A Complete How-to Guide on Starting A New Online Business

by 26th of July, 2021

A Complete How-to Guide on Starting A New Online Business

Are you interested in starting a new online business? Keep these things in mind! First, you need to decide whether you want to start a strictly online business or extend a brick-and-mortar store online.

In this article, I'd like to take you through some of the different online business models that exist to give you some ideas to analyse and consider if you're thinking about getting into the 'e' world.

Please bear in mind that this is just a basic overview and not an exhaustive list.

Different Online Business Models

1. Direct Selling for Physical Products:

Most of the time, direct sales (especially with physical goods) would come first to most people's minds when they think of 'vending' online. Customer A purchases a physical item from your e-commerce store, and you deliver the goods to the customer's specified location. It's important to note that the online variant of the direct sales business model differs from the offline physical shop-based business model, and if you want to switch the physical store online, you'll need to change the practices to account for the differences.

This online business model comes in several flavours, including:

a. Pack your stuff by yourself and ship – this goes without saying. From inventory management to packaging and handling, you're in charge of the entire operation. This is the model I started with for my first online store, and the chances of making a mistake are very high unless you have good processes in place!

b. Go for Outsourcing/Drop Shipping – This is when you sell a commodity that you don't physically see or stock, and a third party delivers the order. There are no goods in this model, but it can be very profitable if done correctly, given the minimal effort involved. However, expect low margins because if your third-party supplier makes a mistake, the consumer will point the finger at you. Drop delivery is paired with white labelling to mask the third-party interference from the consumer, and it looks like they are purchasing directly from you.

2. Direct Selling for Virtual Products:

This is a direct sales model where you sell your customers "virtual" items on an item-by-item basis. eBooks, audio files, images, courses, and other multimedia items are examples of virtual products. The advantage of this model is that once you've created your virtual goods, you can turn it on and, to put it another way, "make money while you sleep."

The following are some examples of variations:

a. You create – This applies to you making the products for download or distribution and offering the provided services.

b. Using white labels – This is when you use material created by someone else, but the consumer still sees the logo and is unaware that a third party was involved in the process. They also are unaware that you did not create the product.

3. Direct Selling for Services:

Yes, single-transaction direct sales are possible for services. An accountant, for example, could sell personal end-of-financial-year tax returns, with full payment made electronically before the service is rendered. The customer then sends all of the requisite details to the firm for completion. Why are you doing this? The company receives immediate payment upfront; no chasing is needed, and no account management is required. For service-based companies that want to take advantage of online sales, there are a plethora of options.

The following are some examples of variations:

a. You deliver – This is where you sell the service and finish it yourself.

b. White-labelled – This is when you offer a service, but the order is provided by a third party, all under your brand name and without the consumer knowledge of the third parties involved.

4. Subscription:

This model works for both physical and virtual products and services.

The subscription model includes:

selling physical and/or digital services/products through your website,
receiving payments electronically, and
delivering according to subscription levels and schedules.

If correctly set up, this model can be very profitable, particularly if you need your customers to stick to minimum subscription periods. Adding a subscription program to an established direct sales model will also help smooth out the monthly revenue ups and downs, making it easier to control the cash flow and plan ahead.

5. Online Marketplaces

This model is popular among start-ups, those who need to transfer stock quickly, and those who want to build and operate an online membership-based market.

The following are some examples of variations:

a. Existing – for instance, eBay, Marketplace, Amazon and Gumtree: This business model focuses on selling on established websites such as eBay. I'm a bit hesitant about this model because it's not easy to get right, particularly given the fierce competition and customers' desire to get the best for the least amount of money.

b. In-house – you create your marketplace: This choice is for anybody who wants to make their own 'eBay.' This is a very uncommon model that is both expensive and difficult to implement. However, with this model, you have complete control and have no commissions to pay.

Direct Selling from Online Marketplace.

6. Combos

When you deploy several business models simultaneously or move from one model to another based on internal requirements, business, or consumer needs/factors, this is known as a combo. For instance, you might build a subscription-based business while still selling some products directly. One of the great things about the modern (internet) world is that there are so many options for setting up your online company. Furthermore, a digital model is much more adaptable than a conventional bricks-and-mortar model, enabling you to grow faster, cheaper, and more efficiently than your offline competitors.

7. Authority

Perhaps the newest online business model is that of authority or influence. This affiliate style of marketing can garner the person with authority a significant extra income stream. Whether they utilise Social Media channels such as Facebook, Instagram or Tik Tok or run an entire YouTube Channel or Podcast.

An authority business draws and holds attention online and can monetise that attention in various ways, e.g., pay per post, 'use my code' advertorials garnishing a % back to the influencer for sales using their 'unique code'.

If you have a significant number of followers or subscribers and provide entertainment, information, or inspiration to the point where people keep coming back for more, brands will be interested in collaborating.

In an authority business, the owner or brand is usually better known than any particular product or service they promote, and it's not a business that can be on sold for profits later on. The influencer is the commodity.

Do you have an online business that you are interested in selling, now or in the future?

Reach out to Jasmine Robson, the Online Business Sales expert now to make sure you are setting your business up to sell for the highest possible price.

Tags: small business success entrepreneurs