How Much Does It Cost to Start an Online Business (eCommerce)
Starting your own eCommerce business requires a little upfront cost. This guide will show you all the costs you need to consider before you begin.
So you want to start selling online. Lucky you - it’s cheaper and more accessible than ever before to start an online business.
That’s not to say that the process is completely frictionless, however. It completely depends on what you’re selling and to whom.
Today we’re focusing on eCommerce businesses. How much does it cost to set up your business and start bringing in cash? This deep dive will outline the costs you need to consider for your business plan.
Here’s What We’ll Cover:
Can You Start an Online Business Without Money?
Before we dig into the real costs of starting a business, let-s answer the big question.
Can you start an online business for free?
An online business with absolutely no upfront costs doesn’t truly exist. This is because time is money. What you’re not investing in actual funds, you’ll be investing in time.
On top of that, the internet is like real estate. You have to rent a space to set up shop. There are free hosting options but they won’t appear as professional to potential customers.
Then there’s the cost of your product. Even if you are making things yourself, you’ll have costs of materials etc, which we’ll go into.
So, in short: no. You cannot start an online business selling products with no upfront costs. But you can lower your overall startup costs. Read on to find out our best tips and tricks to keep costs down.
The Real Costs of Starting Your Online Business
You can’t start a business without:
- Web hosting
- Domain name
- Payment processing
These are the basic building blocks of an eCommerce business.
Web Hosting Costs
To rent your spot on the internet, you need a host. Web hosting comes in many different forms. You have integrated hosts like Wordpress.com, Wix and Squarespace are all-in-one platforms. Signing up to a website builder like those will enable you to get your eCommerce website live in no time.
Wordpress.com - from $11 per month
Wix - from $14 per month
Squarespace - from $12 per month
Weebly - free
Alternatively, you can purchase hosting from other providers to create your own website using Wordpress.org. This can give you more flexibility in memory and functionality for your website. For example, some web hosts can offer faster page-loading than Wix and Squarespace can. But the difference is negligible. For simplicity, web-building platforms are great. For customization and flexibility, self-hosting is ideal. Neither is better or worse - it just depends on what you’re looking for.
Bluehost - from $2.45 per month
SiteGround - from $6.99 per month
GoDaddy - from $2.99 per month
HostGator - from $2.64 per month
Hostinger - from $0.99 per month
Buying a Domain Name
Every professional eCommerce needs a domain name. There’s nothing worse than awkwardly having the name of your web host awkwardly tacked onto the end of your business name. It makes for a very ugly and unprofessional URL.
Domains are relatively cheap to buy. The most expensive solutions for domains can give you extra support. But you can get a domain name for as low as $0.99 if it is unique enough.
GoDaddy - from $0.99 per year
Name Cheap - from $0.99 per year
Building, Marketing and Shipping Inventory
This is the big one. To sell products, you need… well… products.
Selling products without inventory to fulfill orders is a scam. You have to have a functioning product ready to ship to your customers.
So these costs all come down to what you’re selling. Here are some costs to consider:
- Material costs
- Shipping costs
- Labor costs of production
- Marketing and advertising
Your initial product costs may be the most expensive in many ways. Perhaps you’ll want to create a smaller inventory of stock at first to get the first sales going. Low orders of manufactured goods often cost more per unit than huge bulk orders. But that’s just the price you pay to get your business off the ground (no pun intended). A good starting point is $1000 worth of goods to sell in inventory.
Of course, selling digital products online is the cheapest possible thing of all. You can sell infinite copies of one creation of yours that may only cost you time. If it’s an e-book or art print, it may only cost you time and the programs to create them. So for an e-book, that could be a Canva subscription. Art prints may require an Adobe Illustrator subscription or Apple Procreate.
You can lower your marketing costs by being as creative as possible with the resources you have. Gifting free products to influencers is a good route to go. Particularly if you are marketing to millennials and Gen Z. For Gen Xers and above, Facebook groups are a great free marketing tool. It will take time to build an audience. But you’ll be able to nurture a loyal fanbase that will buy from you for a long time.
Alternatively, if you have a little to spend on targeted ads, Facebook ads are a better investment than Google. You can get extremely specific with your audiences and desired outcomes. Facebook ads can cost as little as $5 per day. Although most experts recommend starting with a campaign of $300 in total and going from there. Lower than that and you’re unlikely to make much headway.
About Payment Processing
The final piece of the puzzle is payment processing. Yes, you pay to receive money, unfortunately. It’s the way merchant accounts work!
There are two aspects to this. The front-end processor on your website and the back-end payment processor that actually pays into your bank account.
This can get confusing as sometimes the same company offers both services. So stay with me.
If you have a WordPress website, you’ll need the WooCommerce plugin to start operating as an eCommerce platform. WooCommerce is the front end that creates payment gateways to your backend payment processors.
Squarespace and Wix have their own integrated payment gateways that can appear on your website.
Behind the scenes, PayPal and Stripe are the two most common payment processing services. The fees are relatively similar for both. There are no upfront costs to set up each of these services. However, when you start making money, they will take a percentage depending on how your customer paid. It could be a credit card processing fee or international transfer fees for example.
As a guideline,
Additional Costs of Starting a Business
The above four items are the basics of starting a business. But there are some extraneous costs to consider that may not apply to every business. This list is not exhaustive.
- Licensing - $50-several thousand of dollars
If you’re selling consumable products, skincare or other personal items, you may need a license. It’s best to research the local laws to see exactly what you’ll need to operate your business legally.
- Accounting software - $7+ per month
You could start a business with a humble Excel spreadsheet. But who really wants to do that? Investing in an all-in-one accounting software is ideal for starting your business right from the beginning. It makes tax accountancy way simpler too.
- Incorporation - $50-200
If you choose to incorporate your business, there is a federal registration fee. Sole proprietorship is cheaper than full incorporation.
There are a lot of variables when it comes to business startup costs as we’ve discussed. The exact costs for starting your specific business depend on what you’re selling and how you’re selling it.
Here is a rough summary to give you an idea:
Web hosting - $3-15 per month
Domain name - from $0.99 per year
Inventory - highly dependent on your product but $1000 maximum is a good place to aim initially
Payment processing - around $0.30 per transaction
We hope this blog post was helpful! For more guides like this one, head to our resource hub.