How to start a small online business

Some people find it difficult to generate ideas, but that’s probably because they overanalyse their light bulb moments before they’ve had a chance to form properly. It’s good to spot the obvious flaws straight away, since it saves time and frees up space for the next divine intervention, but for many people the real problem is lack of belief in themselves. Surely, they think, if it’s truly a good idea someone else has already exploited it?

It takes a few seconds to establish the existence or not of competitors, so it’s daft to dismiss an idea without checking. Taking an objective view, you’ll likely find the current occupants of your market are pretty poor at what they do. If you’re unlucky, your target market may be dominated by an efficient operation, in which case you might want to look for another idea, but in my experience most markets are underserved in one way or another.

Many people reject ideas because they think the concept is too big for them, but this is merely a failure of imagination. Spend too long in corporate employment and you might start to believe that you should stick to your particular hamster wheel, safe within the confines of a job description in a company that only works because everyone else is doing the same. Run your own business and suddenly you’ll be running on several wheels, so don’t let your conditioning dictate your capabilities; you’ll be surprised what you can achieve when given the room to breathe.

In a perfect world, your idea will be riding the crest of a wave, with increasing demand that shows no sign of slackening. You can track the trajectory of almost any trend using Google Trends, which visualises the ebbs and flows of internet interest by charting the popularity of keywords as a proportion of total searches. Type “iphone case”, for example, and you’ll spot two things: the phrase is most popular around Christmas, rather than aligned with product launches; and it spiked in 2014 and has been fairly steady since then. This doesn’t prove fewer people are searching for iPhone cases – although that may be true – but rather that the phrase forms a lower percentage of searches in the past year.

On the other hand, “Galaxy case” has been on the decline this year. So, if your idea is to supply personalised smartphone cases, you’ll have to decide whether it’s sensible for your new online business to focus purely on the Galaxy, or whether the data from Google Trend suggests that a flexible manufacturing process that targets more models is likely to pay off in the long term.

When using Google Trends, it’s important to include “buying words” in your search, since there are plenty of topics that people search for that won’t lead to a purchase, say “buy X”, “Y kit” or indeed “iPhone case”. Look at the competition and don’t be frightened if Google tells you your phrase is highly competitive – this suggests there’s money in it, and that a slight variation might be profitable.

I’d recommend starting small, preferably in parallel with your existing business or day job (make sure your contract doesn’t forbid it). It’s by no means typical or necessary to seek investment during the start-up phase, not least because you’re unlikely to get any until you’ve demonstrated there’s a profitable business to be had. By starting small and only investing money you can afford to lose, you can test your idea without risking everything or being laughed out of the office by some venture capitalist.

Personally, I’m a risk-averse control freak who wouldn’t under any circumstances give away equity in his company to make it grow faster. I’ve experienced what it’s like to have sleeping partners in the wings; it can be rather unpleasant. That said, some entrepreneurs are happy to sacrifice a degree of control and ownership for the shot in the arm that a properly qualified and resourced investor can offer.

Doing just enough research

The internet provides not only a platform to sell your product or service, but also a way to research whether it’s likely to sell in the first place. When it comes to striking a balance between thorough up-front research and getting the product in front of customers, I strongly recommend Eric Ries’ book The Lean Startup. Bear in mind that the job of a start-up is to learn how to make money, not necessarily to be profitable itself. Once it’s served this function, the company can employ the knowledge gained to create a sustainable business.

That said, while it’s important to do sufficient research, don’t let it become an excuse for procrastination. You need to do enough research to support your investment of time and money and get a product to market – even if it’s a bit rough-and-ready – and no more. It needs to be good enough to be a valid test of whether it’s going to pay off. If you were planning to launch an online clothing retailer, you’d need enough stock lines to test whether your marketing, pricing and conversion techniques were going to bring in enough profit to make it worth scaling up. If you were planning to make smartphone cases, you might begin with one model and see how it goes. Alternatively, you might design cases for a wider range of phones, but print them on demand until you discover which ones sell well enough to justify the expense of having moulds made.

Enjoying the work

Contrary to popular belief, you don’t have to love creating your company’s products, but you do have to be excited about what your company does for customers. For example, if you start a business that makes the bolts for prosthetic limbs, making the bolts themselves is hardly going to be exciting, but knowing how they’ll be used will be hugely fulfilling. It makes little sense to simply “follow the money” and start businesses based on perceived financial promise. You’ll be devoting many hours to your new enterprise, and it’s inevitable that some tasks will be less interesting than others, but you must be fully behind the core concept on which your company is built.

Choosing the right technology

If you’re setting up an e-commerce site, test the main providers thoroughly before plumping for one. Volusion and BigCommerce are great all-round choices, although I’ve heard good things about Shopify. The more products you intend to sell, the more important it is to select the right platform. I can’t recommend the freebie options such as PrestaShop and osCommerce, since I’ve found them more difficult to set up and harder to achieve professional results with. To be frank, it makes no sense to scrimp here – the shop is the most important part of any e-commerce business.

If your business sells services, you’ll still need a good-quality website. I’d recommend WordPress as the platform for that site. In almost every case, you should involve someone who knows how to design and build your online presence so that it looks professional and works as such. Most of the visits to my online retailer are from mobile devices, so it’s essential you choose a responsive design that works as well on small screens as it does on laptops. Ignore the race to mobile at your peril.

All online businesses need office software, and Microsoft’s Office 365 represents excellent value for money for small firms. Nonetheless, I prefer Google Apps, largely because it’s browser-based, which means I can access and edit documents on almost any internet-connected device. Google Apps, which includes cloud storage via Drive and document editing through Docs, Sheets and Slides, feels more integrated to me, and I find it more intuitive to use. I retain my subscription to Office 365, since Word is still the best-supported tool for creating and formatting e-books, but even that’s becoming marginal in my case.

For bookkeeping, I recommend FreeAgent, although Xero and Kashflow are also very good indeed. Sage, once king of the accountancy software heap, has struggled to adapt to the growing market for online software and its range of products is comparatively difficult to use. Completing my first VAT return on FreeAgent – having been stuck with Sage for many years – was one of the best days of my working life.

Running your venture

Without marketing, you don’t have a business. Accept and embrace this fact. It’s far easier to enjoy marketing your own business, since you’ll believe in it and your marketing will feel genuine as a result. Promoting your business must never become an afterthought. Unless you connect effectively with a sufficiently large audience of target customers, your business will fail – no matter how good the idea.

Google AdWords remains the single most effective platform for generating instant sales. For most businesses, I’d recommend starting there and getting your AdWords campaigns running profitably before you even consider any of the other platforms. In the UK, Google represents around 85% of traffic; Microsoft’s Bing advertising platform is many years behind in depth, sophistication and flexibility.

Social media marketing and search engine optimisation are tasks that require small amounts of effort over a long time. A complete marketing strategy will involve both fast paid-for results, and a drip, drip of attention gained by posting good content on social media and blogs to increase the prominence of your business.

Choose your social media platform based on where your customers are most likely to be found. If I were selling technology, I’d get involved in a community on Google+. Most Twitter users are under 50, and half of them are younger than 35, with an even gender split. On average, Twitter users are more literate and better educated than the population as a whole; if that sounds like your target customer profile, try the Twitter advertising tools.

On a day-to-day basis, your primary role is to manage cash and make sure it doesn’t runs out. Lack of cash kills businesses, even those with good products. As soon as your bank is prepared to lend you money, arrange for an overdraft facility. This way, you won’t be left destitute when a client fails to pay on time. All major banks have decent online banking portals, so there’s no excuse for being unaware of your situation.

Being an entrepreneur

In the real world, businesspeople make money by acting with integrity and treating their customers fairly. This is particularly important for small online businesses, since service is one of the areas in which they can comfortably outperform the big, impersonal corporations. In fact, one of your biggest challenges is persuading potential customers that you’re trustworthy. For that reason, I recommend signing up to a third-party reviews site – ShopperApproved.com is my choice – that has a Google feed; your star rating will then appear alongside your ads.

One attribute that differentiates entrepreneurs from dreamers is single-mindedness: the former are like dogs with bones and won’t let go until the job is finished – or abandoned. That’s right, a true entrepreneur knows when to walk away. Going down with the ship may sound romantic and honourable, but it’s far better to have bought another ship before the first one sinks.

Entrepreneurs also know they need support. For many of us, this comes from family and colleagues, but also from business networks both online and in the real world. This is particularly important if you’re selling to other businesses. Look for a local breakfast club where you can go to learn how other entrepreneurs in your area are succeeding (or otherwise) and you’ll occasionally get the chance to pitch your services.