Starting up your online business

Smallbusiness.co.uk offers some top tips for entrepreneurs looking to set up an online business venture.

With e-commerce growing by 14 per cent year-on-year in the UK and online shopping at an all-time high (estimated at over £750 billion in the UK as of 2022), there has never been a better time to think about starting an online business. Whether you are feeling the strain of your current job or simply considering other options available, you are not alone in wanting to explore e-commerce opportunities. Research from online payment service provider PayPoint.net shows that as many as 50 per cent of Britain’s office workers are frustrated entrepreneurs, who have considered setting up their own business, with the most popular choice of a business start-up being an online venture.

Many would-be entrepreneurs can face a range of obstacles when trying to join the e-commerce revolution and some fail to understand the number of steps which need to be completed before an online business is ready to start trading. It can often feel overwhelming, which discourages them from pursuing the venture. However, knowing what processes are involved is generally half the battle.

Fortunately, there are a few simple steps, which if followed correctly, can ensure that setting up an online business is easy and hassle free:

  1. Register a company
  2. Write your business plan
  3. Register a domain name
  4. Create your website (and make it secure!)
  5. Set up an Internet Merchant Account (IMA)
  6. Start your online and offline marketing to drive traffic to your site

The following advice is designed to keep any budding entrepreneurs on the right track and on your way to trading online as quickly as possible:

Step 1: Registering a company

Firstly, you will need to set up a legal entity which is required if you want to trade online. Happily, registering your company and getting a company registration number is relatively straightforward in the UK. You can start the process by visiting the .gov.uk web portal.

Your other option is to use a Company Formation Agent; the cost of this starts from about £15, or for a full package that takes away all the admin, up to £90 (and can even be arranged on the same day if required.)

Related: Registering as a company limited by guarantee

Step 2: Write your business plan

Writing your business plan enables you to be prepared for every eventuality. Ask yourself questions such as:

  • Who is your target audience?
  • What are your sales forecasts?
  • What are your future plans for the company and how are you going to get there?
  • How much is it going to cost you to set up and run your online business?

Related: Writing a business plan: The basics

Step 3: Register a domain name

Once all of the basics have been covered, you will need to begin setting up your online presence. The first step is to choose and then register your domain name:

  • Select your web address carefully as a good name or brand will help you drive traffic to your site
  • If possible, try to get a TLD (top level domain) like a dot com – but if you intend to only sell in the UK then a .co.uk is perfectly fine (or even the super-short, and hence easy to remember domain ‘.uk’).
  • Registering your domain name is relatively easy and costs £3-£25 depending on the type you require

Related: Nominet’s domain look up tool – The WHOIS lookup tool will return domain information for .uk, .co.uk, .org.uk, .me.uk, .sch.uk, .plc.uk, .ltd.uk, .cymru and .wales – more advice also available here.

Step 4: Create your website

You have two main options here: either get a pro in or DIY. Working with a web developer will ensure that you get a bespoke site that meets your business needs. However, there are a now a number of excellent website builder software platforms on the market that can help you get a functioning and reasonably good looking website up and running.

NB: To ensure your start-up online business has the best chance of succeeding your website absolutely must be ‘Mobile friendly’ and ‘Secure’ (https). Do not skip these steps when building the site.

Related: Find the best Website Builder Software for your business.

Step 5: Set up an Internet Merchant Account (IMA)

You will need to open an online merchant account – often referred to as an internet merchant account (IMA). This is separate to your business bank account and is required specifically for online trading. It can take up to several weeks to set this up, but there are faster services available.

Services are available to help new online businesses set up an IMA and start trading within 24 hours. To ensure your IMA application is accepted you will need to:

  • Provide a business plan and an accurate account of your previous business experience
  • Supply personal documentation to prove you are who you say you are
  • Decide how you want to accept payments, whether its over the web, phone or a combination of the two and if a multi-currency platform is needed.
  • Make sure that you are PCI compliant. This is the security standard that applies to any business that handles or stores card details and was mandated by Visa and MasterCard. Failure to be compliant can cost your business severely with daily fines and even suspension of your processing facilities from the card schemes in the event of a security breach
  • Be aware of the security risks associated with trading online. Fraud is a major issue for online retailers and can cost merchants valuable income, therefore it is vital to select a risk management platform that reduces the risks associated with ID theft and allows you to safely and quickly accept online payments
  • Finally, be available. Many accounts lie dormant for longer than necessary while waiting for documentation and signatures. So make sure that you are easily contactable as it will speed up the approval process.

Related: Choosing the right merchant service for your small business

Step 6: Start marketing to drive traffic to your site

Onsite you should make sure you have a basic analytics package running so you you can analyse your visitor stats. Try to plan a structured content strategy that focuses on publishing useful and informative pages. Use compelling headlines and focus on benefits in your copy. Make sure to include testimonials and any relevant credentials that will build a trust with your potential customers.

Offsite, you might want to look at PPC (pay-per-click) advertising with Google AdWords and Microsoft Advertising. They both have introductory offers for new websites but beware of bidding too high initially. Make sure you create accounts with all the main social media sites and link them to your website. If your are selling products rather than services highlight your pictures and images – particularly good for Instagram and Pinterest. And be sure to brand all your offline marketing materials with your website details.

Related: Video: Best practice website marketing tips

While there are a number of hurdles that would-be entrepreneurs have to overcome when starting a new online business, the process should be exciting and not painful. To ensure that the new online business is given the best possible opportunity for success it’s vital that you understand the basic operational requirements and know where to turn for advice when it’s needed.

This article was contributed by Michael Norton

Further Resources

Starting an e-commerce business – what to know

Chloe Thomas, founder of marketing agency Digital Gearbox, discusses the key considerations entrepreneurs need to make before embarking on an e-commerce venture.

Despite the now traditional news stories of retail businesses going into administration, starting an e-commerce business can be a great way to build for your future.

For every retail failure there are many stellar success stories, and even more of comfortable survival. If you want to start out in e-commerce there’s a few things you need to think about before putting any money where your mouth is!

One of the problems with e-commerce is that getting started is way too easy – find some stuff to sell, buy a website in a box (or just create an eBay account), upload your logo and you are live. What you have is a website – not an eCommerce business.

Whilst launching a successful e-commerce business includes all of that, it requires much more. Before you do anything more than putting pen to paper you need to decide on three things:

  1. What your e-commerce business structure will be (where you’re going to sell)
  2. What your product range scope will be (what you’re going to sell)
  3. What your Unique Selling Proposition (USP) will be (why customers should buy from you).

Those three decisions will influence everything else you do. So outlining them will help you decide if your business idea is worth investing time and effort in. There are seven e-commerce business structures, defined by how customers can buy your products. Three of these are structures that can work well for start-ups:

  • Online only, you have your own website
  • Boutique bricks and clicks, you have one or two physical shops and a website
  • PiggyBacking, instead of having a website you use eBay, Amazon, Etsy etc to host your online store.

If your idea requires a business structure more complex than those, it’s going to be harder to build success, so it might be time to look for another idea.

The product range scope is about how varied your product selection is, not how many products you are selling. Right now the most successful online businesses are those at either end of the product range scope – either department stores (see Amazon) or the very, very niche (see theperfumeshop.com). Very few businesses can launch successfully outside the niche end. So if your product range contains a wide variety of product types (lamps, and beds, and towels) then you would be well-advised to re-think.

A niche product range scope gives you lots of benefits; your money won’t be spread across so much stock; you will do better in the search engines because your website will focused on certain keywords; your blog will be easier to write; and (most importantly) customers will “get” your business quicker – if they don’t understand they won’t buy.

The third thing you need to identify is your USP (unique selling proposition). What is it that makes you different? Customer service? Product? Price? Branding? Whatever it is, you need to become the best at that in your marketplace – can you? If you’re going to be truly successful then you need to avoid a USP of price – being the cheapest just erodes your margin, and due to economies of scale it is much easier for the companies with the biggest turnover to compete in this area.

I’d suggest you need to create a USP on customer service (making it so easy for the customer they just keep coming back), product (if they want welly boots you’re the only place to go), or knowledge and information (if they want to understand what camera tripod to buy you have everything they need to know). The last will also help you a lot with your marketing because having lots of great content will help win you traffic from the search engines.

Measuring each of your e-commerce business ideas against these three areas will help you work out which idea is the best. It is also a great way to stress test an idea – how easy is it to identify the e-commerce business structure, the USP, the product range scope? If you’re struggling then the idea isn’t solid enough to become a business.

Once you’ve got the idea that’s passed the tests, it’s time to move onto building a business plan. The key areas within this will be:

  • Website – costs and plans
  • Marketing – costs and plans
  • Products – costs and plans.

You need all three of these to work together to make sure your business will be a success.

Related Topics

E-commerce
Online business

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