans to many potential investors before they secure funding. What this means is that you may regularly have to amend your presentation to update statistics or adjust to audience-specific needs. For a traditional business plan, this could mean rewriting a whole section of your plan. For the three alternatives, updating is much easier because they are not voluminous.
• Guide for a More In-depth Business Plan: All three alternatives have the added benefit of being able to double as a sketch of your business plan if the need to create one arises in the future.

Business Plan FAQ

Business plans are important for any entrepreneur who is looking for a framework to run their company over some time or seeking external support. Although they are essential for new businesses, every company should ideally have a business plan to track their growth from time to time.  They can be used by startups seeking investments or loans to convey their business ideas or an employee to convince his boss of the feasibility of starting a new project. They can also be used by companies seeking to recruit high-profile employee targets into key positions or trying to secure partnerships with other firms.

Business plans often vary depending on your target audience, the scope, and the goals for the plan. Startup plans are the most common among the different types of business plans.  A start-up plan is used by a new business to present all the necessary information to help get the business up and running. They are usually used by entrepreneurs who are seeking funding from investors or bank loans. The established company alternative to a start-up plan is a feasibility plan. A feasibility plan is often used by an established company looking for new business opportunities. They are used to show the upsides of creating a new product for a consumer base. Because the audience is usually company people, it requires less company analysis. The third type of business plan is the lean business plan. A lean business plan is a brief, straight-to-the-point breakdown of your ideas and analysis for your business. It does not contain details of your proposal and can be written on one page. Finally, you have the what-if plan. As it implies, a what-if plan is a preparation for the worst-case scenario. You must always be prepared for the possibility of your original plan being rejected. A good what-if plan will serve as a good plan B to the original.

A good business plan has 10 key components. They include an executive plan, product analysis, desired customer base, company analysis, industry analysis, marketing strategy, sales strategy, financial projection, funding, and appendix. Executive Plan Your business should begin with your executive plan. An executive plan will provide early insight into what you are planning to achieve with your business. It should include your mission statement and highlight some of the important points which you will explain later. Product Analysis The next component of your business plan is your product analysis. A key part of this section is explaining the type of item or service you are going to offer as well as the market problems your product will solve. Desired Consumer Base Your product analysis should be supplemented with a detailed breakdown of your desired consumer base. Investors are always interested in knowing the economic power of your market as well as potential MVP customers. Company Analysis The next component of your business plan is your company analysis. Here, you explain how you want to run your business. It will include your operational strategy, an insight into the workforce needed to keep the company running, and important executive positions. It will also provide a calculation of expected operational costs.  Industry Analysis A good business plan should also contain well laid out industry analysis. It is important to convince potential investors you know the companies you will be competing with, as well as your plans to gain an edge on the competition. Marketing Strategy Your business plan should also include your marketing strategy. This is how you intend to spread awareness of your product. It should include a detailed explanation of the company brand as well as your advertising methods. Sales Strategy Your sales strategy comes after the market strategy. Here you give an overview of your company's pricing strategy and how you aim to maximize profits. You can also explain how your prices will adapt to market behaviors. Financial Projection The financial projection is the next component of your business plan. It explains your company's expected running cost and revenue earned during the tenure of the business plan. Financial projection gives a clear idea of how your company will develop in the future. Funding The next component of your business plan is funding. You have to detail how much external investment you need to get your business idea off the ground here. Appendix The last component of your plan is the appendix. This is where you put licenses, graphs, or key information that does not fit in any of the other components.

The business model canvas is a business management tool used to quickly define your business idea and model. It is often used when investors need you to pitch your business idea during a brief window.

A pitch deck is similar to a business model canvas except that it makes use of slides in its presentation. A pitch is not primarily used to secure funding, rather its main purpose is to entice potential investors by selling a very optimistic outlook on the business.

Business plan competitions help you evaluate the strength of your business plan. By participating in business plan competitions, you are improving your experience. The experience provides you with a degree of validation while practicing important skills. The main motivation for entering into the competitions is often to secure funding by finishing in podium positions. There is also the chance that you may catch the eye of a casual observer outside of the competition. These competitions also provide good networking opportunities. You could meet mentors who will take a keen interest in guiding you in your business journey. You also have the opportunity to meet other entrepreneurs whose ideas can complement yours.

Exlore Further

• 12 Key Elements of a Business Plan (Top Components Explained)
• 13 Sources of Business Finance For Companies & Sole Traders
• 5 Common Types of Business Structures (+ Pros & Cons)
• How to Buy a Business in 8 Steps (+ Due Diligence Checklist)

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Martin luenendonk.

Martin loves entrepreneurship and has helped dozens of entrepreneurs by validating the business idea, finding scalable customer acquisition channels, and building a data-driven organization. During his time working in investment banking, tech startups, and industry-leading companies he gained extensive knowledge in using different software tools to optimize business processes.

This insights and his love for researching SaaS products enables him to provide in-depth, fact-based software reviews to enable software buyers make better decisions.

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A Better Lemonade Stand

Insights, trends, tools, & opportunities to build a better online business.

How to Make a Business Plan for an Online Business

posted on July 13, 2020

Do you need a business plan for your online business?

The answer is yes!

Most businesses benefit from having some kind of business plan, so an online business plan counts, too. But, it usually doesn’t have to include the same things that traditional business plans cover, and it likely will also include additional things that don’t apply to brick-and-mortar businesses.

Online business plans are a bit of a different ball game, so that’s what this post will help you out with—how to create a business plan for your online business.

Let’s create an online business plan!

Table of Contents

What is an online business plan, when to create a business plan, how to create an online business plan, do i need a business plan for an online business, your business’ essentials, your product & niche information, your business model, your product acquisition methods, your costs & pricing, your competitive analysis, your customer personas, your branding assets, your unique value proposition, your consumer channels, your store build information, your marketing strategies.

First things first, what is a business plan, and what is a business plan for an online business?

A business plan is a document that details a business’ important information and its future projections. A business plan should include factual information like a business’ name, URL, and operational costs, but also qualitative research like the business’ strengths and weaknesses and fictitious customer personas.

A business plan acts as a record of a business’ information so it can be easily referenced at any point in the business’ lifetime and it also acts as a blueprint of the path the business wants to take. Business plans are not only used by the founders of the business, but also by business partners, investors, and if the business is ever sold, it will likely be referenced during the sales process or post-purchase.

An online business plan is a business plan designed specifically for online businesses. Since many businesses nowadays exist solely online and don’t have a brick-and-mortar location, merchants need to design their business plan to suit their digital business. A lot of the general sections of the business plan stay the same, however, there are some differences.

How Online Business Plans Differ from Traditional Business Plans

The main differences between business plans for traditional brick-and-mortar businesses and business plans for online businesses are this:

• It Includes the Business’ Digital Locations: Instead of marking down the business’ physical address, the business plan includes the digital locations where the business can be found online including its domain name, URL, and social handles.
• There’s a Global Competitive Analysis: Businesses with a physical location may only compare themselves to their local competitors, however, online businesses essentially compete against global competitors as well as local competitors because the online ecommerce world virtually has no borders. Online businesses can generally serve customers from all over the world, so global competitors in a business’ niche become their direct competition. In a business plan, this will be addressed in the competitive analysis section.
• There are Digital-Related Product Strengths & Weaknesses: Since online businesses may sell digital products or they may send out digital materials like emails and digital receipts, their business plan may discuss digital-related product strengths and weaknesses that brick-and-mortar businesses won’t experience.
• You’ll See Lower Barriers to Entry: To get started, online businesses don’t usually need physical infrastructures like a building or an office—it’s all online. This means that the business’ set-up costs and launch costs may look a lot lower in an online business plan as opposed to a business plan for a brick-and-mortar business.
• You’ll See Different Store-Building Costs: The operating costs for digital businesses, in general, will look a lot different in an online business plan, too. While brick-and-mortar businesses factor expenses like heating, electricity, and water into their business’ running costs, an online business will factor monthly ecommerce platform costs and app costs into their business plan instead.
• Their Marketing Strategies Will Likely Look Different: Online businesses will be more likely to have robust digital marketing strategies—like social media marketing—in their business plan while brick-and-mortar businesses may focus more on more traditional methods like print advertisements, word-of-mouth marketing, and local foot traffic.

You can create a business plan at any point in your business-building process. It’s usually best to do it at the very beginning though so you have a roadmap leading you where you want to go, but if you’ve already started your business in some capacity and you didn’t create one at the beginning, you can still create a business plan too!

Business plans really just help guide the next steps of your business, no matter where your business is currently at. Plus, some aspects of your business plan will change as your business evolves over time so it can be a living document that gets updated as your business progresses if that’s something you want to do.

Creating a business plan is pretty simple, you can make one in whatever word processor you’re most comfortable with, such as Google Docs , Microsoft Word , Apple Pages , Evernote , or Bear App . You could even use Airtable or Google Sheets if you prefer to work with spreadsheets.

Your business plan doesn’t have to be particularly fancy, it mostly just has to be organized. Create clear headings and sub-headings for each section and make sure to write clearly and concisely. Ideally, your business plan shouldn’t be too big of a document—you want it to be thorough but easy to read and to skim.

The answer is yes! All businesses can benefit from having a business plan, whether you’re starting an online business, a brick-and-mortar business, or even a business that does both.

If you’re starting an online business, your business plan will act as a record of your business’ important information and you can include plans and projections for the future which can help you to stay on track.

A lot of ecommerce entrepreneurs struggle with accountability, goal-setting, and staying on track when it comes to building, launching, and growing an online business, so having an online business plan can give you a greater chance at long term success.

As mentioned in the previous section, our One Page Ecommerce Business Plan worksheet and ebook has been created specifically for online businesses, so if you’re struggling to make traditional business plan templates work for your digital business, it can be your solution.

What to Include in Your Online Business Plan

Ready to actually make a business plan for your online business? The following are the sections you’ll want to include in it plus some information about why it’s important to have in your business plan.

Create a heading for each of these sections in your business plan document and note down the necessary information as it pertains to your business. Or, if you’re using the One Page Business Plan , simply fill in the digital worksheet.

First things first, your business plan should start off with the basics:

• Your business name
• Your domain name
• Your social handles

These are fundamental parts of your brand that you need to know before you move onto planning pretty much any other part of your business because your choices here will impact everything else.

Business Name

Choosing a business name can be tough—often it’s the first sticking points for most entrepreneurs—and that makes sense because it’s such an important part of any business.

If you’re still deciding on your business name, check out our blog post here on how to come up with a business name for useful tips to help guide you in the right direction. Don’t get so caught up in choosing the perfect name that it delays you from actually starting your business, though. You don’t want to be stuck on the first step for too long!

Domain Name

Every online business needs a domain name so add it to your online business plan just so it’s recorded with everything else about your business.

Here are a few tips for picking a good domain name:

• Keep it short so it’s easier for your customers to remember
• Make sure it’s easy to spell (again, so customers can remember it)
• Refrain from using dashes, hyphens or numbers as they can make your URL seem spammy or unprofessional
• Try to use a common top-level domain like .com, .ca, .net, or .store ( .Store Domains Review ). The domain name you want might not be available with the top-level domain that you want, but try to get something that works for your business
• Opt-in for WhoIs protection when you purchase your domain so you can protect your personal information
• When you purchase your domain, also opt-in for automatic yearly renewals so you don’t ever lose ownership of your domain (if you do lose ownership, someone else could purchase it meaning you wouldn’t be able to use it anymore)

When it comes to actually purchasing your domain, you can use domain registrars like Namecheap or Hover —or, if you’re setting up a Shopify store ( Shopify Review ), you can purchase a domain through them.

Social Handles

Your social channels are likely going to be an important part of your business’ identity, so add them to your business plan to keep them organized and in one place. If you’re lucky, all your social handles can be the same, however, depending on the availability on each platform, you might not be able to get your brand name on every single social platform.

Whichever platforms you do choose to be on though, make sure you list them as well as your handle on your business plan.

Here are some of the social platforms you might want to register your business on (you can choose to register on all of them, even if you don’t plan to post on some of them, just to ensure that you “own” the handle should you ever decide to use the platform for your brand):

We also recommend getting your social handles as soon as you decide on the name for your business so you have the best possible chance at getting the exact handle name you want. The sooner you register, the better!

This section of your business plan includes basic information outlining the kinds of products you sell and the niche you serve. One quick look at this part of your business plan should give somebody an idea of what you do and who you do it for.

Step one, describe your niche. Your niche is the audience you serve with the products you create. Ideally, you want your niche to be broad enough so you have a significant market of people to sell to but also narrow enough that you have clearly defined buyer personas in mind.

Targeting too broad of a niche can mean that you won’t be able to hone-in on your audiences’ needs and wants easily, which can cause your product designs and/or marketing to lose focus, and having too narrow of a niche can leave you with too small of an audience to sell to. You want to find that sweet spot.

For example, choosing “women” as a niche is too broad. A better example of a clearly-defined niche is, “women who hike.”

In this part of your business plan, you should be able to summarise in one sentence what your product, or products, are. Keep it simple and keep it short—this is just the cliff notes version of what you sell so anyone reading your business plan gets an elevator pitch version of what you do.

Product Strengths & Weaknesses

In this section of your business plan, list the main strengths and weaknesses of your product so that anyone reading your business plan has an overview of the advantages and challenges that selling your products might face.

To get an idea of what your products’ strengths and weaknesses might be, use these methods:

• Use our Instant Product Evaluator Tool to rate your product on a scale of 0-100 so you have an idea of where your strengths and weaknesses may lie
• Conduct a SWOT analysis to get a comprehensive idea of what your business’ strengths and weaknesses are

No product is perfect, so expect to find some weaknesses. Some examples of product weaknesses could be the price (maybe you can’t out-price your competition because of the materials you use or the level of quality you want to maintain), or it could be the quality (maybe with the manufacturing options available to you, you can’t make your product with high-quality materials), or it could be that your product contains certain ingredients that make it difficult to ship to other countries, meaning you’ll have to meet different countries’ regulations in order to sell globally (this often applies to food or cosmetics products).

On the other hand, it’s also important to identify your product’s strengths because if it doesn’t have any, then it’s probably not worth selling!

Identifying these upfront gives you the opportunity to acknowledge the potential success of your product idea before you start investing time and resources into developing it. This can help you avoid pitfalls and unpleasant surprises in the future that you may not have otherwise considered.

Product Trajectory Forecast

Lastly in this section, identify whether you think your product is on a trending, fad, growing, or stable trajectory. These options will help you classify the longevity you see your business having.

Here’s the breakdown of what these options mean:

• Trending Trajectory: If your product is part of a trend, you’re expecting short-term longevity for your business. You expect interest in your product to be of-the-moment—quickly booming, maintaining some stability as it plateaus, and then ultimately the demand for your product will die down quickly. Products that are trending usually have longevity of 2-6 years, give or take. (Example: Fashion trends that last a few seasons and then become out-of-date)
• Fad Trajectory: If your product is a fad, you expect very short-term demand for your product and thus, very short-term longevity for your business overall. Trends usually last 1-2 years or less, and they burn out as quickly as they came in. (Example: Fidget spinners)
• Growing Trajectory: This type of product is on the rise, therefore, you expect business to grow steadily over time. Products that are in this category might not be super in-demand yet, however, their popularity is increasing and over several years they’ll likely hit a plateau and become stable. (Example: Drones)
• Stable Trajectory: This type of product is in demand now and demand for it has been steady for a while. When you start a business with a product that exists in this category, you can expect your business to have as much longevity as possible because demand is unlikely to change drastically. (Example: Phone cases )

Not sure what trajectory-level to label your product(s)? Type your keywords into Google Trends to get an overall idea of the demand for your products over time.

There are four main business models that are common amongst ecommerce businesses: Making, manufacturing, wholesale, or dropshipping.

Whether you choose to make, manufacture, wholesale or dropship plays a huge role in many different aspects of your business. Which model you choose will depend on your level of skill, the products you want to sell, the level of funds you have to work with, how much profit you intend to make, and how you want your business to grow.

When making your business plan, note down which business model you’re using so whoever is reading it has an idea of how you’re souring your products.

How you acquire your products is very important information to know about your business, so include all contact information for your main suppliers and backup suppliers.

This is important to have listed in one place in case you or your team need to get a hold of your suppliers, or in case your backup suppliers are needed, their contact information will be easily accessible.

A business’ success depends on the health of its financials, so including them in your business plan is a good idea. Not only is it necessary information to know and have for your own reference, but it is necessary information that people looking at your business plan (like investors) will want to know.

You don’t have to give your full financial statements in your business plan—just giving a quick overview of the most essential details is all you need. The following sections are all things you should include.

Project Launch Budget

If you haven’t already launched your ecommerce business, include your launch budget as part of your business plan to give insight into how you’re planning to launch and what it will entail financially. This can give anyone who you’re working with, or who are investing in your business, an idea of what funds are needed upfront to get your business up and running.

Product Cost

For each product that you sell, note down how much it takes to manufacture that product. This is important information to know when determining margins, profits, budgets, and financial strategies in general, so put it in your business plan so you don’t forget it.

Product Price

In addition to the product cost, also include the product price. This section should indicate the price that you’re selling each product to your customers for. Knowing this information is key because again, it will also play a part in determining margins, profits, budgets, and financials.

Your profit margins are a main indicator of your business’ financials, so also include them in your business plan.

You can determine your profit margin percentages with this formula:

(Profit / Selling Price) x 100 = Margin %

And your profit margins in dollar amounts with this formula:

Product Price – Product Cost = Margin $

Again, not only is this important information for you to know, but potential investors would also want to know this information as well.

Expected Average Order Size

Your expected average order size will depend on what product you sell and how many products you expect a single customer to purchase at one time. You’ll have to guesstimate this number based on what makes sense for your business.

For example, if you’re an online clothing retailer that sells different types of tops, shirts, dresses, skirts, and jeans, it makes sense for your customers to purchase a couple of items at a time.

In time, you’ll learn exactly what this number is, but guesstimating and establishing a number prior to launch is a good way to begin understanding the potential of your businesses and setting targets.

Your expected average order size can be represented by both a number (1 item, 2 items) or it can be the value of those items (in your currency).

Expected Average Order Profit

Similar to the previous section, understanding your business’ average order profit is also important to help you understand your business’ numbers so you can make well-thought-out decisions.

Expected Average Order Profit = Expected Average Order Size – Cost of the Order

There are so many things that eat into the revenue of every product you sell—the cost of each order doesn’t just come down to the actual cost of the product itself. Other aspects of your business operations such as the shipping costs, product packaging costs, the cost of returns, advertising costs to get customers, and customer support costs all factor into the cost of the order which ultimately will impact your profits. So beyond just understanding average order values, you need to understand your average order profit as well.

Monthly Marketing Budget

Establishing a monthly marketing budget can help you make better decisions when it comes to your marketing—forcing you to think more critically about the return on investment (ROI) you receive as well as potentially forcing you to try new marketing methods, campaigns, and channels.

List it in your business plan so you and your team have an understanding of what your marketing goals are going forward and how you plan to carry out those goals financially.

Performing a competitive analysis is a very important part of your business plan and can bring to light some of the strengths and weaknesses of your brand or product you may not have otherwise discovered that you had.

In your business plan, list out your top three competitors that match you somewhat in size and sell similar products to the same market as you. Take time to learn about their companies and determine what their strengths and weaknesses are. These can be found by perusing their website, reading customer reviews, observing customer engagement on their social platforms, reading about their brand story, going through their blog posts, reading through their policies, and even ordering from them to understand the experience from a customer’s lens.

You can create an entire document focused on competitor analysis (which we recommend doing) but in your business plan, it doesn’t have to be quite so detailed. Do your research but then note your findings in your business plan in an easily digestible way so whenever you refer to it, you can quickly see what it is your competitors excel at and where their Achilles’ heels are. You want it to be easy to understand so you don’t have to sift through tons of paperwork anytime you need a refresher.

Every brand has its core customers. When businesses strategize, they often create customer personas (also known as buyer personas) to illustrate who their core customers are so they can clearly think about business decisions from these core customers’ perspectives. In your business plan, list out your customer personas and some of the main descriptive information for each one so you can easily refer back to them.

When you’re developing your customer personas it’s important to put a name to them and an image and to write down information such as their age, gender, where they live, what they do, how much money they make, their interests, their educational background, etc. You want to be as specific as possible so you can get a very clear image in your mind of who this person is.

Each person you develop should be slightly different, but still relevant to your brand. Just like people in real life, everyone’s unique, but people of varied interests can still share similar interests. Not all of your future customers will be identical to one another, but they’ll all have similar interests and thus, be similarly interested in your brand.

In the future, anytime you make a decision for your business, you should run your ideas through the filter of your customer personas. Ask yourself what your customer personas would think of this idea—would they be excited to purchase it, would it be relevant to them, would it alienate them, would they tell their friends about it? If your ideas aren’t in line with your core customers then they aren’t worthwhile to pursue.

Your branding is a major pillar of your overall business and often, there are little pertinent details about your brand that can be tedious to remember. Instead of having them filed away in ambiguous corners of your computer, written down on loose sheets of paper, or worse, forgotten altogether, put them in your business plan.

This is helpful for your own reference but it’s also valuable information that anyone who takes over your business (should that happen) will need to know.

So, what should you include?

Your Brand Pillars

Brand pillars are simple, straightforward, and concrete adjectives representing your brand that will help you guide the decisions you make for your business so you always stay true to your core fundamentals.

Your brand pillars will be used when building your website, talking to customers, selecting imagery, writing copy, creating policies, and posting on social media. They’re the essence of your brand that you want to be consistent throughout every aspect of your business.

Your brand pillars should be around four descriptive words that you can choose either individually or with your team. The purpose is to find the four words that truly define what your brand is and what you want it to represent to others.

Brand Colors (HEX Codes)

Every successful, identifiable brand has a color palette. For some brands, the colors they use are so identifiable people can recognize a brand just by its exact shade. Check out BrandColors to get an idea of the brand colors that companies are using and get a sense of their color palettes.

When creating your business plan, list your brand colors so you can easily identify what they are. The easiest way to do this is to identify the HEX codes for each color. HEX codes are six-digit numbers used by computing applications to represent specific colors so if ever you need to find a color or adjust a color in an application like Photoshop or Canva, you can just use the HEX code to get the exact color that you’re looking for.

Noting down your HEX codes will make sure you know exactly what each of your brand colors are without having to guess every time you go to create a piece of branding.

Most brands have about 3-5 brand colors, so we recommend sticking with that. If you need help determining your brand’s color palette, check out these resources:

• Adobe Color Wheel
• Adobe Most Popular Color Palettes

Brand Fonts

Another essential part of your business’ branding are your typefaces and fonts. Most brands have around 2-4 fonts that are a part of their branding and these fonts will be used on their website, social media platforms, marketing materials, and even on product packaging.

A brand’s font can be as recognizable as its name and color palette, so it’s important to know what your fonts are called!

Make sure to list all of the fonts that you’re using in your business plan so you don’t forget them and so anyone who may take over your business in the future knows which fonts have been used in the past.

Photography Style

In addition to having product photos on your website—which are usually simple images of your products against a plain white background—you should also have some lifestyle photos and images of your products in action.

Unlike product photos, which should simply be a photo of the product against a neutral background, lifestyle shots should be of your product in its natural habitat, so your customers can envision it being a part of their own life.

For the sake of consistency throughout your entire website, your lifestyle shots should have their own style. This style should reflect your brand and be determined against your four brand pillars and should evoke the feelings you want your customers to connect with.

Your photography style can be bright, it can be mysterious, it can be rugged, or loud—whatever you think will represent your brand and engage with your customers most. The most important thing is to find a specific style so that the lifestyle photos you take or acquire from stock photo services are consistent across your entire website.

In your business plan, try to pin down your photography style and describe it. If necessary, include some example shots of quintessential photography representing your brand. This can help you keep your images consistent and can even help you describe what you’re looking for if you hire photographers to take your shots for you.

Your brand’s unique value proposition (UVP—also sometimes known as a unique selling proposition) is what you’re pledging to deliver to your customers—in other words, what your customers can hope to achieve or experience as a result of purchasing your products.

Most unique value propositions can be summed up into one sentence, and usually, they’re displayed on the homepage of a brand’s website, above the fold .

Your UVP doesn’t have to promise anything groundbreaking, and it’s usually something as simple as offering a lower price, or a better quality product, or a more reliable service, or a greater selection, or a heightened brand perception.

So whatever yours is, distill it into a 15-word maximum sentence and write it down in your business plan. It’s going to be a leading guidepost for your brand so you need to remember what it is!

But beyond just including it in your business plan, make sure you’re living it, too. Your UVP needs to be something that you’re actively focusing on and delivering to your audience, not just a motto you put on your website because it sounds good.

This section is where you’ll predict your total expected sales from both consumers and businesses in one year. Essentially, in this part of your business plan, write down where you expect to make most of your sales from.

Here are your options:

• B2B (Business-to-Business): This refers to businesses that sell their products to other businesses (like wholesalers, manufacturers, and suppliers).
• B2C (Business-to-Consumer): This refers to businesses that sell their products directly to consumers. This can also include direct-to-consumer (DTC).
• B2G (Business-to-Government): This refers to businesses that sell their products to governments, or government entities.

If your business is only selling products to consumers, you can predict that 100% of your sales in one year will come from B2C.

If you make your own products and only sell them to other businesses to resell on their websites, you can predict that 100% of your sales will come from B2B.

If you sell a quarter of your products directly to consumers, and three-quarters of your products to resell on other business’ websites, then you can predict that 25% of your sales will be B2C and 75% of your sales will be B2B.

Make your predictions based on your own business’ unique situation. Thoughtfully considering these options early-on can help you make better decisions for your marketing channels, budget, and the overall direction of your brand.

In this section of your business plan, break down the nitty-gritty details of your online store’s digital infrastructure as well as the cost of maintaining it so you have a record of some of your business’ main operational costs.

Just as brick-and-mortar businesses have operational costs like water, heating, and electricity, online businesses have operational costs like their ecommerce platform subscription, theme costs, and apps.

First off, list your ecommerce platform of choice and how much it costs you per month or per year to subscribe to.

Your ecommerce platform is the host that’s going to be supporting your business so it’s no small decision to make when considering which one to select. There are many different ones to choose from—some are more mainstream and some are more niche, but ultimately the best one for your business depends on your own individual needs.

We highly recommend Shopify because it’s intuitive, customizable, secure, supported, reasonably priced, and the best option for most types of stores—but there are many other options.

Next up, list any essential apps that you use to run your online business, including their monthly or yearly costs. This could include security apps like Rewind ( Rewind Review ) or Sucuri ( Sucuri Review ), the Spocket app if you’re using it to source your dropshipping products ( Spocket Review ), or even marketing apps like ProveSource ( ProveSource Review ). Whatever is essential to your business’ operations—include it in your business plan!

And finally, also list which theme you’re using for your store, where you purchased it from, and how much it cost. This is important information to know not only for your business’ records but in case you need to look up your theme’s development documents to troubleshoot any problems in the future.

Now, your marketing is always going to grow and change, and it’s one of those things that you’ll be tweaking more than most of the other things on your business plan, so we recommend starting by setting three-month marketing goals in your business plan so you create a direction to work towards that keeps you accountable.

Here are some things you can list in this section of your business plan:

• Your 3-Month Marketing Goal: Where do you want your business to be in three months? Ask yourself realistically how much profit you’d like to make in the next three months and write it down. Also ask yourself what non-financial business goals you want to achieve like the number of subscribers on your email list, the number of followers on your social channels, or even the number of product reviews your customers post. Make sure it’s something you have to work hard towards, but that it’s still attainable.
• The Number of Orders Needed to Reach Your Goal: In order to make your goal amount of profit in three months, how many orders will you need to make? This is where your Average Order Profit number is important because it’s what you’ll use to help you make this projection.
• The Unique Visitors Required to Reach Your Goal Based on a 1% Conversion Rate: If 1% of your unique visitors make an average purchase, how many unique visitors will it take to reach your three-month goal?
• Your Marketing Channels/Focus: Choose up to three main ways you plan to market your business. What methods are you going to focus on to get traffic to your store? You can focus on marketing through your own social media platforms, through your own blog, through guest blogging, by sponsoring social media influencers, through Facebook Ads, Instagram Ads, Pinterest Ads, contests, giveaways, etc. The options are endless.

If you need help developing a marketing action plan, especially for the first few months of your business, check out our 52 Week Marketing Plan which has a bunch of strategies and tactics you can use to market your new online store. It will help you try out new marketing methods so you can discover what actually works for your brand!

Keep in mind that your business plan should be a dynamic document, not a static one, meaning: Keep updating it, refining it, and tweaking it. It should be a representation of where your business currently is and a guidepost for where your business is going in the future. Your business is going to be constantly evolving which means your business plan should, too.

Remember, our One Page Ecommerce Business Plan is tailor-made to benefit online businesses in particular, so if you’re looking for a business plan template for your online business, it’s worth checking out.

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How to Start a Business From Scratch in 6 Easy Steps

10 min. read

Updated April 30, 2024

Did you know that most of the world’s new businesses are bootstrapped ? 

That’s right, most business owners do not launch with loans or outside investment but instead use their personal resources and savings to get up and running. They start from scratch and reinvest in the business as it gains traction.

And you can do the same. 

Key Takeaways:

• Start with an idea that uses your experience, knowledge, or passion.
• Determine if there’s a need for your product or service.
• Create a plan and financial forecasts.
• Treat it like a side hustle until you get traction.
• What does it mean to start from scratch?

“Starting a business from scratch” does not mean:

• Using no money to launch your business.
• Getting no outside assistance.
• Inventing a business idea no one has done before.

Starting from scratch is about building a business from the ground up, using personal resources and minimal external financial support. The goal is to establish a sustainable business you control that satisfies a need in the market. 

• Why start a business from scratch?

Here’s why starting from scratch might be the right approach for you:

• Risk reduction: Control your initial investment and expenses and scale gradually, allowing you to avoid overspending.
• Full control: With no outside investment or stakeholders to please, you can shape your business how you see fit.
• Proves your idea has real customers: Test your concept with customers early to help refine your offering and validate market demand.
• Fast decision-making: Quickly pivot to meet changing market demands without the red tape of larger organizations.
• Potentially makes future funding easier: You take the time to prove your business model and profitability before seeking funding. Your track record reduces investor and lender risk and can lead to better funding terms.

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• 6 steps to start a new business from scratch

For this article, we will focus on the steps that take you from a budding business idea to generating sales. 

For additional resources, check out our starting a business guide .

1. Start with an idea

Do some self-reflection and choose an idea you’re passionate about or one that uses your existing skills and experience. 

This will make it far easier to execute and often requires less research, training, and upfront investment to get up and running than an idea completely new to you.

For example, service-based businesses, like accounting or consulting, often need just your time and expertise. If any cash is needed, it should be a small enough amount to fund yourself, giving you full control over the speed at which you grow your business.

As you explore possible ideas, create a one-page business plan to document how it could work. 

It doesn’t have to be an official plan at this stage; just fill in what you can, mark any assumptions, and keep adding details throughout the rest of this process.

What businesses can you typically start from scratch?

While not an exhaustive list, here are a few potential ideas that can be started from scratch:

• Freelance Writing or Content Creation: Offer writing skills to businesses and online publications.
• Consulting Services: Share your professional management, marketing, or tech expertise.
• Handmade Crafts and Art: Sell your unique creations on platforms like Etsy or at local fairs.
• Tutoring: Offer either in-person or online.
• Web Design and Development: Build websites for small businesses or individuals.
• Virtual Assistant: Provide administrative support to businesses remotely.
• Landscaping and Gardening Services: Turn your love of plants into a business with basic gardening tools.

For more business options and a process to generate ideas, check out our guide on developing good business ideas .

2. Find product-market fit

Landing on an idea is not enough to create a viable business. You need to determine if you have initial product-market fit—that your business satisfies and is demanded by a large enough group of people. 

This involves identifying your potential customers, understanding their motivations and needs, and determining whether they are willing to pay for your product or service. Additionally, spend time researching the market and understand who your competitors are. 

At this stage, you don’t need a fully fleshed-out business. You just need enough of an idea to start speaking to potential customers.  

This is where your one-page plan can be incredibly useful, as it helps you formalize enough information to have the working framework of a business. You can even add notes from your customer interviews to help adapt your plan.

Your goal, in this instance, is to:

• Hone in on pain points your potential customers have
• Verify that you can solve them
• Identify any gaps or issues with your idea
• (Bonus) Make initial sales 

Keep in mind that you may find none of that. Your solution may not be needed or is missing key components. You may even be targeting the wrong audience and need to change course.

That’s completely okay! Most businesses don’t get things right the first time. Be willing to refine and iterate on your initial idea. Verify what works and what doesn’t, and make the right adjustments to create a sustainable business that customers really want.

3. Examine your resources

While I have this as the third step, you’ll likely be doing this throughout every stage of starting a business.

Start by evaluating your funding sources. Personal savings are ideal as they keep you in full control of your business. If needed, consider asking friends and family for small contributions, as they’ll likely be much more flexible about repayment than traditional lenders.

Next, consider if a partner could benefit your venture. Do they bring complementary skills, share the workload, or offer additional resources? 

The right partner can fill crucial roles – like marketing or operations – allowing you to focus on your core strengths. They may even fill a necessary gap to get customers in the door.

Finally, don’t underestimate the power of your network. Reach out to former colleagues, industry peers, and mentors for advice, services, or referrals.

Why you need to know your available resources

Taking stock of your resources is the first step in understanding what is feasible for your business. It helps you determine whether you have enough cash, expertise, and support to meet your customers’ expectations.

For example, let’s say you want to launch an eCommerce website and have enough cash on hand to fulfill orders but require customers to pay for shipping. If you’re competing with similar businesses that offer free shipping, your lack of it could turn customers away.

Similarly, you have a solid understanding of product development and have already gotten pre-orders. But you have no idea how to set up an eCommerce site , keep track of orders, and ensure they actually ship.

In both circumstances, your resources fall short of the needs of your customers. You may have to explore funding ( it doesn’t have to be a loan ) and find a partner with the right skill set to get your site up and running. 

4. Write a business plan and develop financial forecasts

At this point, you need to finalize your business plan and create initial forecasts . 

If you’ve been using the one-page plan throughout the last few steps, then this shouldn’t be a time-consuming process. Your goal at this point is to clearly define:

• Business Model: Value proposition, customer segments, distribution channels, and revenue streams.
• Milestones: Set realistic goals (landing your first customer, scaling, etc.) with specific timelines and action steps to track progress.

For your forecasts, start by estimating your:

• Startup costs and ongoing expenses
• Revenue in the first year of operation
• Cash flow — how much money will be moving in and out of your business each month as you collect revenue and pay expenses

These numbers do not have to be perfect. You’ll likely be making educated guesses or using industry estimates. The point is to have something that you believe represents your business. It will help you maintain a healthy cash flow and understand what it will take to be profitable.

Remember, you don’t need to create an overly lengthy plan or complex financial statements. They’re your tools, so focus on usability – they should be flexible and evolve with your business, helping you make informed decisions.

Dedicate time ( at least monthly or quarterly) to reviewing and updating your plan and forecasts as you gather data to ensure your strategy aligns with real-world performance.

5. Protect your business

As a business owner, you must make your business legal and guard against liabilities. To keep things simple, we’ll assume you’re starting as a sole proprietorship for this article.

Check out our full guide to learn more about the specifics of each legal structure .

Necessary legal components for a simple startup:

• Business Registration: As a sole proprietor, you may not need to register your business with the state government if you do business under your legal name. However, if you operate under a name that’s not yours, you must file for a “Doing Business As” (DBA) name. This is often required to set up a business bank account.
• Licenses & Permits: Research local requirements for your specific business type. You may need a general business license, professional licenses, or specific permits (e.g., health and safety). Contact your city or county business office for details.
• Tax Registration: Report business income on your personal tax return. If you plan to hire employees, you’ll need to apply for an Employer Identification Number (EIN) from the IRS. Even without employees, an EIN can protect your personal information and may streamline certain business transactions. Check if you need to register for state sales tax collections.
• Insurance : Consider general liability insurance for accidents and negligence claims. Get professional liability (errors and omissions) insurance if you offer professional services.
• Contracts: Use written agreements for business partners and supplier or contractor transactions. This clarifies expectations, prevents disputes, and protects both parties. Contact a lawyer to review or help you write this documentation if needed.

6. Promote and run your business

At this point, you just need to run your business. You don’t need to go all in, either. Launch it as a side hustle until you hit the point where it can become your full-time focus.

Don’t overcomplicate it: Set up a simple website, payment system, and essential operational tools. You want to serve customers immediately and learn from real-world experience.

But unless you locked in pre-orders earlier in this process, you’ll need to market your business to do it. 

Select marketing channels you believe will reach your target customers. Start small — you want to avoid overspending while you determine the right mix of marketing tactics. If you’re unsure where to start, paid social media ads (Facebook and Instagram), email campaigns, and local partnerships can be inexpensive options.

Stick to the budget you created, run small, easily measured marketing tests, and look for a positive return on investment (i.e., bringing in more revenue from sales than you spent on advertising). 

Only consider increasing spending after you start bringing in customers.

• Continue to review and revise

You are on your way to running a sustainable business and may even have your first customers already! 

Just don’t get too far ahead of yourself. You’re still proving that there is traction that can be repeated with multiple customers. 

As you operate, review your plan and forecasts. Pay close attention to your cash flow and be willing to pivot if things aren’t working. 

That’s the benefit of starting from scratch: You are in full control and can scale and spend at a pace that improves your chances of success.

If you haven’t yet, download a free one-page business plan template to document your idea. The earlier you begin developing the plan, the more useful it will be throughout the startup process.

Clarify your ideas and understand how to start your business with LivePlan

Kody Wirth is a content writer and SEO specialist for Palo Alto Software—the creator's of Bplans and LivePlan. He has 3+ years experience covering small business topics and runs a part-time content writing service in his spare time.

Table of Contents

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• Roadmap for Success: At its core, a business plan acts as a strategic guide, providing detailed steps on how your business will achieve its objectives. It helps you navigate the startup phase, manage growth effectively, and tackle unforeseen challenges with a well-thought-out strategy.
• Securing Funding: For startups and businesses looking to expand, a business plan is crucial for securing loans or attracting investors. It demonstrates to potential financial backers that your business has a clear vision, a solid strategy for profitability, and a plan for delivering returns on their investment.
• Informed Decision-Making: A well-prepared business plan offers valuable insights into your market, competition, and potential challenges. This information is vital for making informed decisions, from day-to-day operations to long-term strategic shifts.
• Market Analysis and Strategy: It allows you to conduct an in-depth analysis of your target market, understand customer needs, and position your product or service effectively. The marketing strategy outlined in your business plan helps in identifying the best channels and tactics to reach your audience and achieve market penetration.
• Financial Planning: One of the most critical components of a business plan is the financial forecast. It outlines your funding requirements, expected revenue, profit margins, and cash flow projections. This section is essential for budgeting, financial management, and ensuring the financial viability of your business.
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• Customer Success Stories: Our users' achievements are a testament to Plannit AI's effectiveness. These success stories illustrate how diverse businesses have utilized our platform for strategic planning and growth.
• Tailored Business Plan Creation: Our platform stands out with its tailored approach, featuring customizable templates that directly cater to your business type and industry, making plan creation straightforward and relevant.
• Content Generation:: ChatGPT helps draft various sections of a business plan, from executive summaries to marketing strategies, by providing structured and coherent text based on the prompts given.
• Strategic Insights: It can offer suggestions on business strategies by analyzing trends and providing examples from a wide range of industries.
• Financial Planning: While it can't replace professional financial advice, ChatGPT can guide the structure of financial projections and statements, helping you consider important financial aspects of your plan.

Take The First Step Towards Success With our AI-Generated Business Plans

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How to write an effective business plan in 11 steps (with workbook)

February 02, 2023 | 14 minute read

Writing a business plan is a powerful way to position your small business for success as you set out to meet your goals. Landmark studies suggest that business founders who write one are 16% more likely to build viable businesses than those who don’t and that entrepreneurs focused on high growth are 7% more likely to have written a business plan. 1 Even better, other research shows that owners who complete business plans are twice as likely to grow their business successfully or obtain capital compared with those who don’t. 2

The best time to write a business plan is typically after you have vetted and researched your business idea. (See How to start a business in 15 steps. ) If conditions change later, you can rewrite the plan, much like how your GPS reroutes you if there is traffic ahead. When you update your plan regularly, everyone on your team, including outside stakeholders such as investors, will know where you are headed.

What is a business plan?

Typically 15-20 pages long, a business plan is a document that explains what your business does, what you want to achieve in the business and the strategy you plan to use to get there. It details the opportunities you are going after, what resources you will need to achieve your goals and how you will define success.

Why are business plans important?

Business plans help you think through barriers and discover opportunities you may have recognized subconsciously but have not yet articulated. A business plan can also help you to attract potential lenders, investors and partners by providing them with evidence that your business has all of the ingredients necessary for success.

What questions should a business plan answer?

Your business plan should explain how your business will grow and succeed. A great plan will provide detailed answers to questions that a banker or investor will have before putting money into the business, such as:

• What products or services do you provide?
• Who is your target customer?
• What are the benefits of your product and service for customers?
• How much will you charge?
• What is the size of the market?
• What are your marketing plans?
• How much competition does the business face in penetrating that market?
• How much experience does the management team have in running businesses like it?
• How do you plan to measure success?
• What do you expect the business’s revenue, costs and profit to be for the first few years?
• How much will it cost to achieve the goals stated in the business plan?
• What is the long-term growth potential of the business? Is the business scalable?
• How will you enable investors to reap the rewards of backing the business? Do you plan to sell the business to a bigger company eventually or take it public as your “exit strategy”?

How to write a business plan in 11 steps

This step-by-step outline will make it easier to write an effective business plan, even if you’re managing the day-to-day demands of starting a new business. Creating a table of contents that lists key sections of the plan with page numbers will make it easy for readers to flip to the sections that interest them most.

• Use our editable workbook to capture notes and organize your thoughts as you review these critical steps. Note: To avoid losing your work, please remember to save this PDF to your desktop before you begin.

1. Executive summary

The executive summary is your opportunity to make a great first impression on investors and bankers. It should be just as engaging as the enthusiastic elevator pitch you might give if you bumped into a potential backer in an elevator.

In three to five paragraphs, you’ll want to explain what your business does, why it will succeed and where it will be in five years. The executive summary should include short descriptions of the following:

• Business concept. What will your business do?
• Goals and vision. What do you expect the business to achieve, both financially and for other key stakeholders, such as the community?
• Product or service. What does your product or service do — and how is it different from those of competitors?
• Target market. Who do you expect to buy your product or service?
• Marketing strategy. How will you tell people about your product or service?
• Current revenue and profits. If your business is pre-revenue, offer sales projections.
• Projected revenue and profits. Provide a realistic look at the next year, as well as the next three years, ideally.
• Financial resources needed. How much money do you need to borrow or raise to fund your plan?
• Management team. Who are the company’s leaders and what relevant experience will they contribute?

2. Business overview

Here is where you provide a brief history of the business and describe the product(s) or service(s) it offers. Make sure you describe the problem you are attempting to solve, for whom you will solve it (your customers) and how you will solve it. Be sure to describe your business model (such as direct-to-consumer sales through an online store) so readers can envision how you will make sales. Also mention your business structure (such as a sole proprietorship , general partnership, limited partnership or corporation) and why it is advantageous for the business. And be sure to provide context on the state of your industry and where your business will fit into it.

3. Business goals and vision

Explain what you hope to achieve in the business (your vision) as well as its mission and value proposition. Most founders judge success by the size to which they grow the business using measures such as revenue or number of employees. Your goals may not be solely financial. You may also wish to provide jobs or solve a societal problem. If that’s the case, mention those goals as well.

If you are seeking outside funding, explain why you need the money, how you will put it to work to grow the business and how you expect to achieve the goals you have set for the business. Also explain your exit strategy—that is, how you would enable investors to cash out, whether that means selling the business or taking it public.

4. Management and organization

Many investors say they bet on the team behind a business more than the business idea, trusting that talented and experienced people will be capable of bringing sound business concepts to life. With that in mind, make sure to provide short bios of the key members of your management team (including yourself) that emphasize the relevant experience each individual brings, along with their special talents and industry recognition. Many business plans include headshots of the management team with the bios.

Also describe more about how your organization will be structured. Your company may be a sole proprietorship, a limited liability company (LLC) or a corporation in one or more states.

If you will need to hire people for specific roles, this is the place to mention those plans. And if you will rely on outside consultants for certain roles — such as an outsourced CFO — be sure to make a note of it here. Outside backers want to know if you’ve anticipated the staffing you need.

5. Service or product line

A business will only succeed if it sells something people want or need to buy. As you describe the products or services you will offer, make sure to explain what benefits they will provide to your target customers, how they will differ from competing offerings and what the buying cycle will likely be so it is clear that you can actually sell what you are offering. If you have plans to protect your intellectual property through a copyright or patent filing, be sure to mention that. Also explain any research and development work that is underway to show investors the potential for additional revenue streams.

6. Market/industry analysis

Anyone interested in providing financial backing to your business will want to know how big your company can potentially grow so they have an idea of what kind of returns they can expect. In this section, you’ll be able to convey that by explaining to whom you will be selling and how much opportunity there is to reach them. Key details to include are market size; a strengths, weaknesses, opportunities and threats (SWOT) analysis ; a competitive analysis; and customer segmentation. Make it clear how you developed any projections you’ve made by citing interviews or research.

Also describe the current state of the industry. Where is there room for improvement? Are most companies using antiquated processes and technology? If your business is a local one, what is the market in your area like? Do most of the restaurants where you plan to open your café serve mediocre food? What will you do better?

In this section, also list competitors, including their names, websites and social media handles. Describe each source of competition and how your business will address it.

7. Sales and marketing

Explain how you will spread the word to potential customers about what you sell. Will you be using paid online search advertising, social media promotions, traditional direct mail, print advertising in local publications, sponsorship of a local radio or TV show, your own YouTube content or some other method entirely? List all of the methods you will use.

Make sure readers know exactly what the path to a sale will be and why that approach will resonate with customers in your ideal target markets as well as existing customer segments. If you have already begun using the methods you’ve outlined, include data on the results so readers know whether they have been effective.

8. Financials

In a new business, you may not have any past financial data or financial statements to include, but that doesn’t mean you have nothing to share. Preparing a budget and financial plan will help show investors or bankers that you have developed a clear understanding of the financial aspects of running your business. (The U.S. Small Business Administration (SBA) has prepared a guide you can use; SCORE , a nonprofit organization that partners with the SBA, offers a financial projections template to help you look ahead.) For an existing business, you will want to include income statements, profit and loss statements, cash flow statements and balance sheets, ideally going back three years.

Make a list of the specific steps you plan to take to achieve the financial results you have outlined. The steps are generally the most detailed for the first year, given that you may need to revise your plan later as you gather feedback from the marketplace.

Include interactive spreadsheets that contain a detailed financial analysis showing how much it costs your business to produce the goods and services you provide, the profits you will generate, any planned investments and the taxes you will pay. See our startup costs calculator to get started.

9. Financial projections

Creating a detailed sales forecast can help you get outside backers excited about supporting you. A sales forecast is typically a table or simple line graph that shows the projected sales of the company over time with monthly or quarterly details for the next 12 months and a broader projection as much as five years into the future. If you haven’t yet launched the company, turn to your market research to develop estimates. For more information, see “ How to create a sales forecast for your small business. ”

10. Funding request

If you are seeking outside financing such as a loan or equity investment, your potential backers will want to know how much money you need and how you will spend it. Describe the amount you are trying to raise, how you arrived at that number and what type of funding you are seeking (such as debt, equity or a combination of both). If you are contributing some of your own funds, it is worth noting this, as it shows that you have skin in the game.

11. Appendix

This should include any information and supporting documents that will help investors and bankers gain a greater understanding of the potential of your business. Depending on your industry, you might include local permits, licenses, deeds and other legal documents; professional certifications and licenses; media clips; information on patents and other intellectual property; key customer contracts and purchase orders; and other relevant documents.

Some business owners find it helpful to develop a list of key concepts, such as the names of the company’s products and industry terms. This can be helpful if you do business in an industry that may not be familiar to the readers of the business plan.

Tips for creating an effective business plan

Use clear, simple language. It’ll be easier to win people over if your plan is easy to read. Steer clear of industry jargon, and if you must use any phrases the average adult won’t know, be sure to define them.

Emphasize what makes your business unique. Investors and bankers want to know how you will solve a problem or gap in the marketplace differently from anyone else. Make sure you’re conveying your differentiating factors.

Nail the details. An ideal business plan will be detailed and accurate. Make sure that any financial projections you make are realistic and grounded in solid market research. (If you need help in making your calculations, you can get free advice at SCORE.) Seasoned bankers and investors will quickly spot numbers that are overly optimistic.

Take time to polish it. Your final version of the plan should be neat and professional with an attractive layout and copy that has been carefully proofread.

Include professional photos. High-quality shots of your product or place of business can help make it clear why your business stands out.

Updating an existing business plan

Some business owners in rapidly growing businesses update their business plan quarterly. Others do so every six months or every year. When you update your plan make sure you consider these three things:

• Are your goals still current? As you’ve tested your concept, your goals may have changed. The plan should reflect this.
• Have you revised any strategies in response to feedback from the marketplace? You may have found that your offerings resonated with a different customer segment than you expected or that your advertising plan didn’t work and you need to try a different approach. Given that investors will want to see a marketing and advertising plan that works, keeping this section current will ensure you are always ready to meet with one who shows interest.
• Have your staffing needs changed? If you set ambitious goals, you may need help from team members or outside consultants you did not anticipate when you first started the business. Take stock now so you can plan accordingly.

Final thoughts

Most business owners don’t follow their business plans exactly. But writing one will get you off to a much better start than simply opening your doors and hoping for the best, and it will be easier to analyze any aspects of your business that aren’t working later so you can course-correct. Ultimately, it may be one of the best investments you can make in the future of your business.

Business plan FAQs

What are common mistakes when writing a business plan.

The biggest mistake you can make when writing a business plan is creating one before the idea has been properly researched and tested. Not every idea is meant to become a business. Other common mistakes include:

• Not describing your management team in a way that is appealing to investors. Simply cutting and pasting someone’s professional bio into the management section won’t do the trick. You’ll want to highlight the credentials of each team member in a way that is relevant to this business.
• Failing to include financial projections — or including overly optimistic ones. Investors look at a lot of business plans and can tell quickly whether your numbers are accurate or pie in the sky. Have a good small business accountant review your numbers to make sure they are realistic.
• Lack of a clear exit strategy for investors. Investors may want the option to cash out eventually and would want to know how they can go about doing that.
• Slapdash presentation. Make sure to fact-check any industry statistics you cite and that any charts, graphs or images are carefully prepared and easy to read.

What are the different types of business plans?

There are a variety of styles of business plans. Here are three major types:

Traditional business plan. This is a formal document for pitching to investors based on the outline in this article. If your business is a complicated one, the plan may exceed the typical length and stretch to as many as 50 pages.

One-page business plan. This is a simplified version of a formal business plan designed to fit on one page. Typically, each section will be described in bullet points or in a chart format rather than in the narrative style of an executive summary. It can be helpful as a summary document to give to investors — or for internal use. Another variation on the one-page theme is the business model canvas .

Lean plan. This methodology for creating a business plan is ideal for a business that is evolving quickly. It is designed in a way that makes it easy to update on a regular basis. Lean business plans are usually about one page long. The SBA has provided an example of what this type of plan includes on its website.

Is the business plan for a nonprofit different from the plan for other business types?

Many elements of a business plan for a nonprofit are similar to those of a for-profit business. However, because the goal of a nonprofit is achieving its mission — rather than turning a profit — the business plan should emphasize its specific goals on that front and how it will achieve them. Many nonprofits set key performance indicators (KPIs) — numbers that they track to show they are moving the needle on their goals.

Nonprofits will generally emphasize their fundraising strategies in their business plans rather than sales strategies. The funds they raise are the lifeblood of the programs they run.

What is the difference between a business plan, a strategic plan and a marketing plan?

A strategic plan is different from the type of business plan you’ve read about here in that it emphasizes the long-term goals of the business and how your business will achieve them over the long run. A strong business plan can function as both a business plan and a strategic plan.

A marketing plan is different from a business plan in that it is focused on four main areas of the business: product (what you are selling and how you will differentiate it), price (how much your products or services will cost and why), promotion (how you will get your ideal customer to notice and buy what you are selling) and place (where you will sell your products). A thorough business plan may cover these topics, doing double duty as both a business plan and a marketing plan.

Explore more

Editable business plan workbook

Starting a new business

1 . Francis J. Green and Christian Hopp. “Research: Writing a Business Plan Makes Your Startup More Likely to Succeed.” HBR. July 14, 2017. Available online at https://hbr.org/2017/07/research-writing-a-business-plan-makes-your-startup-more-likely-to-succeed.

2 . CorpNet, “The Startup Business Plan: Why It’s Important and How You Can Create One,” June 29, 2022.

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How To Set Up An Online Course Business: Step-By-Step In 2024

According to a Valuates Reports E-learning Marketing Report , the online learning industry will be worth more than $370 billion by 2026. So, now is an excellent time to start an online course business.

But like any business, you need good planning and smart ideas to succeed. Every step matters, from finding a niche topic to designing good courses and marketing them. One wrong move can ruin your online course business.

Where do you even begin? With countless platforms to choose from, endless marketing strategies, and the overwhelming need to create high-quality content, it's easy to feel paralyzed before you even start.

We'll walk you step-by-step through building a successful online course business. You'll learn to spot the most profitable course ideas, choose the ideal platform for your needs, and attract a loyal audience eager to learn from you.

12 Steps On How To Set Up An Online Course Business

Here are 12 steps on how to set up a successful online course business:

• Market Research and Validation
• Develop Your Business Plan
• Choose a Platform
• Course Development
• Scaffolding and Active Learning
• Build an Online Learning Community
• Select a Business Model
• Create a Conversion-Driven Course Page
• Set Up a Sales Funnel
• Implement Ongoing Marketing Strategies
• Monitor and Enhance Course Quality
• Expand Your Course Offerings

This checklist guides you through everything to create a successful online course business.

1. Market Research And Validation

Doing market research should be the first step when you have an idea for an online course. This means deeply understanding your target audience and the current competition.

Then, proper validation will confirm there is demand and room for your ideas. It will also shape the specifics of your content strategy and business approach.

Identify Your Niche

To kick off, you need to pinpoint the niche you want to focus on. It should be a subject area that interests you and one that you are knowledgeable about. Look into current trends within your field and identify emerging needs that your course could fulfill. This initial step sets the direction for your entire project.

Why does having a niche matter?

• Trying to teach "everything" results in a watered-down course. Being known for a specialty builds authority.
• A crowded general market is harder to compete in. A niche lets you shine.
• Your marketing gets laser-focused, making everything easier.

For example, instead of building an online course on "social media marketing," focus on “Instagram marketing techniques for personal trainers.” Obsessing over niches leads to focused content and better solutions.

Not sure what your niche is? Grab our free guide and learn how to find your niche in less than 10 minutes.

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Understand Pain Points And Goals

Once you've identified your niche, the next step is to understand your audience's pain points and goals:

• What struggles does your audience face?
• What goals do they want to achieve?

To understand the pain points, first, create a detailed profile of your ideal student, including demographic details, learning goals, and challenges. 

Tools like Google Analytics , social media insights, and forums related to your niche can provide valuable data. Understanding your audience helps in tailoring your course to their needs.

Frame your niche around resolving frustrations and helping students accomplish the outcomes they desire from the learning experience.

Explore popular forums, Facebook Groups , subreddits, and online communities for your target audience. Review recent discussions and comments for common questions, frustrations, and desires people post about.

Research The Competition Thoroughly

This next step is to analyze your competition. Use search engines and online course platforms to see who else is offering courses similar to what you have in mind.

Take note of their course content, how they price their courses, and the feedback they receive from students. This will give you a clearer picture of what works, what doesn’t, and where there might be gaps that your course can fill.

Ask yourself these questions:

• What do they do well?
• Where is there room for improvement?
• What topics do they cover? What’s missing?
• What do students rave about?
• What are their complaints?
• What business models and pricing do they use?
• What messaging and selling approaches engage their audience?

This uncovers hidden needs you can address. Gaps show you opportunities to meet unmet needs.

Validate Demand With Keyword Research

Next, do keyword research. Keyword research reveals search volume data — the quantifiable demand for specific topics. It also helps optimize marketing later.

Using platforms like Google’s Keyword Planner , Semrush , or Ahrefs can help you identify the terms and topics your potential students are searching for.

In this step, many often ask themselves, is a keyword with very high competition good?

High-competition keywords, such as those with very high search volume or existing dominant domains targeting them, will be extremely difficult to rank for as a new website. 

The high competition indicates that established sites and authority domains already capture those terms.

Bidding against them for pay-per-click ads will also drive costs high due to the high commercial intent behind these popular searches.

Instead, you'll want to uncover "long-tail" keywords and search queries with solid search volume between 500-5,000 monthly searches. These indicate decent demand from real users but are more targeted and niche-specific phrases with much lower competition.

This allows you to carve out space in the rankings to capture organic traffic more easily in less competitive niches. The demand indicates interest, but competition is not yet saturating the keyword so that you can make a play at dominant positioning.

In summary:

✅ Good = 500-5,000 searches per month, low-medium competition

❌ Bad = 100,000+ searches, high competition existing domains

Get Audience Insights

Directly engaging with your potential audience through surveys can provide specific insights into their preferences and needs.

Ask people matching your target niche about their needs, interests, problems, and willingness to pay for solutions like an online course.

Their direct input further validates you are solving real issues, clears up assumptions, and ensures you craft relevant courses they will invest in.

Use tools like SurveyMonkey or Google Forms to create surveys you can distribute via social media, email, or forums.

Pro Tip: Create A Minimum Viable Product (MVP)

Creating an entire course needs a lot of effort. So, before fully committing to developing your entire course, consider creating a Minimum Viable Product (MVP) such as a series of webinars, an eBook, or a mini-course .

This approach allows you to test the market's interest in your course topic with minimal investment. The feedback and engagement from your MVP will help you refine your course concept and content.

Not sure if your product idea will work? Check out our free guide, which will help you validate your idea, find your ideal customer, and discover profitable solutions.

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Adjust And Refine Your Concept

Finally, use analytics to validate the demand for your course. Engagement metrics such as page views, time spent on your content, social shares, and comments can strongly indicate interest.

Also, tweak your audience, course topics, and angles until you have confidence they serve a need and capture the voice of who you intend to serve.

While it takes some legwork upfront, proper validation sets your online course up for sustainable success by intentional design instead of guessing. It helps you know if your course will be profitable .

2. Develop Your Business Plan

After checking that your course idea has demand, the next big step is creating a business plan. This will outline how you will build your online course.

Now, a full-blown traditional business plan might be overkill for some online course creators, but taking the time to map out your approach is essential for a focused and sustainable business.

Here are the key parts to include in an online course business plan:

Define Your Target Students

First, be very specific about who your ideal students are. Go beyond just demographics like age and gender. Also, include details about their motivations, interests, goals, and hesitations around buying courses.

Understand what is most important to them in making a purchasing decision. This helps ensure your messaging really connects with their priorities.

Outline Your Course Topics & Delivery

Map out exactly what subjects your courses will cover and how they will be delivered based on the gaps you found in research.

• Will they be self-paced or as a cohort?
• Will you have single courses, bundles, or memberships?

Show how your educational design addresses student needs and gets them closer to their goals.

Explain Your Marketing And Sales Process

Determine precisely how you will attract students and convert sales. 

What marketing channels, sales messaging, and tools will compel enrollments? Estimate your cost to acquire a student, too.

Outline website traffic sources, lead capture tactics, and launch sequences you will use.

Market Analysis

Research your target audience, including their demographic details, learning preferences, and challenges they face in the current education market.

Additionally, conduct a competitive analysis to identify your main competitors, their offerings, strengths, and weaknesses. This analysis will help you understand your position in the market and identify opportunities for differentiation.

For market analysis, use SimilarWeb . This (paid) tool lets you analyze website traffic data for competitors to gauge total visits, source channels, and engagement metrics. This reveals high-level performance benchmarks to compare to your own.

Financial Plan

One of the most critical components of your business plan is the financial plan. Start with an initial budget that includes startup costs (website development, course creation software, marketing expenses) and operational costs (hosting fees, salaries, ongoing marketing expenses).

Then, project your revenue streams, including course sales, subscription services, or corporate training programs. Provide financial projections for the first year, broken down monthly, and for the next three to five years annually.

When creating your financial plan, be aware that some platforms like Kajabi offer an all-in-one solution for online course entrepreneurs . Kajabi’s platform includes:

• A website builder
• Course creator tools
• Email marketing tools
• Messaging capabilities
• Marketing funnels

This simplifies financial planning by consolidating costs into one predictable subscription fee.

Risk Analysis

Identify potential risks to your business, such as technological changes, market trends, or competitive pressures, and outline strategies to mitigate these risks. This could include diversifying course offerings, investing in marketing, or keeping abreast of technological advancements in e-learning.

Plan For Continuous Improvements

Think about how you'll keep evaluating and improving each business area using customer feedback and data. Set process improvements to increase profits and impact over time.

While planning is key, stay flexible to change tactics when you see what works. Use your plan as an evolving guide.

With a solid business plan, you now have a detailed map for executing the buildout of your online course.

3. Choose A Platform

The right platform you settle on directly influences the success of your online learning business.

The platform you select significantly impacts your course's accessibility, engagement, and overall student experience. In addition, it influences the efficiency of your marketing efforts, the ease of managing your content, and your ability to scale your business. 

For example, if you compare Kajabi vs. Thinkific , you'll find distinct features and benefits. Understanding these differences is key to making an informed decision that aligns with your business goals and the needs of your students.

Kajabi is an all-in-one platform for online course creators, providing course hosting and marketing and sales tools integrated into the same ecosystem.

One of Kajabi's standout features is its robust set of marketing tools.

Thinkific, on the other hand, offers great flexibility and control over the course creation and delivery process. It's well-suited for creators who want detailed control over their course's structure and student experience.

Kajabi is better for sales and marketing, while Thinkific has more student assessment features. Kajabi also offers more features for landing page creation.

Apart from Kajabi and Thinkific, there are tens of online course platforms . 

So, how do you know which platform to settle for?

• Understand Your Needs: Understand your requirements. Consider the nature of your courses, the expected volume of students, and the level of interaction you wish to have with them.
• Customization: The ability to customize your online course platform can significantly enhance your brand's visibility and create a unique learning environment for your students. Platforms like Kajabi offer extensive customization options, allowing you to tailor the look and feel of your course pages, landing pages, and email communications.
• Marketing Tools: An ideal platform should offer built-in features like email marketing, landing pages, and sales funnel builders.
• Content Delivery and Engagement Features: Features like video hosting, interactive quizzes, and discussion forums can enhance the learning experience. Additionally, the ability to track student progress, offer certificates of completion, and provide personalized feedback can contribute to a more engaging and rewarding course.
• Scalability: As your online course business grows, you'll need a platform to scale. This means supporting an increasing number of students and courses and offering advanced features like membership sites, affiliate programs, and more sophisticated marketing automation tools.
• Payment and Monetization Options: Your platform should offer flexible payment and monetization options to accommodate different business models. Look for platforms that support multiple payment gateways, offer payment plans, and allow for coupon codes and discounts.
• Support and Community: Finally, consider the level of support and the community surrounding the platform. Additionally, an active community of other course creators can provide insights, advice, and inspiration.

Kajabi offers 24/7 customer support through email and chat, and it has vibrant communities where you can connect and learn from other creators.

While other tools can work, Kajabi specializes in supporting online course creators directly.

Sign up with Kajabi for a 14-day free trial to test our comprehensive features.

4. Develop Your Course

This process involves several key steps — planning your course content, selecting the right delivery methods, and creating engaging materials.

Inventory Your Existing Materials

Begin by taking stock of all the materials you have that are relevant to your course topic. 

This could include blog posts, webinar recordings, podcasts, eBooks, or any other content that provides valuable insights into your subject area. Organize these materials in a way that aligns with your course outline.

Define Your Learning Objectives

Start by clearly defining what you want your students to learn or achieve by the end of the course. These objectives should be specific, measurable, achievable, relevant, and time-bound (SMART).

Learning objectives are the foundation for your course, guiding the development of your content and assessments.

Take, for example, the course “Photography Basics: Master Your Camera in 30 Days.”

Overall Course Goal:  By the end of this course, students will be able to take professional-looking photographs using their camera's manual mode.

Some broad topics and their SMART learning objectives could be:

• Camera Settings: By the end of Module 1, students will be able to explain the relationship between aperture, shutter speed, and ISO and how to adjust them for different lighting scenarios.
• Composition: By the end of Module 2, students will be able to apply the rule of thirds and leading lines to compose visually appealing photographs.
• Photo Editing: By the end of Module 3, students can use basic photo editing software to adjust exposure and color balance and crop their images.

Identify Gaps And Create New Content

With your existing materials organized, identify any gaps in the content that need to be filled to meet your learning objectives.

For each gap, plan the creation of new content. Ensure that each piece of content directly contributes to achieving a specific learning objective.

Choose The Right Delivery Methods

Different topics and learning objectives require different teaching methods.

For example, teaching concepts like aperture and shutter speed would benefit from combining short, explanatory videos that demonstrate how these settings affect images in real time.

Supplement this with downloadable cheat sheets and diagrams for quick reference. Additionally, provide practice assignments where students submit photos taken with specific settings.

Build Assessments

Assessments are crucial for measuring student progress and ensuring they meet the learning objectives.

Design quizzes, tests, projects, or peer assessments that align with your course goals. Provide clear instructions and criteria for evaluation to maintain transparency and fairness.

Ensure Content Accessibility

Making your course accessible to all learners, including those with disabilities, is essential. This includes:

• Subtitles and Transcripts: Provide subtitles for videos and transcripts for audio content to aid learners who are deaf or hard of hearing.
• Accessible Documents: Ensure downloadable materials are accessible, using clear headings, descriptive links, and alt text for images.
• Responsive Design: Use a responsive platform, ensuring that content is accessible on various devices, including smartphones and tablets.

Pilot Your Course

Consider offering a pilot version of your course to a small group of learners in exchange for detailed feedback.

This can provide insights into how your course is received and highlight areas for improvement before a full launch.

5. Scaffolding And Active Learning

To help students learn step-by-step, use scaffolding when structuring your lessons. Scaffolding means setting up your instruction like building blocks — starting with simpler concepts as the base before advancing to more complex material and skills.

It works like this:

• Introduce the Key Idea. Explain the core concept, like “how to write an effective email subject line,” first without complications. Use examples that isolate the basic skill or fact being learned.
• Add Layers Gradually. Next, provide more use cases, applications, settings, or rules that increase intricacy. In our example, move from general email subject line tips to specifics for e-commerce, then job applications, formal communication, etc. Sequencing easy to difficult allows incremental comprehension.

At each milestone, assess their grasp before progressing.

• Summarize and Check Understanding. Recap key takeaways once complete concepts are covered. Have a final quiz or reflection to help students summarize main ideas or demonstrate new capabilities.

Scaffolding works well because it meets learners where they are and then constructs broader expertise. Use it extensively.

The other core technique, active learning, involves encouraging regular student contribution and interaction.

Design assignments that require students to apply concepts in new and challenging ways. This could include problem-solving exercises, simulations, or creating digital projects.

Scaffolding and active learning strategies support student learning and foster a more engaging and interactive learning environment.

6. Build An Online Learning Community

Don’t just create isolated courses. Facilitate shared learning by building a thriving community among your students.

Humans are social. We discuss ideas, ask questions, and share wins and motivation with others. Your online courses should replicate this collaborative experience.

Here are key ways to foster community:

Create Cohorts

For example, create group sets of students starting/completing courses simultaneously. 

This lets them bond around shared milestones and challenges during the learning journey. Assign group projects and discussions to strengthen relationships.

Host Live Events

Weekly or monthly webinars, live Q&As with instructors, and cohort video meetups make learning conversational. This allows students to interact in real time and get personal mentoring.

Provide Collaborative Learning Opportunities

Design assignments that require collaboration, such as group projects or collaborative research. These activities necessitate interaction and can lead to stronger community ties.

Send Regular Emails

Use email check-ins to nourish the community with curated resources, tips, reminders, motivational stories, or progress check-ins. This facilitates instructor guidance and support.

Kajabi has a Communities feature that simplifies the process of building and nurturing an online learning community within its platform.

This feature offers a space that resembles a social network but is focused on your courses and content, facilitating a more engaging and interactive learning environment.

Features of Kajabi Communities include:

• Discussion Forums: Within the community, you can set up forums on various topics related to the course. These forums can host discussions, answer sessions, and collaborative learning efforts.
• Content Sharing: Students and instructors can share resources, articles, videos, and other educational materials directly within the community.
• Announcements and Updates: Instructors can use the community to post announcements, updates, or motivational messages. 
• Peer-to-Peer Interaction: The Communities feature facilitates peer-to-peer interactions. Students can participate in discussions and connect with peers with similar interests or goals.

By leveraging this feature, you can create a dynamic, supportive, and engaging environment that motivates students, fosters collaboration, and enhances learning outcomes.

7. Select a Business Model

The business model you choose impacts how you market your courses, engage with your students, and, ultimately, how you generate revenue.

The ideal business model aligns with your content, target audience, and financial goals, offering flexibility as your online course business grows.

Blaine Anderson's success story with Dating By Blaine exemplifies how the right business model can lead to extraordinary success in the online course industry.

Blaine's approach revolves around coaching programs, ranging from self-paced courses to more personalized group and 1-on-1 coaching. 

This business model is effective for niches where personal transformation and tailored advice are crucial, such as dating coaching. It allows for premium pricing due to the high value and personalized experience offered to clients.

While Blaine's model emphasizes coaching and personal development, other models in the online course market include:

• Sell Courses Individually: Students pay one fee to get full access to that specific course. For example, you sell a “Baking Cupcakes” online course for a one-time $49 purchase. This is simple but doesn’t bring in money long-term per student.
• Subscription Model: This model, suited for creators with a broad range of content, provides recurring revenue and builds a loyal community. It's effective for topics where ongoing learning and updates are valued, such as tech skills, creative arts, or business strategies.
• Memberships: In this model, you bundle courses into groups that students can access at different tiered pricing levels. For example, your $25 basic cooking membership includes 3 beginner baking courses. The $99 premium membership includes all 15 available advanced cooking courses. This pushes average purchases higher.
• Corporate Training: This targets businesses rather than individuals. Corporate training involves selling your courses to organizations for employee development. This model can lead to larger contracts and a steady client base.
• Freemium Model: The freemium model offers basic course content for free while charging for premium content or additional features. This approach can attract many students and convert a portion into paying customers.

Choosing the right business model for your online course requires a deep understanding of your content, audience, and financial objectives.

Experiment and be flexible. This lets you adapt and refine your business model as your course business evolves.

8. Create A Conversion-Driven Course Page

The goal is to turn visitors into students. You've spent time developing an amazing course and attracting potential students. A low conversion rate means wasted traffic, potential revenue, and all that effort not paying off. 

The course page should, therefore, present your course and convince potential students that your course can solve their problems or fulfill their desires.

The page should adhere to SEO best practices.

Consider a hypothetical course titled "Introduction to Digital Marketing: Master Digital Strategies."

Keyword Research And Optimization

Start by identifying the keywords your target audience is searching for.

For the above digital marketing course, relevant keywords might include "digital marketing course," "learn digital marketing," "online marketing class," etc.

• Page Title: Incorporate your primary keyword naturally. E.g., "Introduction to Digital Marketing: Master Digital Strategies | [Your Brand Name]."
• Meta Description: Write a compelling meta description using related keywords. "Dive into digital marketing with our comprehensive online course. Learn SEO, social media, PPC, and more to skyrocket your marketing skills."
• Headings and Subheadings: Use H1 for your main title and H2s for section headings, including keywords where they fit naturally. E.g., "What You Will Learn in This Digital Marketing Course."

Content Optimization

Write a detailed course description incorporating your target keywords. Ensure the content is informative and engaging and outlines the benefits and outcomes of the course.

Integrate long-tail keywords in your content, such as "how to start in digital marketing" or "beginner digital marketing courses online," to capture more specific search queries.

Social Proof And Testimonials

Highlight video testimonials prominently on your course page. 

You can create a dedicated section titled "Success Stories" or "Student Testimonials" and optimize it with relevant keywords like "digital marketing course reviews" or "student feedback on digital marketing course."

Remember, 79% of consumers watch a video testimonial to learn more about a brand or product. Incorporating video testimonials from past students or a course preview can significantly boost credibility and conversions.

Clear Calls-to-Action (CTAs)

Your CTAs should be clear, compelling, and include action-oriented language.

For SEO, ensure that anchor texts leading to your course page are descriptive and keyword-rich when linked from other pages or posts. E.g., "Enroll in our digital marketing course today."

Kajabi offers a complete landing page builder, making it easy to create high-converting pages that attract students.

With Kajabi, you can quickly build professional-looking landing pages by customizing flexible templates instead of complex coding. Easily make beautiful pages for lead capture, sales, launches, etc.

Key features include templates for every use case to promote your course effectively. You can create a webinar registration page, coupon giveaway page, or waitlist join page.

Dynamic sections let you fine-tune design on all devices. And you can seamlessly connect landing pages with the rest of your Kajabi ecosystem, like email and course access.

9. Setting Up A Sales Funnel

Think of a sales funnel as a series of steps that guide someone from being vaguely aware of your course to becoming a paying student.  Some potential students naturally drop out at each stage of the funnel, which is why it's shaped like a funnel — it gets narrower as you get closer to a sale.

Let’s take an example of how you can set up a sales funnel for an online course on digital marketing.

• Create Awareness: Start by writing informative blog posts about topics related to digital marketing and share these on social media platforms. You could also host a free webinar on a relevant subject, such as "The Top Digital Marketing Trends in 2024." The aim is to provide valuable content that introduces the audience to your expertise and leads them to your course's landing page.
• Build Interest: On your landing page, include an engaging summary of what your course offers, highlighting the unique benefits of taking the course. Use a mix of text, images, and videos to keep the potential customer engaged. Include a signup form where they can leave their email in exchange for a free eBook or course sample.
• Facilitate the Decision: Follow up with an email sequence that provides additional information about the course, shares success stories from past students, and addresses common objections. In the final email of the sequence, make a compelling offer, such as a limited-time discount or an exclusive bonus material, to encourage them to make a decision.
• Encourage Action: Ensure your sales page is optimized for conversions. It should clearly state the course price and what’s included and have an easy-to-use checkout process. At this stage, remove any barriers to purchase. Offer multiple payment options and a money-back guarantee.

Kajabi offers several pre-built funnel templates tailored to common business goals, such as product launches, webinar funnels, and lead magnet funnels.

These templates come with recommended steps and content that you can customize to fit your specific needs.

You also get detailed analytics for each funnel. This way, you can track the performance of your sales funnel. You can see how many people enter your funnel, conversion rates at each step, and overall revenue generated.

Want to write killer copy for your sales pages? Get our free "8 Steps to the Perfect Sales Page" worksheet and learn how to write killer copy that turns website visitors into customers today.

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10. Implement Ongoing Marketing Strategies

You should continuously get the word out about your courses through different marketing channels to attract new students over time.

First, publish educational blogs and videos optimized for keywords people search related to your niche. This helps them find you in search engines like Google and draws them to your site.

Make great use of social media. As of January 2024, there are over 5.04 billion social media users globally. Share short video clips, graphics, or student success stories on social media platforms your audience uses, like Facebook, Instagram, or TikTok. 

Link to free downloads or course discounts in posts to encourage sign-ups.

Other strategies include:

• Email Sequences: When a visitor gives you their email address, trigger a pre-made series of 4-6 automated emails over weeks/months that share tips or course benefits to build interest and guide them to eventually enroll (utilize the sales funnel feature).
• Strategic Partners: Partner with complementary brands and influencers to cross-promote courses and run co-marketing campaigns. Shoutouts, bundled deals, and summits expand awareness.
• Retargeting Ads: If visitors don’t enroll initially, remarket to them through ads on Facebook or Instagram.
• Referrals: Give students unique coupon codes or rewards to share courses with friends for discounts. Word-of-mouth via existing learners works great.

Expert Tip: Analyze cost, conversions, and ROI per channel. This will guide you on where to focus marketing dollars for positive returns.

11. Monitor And Enhance Course Quality

Creating excellent courses is an ongoing effort. Consistently gather student feedback to guide improvements over time.

The best strategy is to prompt students to leave reviews. Positive public reviews build social proof.

Now, don’t be afraid of receiving negative reviews. They are good sources of honest feedback. They indicate where your course may be falling short and offer direct insights into how you can improve.

Expert Tip: Respond to negative feedback promptly and constructively. It demonstrates your commitment to student satisfaction and continuous improvement.

Also, encourage open discussions within your course platform or community forums.

Lastly, regularly send out surveys or questionnaires at the end of your course or module. Ask specific questions about the course content, delivery method, and overall experience to gather actionable insights.

12. Expand Your Course Offerings

Over time, adding more courses at varying skill levels and related topics lets you attract new students while engaging past students more deeply.

Start with newbie courses to build fundamentals. Then, create intermediate and advanced courses to layer on more complex abilities for the same topic.

For example, an initial real estate investing course can be followed by advanced rental property management and commercial real estate investing offerings later.

Also, add courses around related subjects under your niche to capture wider demand.

For instance, expand photography courses into dedicated offerings just on lighting, landscape photography, wedding photography, Adobe Photoshop, and Instagram for photographers.

You can also introduce premium courses. Develop special edition courses with celebrity guest teachers, live interaction through cohorts, or highly tactical skill-building around advanced tactics.

For example, mastermind sessions on copywriting psychology with expert Brian Dean or paid cohorts on building 7-figure agencies .

Final Thoughts

Launching and scaling an online course business is a multifaceted undertaking. It requires careful planning, execution, and ongoing optimization.

From conducting thorough market research to developing high-quality content, choosing the right platform, and implementing effective marketing strategies, each step plays a crucial role in building a successful online education platform.

Platforms like Kajabi simplify execution, accelerating your productivity.

Kajabi’s comprehensive suite of tools—intuitive course builder, customizable landing pages, advanced marketing automation, analytics, secure payments, and funnels—provides you with everything you need to launch and grow your online course business.

Sign up with Kajabi today and explore our full features with a 14-day free trial.

How To Set Up An Online Course Business: Frequently Asked Questions

What is the first step in setting up an online course business.

Start by conducting thorough market research and validation. Identify a niche that matches your expertise and interests, and deeply understand the needs and preferences of your target audience.

You should also analyze your competitors to identify gaps in the market and opportunities for differentiation. Validating your course idea is critical. You can do this by offering a mini-course or a free webinar to gauge interest. This ensures a demand for your course, laying a solid foundation for your online course business.

How Do I Choose The Right Platform For Set Up My Online Course? 

First, consider the platform's ease of use. It should be intuitive for both you and your learners to navigate. Next, assess the platform's content delivery capabilities, including support for various media types like video, text, and interactive quizzes.

Additionally, look into the marketing and sales tools provided, such as email marketing integration, landing page builders, and analytics to track student engagement and course performance.

Also, consider the cost and whether the platform offers the scalability to grow with your business. Finally, check for community features that allow for interaction and engagement among students.

What Common Mistakes You Should Avoid When Setting Up Your Online Course Business?

Don’t skip market research and validation. This will create courses with little demand, wasting valuable time and resources. Ensure you understand your target audience's needs and verify their interest in your course topic before development. 

Secondly, underestimating the importance of high-quality content and engaging course design. Invest in professional production and interactive elements to enhance the learning experience.

Additionally, neglecting marketing and student engagement strategies can result in low enrollment numbers. Develop a comprehensive marketing plan and actively engage with your students through forums, email, and social media to build a community around your courses.

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How to get started with your LLC

Northwest registered agent, taylor brands, zenbusiness, form an llc online: 4 companies for same day llc formation.

Paid non-client promotion: Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate investing products to write unbiased product reviews.

• As a small-business owner, I have no regrets about taking the time to set up an LLC.
• Depending on what other services you need, a paid LLC service might be for you.
• From mailing addresses to consultations with an attorney, LLC services offer plenty of choice.

When I started freelancing, I had a simple goal: I wanted to cover my monthly rent, which was about $1,200 at the time. Luckily, my business took off, and within a few years, I was turning over six figures. I was thrilled, but I also realized that I needed to operate my career like a business, not a side hustle.

One of the best ways that small business owners can protect themselves is by forming a limited liability company, or LLC. An LLC is a legal structure that keeps your personal finances separate from your business assets and debts. Having an LLC lets you unlock other good business practices, like opening a business bank account or business credit card . It also keeps your taxes fairly straightforward since profits pass through the LLC to its members, and you pay on your personal tax returns.

All of that might sound complicated, but it boils down to a simple question: is setting up an LLC a good idea? For me, the answer is definitely. I love having separate business bank accounts, signing contracts with clients as an LLC, and knowing that I'm protected legally.

LLCs are regulated at the state level, and each state does things a little bit differently. It's best to look at the LLC regulations in your state. In my state, I started with the Secretary of State's office and followed their directions.

I was able to do everything through the state website, but if you need a bit more guidance, these websites can help. Many also provide additional services, like branding or web hosting. Remember, in addition to the fees listed below, you'll need to pay state filing fees and likely an annual renewal fee with your state to keep your LLC in good standing.

LegalZoom is a well-known online legal service platform that's available nationwide. The company offers three different plans for forming your LLC:

• Basic (Free): This one is free (you just cover the filing fees with your state) and simply registers the formation of the company.
• Pro ($249): You get an employer ID number (EIN), which you need to file taxes and use on paperwork for your LLC. You also get up to 150 legal documents a year, plus you get guidance on operating an LLC.
• Premium ($299): This includes an LLC formation, EIN, and consultation with a business attorney in your state.

Since I'm the only person involved with my company, and the services it provides are fairly straightforward, I'd be comfortable with the Basic package. However, if you have partners or more complicated services, the extra guidance from the Pro or Premium package could be beneficial.

Get started with LegalZoom .

Want to register a business as you travel? Northwest Registered Agent lets you form an LLC for just $39, plus your state filing fees. It also acts as a legal address that can accept mail and legal documents while you're off being a digital nomad. Despite the low cost, you get a lot for your money, including a business mailing address, phone number, website, email, and one year of registered agent services.

I personally love that Northwest emphasizes that they'll give you everything you need to print and take to the bank to open a business bank account. From experience, I know opening a business bank account can be a major hassle, so this alone is well worth the $39.

Get started with Northwest Registered Agent .

If you need your company to stand out, Tailor Brands is a great option to register your LLC. Not only does the company facilitate your registration for free, but they can help you create a logo, trademark it, and refine your branding (for a charge). All of that goes a long way in helping your business look professional, which attracts customers your way.

ZenBusiness not only sounds calming, but it's also endorsed by entrepreneur Mark Cuban. I like that ZenBusiness offers web hosting, giving you a one-stop shop to get your online business up and running. It delivers three straight-forward options for creating your LLC:

• Starter (Free): The starter level allows you to file your LLC in two to three weeks. That's a bit slower than some rivals, but hey, it's free. You can also select from add-ons, including higher-speed filing ($79) and a business email address ($25 annually).
• Pro ($199 a year): The Pro level includes faster filing, which takes about one to five business days. You'll also get an operating agreement, which is key if you have partners in your LLC.
• Premium ($349 a year): The Premium level includes fast filing, a business website and email address, business documents, and more.

Get started with ZenBusiness . 

State filing fees to form an LLC will vary. The online provider you choose will also add a fee to file using their standardized forms.  Many services provide multiple price points with different levels of service, but you can expect to pay a service fee between $50 - $200 for most basic LLC formations.

Popular options include ZenBusiness, LegalZoom, and Northwest Registered Agent. The best fit depends on your specific needs and budget.

Yes, you can file directly through your state's business website. The benefit to using a serivce is that they have compiled the forms and documents necessary to meet your state's specific requirements.

Not usually, but an attorney can be helpful if you have a complex business structure or multiple owners.

*This article is for informational purposes only and should not be construed as legal advice. You may want to seek the advice of an attorney to evaluate all relevant considerations in forming a business entity. 

**Discount may not be combined with any other offer or promotion. Available virtually and at participating locations. Void if transferred and where prohibited. Discount will appear in your cart automatically when you use the link. No cash value.

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