9th March, 2021
A guide to starting your own online-only business
From market research to banking, this article has everything you need to know about launching an online business.
With more entrepreneurs and startups pursuing web-based ventures, the nature of online business grows ever more competitive. In 2020, online shopping behaviour changed dramatically due to the Covid-19 pandemic, with some ecommerce sites thriving and others faring less well. With the needs of customers changing, setting up your business online will take a lot of thought and market research.
To help you start your journey, this step-by-step guide explores how you can prep, set up and launch your own online-only business.
1. Conduct market research and find a consumer need
Whether you have a business idea already or you’re still looking for inspiration, you should start by identifying what consumers need and how you can fulfil it. The best way to do this is via market research.
Start by identifying successful online businesses that already have a presence in your chosen industry. From there, find a niche by exploring the competition and identifying an unfulfilled need. Here are some of the best ways to do this:
Best online business to start
Whether you already have a loose concept or you’re still seeking the perfect business idea, research into some of the best online-only businesses ideas to help inspire you. From web designing or freelance writing to tutoring or life coaching, there is an array of promising online business ideas to pursue.
Research your competitors
Identify and analyse all the potential competitors in your chosen industry. Research what products they offer and what sells best, their benefits and services (free shipping, hassle-free returns, etc.) and how well they’re performing (what do their customer reviews say about them?).
When conducting competitor research, ask yourself the following questions:
- Is there a gap in the market?
- How can I create a better product for a market that already exists?
- Is there a need? And if so, how can I fulfil that need?
Conduct keyword research
To fully understand consumer needs, conducting keyword research as part of your market research is essential. Keyword research is the practice of finding key search terms that users have entered when searching for online content – in this case, keywords relating to your product or service. As well as analysing competitor keywords look closely at the keywords and topics that consumers are searching for but not receiving many results. This way, you’re able to better identify and fulfil a need.
Define your target audience
Both competitor analysis and keyword research can help you identify your target audience and social media is a great tool too. Using all the information you gather you should be able to answer the following questions about your target market:
- How old are they?
- Where do they live?
- Are they mainly male or female?
- What sort of jobs do they have?
- What else are they interested in?
This information should help you determine how you can offer better products, services or solutions than your competitors. For example, if your competitors are catering mainly to young people but older people are engaging with the brand on social media, perhaps you could tailor your business to suit the needs of the older audience.
As part of the research, don’t be afraid to seek genuine feedback along the way. Once you have a better idea of your target audience, ask those who match the demographics for their thoughts and opinions on your business plans. Listen to what they have to say and take any criticism as constructive – it will help you build a better business in the long run.
You should also ask family, friends, peers, and online forums about any services, products or content that they haven’t been able to find online but would love to access.
Asking the opinions of those closest to you can be tricky, because they’ll often tell you what you want to hear, rather than what you need to hear. When asking people you know such as family and friends, make sure you’re asking those that you know will give you a truly honest answer.
Still not sure what you want to sell? Check out our list of the most profitable products to sell online for more inspiration.
2. Set up an online business plan
Once you’ve got your online-only business idea and decided which product or service you want to sell, you must come up with your online business model. Keep in mind that there is no single business model that works best for everyone. You need to carefully consider which model will benefit your online business the most in regard to profit and longevity. Here are a few common business models:
If you’re setting up an online-only shop and selling products, you’ll make revenue from those product sales which means that you’ll operate on an e-commerce business model. There are many different e-commerce business models, but the primary ones are business to consumer (B2C) or business to business (B2B).
Instead of investing heavily in stock and managing the inventory of that product, drop-shipping is a business model where the manufacturer or wholesaler ships the product directly to the buyer. If you’re on a budget when you first start your own online business, dropshipping can be a great way to save money.
The subscription business model allows you to charge customers a recurring fee, usually monthly or annually, to access your product(s) or service(s). Popular subscription-based businesses include content delivery services (such as video streaming or fitness plans) and food services (snack boxes, recipe kits, etc).
3. Get funding
The next step in building your own business is to secure funding. If you have your own savings, you’re off to a good start. If this is not the case, there are many ways you can secure funding. Before you go any further, write down everything you’ve learnt from your research and your plans for launching and managing your business. This will help you know how much funding you need and will prove to investors that you’ve thought through your business.
Here are a few examples of investment options:
One option is to apply for a small business government grant. While there are many different grants available, the application process is complex. Each grant often has its own requirements and criteria for applying, which makes securing one quite difficult. That said, a government grant can be a great option to those without the necessary startup funds. You can find more information about government grants via their ‘Finance and support for your business’ online portal by selecting the ‘grants’ tick box.
A traditional and popular way of securing funding for a new business is by applying for a bank loan. These are available at high-street banks and via online financial brands.
There are different types of loans with different terms and interest rates which is why you need to conduct your own research to find the best loan for you and your online business. You could also work with a finance broker who can help with this process – brokers usually take a commission from the provider so there is often no charge for you.
Crowdfunding has become a very popular way for new businesses, inventors and entrepreneurs alike to secure funding. There are plenty of crowdfunding platforms to choose from including Kickstarter, Indiegogo and GoFundMe. There’s no right or wrong platform to go for – it entirely depends on your business needs and goals. See what types of business ventures do well on each platform to help you make a decision.
Generally, you’ll set a goal for how money you’d like to raise over a certain period of time, for example £2,000 over a period of 40 days The general public will then pledge money to help reach your goal, usually in return for a ‘perk’ – a special gift or exclusive content. You can offer bigger incentives for higher pledge amounts.
If you’re open to sharing your business with an investor, then you might want to consider acquiring funding from an angel investor. In short, angel investors are wealthy individuals who provide funding in exchange for a share of equity in your business. Think Dragon’s Den, but without the TV cameras. You can search for an angel investor on sites like Angel Investment Network, SFC and Coral Reef.
4. Open a business bank account
Once you’ve sorted funding, you’ll need to open a business bank account. All major UK banks offer different business banking services, so shopping around is essential for finding the one that best suits you and your business. You might find it helpful to discuss your options with an accountant or financial advisor.
The step-by-step process is generally straightforward but can differ depending on which bank you decide to open your business with. As a rule, you’ll need the following documents to open a business bank account:
- Proof of ID (eg. passport or driving licence)
- Proof of address (eg. utility bill or recent bank statement)
- Full business address details
- Contact details
- Companies House registration number (for limited companies and partnerships only)
- Estimated annual turnover.
In some cases, you’ll also need to prove your own personal financial situation, with documents to show you have a clean credit and banking history.
Money transfer service
You should also consider using a money transfer service once your business is up and running – one that allows you to make international business payments is essential if you’re trading or shipping abroad.
When choosing a payment service, you should make sure the platform offers a high level of security in order to keep your money safe and secure. You’ll want to find a service that offers fair exchange rates, ease of use and transparent fees.
5. Create a website
You can’t start an online business without an online presence. Once you’ve secured funding and opened a business bank account, it’s time to create your website. Depending on your expertise and budget, there are different ways you can do this:
- Build the site yourself. Building a website from scratch can be complex, but if you’re confident in your coding skills, you should be able to put together a good website. Building your own site may be more time consuming, but it will be cheaper and you’ll have full control.
- Use a website building tool. If you don’t have the skills required for building a site yourself, there are plenty of online tools that will guide you through the process. Many – including WordPress and Squarespace – allow you to create an entire website using a drag-and-drop editor, meaning there’s no coding knowledge required. It’s simple, fast and effective.
- Hire a web developer and designer, if you have the budget. As an online-only business, your website is everything. To ensure it looks professional, trustworthy and high-quality, hire some experts to take on this task. The only fallback of hiring a developer is that if something goes wrong, you’ll have to rely on them to fix the issue.
6. Launch and promote your business
Once your website is live and your products or services are ready to share with the world, the next step is vital – promoting your business.
There are many ways you can promote your business and brand, all of which require dedication and hard work. Here are some common yet proven strategies to help you promote your business.
As its name implies, email marketing consists of sending regular marketing emails (such as newsletters) to your customer base to keep them up-to-date with any special offers or business related news. When gathering customer email addresses, it is essential that you comply with GDPR rules and regulations.
PPC is an online marketing strategy in which companies or advertisers pay a fee to a search engine, such as Google, each time a user clicks on their advert. The advert is positioned as a sponsored listing at the very top of the search results or as an advert on other websites via a display network. PPC is used for different campaign goals, including sales, leads and brand awareness.
For search ads, companies and advertisers can bid for their ad to be displayed when a user searches for a particular keyword. For example, if a user searches for “dog food” the results will show ads from companies that have paid for their product to appear for this search. Keep in mind that generic terms will be the most expensive, so it’s best to focus on your niche.
Another way you can promote your business and generate leads is via affiliate marketing. An affiliate programme, allows you to place adverts for your business, such as display ads, listings or sponsored content for your business, on relevant websites (known as your affiliates). These adverts will contain a hyperlink to your product or page of choice. If a site visitor clicks your hyperlink, lands on your site and makes a purchase, you then pay a fee (or ‘commission’) to the affiliate website.
PR is another effective way you can promote your brand and business. If you have a good understanding of the PR process, you could give it a go yourself to save yourself some money. However, PR is a time-consuming task and you may benefit from the expertise of professionals. PR strategies can vary depending on your goal. For example, digital PR campaigns are designed to secure backlinks to your website for SEO purposes, while others can be designed to promote your brand or drive traffic to your website.
You may also be interested in our ultimate guide to invoicing and how to manage your work-life balance when running a business from home.
This article is provided as general information purposes only, and is not intended to cover all aspects of the topic. We recommend that you take professional and specialised advice before taking, or refraining from, any action based on the content of this publication, as this article is not intended to constitute expert advice. We do not guarantee, explicitly or implicitly, that the content of this article is accurate, complete or up-to-date. The information in this article does not constitute legal, tax or other professional advice from PagoFX or its affiliates.