In my previous article on My Latest Take On Hosted vs Non-Hosted Ecommerce Solutions, I recommended two hosted shopping cart solutions, Volusion and BigCommerce, that do not charge any transaction fees for using their service. Not being charged a percentage of your sales is nice because you can run your store at more or less a flat monthly rate(not taking into account credit card fees) that does not scale proportionally to your revenues.

A few weeks ago, I signed up for trial accounts with both Volusion and BigCommerce and decided to compare the two services. Before I get into the guts of the review, I’ll just tell you up front that you can’t really go wrong with either service and choosing between the two really depends on which features and factors you value more.

I also wanted to mention that I’m not going to really go into that much depth in terms of the backend features of either solution as both Volusion and BigCommerce offer more than enough features to manage a big time store. Instead, I’m going to focus on the differences between the two from a price/usability/support standpoint.

What Volusion And BigCommerce Do Well

As soon as you sign up for either service, you are assigned a personal consultant who will contact you by both email and phone. All I can say is that this is really cool. If you are a clueless new shop owner and you have questions, you are given a direct point of contact with which to obtain help and support.

I ended up chatting with my assigned consultants on the phone for 10-15 minutes each and pretended to be a customer looking to migrate an existing shop. The consultants from both companies could answer basic questions as well as some of the more technical ones.

For example, I asked Volusion if I could issue 301 redirects for products from my old store to my new one. I also asked if I could have SSH access directly to the server instead of having to upload my changes via FTP or use the web interface (The answer was no unfortunately). Turns out that direct access to anything server side is pretty much off limits which is understandable. The only code or scripting that you can perform is HTML/CSS and javascript.

Customizing Your Store

Before I get into the more GUI oriented features, I just thought I’d say a few words about customizing your store with either Volusion or BigCommerce. With both services, there is a learning curve in regards to figuring out where all of the files reside and what they do. But in general, both shopping cart solutions do a great job of separating out the core shopping cart functionality from the aesthetics.

In other words, you will never have to deal with ASP code or php code at all. In fact, all you have to really know is a little HTML/CSS in order to fully customize your store. Both Volusion and BigCommerce have completely abstracted out all of the shopping cart functionality from the files that you have access to. Using simple directives, you can move around menus, rearrange your store and give it a whole new look without worrying about breaking any core functionality. This may not seem appealing to someone like me who wants full control of everything, but to someone who is tech averse, this is awesome! Using their templates and a smidgen of HTML/CSS, you can throw up a decent looking store very quickly.

What BigCommerce Does Better

From a design and usability standpoint, the BigCommerce design interface struck me as more modern and hip compared to Volusion. Not only does BigCommerce offer more templates but they also look better as well.

Whereas Volusion’s templates come across as kind of vanilla, Big Commerce’s templates are more eye catching and attractive. Of course this only really matters if you are going to go with a standard template with your store, but my first impression was that you can create a better looking store out of the box with BigCommerce.

Another feature that makes BigCommerce shine from a design perspective is that they offer a drag and drop interface with which you can reposition key shopping cart elements using just your mouse. For example, let’s say you want to move a menu from the top of the screen to the left hand sidebar. All you have to do is click on the menu bar and drag it to the left and it will snap into place. Having the ability to massage your shopping cart graphically is nice if you want to quickly rearrange things around with your store in order to see what looks best before you freeze your design.

From a feature perspective, BigCommerce and Volusion are both pretty much on par. Bigcommerce has a few additional minor features like social media toolbars and easy YouTube video integration but realistically, adding these things to your cart is as easy as copying over some javascript code. In other words, they aren’t a big deal.

However, BigCommerce does have one nice useful feature that Volusion doesn’t have and that’s an abandoned shopping cart report. If a customer enters their information and then bails, you can generate a nice report that outlines when, where and how often this happens. This information is useful because you can then try to get them back somehow by either contacting them or giving them a coupon.

To sum it all up, BigCommerce is a sleeker entry into the hosted ecommerce arena from a design and graphical perspective. Their out of the box stores just look better.

What Volusion Does Better

The big advantage that Volusion has over BigCommerce is that they’ve been around longer and it shows. Since they’ve been in business for over 10 years and host thousands of shopping carts already, their library of tutorials and videos is pretty vast. Basically, they have years and years of experience answering commonly asked questions and have created tutorials and FAQ pages that cover almost anything you might want to know.

Since they’ve been around for so long and have a large customer base, this gives off the impression that they are a more stable player. Remember, whenever you sign up for a hosted ecommerce solution, you are essentially getting yourself pregnant. You become tied to their service. If your ecommerce platform goes out of business, then so do you. Stability matters and Volusion has definitely been around longer.

The other advantage that Volusion has is with their support. Volusion offers support by phone and email 24 hours a day,7 days a week. Just to test this theory, I contacted them on a sunday afternoon and was able to get someone to answer questions. BigCommerce offers phone support as well, but if you want to be able to contact someone any day at anytime, Volusion is your best bet.

Some other things that Volusion has that BigCommerce doesn’t is a fully PCI compliant store. This shouldn’t really be a major decision making factor as long as you can accept credit cards with your store. In addition, BigCommerce is working on being compliant and will probably be compliant at some point in the near future.

One useful thing that Volusion has that BigCommerce doesn’t have is the ability to send out email newsletters to customers. Email marketing is very important to an online store and is an easy way to get repeat customers for your business. BigCommerce only allows you to export email addresses to a file so you’ll need to sign up with a separate email marketing service in order to send out newsletters.

Some Comments About Pricing

If you go based on price alone, BigCommerce seems to be cheaper than Volusion in terms of what you get. For example for 25 bucks, Volusion allows you to sell 25 products with 1GB worth of bandwidth a month. For the same 25 dollars, BigCommerce allows you to sell 100 products with 2GB of bandwidth. However, don’t be fooled by the low pricing. As your store matures and you require more bandwidth, Volusion actually ends up being cheaper later on. In other words, Volusion’s higher level plans are cheaper.

For example, if we were to use Volusion with our online store today, we would need to sign up for the Gold package which costs 99 dollars a month. With BigCommerce however, we would require the platinum package which costs 150 dollars a month. As your store grows, you will discover that you are limited by bandwidth more than the number of products(for most stores at least). Volusion’s entry level packages are more expensive but get cheaper as time goes on.

Conclusion

Like I said in the introduction, both Volusion and BigCommerce are incredible hosted ecommerce solutions. When making a decision it depends on what you value the most. BigCommerce is definitely flashier, with better design tools and templates. They are also cheaper in the beginning when you are just starting out.

Volusion offers superior 24/7 support with more tutorials and online help. Volusion also becomes less expensive as your bandwidth requirements increase. They have also been around the block longer and come across as the more stable incumbent. The choice is up to you.

As long as I’ve been writing tutorials on how to open an online store, I’ve always advocated going with a free open source shopping cart and hosting it yourself as opposed to signing up for an all-in-one hosted ecommerce solution. After all, if you host your shopping cart yourself, you’re in charge of your own destiny. You have full control over the source and no one can suddenly raise prices on you. Plus, there are many cool things that you can do on your own that the big hosted solutions won’t allow you to do.

Photo By Kevin McShane

But after running this blog for a couple of years now and listening to reader feedback, I’ve come to realize that using an open source ecommerce solution and self-hosting may not be the right solution for everyone.

Some people are just completely tech averse and don’t want to deal anything remotely related to computers or technology. While I used to urge these people to learn some of the basics, what would inevitably happen would be that these people would quit before they even got started because they were scared of the technical aspects of running a store.

Of course, some people are just not cut out to be entrepreneurs but I strongly believe that by just giving yourself a chance, you are already half way there. By making it easier to start a business, you are more inclined to take the plunge. Don’t get me wrong, self hosting your shopping cart is still a superior solution in my eyes for the control and flexibility, but I thought that it might be a good time to evaluate some of the leading hosted shopping cart solutions.

What’s Out There?

For the last couple of years, I’ve been recommending Yahoo Merchant Solutions mainly because I had test driven the cart and several of my friends and competitors successfully use Yahoo to run their business.

Yahoo is an excellent hosted shopping cart, but the main thing I always had against Yahoo was that they charge you a percentage of your gross sales. Taking away 1.5% may not seem like a big deal early on, but once your store becomes big, 1.5% can be a huge chunk of change. Also what sucks is that this 1.5% is applied directly to your revenues and not your profit. If you run a store with low margin goods, 1.5% could mean the difference between losing money and being profitable. Now that there are more choices out there that do not take any fees whatsoever, I can no longer recommend Yahoo.

I spent this last weekend test driving hosted shopping carts and I found that both Volusion and BigCommerce offer an awesome hosted shopping cart solution for a low fixed monthly fee. That’s right! Just a low fixed monthly fee and no transaction fees whatsoever! Plans actually start as low as 25 bucks.

Their business model is different than Yahoo in that they charge a flat fee based on the number of products that you offer in your store and they also impose a bandwidth limit as well. But outside of the monthly fee and possible bandwidth overages, your fees will not grow linearly with your revenues like with a Yahoo Store. Volusion and BigCommerce make their money from a fixed monthly subscription model as opposed to taxing their merchants.

The Design Tools Are Better Now

The other thing that I noticed was that the out of the box graphical design tools are now much better with the latest hosted solutions. Normally I could care less about graphical web design tools. After all, you will eventually have to touch html code to make your store look exactly the way you want it to.

However, peering through the eyes of the tech averse entrepreneur, I can see how these tools could be valuable from a psychological perspective. Being able to throw up a decent looking online store without knowing much html/CSS at all reduces uncertainty and postpones the hurdle of having to learn about programming.

Big Commerce for example offers an intuitive drag and drop interface where you can shuffle things around with your store at the click of a button. Both Volusion and Big Commerce also offer a pretty good library of standard templates for you to start out with. All in all, I found that I could throw up a decent looking store within a matter of minutes without knowing a lick of HTML.

Their back end features and tracking are also top notch, but what’s different now is that there’s built in support for popular social media sites like Facebook. Again if you know the basics of web development, adding these things isn’t a big deal but for a tech averse shop owner, it’s pretty convenient.

You Don’t Have To Be A Tech Expert To Start

If you have an ounce of tech in you or you are eager to learn about the web, then I still recommend hosting your own cart. Who knows? BigCommerce or Volusion could go out of business someday and take your store down with it. They could also increase their fees once you are dependent on their services.

But for now, both Volusion and Big Commerce are offering a heck of a deal at only $25/month to start a fully featured online store. If you want to avoid the technical aspects altogether and focus on selling, then going with either of these services is a no brainer.

Up next, I’m going to do a breakdown of Volusion vs BigCommerce while my evaluation is fresh in my mind. Both services offer various pros and cons so tradeoffs need to be made if you are deciding between the two.

Since I commonly get asked what services I use for my online store, I thought it would be useful to create a resource page that details every product, tool and service I recommend. If you are thinking about starting an online store in the near future, you should bookmark this page for your reference and convenience. Enjoy!

Web Hosting

Blue Host – Blue Host is the shared host that my wife and I used for 2 years to run our online store before we switched over to dedicated hosting. BlueHost is inexpensive, reliable and offers a wide array of free services. Highly recommended for new shop owners.

ServInt – ServInt is the dedicated webhost that I use now for every website I own including my blog and online store. Service and uptime are top notch and I’ve never had any problems ever. If you are looking for VPS or dedicated hosting, ServInt is awesome.

Domain Registrar and SSL Certs

Go Daddy – While I don’t recommend their hosting service for an online store, GoDaddy offers an excellent and easy to use interface with which to manage your domain names. In addition, they offer a very inexpensive SSL certificate as well. GoDaddy is the service I use for all of my domain management and SSL needs.

Incorporation, DBA, Business Paperwork

LegalZoom – For everything from registering your DBA or filing for an LLC or corporation, LegalZoom is awesome because they get the job done at a fraction of the price. Highly Recommended.

Product Sourcing

Worldwide Brands – An incredible service that helps you locate and contact wholesale vendors for products that you want to sell. The best part is that there’s only one upfront fee that you have to pay and then you can use the service for life. If you don’t like going to tradeshows or cold calling wholesalers, then Worldwide Brands is the way to go because they will save you time.

Global Sources – If you want to import your goods from Asia, then Global Sources is a good place to start. Going through the massive lists of suppliers can be intimidating on this site, but it’s a good place to learn about various trade shows and get in touch with potential vendors.

Canton Fair – This is the trade show that my wife and I try and make every year. It is enormous and a good way to meet vendors face to face if you don’t mind traveling to China.

Shopping Carts

Magento – Magento is one of the most feature rich shopping carts I’ve evaluated and it’s absolutely free. The only downside is that you need a fairly powerful webhost to run it, otherwise your website might get bogged down.

ZenCart – Zen Cart is an easy to use shopping cart that runs extremely fast on shared hosting environments. In addition, most shared hosts like BlueHost offer a 1 click install. Zen Cart has most of the features you need to run a small-medium sized ecommerce business and it’s free!.

OSCMax – Like ZenCart, OSCMax is an easy to use shopping cart that runs extremely fast on shared hosting environments as well. The main advantage of OSCMax is that it is based off of the OSCommerce code base and as a result, you can take advantage of OSCommerce’s huge plugin library. Also like ZenCart and Magento, OSCMax is completely free.

Volusion Ecommerce – If you are not a technical person, don’t want to deal with a webhost or a server, and want to throw up your online store as fast as possible, then Volusion is a great way to go. What’s nice about Volusion is that unlike other hosted ecommerce solutions, they only charge a monthly fee based on the number of products you are selling and nothing else. Volusion also offers 24/7 technical support.

Big Commerce – Like Volusion, BigCommerce also offers a great self hosted shopping cart solution for a fixed monthly fee. Big Commerce has a really nice drag and drop interface so you can design your shopping cart without knowing any HTML whatsoever. While they haven’t been around as long as Volusion and they don’t offer 24 hour support, they are slightly cheaper and provide you with free credit towards Google Adwords.

Shopping Cart Design

Algozone – Most of us aren’t web designers so the best and quickest way to put up an attractive online store is to purchase a template. Algozone offers a large variety of online store designs that you can tailor for your own store. Trust me, it is much easier to start out with an attractive design and then tweak it rather that start completely from scratch.

Credit Cart Payment Processors

Merchant Plus – An Authorize.net Provider – Back when I was looking for credit card processors, I couldn’t find a better deal than Merchant Plus. They offer very low rates and their support is excellent. Merchant Plus also integrates seamlessly with all of the open source shopping carts that I recommend.

PayPal Website Payments Pro – Since my wife and I use Paypal for many purposes already, we decided on Paypal Website Payments Pro to process credit cards for our online store today. Paypal is nice because it you can ship your packages directly from their interface which saves you from having to use a service like Stamps.com. However, their rates are higher so you have to weigh the pros/cons compared to using a service like Merchant Plus.

Communication, Internet Telephony

Google Voice – It’s free and it’s versatile. Google voice allows you to forward a call from one number to any phone line that you want. My wife and I use Google voice all the time and this service is completely free.

Skype – Skype is great for making international calls. If we have to contact our overseas vendors, we always use Skype because the rates are incredibly low.

Ring Central – Ring Central is an excellent service that is like Google Voice on steroids. With Ring Central, you can get a 1800 number with which you can send/receive calls or faxes at any time. In addition, you can create an auto-receptionist and a custom greeting that lets callers wait for an available employee. And like Google Voice, you can forward a call to any phone line of your choice or make calls from any phone using your office phone number. This service is awesome especially if you are short staffed in your customer support department.

Organizing and Manipulating Photos

Picasa – When you have thousands of product photos to go through, Picasa offers an easy way to breeze through your photo list and make minor edits. Best of all, it’s free.

Adobe Photoshop – I don’t want to say that Photoshop is a must have but it sure does save a ton of time. Sometimes when my wife and I take our photos, they aren’t perfect and we need to make minor edits. For example, if there are wrinkles in our product, we can remove them using Photoshop which saves us a ton of time. Not required but highly highly recommended.

Smug Mug – This service offers an excellent means to backup your product photos online. They store and replicate their photos across multiple datacenters located in different parts of the world so the chances of you losing your photos is extremely low. A must have service to backup your product photos and photos of your family.

Bookkeeping and Finances

Quickbooks – Quickbooks has become the defacto standard for small business bookkeeping. It’s inexpensive and it’s easy to use once you get the hang of it.

Quicken – Quicken allows you to manage your personal finances so you can get a clear picture of your overall financial situation. Wouldn’t be able to save money or build wealth as effectively without it.

Turbo Tax – I’ve already shown that Turbo Tax can perform as well or better than an accountant in my article on the Outcome Of Hiring An Accountant To Do Our Taxes Vs Using Turbo Tax Or Tax Cut. Seriously, TurboTax is awesome even if you run a business and will help you maximize your tax return.

Intuit Online Payroll – Intuit Online Payroll is an excellent payroll service that is priced really well. If you have employees, then it makes sense to outsource the payroll paperwork to someone else. Since Intuit Online Payroll is so inexpensive, it’s a no brainer.

Handling Shipping and Returns – Where To Get A Physical Address

UPS Store – The UPS store is awesome because you can sign up for a mailbox that has a real physical address. If you don’t want to use your own address (if you run your business out of your home) or if you just want to use a separate address, then opening a UPS store mailbox is ideal. Best of all, they will email you whenever you have mail.

USPS PO Box – A PO Box is a poor mans UPS Store mailbox. However, they are also about 10X cheaper than UPS. The disadvantage is that everyone knows that a PO Box is not a real physical address. In addition, PO Boxes can only receive mail from USPS. FedEx and UPS do not deliver to PO Boxes.

Packing Supplies

ULine – ULine is awesome! We get most if not all of our packing supplies from here and they are all reasonably priced.

Unique Packing – Uniquepacking carries some of the harder to find packing supplies. We purchase our cello bags and our anti rip bags from here.

Shipping Carriers

United States Postal Service – Since they are the cheapest shipping carrier and most of our items are lightweight, we use USPS for the majority of our orders. They aren’t the most reliable but are by far the cheapest if your package weighs less than 2 lbs.

FedEx – If the package exceeds 2 lbs, FedEx is our carrier of choice. As soon as you open an account, you get 15% off shipping which makes it cheaper than UPS out of the box. If you ship high volumes, then you can negotiate for better pricing.

DHL – We use DHL for all international shipments because they handle customs and everything for you. All you have to do is sit back, relax and pay the customs bill.

Website Maintenance And Backups

Site Uptime – I use Site Uptime to monitor the downtime for all of our websites. Basically, Site Uptime pings your websites at specified intervals and then sends you an email if your site is down. For all mission critical websites, I highly recommend this service.

Ready NAS – For onsite backups, I use a Ready NAS network storage appliance running RAID 1. This device sits on your network, mirrors your data on 2 drives and sends you an email if one of your drives is about to fail. If a drive is bad, you can simply hot swap it with a new one and the box will make your data redundant again. A must have for backups at home.

Marketing Tools

Google Adwords – Adwords is an incredible tool. Use it to drive very targeted traffic to your online store so you can gain new customers and improve your conversion rate. Even though most of our customers arrive at our website organically today, we still run Adwords to drive traffic because the ROI is excellent.

Aweber – We use Aweber to manage all of our email campaigns. With easy to use templates and awesome email tracking, this service is a must have if you run a newsletter. Read my review here on MailChimp Vs Aweber

ScreenFlow – Screencast videos are videos in which you display slides or whatever is on your computer screen while you narrate in the background. If you want to create screencast videos for your website, then screenflow is an excellent and well priced tool to get the job done.

Please note that some of the links above are affiliate links to products that will earn me a commission. These are all things that I have experience with that I am recommending because they are helpful and are companies that I trust, not because of the commissions that I may earn from you using these products.

Based on several emails that I’ve been receiving lately, it seems that a few of you are hesitant to start a business because you’re hung up or stuck on selecting a business idea to pursue. And the number one concern seems to be whether there is enough demand or too much competition in your niche to succeed.

Photo By Soller

I received an excellent email in my inbox a few weeks ago that pretty much summarizes where a lot of people are getting stuck so I’ve decided to dedicate a blog entry to the topic.

I just came across your site and it seems like an awesome resource. I have a question for you, that might make a nice blog post. I did a search of your site, but could not find the answer to my question, so here it is:

My wife has an idea for an ecommerce store. It seems to us that she’s found a pretty good niche. The niche seems to be emerging and trendy, but not a fad.

It seems to me that there are two aspects to identifying a profitable opportunity: market demand and market competition.

In order to assess demand, I’ve looked at the google keyword tool and there does seem to be plenty of searches. Are there any other good ways of determining market demand for an ecommerce store?

In order to assess competition, we’ve been googling to find competitors and there are a bunch. Then I’ve been using alexa/compete.com (flawed, I know) to see what kind of traffic these sites get. It appears that with a few notable exceptions, most of our competitors do pretty low traffic. Of course, I’m under no illusions that we’ve found all of our competitors either. I would also note that the google keyword tool indicates a high level of competition for most of the keyword terms.

Does you have any other suggestions for determining the level of competition?

The third remaining problem, is that I don’t know how to compare the market demand to the market competition. We’re just not sure if the demand / competition ratio is high enough to pursue this further. I just can’t think of a good quantitative way of measuring the demand / competition ratio.

Any tips on analyzing market demand / market competition ratio for an ecommerce store?

I guess it all boils down to: We believe there to be significant demand, how do we know whether or not there is TOO much competition to be successful? (we would define success in this venture as allowing her to quit her job, like your wife!)

Eric

Before jumping into anything, it is indeed extremely important to estimate the supply and demand for the niche that you are selling into. Here are some of the ways that my wife and I assessed the strength of our business idea before we got started.

We Used Keyword Analysis

Eric mentioned using keyword analysis as one of the ways he checked on the demand for his idea. With keyword data and the number of searches performed per month, you can also make some decent back of the envelope calculations to see if your niche is large enough for you to make a decent living.

For example based on your idea, you should be able to easily determine what your approximate profit per sale is by looking at your competitors’ prices and your wholesale cost. Then, by making a conservative estimate of your click through rate and conversion rate, you can obtain a range of profit numbers for your business idea. In fact, I go through this analysis in more depth in my article on How To Determine If Your Business Is Viable. While these calculations are crude, it is a good way to eliminate poor ideas with little demand right off the bat.

We Used Ebay

While Ebay is a horrible place to host your full blown business, it is very useful for determining demand and pricing for your products. Look for similar products in your niche and take a quick glance at the completed listings for relevant auctions. Based on the ratio of completed auctions and the ending price, would this be enough profit for your business to survive?

If you there are very few completed listings available, throw up a few auctions of your own and see how much people are willing to pay. As you are performing your experiments, it’s important to keep a few things open in the back of your mind. One, Ebay items tend to sell for much cheaper than normal online shops. This is because the majority of Ebay shoppers are looking for bargains and the seller’s brand is much less of a factor. Just to give you an idea, similar products to some of the ones we carry can be found on Ebay for up 20% less. However, the quality is hit or miss and most of our larger customers prefer dealing with an actual company as opposed to individual Ebay sellers.

Two, the item you are trying to sell may not be a good fit for Ebay. If you are selling unique hand crafted products or something with a completely new concept, it might be hard for shoppers on Ebay to find your stuff. The main reason is that shoppers on Ebay do searches for products rather than searches for solutions like people do on Google. In any case, if you are seeing a good amount of completed auctions, that’s a pretty good sign that the demand is there.

We Used The Forums

The forums are especially helpful for coming up with ideas for products to sell and for getting an idea of what people are looking for. Simply go to a popular forum in your niche and do a search for any of the following terms.

• “trying to find”
• “advice about”
• “I hate it when”
• “I need help with”
• “I’m looking for”
• “can’t find”
• “have no clue”
• “question about”

Obviously, there are other terms you can search for but you get the idea. People use the forums to ask questions and based on these questions you can come up with solutions to sell for their problems. If you already have a product idea, do a search. Are people looking for or talking about it?

The forums are extremely powerful. Early on with our wedding linens store, we used The Knot and The Wedding Channel forums to communicate with would be brides about what products to populate our store with. People on the forums are very responsive, especially if they believe you can help them out.

We Used Adwords

These days, throwing up a store is quick and easy, so why not just put something up and drive some targeted traffic to it as a test? In the beginning, it’s not about making a profit. Go to a store and buy the product if you have to and then see if you can sell it.

Adwords is extremely powerful in this respect because you have full control over what types of traffic you want to drive based on your keywords and your ad copy. Starting an online store is not risky from a monetary standpoint, so it’s in your best interests to stop guessing and get some real hard data to work with. After all, you can speculate all you want and analyze your competitors to death but you’ll never truly be able to tell until you try….which brings me to the last and most important thing I have to say.

Don’t Worry About The Competition Too Much

If I were to do it all again, I would care less about the amount of competition as opposed to the quality of the competition. If you have a unique spin on the products you want to sell and you are confident that you can stand out among your competitors, then go for it!

If you find that your store is getting lost in the crowd, pick a narrower niche to pursue and specialize! When my wife and I first started out, we were considering selling generic wedding favors. But the main problem was that there 4 or 5 huge players already in the market. As a result, we decided to go much more narrow and focus on wedding handkerchiefs. The end result was that we were able to rank much higher in search than our competition because our website was so targeted to a single topic. It’s counter intuitive, but focusing on selling less variety is to your advantage.

Once you’ve found your niche, find out who your top competitors are for your keywords and then do a search for all of their backlinks. Basically, you are trying to determine what it takes to become #1 in Google for your products. Because the number of backlinks largely determines your search ranking, you can assess how much work you are going to need to do to overtake your competitors. Again, if your keywords are too competitive, you may want to consider focusing your business more.

Conclusion

The key thing to realize is that opening an online store is not like opening a brick and mortar store. And sometimes it takes more work and time to do analysis and speculation than it does to actually throw your store up. Of course you have to do some amount of due diligence, but if you truly believe that you are unique and can stand out among the crowd, then I say pull the trigger! What’s the worse that could happen?

Many of the questions that I receive in my inbox at MyWifeQuitHerJob.com are related to opening a dropshipping store and I can certainly understand the appeal. When you run an online store that only offers dropshipped products, you don’t have to worry about inventory and you don’t have to worry about product fulfillment. All you have to do is sell the product, take orders and make a decent profit. Alas, if only it were that easy…. As with everything that sounds too good to be true, there are always gotchas.

Photo By Suzanna

In theory, dropshipping sounds like a great idea because it’s inherently scalable without you having to do a lot of work up front. But when you dig down a bit further, it becomes obvious why dropshipping isn’t so great. Most people try to open up a dropshipped shop expecting it to be easy, but in reality it’s much harder to operate a dropshipped shop than a traditional online store and I will explain the reasons why below.

You Won’t Be Getting The Lowest Price

Most people open up a dropshipped online store with the misconception that they will be receiving the same wholesale pricing as everyone else for their products. In reality however, dropship distributors often charge extra fees and/or tack these fees onto the quoted wholesale price.

Put yourself in your distributor’s shoes for a moment. Would you prefer to sell a large bulk quantity of products all at once to a store or would you rather sell onesy, twosy amounts to individual customers and be forced to individually ship and pack each item? The distributor is doing all of the work here and this will be certainly be reflected in your wholesale price.

Because your wholesale prices are higher than a traditional store, you will not be able to compete as effectively on price unless you take a good sized profit hit. All of the convenience of not having to do any of the fulfillment work comes at a cost.

You Will Need To Charge Higher Shipping Costs

Often times, you will require the use of several dropship distributors to fully flesh out the product selection for your store. Using 2 or more different dropshippers means that 2 or more companies will be making separate shipments to your customers, which means that 2 or more companies will be charging you their own separate shipping costs.

If I’m a customer and I buy products from you across 3 different distributors, you will have to charge me a much higher shipping cost just so you can break even. The only way around this is to only use one dropship distributor which may not carry the breadth of products that you need. The result is that you will have to pass these extra costs onto the consumer which reduces your price competitiveness.

Dropshipping Can Be A Logistical Nightmare

You might think that since the dropship distributor is doing all the work that you can sit back and relax. Unfortunately, you have to deal with your customer base. You have to be the one that answers all of the questions. You have to be the one to apologize when an order doesn’t arrive on time.

The main problem is that when you use several different dropship distributors, getting the entire order to the end customer can be a logistical nightmare. All distributors will have different shipping times and will be shipping from completely different locations. If a customer orders products across 3 different distributors, they will end up receiving 3 different packages at varying times. If an order is particularly time sensitive and needs to be rushed, you will have to make sure that all of your distributors can deliver the product on time.

In effect, you are staking the reputation of your online store and linking yourself to all of your dropship distributors in a single chain. If even a single distributor is unreliable, then it will reflect negatively on your online store.

Your Customer Service Will Be Out Of Your Hands

These days, customer service and reputation are extremely important. With the world wide web, social media and Twitter, news of a botched transaction can spread extremely fast so it is absolutely crucial that you maintain a great image for your online store.

Whenever I receive a call for our online wedding linens store, I always take the time to ask how they found us. And the majority of the time, the people who find us do so because they were referred to us by one of their friends. Word travels fast. Our customer service is one of the main reasons why we have grown over 3x in the past 3 years.

With dropshipping, you unfortunately have very little control over your customer service. Since you are not in charge of product fulfillment, you can’t control when a customer will receive their product. If a customer wants to make a return, it’s a major pain because you have to make sure that you get your money back before you can provide a refund.

Sure, there are always ways to mitigate these problems but the solution inevitably involves either raising prices or taking a profit hit at the expense of customer satisfaction. Dealing with credit card chargebacks is also much more common with dropshipped stores as well.

Is It Really Less Work?

It really depends. Arguably, the time that you save in not having to deal with inventory and fulfillment will be spent dealing with customers unless you have a reliable core of dropship distributors.

One thing that I forgot to mention is that many drop shippers don’t have up to date automated supply chain technology with a real time API. What this means is that you may not be alerted in real time whether a particular product is available for sale or not. Therefore if an item is out of stock, you will have to interface with the customer to let them know when they can have their items. Unless your shopping cart is closely tied with your dropshipper’s database, it will be difficult to maintain an accurate inventory count.

With dropshipping, you are in effect trading off not having to deal with fulfillment logistics with having to deal with more customer headaches. And depending on your personality, this may or may not be a wise tradeoff.

While the tone of this article has been anti-dropshipping in general, don’t get me wrong. Many people have been successful with dropshipping as it works very well with small niche stores but my personal opinion is to avoid it if you can. If you are considering opening a store composed solely of dropshipped products, you might want to consider affiliate marketing instead. With affiliate marketing, you simply have to refer a customer to a store and you make money whenever your referral makes a purchase. There is no customer support, no product fulfillment….nada. The only drawback is that the profits aren’t as high but at least you don’t have to deal with customer headaches that you can’t control.

When most people think about entrepreneurship or starting their own business, the first thing that comes to mind is the risk that is associated with being your own boss. Perhaps that is why entrepreneurship is such an exhilarating and sexy term. It takes guts to go out on your own.

Photo By Better Than Bacon

But the funny thing is that most of the successful entrepreneurs I know are very conservative and don’t like taking risks at all. Ironically, my entrepreneur friends are some of most risk averse people I know! I happen to fall into this same camp as well. Sure, I would risk a good amount of money to start my own business but would I ever bet the entire bank or stake my livelihood on a business idea? Hell no!

Managing Risk

One of key aspects of entrepreneurship is knowing how to mitigate risk. The media portrays entrepreneurs as these daredevils who dropped out of college and risked everything to start their own companies when the real story was that many had safety nets in place in case things didn’t work out.

Bill Gates didn’t initially drop out of college, he took a leave of absence. Plus, he came from a wealthy family that would have supported him if Microsoft failed. Sergey Brin and Larry Page had their degrees and could have easily found a job if the whole Google thing didn’t work out.

The point is that entrepreneurship is not about gambling so much as it’s about investing intelligently. Here are some tips on how I would mitigate risk when starting an online store.

Keep A Nest Egg

First and foremost, don’t risk all of your money on a business venture ever! Make sure you keep a hidden stash lying around somewhere that can bail you out in case things don’t go as planned. Starting a business is difficult as it is and you don’t need the additional burden of worrying about not being able to pay your bills. This may sound like common sense to most of you, but you’d be surprised by how many people are willing to invest most of their entire net worth on a marginal idea.

Keep Your Full Time Job

If you can pull it off, keep the day job. This takes discipline and it can’t always be done depending on the nature of your business, but it is easily the best, no pressure way of starting a business. My wife and I worked on our wedding linens business on the side knowing that if anything ever went wrong, we were still banking two incomes. Don’t think you have the time? If you analyze your day, you’d be surprised at how much time you can salvage in a typical day.

Pick A Narrow Niche

The narrower your niche, the greater your chances are for success. This may seem counterintuitive at first and many entrepreneurs often fall into the same trap of tackling too much at once.

But when you pick a very specific niche to pursue, your business will be focused. Your business will stand out because you will be perceived as an expert in your field. Your search engine rankings will improve because Google can more effectively categorize your website under a specific topic. In fact, your online business should target no more than 2 or 3 topics or keywords. Any more and you risk diluting your search juice.

For example if you want to sell clothing, I would focus my store on a specific type of clothing first and then target no more than 2 or 3 different clothing types total. If you ever decide to expand beyond this, it might be better to start an entirely new website.

Screw Hope! Test The Market

Since I started this blog, I’ve been corresponding with many newbie shop owners. And one of the biggest mistakes I’ve noticed is that most new store owners have already decided what they want to sell without any testing at all.

“I want to sell widget A! People are going to love it”
“No one’s ever heard of widget B! They’ll sell like hotcakes!”

Every shop owner should have an idea of what they want to offer but leave it up to the market to decide what to actually sell. Test the demand for your products! Use Ebay to see if people will buy your product. Use keyword tools to find out how many people are searching for the products you want to sell. Do a competitive analysis of your niche. Are there any competitors? If not, there probably aren’t any buyers either. The ideal market to pursue is one in which there are only a handful of players.

I remember a long time ago when I heard Bill Gross speak about his company Cars Direct back when ecommerce was in its infancy. Turns out that he initially tested the online car buying market by trying to sell cars that he didn’t even have! He just threw up a website and whenever a car was sold, he had someone go out and buy the car from a local dealer. He didn’t invest much money at all until he discovered that selling cars online was a viable strategy. Make sure you assess the demand for your product before you decide to add it to your portfolio of products! In other words, make sure you have buyers before you decide to sell.

Don’t Buy In Bulk With Your First Order

Along the same lines of testing the market, don’t buy in bulk for your first order if you can help it. Take a loss if necessary but don’t risk a large outlay of cash for goods that you may never get rid of. One of the problems I see with most people is that they don’t want to lose any money even in the interests of experimentation. They’d rather buy a crapload of widget A with the potential of making a huge profit rather than buying a few and breaking even or taking a loss.

Don’t be one of these people and don’t be greedy! Most vendors will provide you with samples or will sell you small quantities at much higher prices. Try to sell in small quantities before you commit to a larger purchase. Don’t worry about losing money!

Find A Partner

It can be emotionally taxing to run a business on your own. Looking back, I could never have done it if I didn’t have my wife. There’s more at stake with your business than monetary risk. There’s also mental risk to consider. Having a partner will keep you motivated and will give you someone to bounce ideas off of. Plus, it will make things much more fun.

On choosing a partner, working with my wife has been fantastic but I’m not 100% sure that I would necessarily recommend working with your spouse on a business. Sure, the amount of mental risk is mitigated but the amount of marital risk drastically increases but that’s a topic for a different post:)

Sell High Mental Value Items

The ideal product to sell is one that evokes some sort of sentimental or emotional value outside of the item’s actual cost. And that is one of the main reasons why my wife and I decided to sell keepsakes as part of our product line. If you can get into your customer’s head, you can command higher prices.

If you sell commodity items, getting customers hooked mentally can still be accomplished through effective branding, but in general it is much easier if you start out with the right product. Avoid commodity items and focus on products that are unique or that you can add value to.

Sell Timeless Items

If you carry inventory, there’s always the risk that your products will sit on your shelves never to be sold. That is why it is important to carry timeless items or products that will rarely go obsolete.

That is why I always stress that it’s much more difficult to sell electronics or technology related products. Pick an industry that moves extremely slowly or avoid selling physical products altogether.

The ideal products to sell in my opinion are informational products because everything is virtual. If you have the means and knowledge to create a book or a course, then that is the way to go.

Keep Spending Low

My wife and I spent about 600 bucks to start our business. We used a beat up old desktop computer that we bought from Craigslist, an old digital camera and launched with a small selection of products. We spent pretty much zero on software, zero on furniture and ran everything out of our living room.

The best part of having an online store is that no one can see the backend of your store. All they get to see is the website storefront so why waste any money initially on your office? Keep spending to an absolute minimum and only buy stuff that is a must have.

One thing that my wife and I focused on was reducing the recurring costs associated with our business. We avoided signing up for too many monthly services unless absolutely necessary. If sales suddenly became slow for any reason, we could keep our online store up and running indefinitely. Even today, it only costs us about 100 bucks a month to maintain our website.

Don’t Buy Your Equipment. Lease Instead!

It is often a big misconception that buying your own equipment is cheaper than renting it. But what most business owners neglect to consider are the maintenance costs and the large initial cash outlay that is required to buy. Why risk the extra money when you have no idea whether your business is going to work out?

If your business requires expensive equipment to run, consider leasing your equipment for at least a few years prior to making the commitment to buy. Don’t feel as though you are throwing your money away with renting. After all, if things don’t work out, you don’t want to be stuck having to liquidate a bunch of heavy machinery that you no longer need.

Have A Backup Plan

The number one way of mitigating risk is to have an escape route or a backup plan. When running any business, it’s important to keep the stress level at an absolute minimum. You want to avoid making decisions under duress or making decisions based on avoiding a drastic outcome. Some entrepreneurship sites recommend going all out without a safety net to add an element of desperation to your startup. The idea is that by placing yourself in a sink or swim situation, you will be forced to learn how to swim.

I personally think that’s a bad idea and I would never intentionally place myself or recommend that you place yourself in any dire situation. That’s called gambling. If you have problems motivating yourself to succeed, then you’ve got other issues that you need to deal with.

Everyone needs a backup plan because things will probably not go as planned with your business. As a result, you will need sufficient runway to make the necessary changes. The obvious backup plan for my wife and I was that we would keep our full time jobs and hire a nanny. Make sure you have something in place and it will make running a successful business that much easier.

Whenever I mention to anyone that I work a full time job, help my wife run our online store and maintain MyWifeQuitHerJob.com all while having two kids in the house, one of the first questions I always get is how I find the time to do all of these things.

Photo by Morbuto

Believe it or not, even with all of these items on my plate, I still feel I have time to take on even more. The secret is being more efficient with your time and managing your day a little bit better. I know. It’s easier said than done. But I’m going to describe in this article how my wife and I organize our time to run our online business and and how we manage to cram a ton of activities into a single day. The reality is that there’s plenty of free time lying around. You just have to learn how to extract every last minute.

The Time Granularity Problem

One of the biggest hurdles to the launch of our online business was that there were too many gargantuan tasks to accomplish. We had to launch our website. We had to write product descriptions. We had to market our store. We had to establish relationships with vendors. We had to establish internal processes.

What ended up happening early on was that we became overwhelmed by these large tasks because each one of them took too many man hours to complete in a single sitting. As a result, even if we had a 1 hour block free, we put off working on our online store because we didn’t think that we could get any meaningful work done in such a small amount of time. We kept telling ourselves that we would start when a large enough time slot was available but it never ever materialized.

The reality is that most of us don’t have huge blocks of time to devote to any given project. Especially if you have a full time job or children running around the house, you often only have small .5-1 hour chunks of free time available. And more often than not, these valuable time slots are wasted away with the belief that nothing can get accomplished in such a brief moment of time.

Breaking The Problem Down

Looking back, much of our success was the result of making efficient use of these small time slots. In order to manage our time more effectively, my wife and I broke our large tasks down into small pieces that could be completed in a single sitting. We ended up dividing our business tasks into half hour time slots. So if we had a spare 30 minutes, we could easily switch gears and cross one of these tasks off the list.

While some tasks took longer than a half hour, no single task exceeded more than a couple hours long. For example, for our website, one of our tasks was to enter in 10 product descriptions into the shopping cart database. Another task was to take 10 product photos. On the product sourcing side, an example task was to contact a short list of vendors or locate a small subset of products that we wanted to sell. Each and every line item was something that we could do quickly and efficiently even in the shortest of time slots.

By crossing these things off the list, we felt like we were always making progress which fueled us to work even faster because we saw light at the end of the tunnel. What also ended up happening was that we worked more often on the business because the tiny size of each task lured us into working longer and harder. Each task seemed so small and easy that we always felt as though we could hammer out another one in no time flat.

Find A Pace You Are Comfortable And Maintain It

Early on, my wife and I also made time for the business by making sacrifices. Not only did we stop watching television but we also drastically cut down on our sleeping time as well. On some days, I would arrive at my day job a walking zombie.

Making healthy sacrifices is fine, but I gradually learned to never make sacrifices at the expense of my health. My main problem is that I like to tackle everything in a single sitting. When I’m excited about something, I’m all too eager to try and get things done in a timely manner even if it means pulling all nighters. But with a business, I discovered that the list of tasks is endless and it’s impossible to just cram through it. You might be able to get through a week of little sleep, but things will eventually catch up to you and you may well burn yourself out.

The strategy I ended up finding far more effective was picking a comfortable, maintainable pace and sticking with it even if the slow pace felt like torture. To find out what pace is right for you, simply ask yourself the following questions. How many hours can you comfortably devote to the business per day for months or even years on end? Can you maintain this frequency easily without impacting your mental well being? It might take a short adjustment period but eventually you’ll discover your sweet spot.

Set A Schedule

Once you’ve made some progress on your business, it’s important to maintain your momentum. And the best way to do so is to establish a routine. Set aside a specific time or day that you can devote solely to the business.

For example, my wife reserve and still set aside Sunday afternoons for business related activities. Not only does this prevent our business from stagnating but it also makes working on our online store involuntary. It’s almost like we’re on autopilot!

Don’t Lie To Yourself

The moral of the story is that time is always available so stop making excuses! No matter what, you can always squeeze out a small block of time even if your schedule seems packed from day to day. By creating tasks that can be accomplished in small chunks, you can make better use of random time slots and consistently make progress. Good luck!

“I have no idea how to create and manage my own website and I have absolutely no interest in learning either. I’m just going to hire someone or pay for a service.”

Believe it or not, most people that I encounter who want to create their own online store or business have this attitude. They are reluctant to learn basic web programming because they are afraid of the technical aspects of running a website.

To me, this attitude is contradictory. You want to start an online only business yet you have no desire to learn about the web? That’s

Photo by Photos8.com

like saying that you want to be a real estate agent but have no desire to learn about the rules and regulations involved in buying or selling a house.

Unless you have the budget to hire a full time web developer, you are going to have to learn a few basic skills in order to be successful with your online store. If you think it’s as simple as hiring a contractor every time you need something done, think again because it will be expensive and a royal pain in the butt.

Trust me, I’ve seen it time and time again. When you rely on a third party programmer to put together a website for you, you’re inevitably going to want to make changes. And especially if this is your very first website, you probably don’t have a good idea exactly what you want in the first place. As a result, you’ll change your mind constantly.

Do I want this graphic on the left or the right? Do I want a pull down menu? All of these little tweaks and changes will add up over time and you’ll soon find yourself spending too much money and time getting your website just right. The problem is that when you have absolutely no desire to learn about basic web programming, you have to rely on your developer every single time you want to make even the smallest of changes.

Do You Even Know What You Want In An Online Store?

Just the other day, I had lunch with a friend of mine who wanted to start an online store in the wedding industry and asked for my advice on how to get her website implemented. Because of her aversion to web programming, she wanted to know the best way to proceed in order to avoid having to deal with anything technical.

What’s funny was that when I first asked her why she didn’t want to learn about the web, she replied that she had no interest in taking a hands on approach in creating her own website. She just wanted to get her store designed and up and running as easily as possible.

But once I showed her the backend of our website, the analytics and all of the cool features I added to our online store, she was completely amazed. In fact prior to my little demonstration, she was under the impression that every single webpage was hand coded in html from scratch each time.

She had no idea that websites could possibly have a dynamic, easy to use graphical backend with which to add/remove products or to add content. She was also surprised at all of the code that was written and available for free! After my brief tutorial, she was definitely intrigued by what she could accomplish with just a little knowledge. Moral of the story? Don’t say that you are not interested in something until you’ve done a little research and have given things a chance.

In any case, no matter which route you decide to take in creating your online store website, you definitely don’t want to be completely dependent on your web developer. At a bare minimum, you should learn the following basic skills.

You Really Don’t Need To Learn Very Much

No matter which shopping cart solution that you choose whether it be OSCommerce, ZenCart, Magento or Yahoo Merchant Solutions, the core shopping cart engine will already be written for you. For example, out of the box you should already have the ability to do the following without even touching any source code whatsoever.

• Manage inventory using a graphical web interface
• Manage content pages within your website
• Manage shipping costs and methods
• Accept payments using the most popular payment methods

What this means is that 95% of the technical work is already done for you right out of the box. You don’t really have to worry too much about how your store works. You just have to focus your energy on making your store look good and writing content.

Learn Basic HTML CSS

All of the aesthetics for your website will be coded using a combination of html and CSS. Really, it’s not that difficult. If you know how to use Microsoft Word, you can learn how to write html. At the heart of it all, html is just a verbose way of describing text and objects. For example, if you want a portion of your text to be bold, you simply need to enclose the bolded text within special tags as demonstrated below

<strong>I want this text to be bold</strong>

As you can imagine, it would be very cumbersome to manually add tags to all of your text, so CSS (Cascading style sheets) provides you with the power to manage the aesthetics of your site in a single file. Without going into too much depth, if you take the time to learn the basics of both CSS and HTML, you will rarely have to rely on a web developer to make small graphical tweaks to your website.

The best part? There are many great tutorials on the web that will teach you the basics for free! Here’s an excellent tutorial that I found online on Starting With HTML + CSS

Learn How To Use Photoshop

Your online store will heavily rely on images in order to sell product so it is vital that all of your photos stand out and look professional. Unless you are a master photographer (or extremely lucky), chances are that you will have to adjust or at least crop your photos before displaying them on the web.

The tool that you use to edit your photos doesn’t necessarily have to be Photoshop, but it is the most popular photo editing software out there and the one that I use for every single photo on our online store. You don’t need to be a power user. At the base level, you should learn how to

• Crop your photos
• Reduce the picture quality and file size for the web
• Adjust the contrast and levels
• Learn how to make minor touchups using the healing brush

Here are a few additional articles that I have written about managing the photos for your online store.

• 5 Tips for Establishing an Efficient Picture Flow For Your Store
• 4 Things to Avoid with the Product Pictures on Your Online Store

It Doesn’t Take Much

If you take a look at the simplicity of this blog and our online store, you can tell that I’m not a professional graphic designer or web developer. But the good news is that you don’t have to be an expert to create a profitable online store or blog. Your end goal should be to learn just enough in order to meet your own needs.

Even though you may think that you have no desire to learn how to create your own website, you should keep an open mind. Do you really want to be at the mercy of your web developer? Do you really want to have to pay money every time you want to make small changes to your website? Take a week or so to learn the basics and the time investment will pay off immediately.

This is part 7 of a 7 part guide on how to start a small business.

Especially if you’re a first time entrepreneur, starting your own business can be quite overwhelming. The are many rules from both an accounting and a legal perspective that need to be followed or you risk getting penalized by the government.

Sometimes unexpected problems or disputes will arise in which you will have no clue how to proceed. That is why it is essential to have an experienced professional available to consult with when things become complex. At a bare minimum, you should find an accountant or a tax expert to help in preparing your initial business tax return even if you think you know what you are doing.

Trust me. Even if you have a strong grasp of the tax rules, an experienced accountant can help you squeeze out that last bit of tax savings. Many of the tax rules are ambiguous and you’ll need an experienced consultant to tell you what the limits are to avoid an audit. In addition, even though your business may be easy to run now, things will get more complicated as your business expands.

How To Find An Accountant

The best way to find an accountant is through a referral. When my wife and I first set out to find an accountant, we mistakenly went straight to a large accounting firm. After an hour consultation and $350 later, we came out of the meeting feeling intimidated by all of the potential accounting fees and tax rules. We were also in such a rush to minimize the hourly fees that we forgot to address many of our questions.

Ultimately, the accountant that you go with should be someone that you feel comfortable with. If you come out of the consultation feeling scared and overwhelmed, then chances are that accountant is not a good fit for you. It’s also important that you don’t feel like you are getting nickel and dimed as well.

We eventually found our accountant by contacting a friend who runs a small retail business. Not only was our new accountant cheaper, but he made us feel at ease with our tax strategy. Even better, he was easily accessible by phone at no additional charge.

Other Resources Mentioned In This Guide

This final section of the guide contains a bunch of resources that I either used or consulted with when forming our online wedding linens store.

• Trademark Issues – Go to the USPTO Website to make sure that your business name has not been taken or registered as a trademark in the federal database
• Incorporating Your Business – Instead of hiring a lawyer, you can pay a small fee to a service like My Corporation and they will handle all of the paperwork for you. Don’t bother paying for a third party service if you are forming an LLC because the LLC paperwork is relatively straightforward.
• Getting A FEIN – Simply go to the IRS Website and register your EIN in a matter of seconds online!
• Register Your DBA or Fictitious Business Name – Services like LegalZoom.com will handle all of the necessary paperwork for a DBA at a very modest fee. Don’t waste your time doing it yourself. Just pay someone to do it.
• Obtain All Business Specific Permits – If you are starting a business in California, then the CalGold Website is an excellent free resource. Otherwise you can pay for a service like LegalZoom.com to find and register all of the necessary permits for you.
• Small Business Taxes – There’s no better resource for tax rules than good ole IRS.gov. You can find all of the necessary tax forms online here as well.
• Doing Payroll – Filing payroll paperwork by yourself is a major pain in the butt. Instead, you should contract out your payroll to a third party service such as Intuit Online Payroll
• Bookkeeping – For your bookkeeping needs, you can’t go wrong with Quick Books Pro. I currently work for a 125 employee company and they still use Quick Books today.
• Getting Financing – The SBA or Small Business Administration is an organization that specializes in helping small businesses get financing. Check with your local SBA office for more information or go to www.sba.gov.

Conclusion

I hope that this small business startup guide has provided you with a guideline of what to expect when starting your own business. All of the rules and regulations can feel overwhelming at first, but there are a ton resources out there to help you on your journey. If you have any specific questions regarding any aspect of starting your own business, feel free to drop me a line and I will try to help you out.

This is part 3 of a 7 part series on how to start a small business.

Even though it’s not technically difficult to officially register your business with the US and state government, it can be quite intimidating. That being said, I can tell you that my wife and I were absolutely terrified about the entire process. What if we screw up and get audited? What if we forget to obtain a permit or fill out some crucial paperwork? The good news is that it’s not that complicated to fill out the forms. The bad news is that all of the information can not be easily found in one centralized location.

For example, when you file with your state, they’ll have no clue about the requirements for your city or town. Similarly, your city tax office will have no clue about the state or federal requirements. Because all of the necessary information is all over the place, I sometimes wonder how people ever manage to get all of the paperwork and requirements correct the first time around.

In any case, this guide will hopefully provide a starting point in giving you an idea of what needs to be done to officially register your business with the government. All of my experience is with the state of California so you’ll have to check with your local state tax office for your own requirements.

Once again, I’m not an expert in this area. Business registration rules change all of the time and you should do your own legwork. In addition, I want to add that this part of the guide does not cover all of the regulatory requirements if you need to hire employees. I’ll cover this is a subsequent section.

Where Do I Begin?

Assuming that you’ve already chosen a corporate structure and filed all of the necessary paperwork properly, you are now ready to register your business. Making your business official consists of 5 main steps which are enumerated below.

• Obtain a federal employer identification number(FEIN)
• Register your ‘Doing Business As’ or your ‘Ficticious Business Name” if you plan on doing business under a different name
• Obtain a business license from your city or locality
• Obtain your state’s sellers permit
• Obtain any other necessary permits depending on the nature of your business

Obtain Your Federal Employer Identification Number

Technically if you are a sole proprietorship, you don’t need to obtain a federal employer identification number or FEIN. But my advice is to get one no matter what for your small business in order to fully separate your business from your personal affairs.

The FEIN is used by the government to identify your small business much like a social security number. For example, this number will be used to open bank accounts, to file your taxes and to register for your business license.

Getting a FEIN is easy. Simply go to the following URL http://www.irs.gov/businesses/small/article/0,,id=102767,00.html and register for your EIN online in one easy step!

Register Your Fictitious Business Name

If you plan on using a name for your business that doesn’t contain your name or the legal name of your business entity, you need to file for a ficititious business name. The term FBN (fictitious business name) is used interchangably with DBA(Doing business as) so don’t get confused if you hear both terms as they are both the same thing.

The government makes you file for an FBN in order to allow customers to locate the owner of a company without too much effort. This requirement really only exists to protect the consumer. If a customer needs to file a complaint or file a lawsuit, they can find out the owner of the business easily.

Registering your FBN immediately is important for two reasons. For one thing, most banks won’t let you open a business account without one and two, registering your business name will lay the groundwork to protect your trademark.

Remember, you only need to file a fictitious business name if you plan on using a business name that does not contain your own name. For example, if I wanted to start Steve Chou’s House of Linens, I wouldn’t have to register an FBN. For more information on how to file an FBN, please check out my article on How to Obtain Your DBA (Doing Business As) or FIC (Fictitious Business Name)

Obtain A Business License From Your City

Everyone is out to get a piece of your profits and your local city government is no exception. Most cities will charge you an annual fee to run your business in addition to a small percentage of your profits.

Unfortunately, every city is different even within the same state so I can’t really help you out much here with the specifics in how to file for a local business license. To find out your city’s requirements, you need to contact your local city tax collector or search for the “county clerk” for your city online.

Obtain A State Seller’s Permit

Anyone who sells physical goods must obtain a seller’s permit from their state. In California, you have to apply for a permit from the California Board of Equalization. Mainly, this permit exists so you can collect sales tax from your customers and pay the state government in a timely manner.

Sales tax is only collected if you sell goods to someone that resides in your home state. Unfortunately, even if all of your customers are out of state, you still have to get a seller’s permit.

Sometimes, it can be very vague as to what constitutes a physical good. For example, if you sell software to the public via electronic methods only, it’s somewhat ambiguous whether your software is considered tangible. However, if you ship CDs containing your software, you definitely have to obtain a seller’s permit. In any case, you’ll need to check with your state to make sure.

Obtain Other Permits That Are Specific To Your Business

Many businesses are subject to additional regulations that are not covered by the standard set of permits described above. Usually if your business has the potential to affect the public or the environment, you’ll usually have to obtain additional permits.

This is usually the most complicated part of starting a business since there are literally hundreds of agencies that regulate businesses at both the state and federal level. You’ll also need to check with the zoning requirements for your business as well if you use any sort of hazardous chemicals etc….

Some states have websites that you can log on to find out all of the necessary permit requirements for your business. For California, I used the CalGOLD website(www.calgold.ca.gov) to check up on our wedding linens business. Unfortunately, this site is specific to California but by entering in the parameters for your business, CalGOLD will tell you upfront which permits you might need. Your state may have a similar website you can consult.

Feeling Overwhelmed?

If you’re feeling overwhelmed at this point, then you are not alone. My wife and I got dizzy reading over all of the required regulations and forms to run our wedding linens business. Locating and filing for the basic selling permits is fairly straightforward but what you really have to watch out for are all of the special permits you might need to obtain.

For example, at one point my wife and I wanted to sell baby clothes and other baby related items online. Turns out that there are requirements that all baby goods need to get tested for chemicals at an independent testing site before you can sell them. This testing is very expensive and must be done on a per item basis.

Use A Service To Help You
In any case, my wife and I went through all of these things more or less manually but if we were to do it all over again, we would use a service like Legal Zoom to take of everything for us. For a reasonable fee, they will do the research and tell you all of the necessary permits that are required for your business. They will even file them for you at an additional cost.

Seriously, your time should be spent building up your business and not on minute details like looking up rules and regulations. If you feel that you are spending way too much time wading through the red tape, it makes sense to pay an expert to do the work for you.

Next Up…Small Business Taxes