During the recent economic downturn, many of the unemployed turned to the internet to earn some money. If you’re one of them, you’ve probably heard a lot of facts and figures about what it takes to make money online, as well as the money you’ll need to start and run a business.
I have been in various businesses for over 20 years, both online and in physical stores, and have become quite ONE with the associated costs. Here’s the real scoop.
Although online businesses are some of the least expensive businesses to start, they are not without risk, when it comes to the money and time you will need to invest. However, compared to other businesses, online ones are much cheaper and therefore more desirable for many.
START-UP COSTS: Here are some facts and figures on how much it would cost to start an online business. Of course, the costs will depend on the nature of your business.
- Accommodation rates: You will pay, on average, approximately $10.00 per month for hosting.
- Domain Registration: Buying a domain is very cheap. Most domains can be had for around $10.00 per year, less if you commit to multiple years.
- Web-page design: The cost of a website is highly variable, depending on the number of pages, shopping carts, and more. You can expect to pay around $1500 for a decent sized website without a shopping cart. This cost could easily exceed $2500-$4000 or more. Here is an area that you can save. Do it yourself. There are a number of different software packages that will get you up and running for little money. Use “WordPress” and you can easily set up a website for free. “Site Build It” is another paid service, but it costs very little compared to a design service. If you want to sell your own products, “Etsy” or “ClickBank” might appeal to you. They all offer business and web setup at no cost. There are many more.
- Inventory: Are you selling physical products? If you’re stocking them, you’ll need to buy some inventory. If you ship direct from supplier to customer, this is not necessary.
- Office supplies: You will need accounting software, a phone line, and other general office supplies. Expect to easily pay $500.00 for these supplies.
ONGOING COSTS: Once you’re open, there are other necessary costs involved in running your business.
- Website Maintenance: Regular updates to your website are a must. If you hired someone to build it, you will most likely have to hire them to upgrade it. Once again, another reason to do it yourself.
- Marketing: Although there are many techniques to acquire free traffic, they take time. If you want more immediate results, you may want to pay for advertising, banner ads, pay per click, etc. The more you spend, the faster your results will be. You could spend $100 a month, or $1000 a month, or $10,000 a month. You could also spend 0 per month. The choice is yours. Know your budget and plan your income accordingly. I would recommend at least $200.00 per month minimum for advertising, more if you can afford it.
- Income Pad: Building any business to a full time income level will take time. Despite what you may have heard, making money online is NOT getting rich quick. It will take time. You must have a financial cushion to help you get through the first months of scarcity. Six months is a good start, longer is even better.
- Software costs: As you continue to trade, you’ll discover software packages that make your life easier because they automatically perform many tasks that you normally do yourself. You could easily spend $200-$300 per month (or even much more if you have the resources) for automation. I highly recommend investing in automating many tasks.
- Office expenses: Although these are minimal, items such as printer ink, paper, etc. should be included.
- Accounting services: Some small business owners prepare their own taxes, but they may also be leaving money on the table in the form of unrealized deductions. My advice would be to hire a tax accountant. Prices vary. I pay $300.00 per year for my business performance. You’ll pay more if you want quarterly reports and other services.
Although this list is far from complete, it should give you a good starting point in your quest for the costs associated with starting and running an online business. Many frugal business owners spend very little. Make more yourself, spend less. It’s that easy.
