An Online Business Guide for Beginners

What is an Online Business?

An online business might seem like just buying and selling goods over the internet. However, online businesses can be as simple as sharing information online or a global marketplace generating millions in revenue. The possibilities are truly endless! For now, let’s focus on the kinds of online businesses that generate income.

Online businesses have come a long way since their origin. Whilst many of us look at websites like Amazon as the first online business, it stretches a bit further back than that. Let’s explore some of the most popular models for building a successful online business.

Did You Know?

The first-ever online business was created in 1982 by a company called Boston Computer Exchange. It was a marketplace for people wanting to sell used computers (think eBay but with used computers only).

Whilst Boston Computer Exchange had a short-lived run (closing down in the 90s), it paved the way for other online businesses such as Amazon and eBay that we still have and use to this day. Now, there are countless ways to build a successful online business. Let’s explore some of the most popular models out there.

Popular Types of Online Businesses

The world of online business is constantly changing. Brand-new ideas are emerging every single day. 

During my time at school, one of my teachers confidently stated during my business class, “Whatever idea you have, scrap it. It’s already been done”. Funnily enough, in the same year, we saw the likes of WhatsApp, Slack, Uber, Venmo and several other well-known brands. If anyone doubts the potential of your business idea, keep those companies in mind.

Let’s now have a look at a few examples of online businesses that will help inspire you to get started with your own business.

Ecommerce: Direct-to-Consumer (DTC)

Direct-to-consumer (DTC), also known as B2C (Business to Consumer), is the classic business model that involves you, as a business, selling directly to a customer. Think buying an iPhone from Apple or a cake from Farah’s Dessert Heaven. It’s a business model that will continue to last—we all need to buy things to survive. Imagine the outrage if your favourite burger place stopped selling those burgers. It sends a chill down my spine just thinking about it.

Thanks to tools such as Shopify, it’s become easy to set up an online shop. During COVID-19, I ran an online store called The Retro Candy Store that I had set up through Shopify. I bought my stock, uploaded the products on the backend of Shopify and customised a theme. After the initial batch of sales from family and friends, I saw hundreds of unrecognisable names order my sweets, a sign that my site was gaining traction!

Why Choose DTC?

Let’s discuss some benefits of running this model and why you should consider choosing it like I did with the Retro Candy Store.

• Higher Profit Margins: Eliminating the middleman allows you to directly control pricing, better aligning it with your business objectives.
• Brand Control: Since it’s your online store and brand, you can design it exactly how you want, including everything from logos and layouts to marketing materials and packaging.
• Customer Relationships: Building loyalty and gathering valuable customer data is crucial. It’s rewarding to see repeat visitors—it indicates that they appreciate your products and service!

Important Considerations for Successful DTC

• Competition: The online marketplace is highly competitive, and maintaining your edge is crucial for survival. With the Retro Candy Store, I encountered hundreds of competitors. However, I saw this as an opportunity to research them and improve my site.
• Marketing Costs: Advertising can be expensive, so you must develop tactical strategies to attract as many visitors to your website as possible. Fortunately, social media offers another avenue to build an audience and drive traffic.
• Logistics: Packing and shipping items can be a real challenge. Additionally, the cost of shipping continues to rise. You must also consider potential issues, like items getting damaged during transit, and have plans to resolve these matters effectively.

DTC offers benefits like better control over your brand and customer relationships. It’s a very addictive business model to run because there’s something about getting an email or notification about a sale! You could even buy a sales counter for your store to place somewhere. So whenever you make a sale, you’ll see that number increase.

E-commerce: Dropshipping

Dropshipping is an effective business model where you sell products without ever needing to hold inventory. Your supplier handles shipping directly to customers, allowing you to focus on your website and marketing!

Why Choose Dropshipping?

Dropshipping is exploding in popularity! The chart illustrates that the global market is poised for significant growth, offering numerous opportunities to establish a successful business.

Let’s take a look at a few reasons why you might like the idea of Dropshipping.

• Huge Growth: The market is booming, opening up endless possibilities for new entrepreneurs! The global forecast of the Dropshipping market will continue to grow. Search Trends also back this up. There is an opportunity to grab a piece of the action.

• Low Startup Costs: Unlike traditional businesses, you don’t need a large upfront investment in inventory. Here’s a basic cost outline:

  • Shopify store: Around £20 per month.
  • Dropshipping service: Prices vary, but plan on around £20 a month
  • Domain name: Budget around £10-£50.

• Scalability: Easily add new products and test different niches without worrying about storage or overstocking.

• Flexibility: Run your business from anywhere with an internet connection.

• Reduced overhead: Save time and money by letting your supplier handle shipping and handling. (Trust me, it’s a lifesaver!)

Important Considerations for Successful Dropshipping

While dropshipping offers exciting potential, it’s essential to be aware of the challenges to ensure a successful business:

• Product Quality: Without direct control over inventory, you may face issues with inconsistent product quality, discrepancies between the items and their online descriptions, or even defective products. It’s wise to sample a few supplier’s products to find one that offers a good balance of value and product quality.

• Packaging: Many dropshipping suppliers do not provide custom-branded packaging, which can cause your business to seem less professional and negatively affect the customer experience. To enhance your brand’s perception, try to include custom branding or personal touches to your packaging whenever possible.

• Long Delivery Times: Shipping times can be a significant pain point, especially if you’re sourcing products from overseas. Customers expect quick delivery, delays can lead to negative reviews. Be upfront about potential shipping times on your website and monitor orders closely.

• Product Returns & Complaints: Handling returns and complaints becomes more complex with dropshipping. You’ll need to coordinate with your supplier on their return policy and determine who bears the cost of return shipping. It’s crucial to have a returns and complaints policy process outlined for customers, even if the supplier ultimately handles the logistics.

• Competition: The low barrier to entry makes dropshipping highly competitive. You’ll need to find your niche and differentiate your offerings through exceptional product selection, marketing, or customer service.

• Marketing: Having an online store isn’t enough to achieve dropshipping success. To truly stand out from the competition, you’ll need robust marketing strategies, focusing on SEO, possibly paid advertising, and developing a recognisable brand.

E-commerce: Marketplaces

Like traditional Sunday markets, online marketplaces like Amazon, eBay, Etsy, and Gumtree bring buyers and sellers together, making it easy to list the occasional item or run a full-fledged online shop for anything from handcrafted goods to food!

Why Choose Online Marketplaces?

With their ease of use and massive potential customer base, it’s easy to see why online marketplaces are so popular. Let’s take a look at a few reasons why you’d consider becoming a seller on online marketplaces:

• Huge audience: The world is your oyster! Millions and millions of people visit these marketplaces, so you don’t need to drive traffic to a website.
• Ease of setup: Many marketplaces offer simple tools for creating your shop quickly. For example, eBay has a bulk listing toolfor sellers who manage a lot of goods.
• Diverse selling: You can sell a wide variety of items! Some people visit charity shops or supermarket clearance sections, looking for bargains on items like books, electronics, or vintage clothing to resell for a higher price on online marketplaces.

Drawbacks of Online Marketplaces

It’s not all sunshine and rainbows with selling on online marketplaces. There are some drawbacks to consider:

• Competition: Online marketplaces are incredibly competitive. While you benefit from the marketplace’s built-in traffic, your listings or shop must stand out. Achieving this requires high-quality pictures, compelling titles and descriptions, and potentially investing in sponsored listings to outshine the competition.
• Fees: Marketplaces often take a percentage of your sales, so bear that in mind. You might be able to reduce these fees with monthly subscriptions, but only consider doing this when you’re selling enough products. Remember, fee structures will vary by platform.
• Limited control: Unlike running your website, you will have to conform to the standards of the marketplace you’re selling on. Examples include picture size, title lengths, colour schemes, etc.

Tips for Success with Online Marketplaces

Despite the challenges, there are strategies to maximise your success in online marketplaces. Below are some tips to consider:

• Find your niche: Don’t try to sell everything! Choose a specific type of product to become an expert in. This makes research, pricing, and marketing easier.

• Excellent product presentation: High-quality photos with good lighting and multiple angles are crucial. Write clear, informative descriptions.

• Pricing strategies: Research similar listings to price competitively. Consider offering bundle deals or small freebies to encourage sales.

• Customer service: Respond promptly to inquiries, ship items quickly and securely, and address any issues professionally. Those 5-star ratings help give new buyers a sense of trust.

• Utilise marketplace-specific tools: Use features like sponsored listings, promotions, and analytics tools to boost your visibility.

E-Commerce: Digital Products

If you love the idea of creating your products and selling them worldwide, digital products offer limitless potential. E-books, online courses, stock photography, design templates, software… the possibilities are endless!

Why Choose Digital Products?

• Infinite sales: Create once, sell repeatedly – no physical inventory required
• Low overhead: No printing, manufacturing, or shipping costs to worry about
• Global reach: Easily sell to customers anywhere with an internet connection

Let’s use e-books as an example. They are electronic versions of traditional books that can be about anything. E-books can be read on most digital devices.

E-books eliminate the hassle of publishers, printing companies, and distributors. With your finished e-book, you can sell directly from your website or online marketplaces. Your focus would then shift towards marketing, where paid advertising and social media are key. Yes, it’s competitive, but a well-written e-book and solid marketing give you a head start!

Remember, e-books are just one example. With your skills and interests, you could turn design templates, online courses, or even software into profitable digital products. The right niche and a focus on quality can build a sustainable online business!

Drawbacks of Digital Products

While the potential is huge, it’s vital to be realistic about the challenges of digital products:

• Competition: The market is crowded, which means you need outstanding marketing strategies to stand out.
• Piracy: Unfortunately, digital products can be subject to illegal copying and distribution. Protecting your intellectual property is important.
• Customer expectations: Buyers expect high-quality, well-formatted digital products. A poorly designed e-book or a course with technical glitches will disappoint customers.

Tips for Success

• Niche down: Don’t try to be everything to everyone. A specific focus makes your products unique.
• Anti-piracy measures: Explore services to help minimise illegal file sharing.
• Invest in quality: Take the time to create polished, professional-grade digital products.

Blogging for Business

Blogging is a powerful tool for building an online business. By sharing your expertise or passions on your website, you can attract an audience and earn income in several ways.

Why Choose Blogging?

• Ownership: You control your content and how it’s monetised.
• Audience building: Quality blog posts attract readers, establishing you as an expert in your niche.
• Multiple income streams: Earn money via ads, affiliate marketing, selling your products, or offering services.
• Flexibility: You set your hours and work from anywhere with an internet connection.

Drawbacks of Blogging

• Time investment: Consistent, high-quality content takes effort.
• Competition: Many bloggers are vying for attention in a crowded online space.
• Slow growth: Building an audience and significant income can take months (or years!).
• Technical skills: Some basic website setup and maintenance are often required.

Tips for Blogging Success

• Find your niche: Write about something you’re passionate about and have knowledge to share.
• Be authentic: Let your personality shine through your writing!
• Focus on quality: Aim for well-researched, engaging posts.
• Promote, promote, promote: Don’t just publish and wait – market your content actively!
• Play the long game: Be patient and persistent!

Services: Your Skills as an Online Business

Offering your expertise as a service is a flexible and rewarding way to build an online business. Here are three popular models for offering services online:

Freelancing

Freelancing provides the ultimate flexibility. Choose the projects that excite you, set your hours, and directly reap the rewards of your hard work. Common areas for freelancing include:

• Writing & Editing: Create blog posts, product descriptions, website content, and more.
• Web Design & Development: Develop attractive and functional websites for both companies and individuals.
• Graphic Design: Design logos, social media visuals, and promotional materials.
• Virtual Assistance: Offer remote administrative, technical, or creative assistance to clients.

Tips for Freelancing Success

• Niche down: Focus on a specific skill set within writing, design, or development to become a sought-after expert.
• Build your portfolio: Highlight your best work to attract clients, even if it means starting with lower-paid projects.
• Network: Engage in industry events, participate in online forums, and connect with other freelancers to expand your opportunities.

Consulting

Consulting is ideal for those with deep knowledge and a talent for solving complex problems. Assist businesses in addressing challenges, optimizing operations, or discovering new growth avenues. Areas of focus in consulting can include:

• Marketing & Sales: Craft strategies to improve lead generation and customer acquisition.
• Finance & Accounting: Guide budgeting, financial analysis, and tax strategies.
• Operations & Technology: Help streamline processes and advise on technological integrations.
• Human Resources: Offer solutions in recruiting, employee relations, and training program development.

Why Choose Consulting?

• High Earning Potential: Your deep expertise allows you to command premium rates.
• Intellectual Stimulation: Tackle complex issues and create significant impacts for clients.
• Diverse Projects: Engage in varied and stimulating work that keeps your career fresh.

Coaching

Coaching provides an opportunity to profoundly impact individuals or teams, guiding them towards personal achievements or professional success. Popular coaching areas include:

• Life Coaching: Support clients in defining goals, overcoming barriers, and enhancing their lives.
• Business Coaching: Assist entrepreneurs with strategy development, mindset adjustment, and leadership skills.
• Health & Wellness Coaching: Promote better health habits concerning nutrition, fitness, and lifestyle.
• Career Coaching: Aid individuals in navigating career changes, enhancing resumes, and improving job-seeking strategies.

Why Choose Coaching?

• Rewarding Experience: Witness and celebrate your clients’ growth and achievements.
• Scalable Model: Expand your reach through individual sessions, group programs, or online courses.
• Increasing Demand: As more individuals seek personal and professional growth, the demand for coaching services rises.

Tips for Coaching Success

• Consider Certification: While optional, obtaining a certification can boost your credibility and show dedication.
• Identify Your Target Audience: Understanding who you serve helps focus your marketing and communications.
• Develop Effective Programs: Structure your coaching to maximize client engagement and progress.

Major Benefits of Running an Online Business

Lower Startup Costs

One of the most appealing aspects of online businesses is their low startup costs compared to traditional brick-and-mortar businesses. Here’s a breakdown of essential online costs:

• Domain Name: This is your web address (like DigiHow.com). Secure a memorable one for around £10-£50. Tip: Don’t stress if your perfect name is taken – strong branding can make any name shine.
• Website Hosting: This is where your website files live, making them accessible online. Basic plans start around £5/month, scaling up with traffic growth. We’ll explore free DIY options in a future post.
• E-commerce Platforms: If you’re selling products, platforms like Shopify (£20+/month) offer website building, inventory management, and sales tools.

Global Reach

Imagine breaking free from the limits of your local area! Online businesses have the potential to reach customers worldwide. Consider these facts:

• Massive potential customer base: In 2023, an estimated 240 million people in the US alone shopped online. Globally, the numbers are even more staggering!
• No geographic boundaries: Your handcrafted soaps aren’t just for local buyers anymore. With a website, you can ship to passionate customers anywhere.
• The power of the Internet: Online shoppers are constantly seeking unique products and experiences. Your online presence is your opportunity to connect with them.

Every Saturday morning, a boy with special needs would come in and play games on a computer. The salesperson would speak with him and spend time with him. Then during one of those weeks, his mum came into the store with her son. She spoke with the salesperson and said her son always talks about the time he spends in the store and how he’s so happy with the computer. So she ended up buying a PC from him.

Flexibility

Online businesses offer unparalleled freedom to shape your work around your life. Here’s why flexibility is such a major perk:

• Set your schedule: Bloggers, e-commerce owners, and many other online entrepreneurs manage their hours. Want to work in bursts of productivity, late at night, or early morning? You can!
• Work from anywhere: With an internet connection, your office can be your home, a coffee shop, or even a beachside resort! This is ideal for travel lovers or those balancing family commitments. Imagine taking an afternoon break to watch your child’s school play – online businesses can make it possible!
• Choose your pace: Grow your business gradually while maintaining a day job, or dive in full-time. The level of commitment is up to you.

The Importance of Smart Choices

While flexibility is amazing, success still requires discipline and strategy. Remember:

• Set realistic goals: Don’t expect to quit your job overnight. Build your business steadily.
• Diversify income streams: Protect yourself from market shifts by having multiple ways to earn money online (e.g., blogging + affiliate marketing + selling a course.)
• Automate when possible: Utilise tools to automate tasks like email marketing and social media scheduling, freeing up valuable time.

Is Online Business, Right for You?

Online businesses offer incredible opportunities, but success requires hard work, dedication, and the right mindset. Before you dive in, honestly consider these key factors:

Assessing Your Skills and Interests

• Unique offerings: What makes your product, service, or idea special? How does it stand out in the market?
• Passion: Are you genuinely enthusiastic about what you’ll be doing? Passion fuels commitment.
• Monetizable skills: Identify how you’ll turn your talents (writing, design, consulting, etc.) into income.

Are You Ready for the Digital Shift?

• Tech comfort: Be willing to learn online tools for marketing, website management, and communication. (Don’t worry, many are quite user-friendly!)
• Online mindset: The digital world moves fast. Adapt, be willing to try new strategies, and embrace ongoing learning.

Understanding the Commitment

• Hard work and hustle: Especially early on, expect long hours and the need to wear many hats (content creator, marketer, customer service…).
• Persistence is key: Success rarely happens overnight. Those who persevere through setbacks often reap the rewards.
• Gradual growth: Celebrate milestones while aiming for sustainable, long-term growth.

Competition and Common Challenges

• The competitive landscape: Research your market. How will you differentiate yourself?
• Building trust: Online shoppers need to feel confident in you. Testimonials, excellent service, and a professional website are crucial.

The Bottom Line

Running an online business is an incredibly rewarding but challenging journey. If you have the drive, the right skills, and the willingness to learn and adapt, the potential is limitless!