The Real Costs of Starting Your Online Business

Updated: September 28, 2023
by TJ Salvatore

The internet has opened up gazillions of possibilities and opportunities for entrepreneurs to capitalize on a global market and get in touch with customers worldwide. With so many digital solutions, marketplaces, and e-commerce platforms available, there are no limits for merchants looking to start an online business.

Although doing so can be simple and affordable, some expenditures are necessary. Depending on the kind of venture you want to kick off and how and where you want to set it all up, costs can vary greatly.

For a little help, below are the most common expenses of starting an online business.

The Real Costs of Starting Your Online Business

Ecommerce Platforms and Web Hosting Costs

A reliable and high-quality online storefront is integral if you want to start an online business. The businesses that have the best online presence are those that pull in customers at the time when they’re most receptive and interested.

Several options are available when creating your online storefront, each with its own charges. Here are the most common:

Use an E-commerce Platform

An e-commerce platform or marketplace is a software application that enables merchants to create an online store, manage inventory, and accept product payments. Popular options include Shopify, Bigcommerce, and Etsy. Each has its unique setup, price structure, and perks.

Shopify provides a website builder with free or paid themes (starting from $180) to help you get started. It charges monthly fees starting at $29 per month if you pay yearly or $39 per month.

Big-commerce is typically ideal for large-volume sellers. It has 12 built-in free themes, and the paid ones generally cost between $150-$300. The Standard tier costs $29.95 monthly, while the Plus tier costs $79.95.

Etsy has no monthly fees. Instead, the platform charges a $0.20 listing fee for every listed product, payment processing fees, and a 6.5% fee for every sale you make.

With all the available platforms, choosing can be pretty overwhelming. You should consider your budget, the features offered, and your familiarity with the app, support, and analytics to make an informed decision.

Build Your Website

Website builders and content management systems are two of the most well-known website construction platforms. A website builder is a tool that makes website creation as easy as ABC, for example, Wix. 

Although there’s a free plan, Wix premium plans can cost around $10-80 monthly. On the other hand, a CMS allows you to create and publish a store plus edit the content in a database. WordPress is a famous example, plus it’s free.

Ensure to pick the right platform that’s best suited to your needs. Also, you must invest in a domain name and web hosting service to build your website. Domain names can cost at least $10-20 a year plus additional fees. On the other hand, web hosting can cost around $3 per month.

Inventory

Stock inventory is imperative whether you sell only online or operate a physical store. Capital, storage costs, and tax account for your inventory expenses. Storage costs cover rent, employee wages, utility, and security.

Note that storage costs can quickly accumulate if you store products for too long. On the other hand, capital costs are a one-time lump sum for buying warehouse space and products. Additionally, tax costs are necessary for legal compliance. The actual costs vary for each industry.

Business License

A business license or permit is necessary to operate a business. The cost depends on the kind of license you need and the geographical location of your business because each state has varying fees.

Generally, a business license can run anywhere from $50 to $100, plus renewal fees. Additionally, you will need a federal business permit or license if your business falls under a specific industry, such as mining and agriculture.

Dropshipping

Dropshipping

As mentioned, holding products for too long in your warehouse can lead to increased costs. So, if you don’t want this happening, adopting a dropshipping model might be a good idea. Dropshippers don’t acquire the products they’re selling or have any inventory until they have an order or a sale.

Still, there are expenses associated with this kind of model, and they’re decided by the sales platform or marketplace you use. Whether it’s Etsy, Walmart, Amazon, or eBay, you must pay a percentage of the sale and listing fees. These charges can scrape off your profit.

Marketing

If you do it well, marketing is an expense with immediate payoff or return. Implementing the correct marketing strategy is crucial as it can make or break your business.

Your website is the first thing your customers will see. Hence, ensuring it’s informative, easy to navigate, and well-designed is vital. Use search engine optimization (SEO) to your advantage.

It can help you earn more organic traffic to your site, making it quicker for search engines to look for and understand your content. Another thing is to use social media platforms like Twitter, Instagram, and Facebook. 

Brand Awareness

These are powerful marketing tools to build brand awareness, share promotions and updates, and engage with your audience. Moreover, utilize email marketing. It’s an effective way to promote your products or services and stay in touch with your customers.

Leverage email marketing software to create automated email campaigns and newsletters. Also, segment your email list to specific groups of customers to send targeted messages.

Furthermore, maximize your use of influencer and content marketing. Influencer marketing involves working with famous people in your industry to market your products and services. On the other hand, content marketing involves creating consistent content to reach, engage, and retain your target customers.

Lastly, make use of paid advertising. It’s an immediate way to get your message or content in front of your target audience. Use platforms like Instagram AdsFacebook Ads, and of course, Google Ads.

Final Takeaway

Starting an online business does not come free, despite what others say. In reality, most new business owners may spend more than they earn in the first few years of operation. So, if you think your funds are limited and scarce, there are ways you can save money when starting an online business.

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About the Author

A freelancer. A nomad. An LGBTQ and animal rights activist. Love meeting new people, exploring new styles of living, new technologies and gadgets, new ways of making money.

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  1. Thank you so much for your advice. I was going to buy too many domain names but decided not to buy them cos it was expensive. Also it will be too difficult to keep up. To me, marketing is too much that does not quickly pays for itself and i have not done it too well so far. But I have learned how to do the right marketing strategy from your post. I think it is very food for me as it can start my online business. Thank you so much.

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