How to start an online business from home?

Posted by: | on October 13, 2022

How to start an online business from home?

A step-by-step guide to learn everything you need to know about successfully starting an online business from home to find the flexibility, and freedom you desire.

home based online business

If you’ve dreamed of one day starting your own online business from home, then you’re not alone. In fact, there are 38 million home-based businesses in the United States.

Many of these business owners cite reasons such as wanting to be their own boss, wanting to pursue their passion, and dealing with the loss of their job due to unexpected life events, such as the coronavirus, as the main driving forces which push them to get creative and look to online methods of earning their income.

Starting an online business from home isn’t an easy feat. You might be stuck wondering what you can offer potential customers, or where to begin in figuring out how to start an online business. 

To help you get started, we’ve written this step-by-step guide that will tell you everything you need to know about successfully launching an online business.

We teach you how to find your perfect niche and develop a business idea, as well as the necessary steps to take when setting up your venture – whether you’re selling a product, service, or know-how.

Why should you start an online business? 

Starting an online business offers several clear advantages over a traditional brick-and-mortar business. Here are four to keep in mind. 

1. Improved scalability

Scaling your business means you increase your output in a cost-effective and reasonable way.

For example, if you own a brick-and-mortar retail clothing store, scaling could mean opening a second store location. That would involve finding a new location, renting or buying it, hiring staff, filling the store with inventory, and paying the ongoing costs (payroll, utilities, rent or mortgage, etc.).

The high upfront cost and delayed ROI are prohibitive for many business owners. 

On the other hand, if your store was online-only, you could scale without the need for such a large investment. You could widen your product offerings while dropshipping them so you don’t need to pay for inventory upfront. You could grow your social media organically. Further, you could invest in advertising to increase the traffic to your website as it suits your budget. 

While scaling an online business does require some investment, it’s minimal compared to a traditional brick-and-mortar business. 

2. High-profit margins and low overhead

Next, the low overhead doesn’t just apply to scaling an online business. You can also start one with minimal expenses as you won’t need retail space, an expensive office, furniture, or inventory. Costs will vary depending on the type of online business you open but can be very low. 

For example, if you start a service-based business offering social media marketing, virtual assistance, writing, web development, or graphic design, you could build a social presence for free and a low-cost website for as little as $100. All you need is your skillset, a computer, and an internet connection to do the work.

If you decide to sell products, you could set up a low-cost website, social profiles, and a dropshipping system. Working online eliminates many of the costs that come with a physical business and enables you to start scrappy. 

3. Location independence

Ever see those people working on their laptops from a tropical island with their toes in the sand? That could literally be you if you start an online business. Working solely online gives you the freedom to live and work from anywhere in the world — as long as there’s an internet connection. 

While running a successful business of any sort requires organization and hard work, you won’t be confined to certain work hours or an office in a particular location. In many cases, you can set your own work hours around the times that work best for you.

It’s a new level of freedom that unlocks a life with many more possibilities. Even if you don’t want to move to that tropical island, you could vacation there without needing to ask your boss first!

4. Limitless market reach

Lastly, imagine a coffee shop locally owned and operated in a small town. Even if it’s the most popular cafe in town with the best pour-overs, it can only reach people in the area.

However, imagine if that coffee shop launch an online store and sold bags of coffee and merchandise that could be shipped anywhere in the world. Then, that coffee shop would have limitless growth potential. 

Online businesses don’t face the limited markets that hold offline businesses back. You can target any market in the world using search engine optimization, social media marketing, and paid media strategies as long as you can coordinate shipping. 

3 Examples of online business models to inspire you

Not sure what kind of online business to start? Here are some good business ideas to inspire you

1.Start an Ecommerce store

An e-commerce store is quite simply a store that sells its products online. 

Example: 

  • Company: Zappos 
  • Website: Zappos.com
  • Founded: 1999
  • Mission: To live and deliver WOW

Zappos started out as a small online retailer that sold shoes and focused on providing the best customer service, customer experience, and company culture. To achieve that, they offered and still offer 24/7 customer service, free shipping both ways, and free uncomplicated returns.

Over the last 20+ years, the company was acquired by Amazon and has expanded into selling clothing, accessories, handbags, and more. In 2020, it had $629.4 million in global net sales. 

2.Become an affiliate

Affiliate marketing is a business model that involves advertising a merchant’s products or services and earning a commission in return. 

Example: 

  • Company: TripAdvisor
  • Website: https://www.tripadvisor.com/
  • Founded: 2000
  • Mission: Helping hundreds of millions of people each month to become better travelers, from planning to booking to taking a trip

TripAdvisor is the largest travel website in the world. It’s a resource with over 950 million reviews that many trust when looking for guidance on accommodations, experiences, restaurants, and more. But how does it make money?

By helping people find deals. Each time someone books through TripAdvisor, TripAdvisor gets a commission. They stand out among the rest due to their strong, far-reaching, trusted brand available in 43 markets and 22 languages.  

3.Create a profitable blog

A blog is a website that contains an ongoing, ever-growing collection of posts. Profitable blogs are often focused on a particular niche and can be monetized by ads, affiliate marketing, product sales, and more. 

Example: 

  • Company: Cookie and Kate
  • Website: https://cookieandkate.com/
  • Founded: 2010
  • Mission: Celebrating good food — real, sustainable food that delights the senses and nourishes the body

Cookie and Kate is a blog created by a woman named Kate, who is obsessed with food and loves photography. She thinks cooking should be fun and recipes should be flexible. She also doesn’t eat meat, believes in eating whole foods, and loves an occasional indulgence.

Her blog includes a comprehensive collection of recipes (with her photos) that reflect all of the above. She’s also published her own cookbook and has a shop with a variety of cooking products. She aims to help others celebrate good food. She’s doing a great job as her website had well over 7 million views in October of 2021.

Follow these 10 steps to launching an online business from home

Now that you have some inspiration for an online business, here are 10 practical steps to help you build one:

  1. Find a business idea
  2. Find what to sell online
  3. Be legally compliant
  4. Conduct online market research
  5. Define your target audience
  6. Define your product management strategy
  7. Evaluate product viability
  8. Define your brand identity
  9. Define the marketing strategies to fuel business growth
  10. Launch your online store

Step 1. Find a business idea

All great home-based, online businesses start with an idea. This can be one of the most daunting parts of starting an online business: where do you even begin? 

The following strategies will have you overflowing with business ideas in no time.

Ask yourself what skills do you have

The best place to start is by looking at your own skills, expertise, and knowledge. Generate ideas by asking yourself:

  • What areas have I studied, whether at university, college, through an online course, at a workshop, etc.?
  • What subjects have I taught to others before? For example, are you the go-to person in your current workplace when it comes to training new employees about certain systems, software, or skills?
  • What topics have you researched the most, whether for work, education, or your own curiosity?
  • What class did you perform the best in during school or college?

Ask your friends and family what you’re good at

Sometimes, we fail to see our own talents, so this is where our friends and family can help us out.

  • What do your loved ones compliment you about the most?
  • Growing up, were you often told you were particularly good at something?

Reach out to your friends and family and ask them where they think your talents and skill set lie. 

Ask your former employees and coworkers

If you’re still in contact with any former coworkers or employees, get in touch with them to find out what they best remember about you.

Was it your patience when they needed your help? Or perhaps your excellent, easy-to-understand way of explaining more complex subjects? The answers to these questions may help you identify where you shine in a business context. 

Create a “skills map” 

This is like a topic map but will be used to map out all the skills you know are good at. Putting your skills down on paper will allow you to see them all at a glance, helping you form connections between skills or choose the one that stands out the most to you.

Here’s how to create a skills map:

  • Start by writing “skills” in the center of your map.
  • Branch out from the center to write your main skills as words or phrases.
  • Explore or break up each of these main skills further by drawing smaller “branches” off of each and writing more words or phrases relating to that idea.

You can complete your skills map using pens and paper, or use a free tool like Mindmaps App. 

See what new insights you find by arranging your skills in this way. Finding a fresh take on a common skill or subject is a great way to develop a business idea. 

Step 2.Find what to sell online

Once you’ve brainstormed ideas for what type of business you can start, the next step is to work out what your business should sell online, which will be either product, services, or your know-how.

Sell Products. 

These are physical objects made available for consumer use. Unlike services or know-how, products are tangible. That is, they can be picked up, touched, and interacted with.

Examples of products being sold online include:

You might make your own products or source them from a wholesaler or drop shipper, we’ll talk about sourcing products later in the guide. 

Offer & Sell Services. 

Services can be defined as tasks performed in a professional and knowledgeable manner by an individual or team for the benefit of its customers.

Examples of services that can be sold online are:

Sell knowledge & expertise 

If you’re knowledgeable about a particular topic that is of interest to your target audience, you can sell your knowledge in one of these forms: 

When selling your know-how online, you’ll want to focus on four important factors to ensure its success:

  • Provide your target audience with an answer to their biggest problems. What are they trying to achieve or overcome? Based on your knowledge, what are the necessary steps to do so?
  • Offer your know-how at various price points to make it accessible for a wide range of your target audience. For example, you might have an eBook priced at $14.95, a 7-day email course priced at $49, and an in-depth video course with printable workbooks priced at $799.
  • Set up necessary online channels to market what you’re selling, including a website, blog, email newsletter, and social media accounts.
  • Make it easy for the buyer to purchase with a simple checkout process and the option to accept payment using PayPal, credit card, or weekly/monthly payment installments.

Whatever you are going to sell, it must have:

  1. Great market viability. A market that is “viable” is one that will continue being profitable for a long time, therefore helping your business to remain successful. Will there be a need for your product or service in many years to come?
  2. Competitive advantage. What does your product or service have that will allow you to outperform your competitors? What will you do better than them and how?
  3. Active target audience. Are there people currently searching for what your product or service offers? Does your product or service target a niche, yet large enough audience to generate plenty of sales?
  4. Fits within legal requirements. Do you have the licenses, permits, or certifications required to run your business and sell your product or service? This brings us to our next section…

Find a profitable niche

After you define the type of product you are going to offer, you need to find a profitable niche for your business. 

A niche is a very focused business area of a broader market. A business that only sells clothing for newborn babies, for example, is a specialized niche within the broader fashion market.

Important benefits of having a niche business include:

  • Less competition in a smaller, more specialized market, giving you a better opportunity to stand out
  • The ability to offer niche market expertise, as well as a specialized skill set and knowledge base
  • The potential to price your products or services higher as you have less competition, yet healthy demand
  • Greater customer loyalty, retention, and satisfaction, as you’re meeting a very specific need in a smaller market
  • Differentiation from competitors serving a more general market

You also need your niche to be profitable to guarantee the success of your home-based, online business.

To find your profitable niche:

  • Focus on an area you are knowledgeable and passionate about (think back to your “skills map”)
  • Identify subtopics within this area and research each one
  • Analyze the target audiences within these areas and think about their needs and wants to identify potential gaps in the marketplace 
  • Research if this sector is evergreen, or has consistent interest over time. To determine this, perform a Google search for the fastest growing industries by revenue growth in your country or use Google Trends.

Step 3. Be legally compliant

Before you launch your online business, you’ll need to make sure you’re legally compliant to avoid any fines or legal issues.

The information below applies to US-based businesses only, so it’s vital that you check your own country’s legal requirements for starting a business, as laws vary.

Additionally, the licenses, permits, or certificates you require to stay legally compliant vary based on your industry and state/country, so always check with local authorities first to ensure you know exactly what is required of you legally before you start your online business.

US-based businesses are required to apply for a business license, as this provides the government with a way of tracking enterprises operating within the area, as well as tax revenue generated.

To obtain a business license, you’ll need:

  • A detailed description of your business’s activities
  • A legal structure. Will you be operating as a sole proprietorship, limited liability company, or corporation?
  • Any required inspections or permits, based on your region’s rules and regulations
  • A sales tax license, if required, from your state agency

You’ll also need to maintain relevant licenses, permits, or certificates and prevent them from expiring.

Step 4.Conduct online market research

When you conduct online market research, you are simply gathering information about the market you will be entering, as well as your competitors and customers.

This is an essential step in starting your online business, as it helps you to determine if there’s a healthy demand for what you plan to sell.

When we talk about demand, it refers to:

  • The need for your product/service/know-how
  • Who wants to purchase what you’re selling?
  • How much are customers willing to spend?

To understand these things, you’ll want to understand where your customers spend time online. Do they use forums? Spend time on Facebook? Or do they prefer to read blog articles? Knowing this will help you get the best information to understand your customers. 

To begin conducting your online market research, you’ll want to use the following tactics and tools.

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