Starting an online business is simple, but you need to have a decent budget to kick off a new idea. There are various costs associated with launching an online business, so it’s a good idea to prepare well before you commit yourself to it.
Depending on the type of startup, where you would like to launch it, and how you want to do it, these costs can hugely vary, but it’s all worth it. Global retail sales are expected to reach $25 trillion by the end of 2019 and it’s expected to reach $30 trillion by 2023. This leaves you with an enormous opportunity for launching a new online business.
There’s already so much going on and there’s still so much scope of expansion. Tech entrepreneurs sense this and many more plan to start a drop shipping business, an online store, or try affiliate marketing models.
With all these points in mind, here is what you need to prepare your money for, and how much you can expect to pay for these services.
General costs
When launching an online business, there are some costs that you will incur before even making the first sale. However, selling online is cost-effective because there are no infrastructure and less human resource costs compared to traditional businesses.
The truth is that an online business is not free and your success will depend on your products, services, and investment you make. Therefore, be prepared to budget for human resources, warehousing, cost of products, logistics, marketing, business fees, and many more.
Marketplaces
There are various options available for selling online, below are some useful information on how you can launch your business:
You can use existing marketplaces such as Amazon and eBay, but you will pay a certain fee and a Final Value Fee to list your products. The Final Value Fee is calculated as a percentage of the sale price of your product. These market places are great if you intend to find customers and create brand awareness.
You can use an open-source eCommerce software which is free but has other cost implications. The costs arise because you have to customize it, do maintenance, and manage it. These costs can be more than 50% of the initial cost each year as you have to pay web developers and designers.
Some expert web developers can charge as much as $150 per hour. This means your budget should be somewhere above $2000 + $100 per month. However, if you have web skills and technical background, these costs per month can be far much lower than $100.
Use a hosted eCommerce service provider who will provide support, maintenance, and service. Different companies are offering various packages for their services. You will be told fixed monthly costs to cover for the software, hosting, upgrades, maintenance, and support.
Domain names and email
To have a successful online business, the first step is to have a domain name and business email address. New domain names cost between $10 and $12, depending on the domain name extension you have decided to use.
Other costs include renewal fees, privacy fees, and transfer fees. These fees depend on particular registrars, therefore, ensure you check all the details before purchasing their services.
Visitors to your site might want to send you messages through your email. It’s a better idea to have a business email address rather than a personal email address. This will help your business to look more professional to your customers.
The best way is to have a virtual office, which is a physical mailing address. You can rent such services at between $50 and $200 a month, and it has a receptionist, a local phone number, and a physical office space to give a good impression on your prospective and current customers.
Payment options
If you would like to accept credit cards, it’s essential to have a payment service provider who will process the payments through a Payment Gateway.
Therefore, you will need to create an account with the payment service provider. However, setup costs vary with others offering their services for free such as PayPal while others might charge up to $500.
You will also get some payment service providers who charge an annual fee of somewhere between $200 and $500. Each payment that you receive also attracts transaction fees ranging from 1.1% + 30 cents to 4.5% or even more. This makes it crucial to shop around for an ideal payment service provider so that the fees don’t affect your bottom line.