Starting a business online does not cost as much money as starting a conventional physical business. You would save the cost of renting a place and setting it up and running such an establishment. But starting a business online still requires you to spend money in order to get your business to a flying start. A lot of small businesses have started small and were able to grow their business. One of such is the story of a Swimwear brand whose owner grew her business online with a secondhand sewing machine into 7 figures as recorded by Shopify.
Though her positive story does not equate to success for all businesses who took their businesses online. Statistics show that only about 10%-20% of businesses survive beyond 120 days. Also, the main factor responsible for this failure is the lack of funds as reported by 32% of small online business owners.
While the reason for the failure of these small businesses may be attributed to low funds. Other factors are lack of capacity and capability to compete with medium and large online Businesses. So many small online business owners do not embrace the reality that it takes time to climb up the ladder.
Another reason small online businesses fail is poor visibility and a lack of good digital marketing campaigns. So how much does it cost to start a business online? That is our main concern in this article. And here is all you need to know.
How much does it cost to start a Business Online?
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Legal Fees:
Though it is not in all business endeavors will you need to bear the cost of legal fees. However, for businesses in skin care, personal items, and other consumable products, it is required that you obtain a license to operate. The estimated cost of obtaining a license as reported by FreshBooks is between $50 and up to thousands of dollars. Researching local laws and what businesses need a license to operate will give you insight into whether you will spend a dime or not on licensing.
Another area of legal you will spend on is the incorporation of your business. There is a standard registration fee for businesses that choose to incorporate. If you choose full incorporation, you will pay more than a business set up as a Sole proprietorship. The estimated cost of incorporation is between $50-$200. Here is how to start your own consulting business, Step-by-step guide.
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Web Hosting:
When you consider the cost to start a business online, you must consider that whatever website you wish to own will require one of the best hosting services. After selecting a hosting platform, you must choose a domain name which is your website’s URL.
A business that anticipates large traffic may have to pump out more funds to get a platform that will host heavy traffic. This also goes into the cost of what you pay. A typical web hosting and a domain name will cost you between $50 and $100, and the subsequent renewal fee is often around $25.
The payment option will depend on whether you want to pay monthly or annually. But a budget of about $100 a month will be sufficient.
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Invest in Web Design and Responsiveness:
If you choose to have your own website, you will require the services of a professional web designer to help you build a website that portrays your brand colors and fonts on all pages of your website.
However, if you do not want to pay someone to help you design your website, Business.com recommends using web design software to your business advantage.
Whether you hire a web designer or build a website yourself through software, you should make your website responsive and user-friendly. Your website should be easily accessible to mobile users. It will help to rank your website higher on Google Search Results.
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Inventory or Dropshipping:
While not all businesses will choose to store, maintain and replenish inventory, others will choose dropshipping to meet purchases only when they occur. Either of the two ways will require you to spend some money on carrying costs for inventories and listing costs for a dropshipping platform.
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Marketing:
All online businesses will need to market their products to make sales. And using digital platforms to market your online business is one of the costs you must fashion in. Top of the list of Digital Marketing needs for an online business is Search Engine Optimization (SEO), Social Media, and Content for your Blog and other pages of your website. In addition, include the cost of running Pay-per-click ads.
1. SEO Cost
SEO helps your business to be searchable online. Also, it ensures that your website ranks on Search Engine Results. SeigeMedia says it will cost an average of $3000+ to get quality SEO jobs done for your online business Per month. And the price goes higher as the level of expertise is demonstrated or showcased. On the other hand, you may not need to spend close to that amount if you hire an in-house SEO Specialist.
2. Social Media Cost
For Social Media Post for your online business, the cost will depend on the amount of work to be done and the number of social media platforms you wish to maintain for your business. Do not assume the role because owning and running a personal social media account is not the same as running social media accounts for businesses.
There must be consistency in maintaining all active social media platforms for your business. Employing the service of a social media specialist will ensure that content is created and posted on a timely basis and that reviews and comments are properly attended to. According to ZipRecruiter, the average reported pay for a social media manager is $4500 per month
3. Web Content Cost
It is understandable if you are unable to write the content yourself. There are freelance content creators you can hire to write your web content. This is apposite because you need your content to pass the quality score to rank on Google and other Search engines. Up Reports 2023 provided an analysis of how much it costs to hire a freelance content creator in the USA for your online business. A 1000-word content ranges between $200 to $750. Some freelancers charge $0.30 to $0.90 per word.
4. Pay Per Click
Paying to attract customers to your online business is also achievable. The amount you pay will depend on the keyword you choose to rank for and when a customer clicks on your ads. You have the ability to target your customer’s interests, demography, etc. When you use, for example, Facebook Ads. You can budget $100/month for a start and increase the budget as you denote success.
5. Webinars
Organizing Webinars and attending the same when organized by like-minded businesses is another way to market your business. Webinars allow you to connect with potential customers who must have subscribed to attend because they saw the value during the Webinar advertising phase.
Traditional Marketing Efforts
In addition to Digital Marketing for your online business, you can include traditional marketing efforts such as distributing flyers and Brochures in your community and at car parks. You should also attend events as an exhibitor to showcase what you’ve got to people and network professionally at conferences and events.
Read more: What makes a business successful?
Comparing Businesses with employees and those without employees – How much does it cost to start a Business Online?
Studies revealed that online businesses which chose to go solo often spend around $18,000 in total while online businesses with employees recorded spending up to $65,000 a year in running the business. Note that the cost to start a business online can reduce if you already have the listed expertise above and the time to do some of the work yourself. However, you should be on the lookout if you are making headway, so as to avoid spending money without seeing results. Thus, at that point, hiring employees to carry out the process would be ideal.
Key Takeaways from how much it costs to start a business online recommended by People Connect are:
- Start Small
- Use free tools
- Hire medium-pay range freelancers who can offer the same results as high earners.
- Always measure performance and re-strategize if need be.