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Beginning An Online Service – Just How Much Should It Expense?

During the recent economic downturn, many of the unemployed have turned to the internet to make some money. If you’re one of them, you’ve probably heard a lot of facts and figures regarding what it takes to make money online, as well as the money you’ll need to start and run a business.

I’ve been in various businesses for over 20 years, both online and bricks and mortar, and I’ve become quite ONE with the associated costs. Here is the real scoop.

Although online businesses are some of the least expensive businesses to start, they are not without their share of risk, regarding both money and time you’ll need to invest. In comparison to other businesses though, online ones are much cheaper and therefore, more desirable to many.

START-UP COSTS: Here are some facts and figures regarding how much it would cost to start an online business. Of course, costs will depend on the nature of your business.

  • Hosting Fees: You’ll pay, on average, approximately $10.00 per month for hosting.
  • Domain Registration: Purchasing a domain is very cheap. Most domains can be had for around $10.00 per year, less if you commit to multiple years.
  • Website Design: The cost of a website is highly variable, depending on the number of pages, shopping carts, and more. You can expect to pay around $1500 for a decent sized website without a shopping cart. This cost could easily top $2500-$4000 or more. Here’s an area you can save. Do it yourself. There are a number of different software packages that will have you up and running for little money. Use “WordPress”and you can have a website easily set up for free. “Site Build It” is another pay service, but costs very little compared to a design service. If you want to sell your own products, “Etsy” or “ClickBank” might be appealing to you. All offer no-cost business and web set-up. There are many more.
  • Inventory: Are you selling physical products? If you’re stocking them, you’ll need to purchase some inventory. If you’re drop shipping directly from the vendor to the customer, this won’t be necessary.
  • Office Supplies: You’ll need bookkeeping software, a phone line, and other general office supplies. Expect to easily pay $500.00 for these supplies.

ON-GOING COSTS: Once your open, there are other necessary costs involved to running your business.

  • Website Maintenance: Regular updates to your website are a necessity. If you hired someone to build it, you’ll most likely have to hire them to update it. Again, another reason for doing it yourself.
  • Marketing: Although there are a lot of techniques to acquire free traffic, these take time. If you want more immediate results, you may want to pay for advertising, banner ads, pay-per-click, etc. The more you spend, the quicker your results. You could spend $100 per month, or $1000 per month or $10,000 per month. You could also spend 0 per month. The choice is yours. Know your budget and plan your income accordingly. I would recommend at least $200.00 per month minimum for advertising, more if you can afford it.
  • Income Cushion: Building any business to a full-time-income level will take time. Despite what you’ve heard, making money online is NOT get rich quick. It will take time. You should have a financial cushion to take you through the first lean months. Six months is a good start, more is even better.
  • Software Costs: As you continue to market, you’ll discover software packages that will make your life easier because they perform many tasks automatically that you normally do yourself. You could easily spend $200-$300 per month (or even much more if you have the resources) for automation. I would highly recommend investing in automating many tasks.
  • Office Expenses: Although these are minimal, items such as printer ink, paper, etc. should be included.
  • Accounting Services: Some small business owners prepare their own taxes, but they also may be leaving money on the table in the form of deductions not taken. My advice would be to hire a tax accountant. Prices vary. I pay $300.00 per year for my business return. You’ll pay more if you want quarterly reports and other services.

Although this list is far from complete, it should give you a good starting point in your quest for knowing the costs associated with starting and running an online business. Many frugal business owners spend very little. Do more yourself, spend less. It’s that simple.

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