How to start an online business – in 7 simple steps
6-minute read
Are you an entrepreneur wanting to find the next big idea to make money online? Selling handmade crafts? Tutoring? Social media influencing? Dropshipping? There’s no end to the opportunities if you choose to start an online business.
But how do you get started? From finding the right website builder and marketing to new customers to understanding the regulatory requirements, this is your guide to starting an online business – from initial idea to becoming a thriving startup.
Keep reading for the steps to starting an online business, plus some ideas of what’s trending for 2023.
What is an online business?
Almost anything can be an online business, but they usually fall into one of two key sectors:
- ecommerce
- services
An ecommerce business is a shop that operates solely online – whereas retail businesses have a physical store you can go into.
Meanwhile many in-person service businesses can translate as online businesses (think tutoring, baking, or even fitness).
How can I start my own online business? 7 simple steps
1. Research online business ideas
What is the best online business to start? Of course ‘best’ is a subjective term. The best business for you will be personal and based on your skills and interests.
Are you looking to do something you’re passionate about and have existing skills in? Or do you want to train in something completely new? Some trades can be higher earners than others too, so it’s worth weighing up what’s important to you.
If you’re looking to sell a product, it’s worth noting that ecommerce is growing in popularity. The UK’s ecommerce market accounted for 27 per cent of all global retail sales in 2022, according to the latest report from Tami (Total Addressable Market Intelligence). And this is expected to increase to 29 per cent by 2026.
Wondering how to start an ecommerce business? Our guide to setting up an online shop covers it all from start to finish.
What can you sell online?
Here are just a few products and services you could offer as you create a website business:
Retail
- arts, crafts, and candles
- pet products
- subscription boxes
Professional services
- accounting
- content writing
- social media marketing
Education services
- coaching
- consultancy
- cooking
- personal training or fitness
Delivery services
- cakes and baking
- meal kits
Entertainment
- podcast
- wedding and party planning
Test your idea
Whatever you choose, it’s important to test your idea – consider doing focus groups, surveys, or a 'fake door' test to gauge interest. A 'fake door' experiment is a way to test demand for something before it exists, for example creating a pretend ad or notification and seeing how many people click it.
Product research and competitor analysis will also help you understand what direction to take your business in.
Consider how much money you could make
While money isn't everything, it's important to take it into consideration when planning your business venture.
This is the average turnover for some key trades that could operate as online businesses, according to Simply Business quote data. Although it’s important to remember that turnover doesn’t mean profit.
Trade | Average annual turnover in 2022 |
|---|---|
Consultant (business and management) | £144,420 |
Home baking | £26,282 |
Fitness instructor | £34,517 |
Graphic designer | £76,826 |
Accounting | £90,879 |
Tutor | £35,520 |
Based on average turnover in 2022 using Simply Business quote data. Data sourced on 10 July 2023.
2. Weigh up the pros and cons
Starting an online business can have its pros and cons:
Selling online advantages | Selling online disadvantages |
|---|---|
Lower start-up costs | High competition |
Reach more potential customers | Reliant on technology |
Analyse and track customer behaviour (and remarket to them) | Unreliable couriers and shipping times |
Earn money day and night | Easy for customers to shop around for a better price |
3. Create your website
Your business website is your shop window to what you do. This is important no matter what you do, but particularly if your business is based online.
Here are a few things you’ll need to think about:
- your business name should be in your domain name (the website's name in the url) so people can easily find you online
- consider accessibility and user experience – people want to be able to instantly understand who you are, what you do, and how to buy your product or service
- how you’ll take payments – many website builders will have ecommerce functionality built in
- the call to action – if you’re a service business, what’s the first thing you want someone to do? Make a booking? Schedule a free consultation? Email you?
Our guide to creating a business website covers everything you need to know.
4. Next, creating a business plan for your online business
While not as exciting as creating products and new ideas, it’s important to stay on top of your business admin:
- create your business plan – and keep it up to date as you grow
- keep accurate records to take the stress out of tax season
- make and stick to your budget
- evolve your marketing strategy – and don’t forget to use data analytics to test and learn to find what works (and what doesn’t)
5. What are the legal requirements for starting an online business?
Next you’ll need to register as self-employed with HMRC so you can start paying tax on your income. Bear in mind that if you’re running your online business alongside employment then you’ll need to be aware of specific side hustle tax implications here.
You should also check any business licences you might need (for example if you’re selling alcohol) and whether you need permission to run your business from home.
Legislation you need to know about for selling online:
- Data Protection Act 2018 – GDPR and how you use customer data
- The Electronic Commerce Regulations 2002 – how you display information and communicate with your customers
- Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 – this replaced distance selling regulations and covers things like the 14-day ‘cooling off period’ you must give customers after making a purchase
- Privacy and Electronic Communications (EC Directive) Regulations 2003 – largely relating to how you use ‘Cookies’ on your website
6. Make sure you have the right insurance
If one of your products causes injury to a customer or damages their property then you could be held responsible. Product liability insurance can cover your business if something does go wrong.
And if you’re a service based industry then you should also consider public liability insurance or professional indemnity depending on what your business does.
A tailored business insurance policy from Simply Business can bring this all together for you, so you only pay for the cover you need.
7. Marketing your business
One of the hardest things about running a business is finding new customers.
But what marketing tools should you be using for your business? And can you start a business without marketing at all?
Marketing is how you’ll reach more people and grow your business so you’ll need to use at least some forms of marketing for your new business. As an online business, digital marketing is going to be a good place to start.
So, make sure you set up social media accounts for your business – and find out how to use social media advertising to your advantage.
From selling on Instagram to how to use SEO (search engine optimisation) to reach more people, our expert guide to marketing covers everything you need to know.
Final questions to consider when you start an online business...
What are the most successful small online businesses?
One of the most attractive elements of operating solely online is there are no business rates or other costs related to having a physical space.
As we’ve mentioned already, some businesses like accounting and consulting services can generate higher turnover than businesses like cake baking and fitness.
Project management is the fastest-growing trade right now, according to Simply Business research. This client facing role could be operated largely online, although you might also have in-person meetings.
Can you start an online business with no money?
While all businesses will require some investment to get started, some can be relatively low cost and low effort to maintain. For example, if you have a highly popular YouTube channel then videos can continue earning revenue over time. These types of businesses are known as passive income streams and can often be run as a side hustle.
More guides for online businesses
Are you thinking of starting your own online business? Let us know how you’re getting on in the comments.
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Written by
Catriona Smith
Catriona Smith is a content and marketing professional with 12 years’ experience across the financial services, higher education, and insurance sectors. She’s also a trained NCTJ Gold Standard journalist. As a Senior Copywriter at Simply Business, Catriona has in-depth knowledge of small business concerns and specialises in tax, marketing, and business operations. Catriona lives in the seaside city of Brighton where she’s also a freelance yoga teacher.
We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Read our full disclaimer
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