How Much Does It Cost To Start An Online Business In 2021
I guess you’re thinking of starting an online business but you might be asking yourself, “how much does it cost to start an online business”. You might also be wondering if this business would be profitable. Right? Hey, I’m Leonard and in this article, I’m going to walk you through some aspects of starting an online business and how much it might cost. Although every business is unique, these costs are common and typically required.
Starting An Online Business
Starting an online business can be easy and inexpensive, but there are some costs to consider. Your startup costs can vary greatly depending on the type of online business you choose to start and how you want to set it up. Let’s take a closer look at the standard startup costs for an online business.
Obtain A Business License
Depending on what the online business is, you might need a business license or permit to start. Since each country and state has different rates, the cost depends on the type of business license you need and where your company is located. A business license can range in price from $60 to several hundred dollars, not including account renewal fees.
You’ll need a good web hosting service and a domain name to host your website. You’ll normally pay about $60 to $100 for a high-end domain name and its security features upfront, followed by a $20 annual charge. The cost of web hosting is determined by the size of your business and the amount of traffic you expect.
Now, bear in mind that this cost can be on the higher end if you need to do everything professionally. On the other hand, if you are working off a shoestring budget then keep reading this article as I will cover your shoestring budget approach later on.
Virtual Private Server
If you anticipate a high volume of daily traffic to your website, you’ll need to pay a little extra for a platform that can handle a large number of visitors. (A Virtual Private Server). You can pay annually or weekly but in any case, you can expect a one-time fee of a few hundred dollars followed by a monthly fee of about $100.
What I’m telling you is not the cheapest way to get your business up and running but it is the best in terms of making a profit in the long run. According to some people who have offline businesses, the ones who have physical premises and sell their products on the high street, their overheads are huge.
Online VS Offline Business
I’m talking like tens of thousands of dollars upfront to get the premises to secure the product and inventory and everything else. In addition to an extra ten thousand dollars per month just to run their brick-and-mortar business. This does not even include any kind of marketing or profit or anything like that.
With an online business, it’s completely different. Of course, you can get started for free but it all depends on the type of business you are thinking of starting and on what scale volume you are thinking. You’ll be surprised at how cheap it can be to start an online business and how large your profit margins can be as well.
There are other important factors you need to consider when addressing the question of “How Much Does It Cost To Start An Online Business In 2021”. I’ve made mention of a Business License or Permit earlier, however, there is more. You may also want to incorporate your business, and this sounds very professional like “oh my business is a Limited company”, but this is necessary especially if you are going to have several employees in your business.
Setting up your business is not difficult to do. There are two main ways to do this. The first way is to start as a sole trader or a sole proprietor and this is essentially just declaring yourself as self-employed and that you have an online business. You then go to your bank and open a business bank account and declare that you’re a sole trader.
Of course, you still need to pay taxes and everything else but I’m not a lawyer so please seek some advice from an account or a lawyer on any tax issues.
I’m not going to tell you the pros and cons of both options but for the most part, the second option is to set up a limited liability company. This might be the better option for you because this involves less risk on you as an individual as opposed to being a sole trader.
Limited Liability Company
Setting up a Limited Liability Company will depend on where you are in the world. In the United Kingdom where I am, a limited company is set up with Company’s House with (Ltd) on the end of your business name. In the United States, it’s LLC and there are a few variations of that as well.
However, this simply involves your business being a separate entity to yourself so if something should go wrong with your business, you are not liable for the most part.
Again, I’m not a solicitor or lawyer so I have to tell you to seek legal advice if you are not sure which one is best for you. Starting as a sole trader is perfectly fine if you are not sure if the business is going to be a large one.
If you start as a sole trader, you can always switch to a limited company in the future. Now the cost for setting up a limited liability company in the United States as of the writing of this article ranges from between $40 and $500 depending on which state you live in.
This does not include any fees which you may pay a lawyer or business attorney to set this up for you if you don’t want to do it yourself. For the most part, it’s fairly simple and you can do this yourself if you want to save a bit of money.
Equipment For Your Business
The next thing you should consider when starting an online business is equipment. Now, most people at this stage will think that they’re now a business and they have to be professional so they go out and buy all the latest equipment. The high-end laptops, the extra-ordinary desks, and chairs but some of these things might not be necessary at the beginning.
When it comes to business your main aim is to generate profit so you have to pay close attention to your return on investment. (ROI). Many successful business owners and entrepreneurs started their business from their basement with not-so-nice desks and chairs. The former CEO of Amazon Jeff Bezos is a perfect example of what I’m speaking of. He started out selling second-hand books from his basement. Now, look at Amazon today.
So try not to go out splashing all of your money on tools, software, desk, and physical equipment that you may not even need. Buy things when they become a necessity. Don’t try and anticipate what you need because you’ll end up buying a bunch of stuff and not even using most of them.
The obvious thing you’ll need in your business is an identity. You can’t just be some anonymous corporation. You need a company name and a company logo. You need some sort of branding. Give your company a good name and a well-designed logo that will compliment your brand.
You can design the logo yourself if you are a creative person. You’ll be able to think of some appropriate designs in maybe a few days, a week, or two. Doing the logo design yourself can save you a bit of money. However, if you’re struggling or you’re finding it difficult to come up with a name and logo design that isn’t already taken, you can use crowdsourcing websites like squad help and even Fiverr help you out.
These websites can create stunning logos and other designs for you. All you need to do is to explain to them the concept of the business, what you’ll be doing, what you’ll be helping people with, and so on.
They will chip in with a bunch of ideas and help you come up with something good that is also available. Now of course this comes with some additional cost which you will decide on, based on how much feedback you want. This might well be an additional cost to the business but of course, this is optional.
Most people don’t require that sort of assistance. They can just come up with a name themselves. You may already have one yourself. Once you have a company name, you need a logo to represent that company.
Now, it’s Ok if you’re a graphic designer or a creative person because you can create this yourself for free. If you’re not a creative person and you just create something with paint and some text, that’s fine, to begin with as well. However, I wouldn’t recommend it because your company branding is something that instills trust in people and if people don’t trust you they’re not going to buy from you.
So I would recommend spending some money just to get something that looks professional that people can know that you’re not some scam artist. A way to do that is to outsource this to people on a platform like fiverr.com.
You can hire people on Fiverr for between $5 and $20 on the low end and even over hundreds of dollars on the high end but I wouldn’t recommend spending that much to create a logo for your business.
Now, this is cool because you can look at previous designs they have done for other people and can see if they’re any good. If their previous designs have been terrible then their design for you is not going to be great either. Do your due diligence and have a look and see what’s good and what’s not and then go with somebody that you feel confident with.
Of course, they usually come with revisions as well so if they come up with a few ideas or a design that you don’t like tell them. It’s totally fine to let them know and they will come up with something better. This is what I always tell people to do as well.
I would say to them, do you have a logo and they would say no. My response would be, “Do you know it’s only going to cost you $20 maximum to get it done?”, and they would have it done. Once you have branding for your online business it’s now time to get your presence online. This involves creating a website.
Again, there are some free solutions here like wix.com and a few similar alternatives. However, a lot of these services place heavy restrictions on what you can and can’t do with those services. I would strongly recommend having your self-hosted website so you know everything is yours and you’re not restricted by what you can and can’t do. I’ve made a list here of things that you’ll typically need with your website.
I’m going to work my way through them so I don’t miss anything.
Now, this is yourdomain.com or whatever extension you want to use. I strongly recommend using a DOT-COM Extention because it has more trust and people are more familiar with it. That’s their go-to when they type a domain name in the web browser.
So a DOT-COM domain name will cost you around $10 per year and depending on the registrar you use. If you search Google for coupon codes you can often discount your domain name even further. In any case, $10 a year for an online business is mind-blowing, to say the least.
A hosting account
This is essentially the home for your domain name. When visitors type in the web address of your domain and they are redirected to whatever is in your hosting account like your website files, videos, images, and so on. There will be a small cost for hosting your website files which will be around $5 to $10 a month.
This amount will not break the bank, it’s not like it’s going to cost you thousands of dollars a month to host your website but it’s something to be aware of. This amount should get you something that’s quite secure and allows you to have a lot of different things on that website.
Setting Up Your Website
“Disclosure: Some of the links in this post are ‘affiliate links.’ This means if you click on the link and purchase the item, I will receive an affiliate commission.”
Many people will think that it costs a huge sum of money to get your site set up but honestly, it can be free, meaning that you can do it yourself. You can install WordPress which is already integrated into the control panel of most web hosting providers. All you need to do is to install a WordPress theme into the WordPress installation.
You can go for a paid theme which is around $79 or you can use some nice free themes like the Colormag free theme, or the Divi theme because these themes just drag and drop elements wherever you want them. It depends on what your business is about.
The themes would have instructions on how you can edit and come up with your design. Of course, it might not be as good as it would be if you were to hire somebody to create that website for you.
However, when you’re just starting, it’s all about just getting something online and not worrying too much about how good it is. You can always improve it over time. You don’t need to know Html coding to design a stunning-looking website from your chosen theme.
An alternative if you don’t like Divi for some reason is Elementor. This editor is a good one as well. The free version of Elementor can do all you need to get things up and running.
So your site is finished and you are ready to make some sales. This is where you are going to implement what is called sales funnels. I’m talking about selling what your product is.
If you’re selling digital products like a video course, an ebook, coaching services, and even physical products like clothing, gadgets, health products, you can increase your conversion rates by having a sales funnel.
There are many different sales funnel software on the market like Groove funnels, Click funnels, Leadpages, Convert Kit, and others, but above all of them, Clickfunnels seems to be the popular one being used by many online marketers.
Having clients in every niche you can imagine Click Funnels has always been the best just because their tracking and functionality are amazing. You can have one-click upsells payment processing. It’s cool to have that in place and that is $97 a month. I don’t recommend going for the high-priced option just because you probably won’t need it.
Paying for any other upgrades might not be necessary at the beginning. You can look at $97 per month as the equivalent to your premises if you were doing an offline business.
I mentioned earlier that offline business owners are paying like $10, 000 a month for their premises. It depends on the area but you know this is equivalent to your premises online. This would be $97 a month instead of $10,000 a month.
Payment Processing Method
The final thing is payment processing and many online business owners use payment gateways like Stripe, Paypal, and a few other payment methods. These platforms are free, however, they build in the fees for using Stripe into the transactions that you receive from your customers.
Let’s say you know a customer pays you $37. You won’t get that full $37. They will deduct a percentage of the sale for using their service. To be fair, it’s not that bad.
They have very competitive rates and they are incredible. They’re one of my favorite companies so I would recommend Stripe for payment processing for your prospective customers. If all of this sounds overwhelming to you it should not be. You just need to do a bit of research, especially on YouTube as to how to integrate these payment methods into your website.
Hire A Web Designer
You can hire somebody else to design the website and integrate these payment methods for you but that will often run you hundreds if not thousands of dollars depending on what you want. I would not recommend you put yourself in this “big money suck” at the early stages of your business. You first want proof of concept before you start investing in making things better.
I designed my website when I first started my blog because I didn’t have the money to invest in a paid theme. I realized that I can always improve things as I go along and nearly a year later, I’m still using the Themegrill Colormag free theme and I have to say that it is doing wonders for my blog.
Launching The Business
Once you are ready to launch your business, the next set of costs you should be aware of are related to selling your products. Now, this depends on if you’re selling digital products or physical products. With physical products, you can get started with drop-shipping which doesn’t require you to have a whole bunch of inventory in your garage or anything like that.
You can have the customer order via your website, it goes directly to the drop-shipping company (Ex. Alibaba), they ship the products to your customers for you and it’s done.
You never really see that product. Alternatively, if you sell digital products like video courses ebooks audio programs coaching programs, etc then you can do this yourself from home.
Minimize Start-up Costs
You do not need some elaborate setup with a whole bunch of equipment, a massive studio, or anything like that. You can even write this yourself in an ebook format just on your laptop using any kind of word processor.
Even using Google documents. It’s cool like that. Even if you are creating a video, you don’t need a huge studio you just need your smartphone. Any recent smartphone with a video camera that can record in HD quality is totally fine.
Just keep in mind that the quality of your video should be at least HD quality. I’m talking like 720p, 1080p HD. These two resolutions would be totally fine for most videos. If you are working from home, try and find a room where it has a backdrop that isn’t untidy because you want to create a good impression for your prospective customers.
Improvise To Minimize Cost
If you don’t have anywhere like that you can use a blank white wall.
Just be sure you’re not too close to it. What if you still don’t have a blank white wall for some reason? You can get a backdrop, a piece of nice cloth, or something like that behind you. That’s fine.
The cool thing is that you can just use what you probably already have. The next thing is optional. If you cannot find a section of your house, you can always use other places but make sure that it has good lighting.
You can hire or buy some lighting if you want. Go to Amazon and look at reasonably priced lighting equipment along with other things like microphones etc. Some lightings can cost $50 and around $25 for a Microphone depending on the type you need. Many online video creators would go for a pretty common Shotgun Microphone, but that’s kind of expensive and kind of elaborate to set up.
However, when you’re just getting started you can use a Lapel microphone which you can find on Amazon for about $25. So definitely nothing to break the bank. This will enable you to have better audio quality instead of this echoey audio you might get from a phone especially if the phone is quite far away from you.
Protect Your Product
The next thing is protecting your products from being accessed for free. Sometimes if you don’t do this your customers can share the link to your information products on social media and similar sites. That way, other people who haven’t paid for your products can access them for free. This sucks!
As a product owner, it’s like “all these people are getting my stuff for free when other people are paying for it”. It’s not only unfair to the customer but it’s unfair on you because of the time and effort you put into those programs.
So to prevent this from happening, you can use Active Member 360. Now, this integrates with the next thing I’m about to talk about which is the active campaign, and this essentially creates a unique login area for each customer with their own set of login details. For instance, if a customer gets a refund, you can block their access and if somebody hasn’t purchased your product they won’t be able to log in because they won’t have any login details.
Again, if they share their login details with others, you can always cancel that account individually. If you want to get started with dropshipping and you like the idea of hands-off delivery or shipping hassles and stuff like that, I would recommend Alibaba and maybe Oberlo. There are other dropshipping companies to choose from but I’m just using those two as examples.
Marketing Your Products
The next set of costs are related to marketing your products because let’s face it, it’s not going to sell itself. Right? Now, the words that you use to describe your product and how it’s going to help people are going to have a direct impact on the number of sales you make and therefore the amount of profit you make.
Having said that, it’s important that if you don’t have a background in sales copywriting, especially online copywriting, I strongly recommend that you hire somebody with copywriting skills. They will create some amazing sales copy that will sell incredibly well for you and just enable you to make a whole lot more profit than you would do if you were writing this stuff yourself.
Hire A Copywriter
So either way, whether you’re selling physical products or digital products I strongly recommend you get a professional copywriter if you are not able to write a compelling sales letter for your products or services. The prices that they charge vary depending on what you are selling and also the freelancer and their experience.
With most copywriters, if they are just getting started they might not have a proven track record so they will charge around $100 to write a sales page for you. However, if you go with somebody who has a proven track record of sales page copywriting for best-selling offers, like the ones you see at the top of affiliate marketplaces like Clickbank, Warrior Plus, JV Zoo, and so on.
Those writers will charge around two thousand dollars, yes you read that right. You have to take these costs into consideration as to how much it will cost to start an online business in 2021.
About $2,000 for a sales page but again keep in mind this is an investment in your future results. You can use these proven sales copies to generate six and seven figures in revenue for years to come. This would take care of your investment. Just to make you aware that this is something which I strongly recommend you do but again, it is optional.
Know Like And Trust
When it comes to marketing you shouldn’t expect everyone to buy the first time around. Sometimes they’ll need a little incentive. They will need to trust you a little before they start buying from you. You will want to have some kind of email autoresponder, email list, or newsletter if you will want to capture your prospect’s email addresses.
There are many autoresponders on the market but some popular ones are Mail Chimp, Infusionsoft, Get Response, Mailerlite Aweber, etc.
These autoresponders come with different requirements but you can start with the more affordable ones. When you get a bit more advanced you can always upgrade to an autoresponder to suit your business needs.
Active Campaign Autoresponder is incredible for beginners because it only costs $15 which is virtually nothing. After all, you have your newsletter and it allows you to do all kinds of cool marketing stuff related to sending newsletters follow-up sequences to people who go to your order form but did not buy your products. Once you have your marketing in place you now need to send people to your website which is called advertising.
Free And Paid Traffic Methods
You can do two different things here. Option one is to spend blood sweat and tears, time and effort, frustration, confusion, and so on, using free traffic methods like writing articles, posting on social media, trying to get ranked one in Google, and just spinning your wheels and hoping that some traffic is going to come to your website. This could probably take the next 6 to 12 months for you to see some results.
I don’t know about you but I don’t like that idea. I would much prefer to have something reliable that’s scalable and it’s much more professional in terms of acquiring customers at a profit. That’s why I recommend paid traffic at the beginning. It’s important to remember that getting your website rank in Google for organic traffic is probably the best approach for the long term. However, if you want to fast-track your online presence, paid traffic is the way to go.
Many online marketers use Facebook Ads as their main paid traffic source. Just to remind you that Facebook Ads can be expensive especially if you don’t know what you are doing. However, there are other alternatives to Facebook. You can always utilize other platforms like Pinterest, YouTube, Google Ads, Solo Ads traffic, etc for your paid traffic. Solo Ads might be a bit dangerous for you as a beginner.
If you want to start with Facebook Ads, $10 a day minimum might be what you have to start with as a daily budget if you want to reach enough leads. Of course, don’t think you’re going to be able to calculate exactly how much it’s going to cost you for the next month and then the next month after that because once you have your ad converting well you might be able to spend $100 in a day and make back at least a hundred dollars that same day.
It all depends on your sales copy and conversion. Most businesses are happy to break even after 30 days. The question you might be asking is, who wants to build a business that’s in the hole for 30 days? Since your business is new, it might take a little time for your prospective customers to know like, and trust you so you have to exercise some patience here. It’s better for you to break even at the end of your 30 days Ads campaign than to be at a loss.
Some businesses can break even on the very same day and then go on to make a profit from people going through their sales funnel and everything else after that. Keep in mind traffic is not a long-term cost it’s more of an investment in your future results. Once you get your campaign working well it’s going to bring home the big bucks for you.
Another thing that some people do when they start an online business is to think, I’m now a business so I need to hire all of these employees and have a huge payroll every month. Very soon they’ll start drowning in debt which is not a great way to start a business.
Instead, I strongly recommend doing as much as you possibly can yourself because that way you can, not only learn, you know in the future when you hire these people, you know exactly what to look for in them. You will be able to hire based on their skills. It’s cheaper for you as well.
Accelerate Business Growth
When you’re starting a business, cash is king and you need to keep that cash flow looking good or at least as good as you possibly can until you start seeing a profit. Now the caveat to this rule is, any role that would rapidly accelerate the growth of your business and we’re talking coaches consultants or agencies here.
So if you are not sure what to do when it comes to your online business or you know you feel like you’re just spinning your wheels and not getting anywhere at a certain point, hire a coach or consultant or even get an agency to do it for you.
Of course, the costs vary depending on their fees and what they charge but you’re looking at anywhere between $1,000 to $2,000 a month. Sometimes even higher for some agencies, so keep that in mind if you want to speed up the process. Otherwise, you can do this for free by learning this stuff yourself.
Finally, we have these small random costs that just pop up out of nowhere. You would have never thought of those little costs. These are little costs like $5 to $10 here and there. I would strongly recommend having a contingency or some kind of savings in place or a buffer in place just for those random costs that just pop up out of nowhere.
For instance, the copywriter might ask, “do you have a product graphic for your digital video course?”. You’re like, damn it, I don’t have one so I need to go to fiverr.com to spend $20 on that graphic. So keep in mind that you should have some sort of contingency plan extra funds for these random costs that crop up.
Those are the typical costs you can expect from starting and growing an online business. Please keep in mind that these are not all required. A lot of them are my recommendation to speed up your results and get you to a profit as soon as possible. You can start a business on a shoestring budget, even for free, but that will take you a long time and I would much rather you get to your end goal sooner rather than later.
How Much Does It Cost To Start An Online Business In 2021
Now, I’m going to break down an approximate cost for you to see what is required and what is optional and how much that all comes to so far. The initial costs of starting your business in the very first month, if you want to do things on the cheap and go with the essentials just to get the business online, will cost you around $200.
Some brick-and-mortar business owners who are reading this might be pulling their hair out in shock and saying “$200 to start a business that can potentially get me to $10,000 a month”. It’s like, what? Yes, you can start a business online for as little as $200.
Approximate Cost Of Online Business
However, if you want to speed up your progress to get better results, I’m projecting that it will cost you $2,800 if you hire an expensive copywriter to do your sales copy and you know you’re using the best hosting provider for your website. Also included in this amount would be using a lawyer to set up your business as a corporation company and everything else.
It will cost you $2,800 compared to $200 on the cheaper side. Of course, keep in mind the larger amount will get you to your end goal faster. So what about after that? Well, before launching your online business you need software tools and other things to get the business online.
This can amount to $150. Yes, you read that right. Your overhead to run and manage your successful online business is $150. After launching your business, if you want to run paid advertising to your offers and your products, then this will cost you an extra $300 a month or $10/day to run Facebook Ads.
Of course, this varies depending on your budget and the advertising platform you are using. Let’s say a minimum of $300/mth, that will of course amount to $300/mth plus $150/mth totaling $450/mth to run your potentially six-figure online business. So that’s it. I hope this article has provided some insights on the subject of “How Much Does It Cost To Start An Online Business In 2021“.
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