STEPS TO STARTING A REAL BUSINESS ONLINE - STEPS 5 and 6
by: Cary Christian
Thus far we have covered the following steps in starting your own real
Step 1 - Introduction and basics
Step 2 - Assessing your personality, the type of business you want to
run, and inventorying your skills, experience and interests.
Step 3 - Identification of needs you can fill, identification of a
market that needs what you can provide, and segmenting that market into
Step 4 - Deciding on what products you want to offer and assessing
Tonight we are going to cover Steps 5 and 6.
1. Determine how you are going to acquire your products.
As we mentioned last week, by far the most profitable products you can sell
will be those you create and control. If this is the route you're going to
take, you need to get down to the specifics at this point.
If you're going to create it yourself, map it out and get started. If you
want to find someone to develop it for you, visit the Elance site at
http://www.elance.com/rfp?rid=B1ZL and post a project for
consultants to bid on, get your best price and run with it.
If you're going to hire someone to develop the product for you, make sure
you have the product totally laid out and planned before turning the work
over to the consultant. Nothing wastes more time and ends up running up
costs than indecision or products that have not been properly planned.
If you've decided to sell products as an affiliate, make sure you select
only outstanding affiliate products. Don't go for the quick buck by
marketing every newly-released matrix program that comes out. That puts you
back into the lottery with the 95 percent of affiliates that never make a
profit. Select products that have the potential of being around for a long
time and are backed by excellent organizations.
If you're going to resell products that you acquire from wholesalers, your
job is easier but there are some things you need to watch out for.
The easiest way to resell products is to find a wholesaler that will drop
ship for you. That way, you don't have to maintain inventory. You process
the orders, the wholesaler ships the product. It's a great and simple way to
The danger comes in finding the right wholesaler. You can buy lists of
wholesalers on the Internet for $5. One problem with these lists is that
they contain very little information about the wholesaler. The second and
most troublesome problem is that most of the companies listed will not be
Many companies that claim to be wholesalers sell their products virtually at
retail. Hook up with these guys and you'll have a short tenure in business
during which you make no sales. You're going to have to research these
companies very carefully to make sure you can buy products at wholesale
prices. Do your research thoroughly. You want to make a minimum of 15
percent profit on these sales. Any less than that and you're not going to
make enough money to survive.
2. Assess your financial situation.
Unless you're going to concentrate totally on selling as an affiliate,
you're going to need some capital. If you're going to subcontract the
development of your own products, you're going to have to pay someone to
develop it for you. It probably won't cost you a lot, but you'll need cash
available unless you can make a deal to split profits. But remember that
you'll make much more in the long run if you simply pay for the development
and keep the profits for yourself.
If you're going the drop-shipping route, you won't be buying products until
you sell them. But there will be a lag between your paying for the product
and receiving your money from the sale. You'll need to be able to cover this
cash outflow in the interim.
The amount of capital you'll need will depend on your projected sales, the
cost of your products, and the everyday cost of running your business, i.e.,
your overhead. Do some projections at various sales levels to determine how
much you will need. And don't forget marketing costs! Free advertising alone
will not get the job done.
If you don't think you have the financial resources to accomplish what you
want, evaluate whether you can borrow the additional funds you will need. If
you cannot, you may have to sell as an affiliate or just start slower until
you can save the capital you need.
1. Write your business plan.
The last point under step 5 leads right into writing your business plan.
Take some time and put your ideas, your market and product information, your
analysis of the competition, and your projections together into a somewhat
formal planning document. Prepare it and present it to yourself and try to
identify all the holes you can find. Take the time now to find the solutions
to any problems you identify. Looking at your proposed business in written
form will help you focus and pull it all together.
2. Take care of the technicalities.
You're close now! Time to start crossing the t's and dotting the i's.
If you're working out of your home, find out if you need any business
licenses from your county or city authorities. For a home business where you
do not maintain inventory and customers do not come to your house, you
probably won't, but you'll want to make sure before you go full speed ahead.
Decide on a name for your business and determine if you want to incorporate.
If you're going to be reselling products and buying from a wholesaler/drop
shipper, you'll want to incorporate and get a business bank account. It will
give you more credibility with the wholesaler and you'll probably need to
take this step anyway to get your merchant account.
You'll need to think about getting that merchant account now also. It can be
a tough process, but it's getting easier with some of the products available
on the web. There are many companies who will take care of the entire
process for you, including processing the sales.
You will also need to get your website ready to start making sales. You'll
need to build in a shopping cart to go with your merchant account.
Again, this process can be simplified. For example, GoEmerchant offers the
merchant account and fully functional website with shopping cart that will
integrate directly with your website or can be used all by itself. You can
create a store in minutes. There are no setup fees and it only costs $59.95
per month as an all-inclusive package. It is our primary choice for
ecommerce capabilities for small and home businesses. You can check it out
Next week, STEP 7 where we're going to pull it all together!
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