Cem's Blog: November 2008

When I had decided to learn and experience the joy and challenges of setting up an online store, with my Engineering and Marketing background, I conducted some research on this subject.
With this research I was trying to find answers to the following questions:

How and where to host our website?
How to get a domain name?
How to design the website?
How and where to get the shopping cart solution?
How should I set the business model?
How can I take advantage of Drop Ship business model?
Which Drop Ship vendors are the best ones?
How to set up a legal company and which one I should pick? (LLC, Corp etc.)
How to get our federal tax ID?
How to get State tax ID and sale permit?
How to advertise our web site?
What should we sell?
What would be our differentiation from the existing web sites?
How do we price our items?
How do we optimize our web site for search engines?
How do we measure our success?
What are the tax implications? Can we take advantage of this with our own tax situation?
How to open a business account and manage it online?
How to get credit card, Google-checkout, Paypal (merchant) accounts to accept payments on my web site ?
How to monitor and analyze our web site activities?
How to optimize our web site for Search Engines
How to attract traffic to our web site and what kind of marketing tools are available for this?

During this period we have learned so much about this topic.
Now our site is up and running and we are advertising and bringing traffic to our new website.

I decided to share what I have learned so far to help the people thinking about setting up a new online business and learn more from people that will comment on this subject.

I want to see if anyone is interested in this topic so I can spend more time to document my experience showing step by step approach to each decision and making logical decisions based on pro and cons you face on each step. (leave some comments)

Now I will list the things that I found necessary to start this journey:

You can do all of the things that are needed to setup your online store just by yourself, without leaving home (Except maybe getting a business account at a bank. Some big banks need to see you in the branch office to be able to open an account)

Setting your expectations right is important:

How much effort is needed?
For the first week, expect to spend at least 5-6 hours a day. (If you want to achieve the results in a time frame that I have listed below)
After the 2nd week, 2-3 hours a day will be sufficient
After 2 months, depending on the traffic and sales, you may need to spend 1-2 hours a day and 2-3 hours on weekends to update your products web site etc.

How much money I will spend?
If you pick a quality web hosting company with good Shopping Cart solution you will need to spend $200-$300 for starter and expect to pay approximately $50-$60 monthly after that. (This will include domain name registration etc)
To be able to set up a legal company, get your Federal Tax ID, State Tax ID, Sale Permit, you may need to spend somewhere between $400 - $900. (This will include legal fees, application fees etc)
When you start to advertise your store you may need to spend ~$1 for a click to bring a relevant customer to your site, and expect your convergence rate to be about %5; meaning you can sell something to about 5% of your customers who will come to your site. You may need to do this to establish a customer base and start to get higher ranking on search engines. (This may continue 6 months to a year). This also means that, for each sale you will be spending approximately $20 on marketing. If you are selling low priced items cost of the good will increase and you need to watch your margins.

How soon I can see some results?
From the day that you decide to start an online retail business to setting up the web site up and running with products, it will take approximately a week. (Assuming spending few hours a day)
Second week, you can get your company established legally with Federal Tax ID and add more products in to your store.
Third week, you can start to find your web site using major search engines. That will be the official existence on the internet.
Fourth week, you can get your business bank accounts and credit card merchant accounts established and ready to accept credit cards on your online store.
Fifth week you can see the traffic increasing to your website, as a result of your marketing efforts.
Do not expect to sell any expensive items and start to make money at least for two months.

If you are convinced that your expectations are under control, now you can move..

First Thing first: Before you start to do anything you need to get organized. By doing this upfront, you will save so much time and you will work much more effectively as you will be dealing with so many things.

Here are the immediate things that you will need:

a. A computer and a relatively fast internet access (DSL, Cable etc) Later you might need a printer, scanner, a phone service (such as cheap VoIP Phone service from Vonage, as some accounts will not accept cell phone numbers) and an actual fax machine or a fax service (such as e-Fax)
b. Back up system (either local or internet based, such as Carbonite)
c. Open a HISTORY document and record everything you have done in a chronological order with dates and relevant information. (could be a new tab in Microsoft Excel)
d. Open a TO-DO-LIST document to keep your to-do lists with due dates and priorities. (could be a new tab in Microsoft Excel)
e. Open an ACCOUNTS document to keep all your new accounts, its web address, your login IDs, passwords, which credit card you used. (could be a new tab in Microsoft Excel)
f. Open an EXPENSES document to record all your expenses. Try to use a single credit card to charge for these expenses. (could be a new tab in Microsoft Excel)
g. In your hard disk create a directory structure that is organized for Finance, Legal, Marketing, Web Design, Products etc. Do the same for creating Favorite Directories in your Browser as you will be collecting so many web addresses to make decisions, revisits etc
h. Create a new e-mail account just for your new company (gmail will be the best as you will need some many Google accounts for many free and paid services.) (It does not have to be carrying your company name on this email account)

Now you are ready to move. Here are the things you need to do in a chronological order: (for each item I will provide detailed explanation in following chapters)

1. Decide what to sell and who to sell and estimate your targeted revenue and profit
2. Check your soon-to-be competitors on the internet to have an idea on the current trends, products and web designs
3. Based on what you see out there, decide on your differentiation

For step1-3 you can check more details at Part-2
4. Decide on where to get your products (distributors, drop ship suppliers)
5. Decide how to ship your products (Fulfillment houses or drop ship vendors)
6. Decide for the domain name of your web site and Register your domain name with available services (such as Register.com)
7. Consult your tax advisor or decide on how to pay tax on this company. You may think about hiring others to help you later or even bring your spouse in to the company to take advantage of some tax benefits.
8. Establish your company legally. It can be an LLC or Corporation. (It can be owned by only you or together with other partners or wife) Request for Federal Tax ID, State Tax ID and State and local Sale Permit (You can do it without leaving your home with online services such as Legalzoom )

9. Create a logo for your company. You will need this soon in jpg and jif format. You can use Microsoft PowerPoint or Adobe Photoshop) (you can download Adobe Photoshop for a trial for 30 days to try to learn and create your logo in the process. You may need this later to create and modify your product and web page pictures) There are also online services to help you to create professional logos (such as LogoMaker.com, Cooltext.com or LogoWorks)
www.logoworks.com

10. Decide on a Web and e-mail Hosting Company (such as Volusion.com)
11. Decide on a Shopping Cart Solution (such as Volusion.com )
12. Sign up for free Drop Ship services if your products need to be shipped to customers (not electronically downloaded) (with services such as Doba.com, WorldwideBrands or Dropshipaccess.com provides)

13. After this you need to prepare your return policy for your products. Later this need to be posted on your web site to get approval from your Merchant Company to give you credit card access
14. Before you have your Business Account and Tax ID, you can start to create Paypal and Google Checkout accounts that you can use later to accept payments before you have MasterCard and VISA merchant accounts
15. While you are waiting for your company to establish legally, you can start to get the product lists from the distributors and set up your web site at the web hosting company. All big services give you 2 weeks to 4 weeks trial period to do these.
16. As soon as you receive the Tax ID and the State documents, you can open a Business Bank Account and apply for a business credit card and a check book)
17. Once you have a business account, you can apply for Merchant accounts (such as SkipJack.com) to be able to accept Master Card, Visa, Amex on your web site
18. During this light period you can start to use QuickBooks Pro (to keep your finance in control) This will be a tool that can connect to your many account such as Banks, Merchant Accounts, Shopping Cart and Web hosting companies and download activities. It will also help you with tax preparation.
19. Now you have your website legally exists and hosted. Next big step is to start working on marketing your web site. Otherwise no one will know about your great products and services.
20. First think is to register your web site name with some search engines starting with Google, Yahoo and MSN live search.
21. During this period you will be adding more products to your web site and improve the look and functionality.
22. Also start to work on Search Engine Optimization (SEO) of your web site for better ranking at search engines and your customers to find you easily
23. Now is the right time to start to try Advertisement such as Google Adwords, Google Base and Yahoo Search Marketing, Yahoo Site Explorer

24. As the traffic starts to come to your web site, you need to use Traffic Analyzing tools such as Google Analytics
25. As you feel more comfortable with your web, you may start to improve the design with more powerful tools such as Adobe Dreamweaver for web design (you can download it free for 30 days)
Adobe Dreamweaver Developer Toolbox

26. You can also buy and download more professional web site pictures online (such as corbis.com)
27. Now is the time to set up your customer support tools, v-mail, emails, online blogs, reviews etc.
28. After this, it is an ongoing iterative process, to analyze your business, web site design, Search Engine Capabilities, Marketing budget and ROI (Return on investment) and Finance to make adjustments.
29. Also you need to constantly research for new products, price changes, and discontinued products and make changes, additions and deletions.

More details are coming…. Stay tuned for the following topics..

My selection process and experience on: