CAN I START A "REAL"
BUSINESS ON THE INTERNET?
If you've been marketing MLM
or other affiliate programs on the Internet you may feel, at times that
you're not involved in a "real" business. The truth is you can create a
business out of just about anything, including MLM and affiliate programs.
In an MLM or affiliate setting, your business is that of a sales
representative who earns commissions and overrides on those salespersons you
introduce to the business.
But we understand why you might not consider this a "real" business. You
don't actually own these businesses and you are not making the lion's share
of the earnings from their activities. On the upside, you are also insulated
from sustaining large losses, which is what makes them good for most people.
You have less risk but still have a good opportunity to make a decent living
or supplement your regular income while working the hours you set for
It has been said that the Internet "levels the playing field," making it
easier for ordinary individuals to build businesses that can compete with
the big boys. This is true to a certain extent, but the massive amounts of
capital large companies can invest in their website, in product research and
development, in building relationships with other influential enterprises,
and in formulating their advertising budgets gives them a powerful
advantage. But you can still carve out your niche and reach a substantial
number of potential customers without breaking the bank.
So if you want to build a "real" business on the Internet and you don't have
loads of capital to throw at it, is it possible for you to do? Absolutely
yes! Let's take a look at what it will take and what it is likely to cost
First of all, understand that this new business is going to require mass
quantities of your time, at least in the beginning. You are going to
have to be totally committed to it to make it work. The most important fact
you can glean from this is that you need to choose a business that you
enjoy. If you enjoy it, you will naturally learn more about the subject
matter of your business and be better able to become an expert in your
It won't be enough to just search the Internet for an niche market that
isn't being properly served and attempt to serve that market. If you are not
personally excited about the market, you will not do well with it. If you
can find a niche market that is not being properly serviced and it is a
business you love, you are in a perfect position to make your move to
capture that market.
Before you actually start your new business, you need to do plenty of
research. Find out what the ranges of selling prices are for your products
paying attention to the average sales prices for your products and the
highest prices being charged.
Is there anyone selling the products at especially low prices? If
someone is selling your potential products at very low prices, can you
determine how they are able to do that? Do they have special deals with
distributors that you won't be able to cultivate? Is it strictly a matter of
Understanding the pricing of your products is only half the battle. How much
are these products going to cost you when you buy them at wholesale prices?
Which companies wholesale your products and can you buy them inexpensively
enough to compete with the low price sellers in your market?
You'll need to carefully evaluate all your potential costs to determine the
profit margin you need to be profitable. You'll probably need at least a 15
percent profit margin on your products, including shipping charges, and your
goal should be a much higher margin.
Make sure you include all your costs in your evaluation, including your
Internet service, online and offline advertising and marketing, postage,
increased phone and fax bills, web site charges, and any other cost you must
pay in order to continue running your business. Depending on the level of
sales you project you might be tempted to believe you can get by with less
than a 15 percent profit margin on your products. Don't do it! If your
profit margin on a product is less than 15 percent, don't sell it.
Chances are good that you can buy the products at the same prices your
competitors pay as long as you are buying from a real wholesaler and not
some middleman company that buys at wholesale and marks up the price to you.
Never buy from middlemen!
You can search the Internet to find prospective wholesalers, but make
absolutely sure they are REAL wholesalers. (If you need help finding
legitimate wholesalers, we'll be happy to help). Anyone can buy wholesale as
long as they are organized as a legitimate business formed to resell the
products. Beware of lists of wholesalers you can buy for five bucks that
you'll find all over the Internet. Most of these will be middleman-type
organizations. You'll find out you pay almost retail to buy from them.
Consider only wholesalers who will drop ship products for you. You do
not want to buy products and maintain an inventory. This would be
prohibitively expensive and make you bear far more risk than you need to.
Almost all wholesalers will drop ship for you. When you receive an order,
you email it or fax it to the wholesaler for processing of the order. They
will notify you when the product ships so you can stay in touch with your
customer with shipping information or information about backorders.
It is absolutely necessary that you organize your business properly. The
following are a few of the things you'll need to do:
You'll need to have a sales tax resale certificate from your state to buy
products without paying sales tax. Your wholesaler will require you to have
one and send them a copy. This is very inexpensive, usually $5 to $10, and
is good for one year.
Plan on opening a business account at your bank. You should be able to find
one that is relatively inexpensive, say $10 to $20 per month. If you write a
lot of checks, you may have to pay more.
You will need to either incorporate your business or file fictitious name (DBA)
papers with your state before you can open the business account in most
cases. Even if your bank doesn't require this, some wholesalers might and it
is a good idea anyway. You should be able to incorporate for $75 to $150
depending on the state you organize in. If you find it will cost you more
than this, get in touch with us and we'll help you do it less expensively.
Consider filing an S Corporation election on Form 2553 with the IRS. By
making this election, you will include the earnings or losses of your
corporation on your personal income tax return and your corporation will not
have to pay tax. This will protect your earnings from double taxation that
can arise when you are organized as a corporation and will make your
business affairs administratively easier to manage.
This is not a difficult thing to do. If you're nervous about it or unsure
about what to do, just ask us and we'll help you perform this step. There is
no cost to this election unless you pay someone else to do it for you. The
form is simple to complete and the instructions contain a fax number for you
to send it to. But if you want to make this election, you must file this
form within 75 days of starting your business for it to be in effect for
your first year of operations.
You might also consider organizing your business as a Limited Liability
Company (LLC) which gives you the protection of a corporation but will allow
you, if you are the sole owner, to report your income on Schedule C of your
1040 rather than filing a separate return.
Check with local government to see if you need a business occupational
license to run your business out of your home. If required, the license or
licenses could cost you from $10 to $200. Since such fees are set locally,
they may vary a great deal. They also usually vary depending on the type and
size of your business. An occupational license for a home-based business, if
required at all, should not cost more than $25. You may need both a County
and City license.
Check local zoning restrictions to make sure you actually can run your
business out of your home. Since you won't be having customers come to your
home and won't be putting a sign outside, you should have no problem with
this, but it never hurts to check.
-Setting up Your Store
You will need a website complete with a storefront and the ability to accept
credit cards to sell your products. In the past this could have been the
single most difficult part of setting up your business, but no more.
There are many companies on the web that will help you with this. If you
already have a website, you can add the storefront and merchant account
capabilities to your existing website.
There are companies that will host the storefront for you and provide you
with a seamless interface from your website. There are many options for your
storefront and merchant account ranging from very inexpensive to very
expensive. You'll need to evaluate your options carefully to determine which
type of storefront will work best for you.
We offer a storefront option from GoEcommerce that costs just $59.95 per
month and includes your hosted storefront which can be integrated with your
existing website or used as a standalone website, your merchant account and
some very good sales tools. There are also no setup fees and you are
guaranteed to be accepted for your merchant account. Do some research on the
Internet to find the plan that works best for you.
You should be able to set up your business legally for under $300 if you
choose a low cost storefront option. In terms of starting a business this is
incredibly inexpensive. You probably spend that much each month joining and
promoting MLM and other affiliate programs. You will still probably spend as
much or more each month promoting your new "real" business, but now you will
be doing it for yourself. You will be keeping ALL the profits rather than
earning a small piece of someone else's
If you're serious about running your own business on the Internet, you must
have your own domain. Using a free website to run your business marks you as
a novice and someone who is not serious about their business. Even if you're
using a storefront package hosted by another company, the gateway to your
store must be through your own domain. There is absolutely no way around
If you have an interest in starting your own business, we can help you with
all of the above steps. If you would like more in-depth information about
any of the above steps, send us an email at
mailto:firstname.lastname@example.org with your specific questions and
we'll be happy to provide you with answers.
-Too Much for you Right Now?
For another excellent, and simpler, idea on how to start your own business
read our guest article below.
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