In 1989, while working at the European Particle Physics Laboratory, Sir Tim Berners-Lee invented the world wide web. More than two decades later and the face of communication, the flow of information and the world of business are unrecognisable as a result.
The internet has created a whole new generation of millionaires, and quite a few billionaires, since its conception. After its creation, globalisation suddenly had a whole new vehicle, and entrepreneurs had a completely new route to market. Amazon, eBay and Google immediately come to mind when thinking of the internet establishment, but at the other end of the spectrum is the sole trading entrepreneur building a business empire from the comfort of a spare bedroom.
Starting an online business can be as simple as setting up a basic shop on eBay to sell a few wholesale items, to coming up with a completely new online concept with a novel way of monetising it.
The beauty of the online business is that it’s suited to just about anyone. You don’t need to be an MBA graduate based in London to succeed. You can start your operation from anywhere, as long as you’ve got access to an internet connection and a bit of business acumen.
You can start off small, work on it part-time or even view it as a hobby before you decide whether to commit to it. Claire Lewis and Pat Wood started their online retro t-shirt shop Truffleshuffle.com as a part-time venture.
“It all started after Pat bought a retro t-shirt in the States and friends kept asking where he’d got it. Truffleshuffle was only ever intended to be a hobby – something to bring in a bit of spare cash. It was only when the site went live and started growing that we thought: ‘there’s mileage in this’.”
At the other end of the scale, Sophie Cornish and Holly Tucker did a five year profit and loss feasibility plan before they started work on their site, Notonthehighstreet.com, an online marketplace where customers can buy from a whole range of independent, quirky and specialised small businesses in a single transaction.
Having established how much time, money and resources you plan to put into your online venture, there are four basic online business models you can follow:
E-commerce – the most closely aligned to the traditional business model of selling. With an e-commerce site you sell a product or service. Customers buy directly from your site, and the products are then either delivered to them or downloaded.
Advertising – with this type of site, the aim is to get as many visitors as possible, increasing the amount of customers your advertisers reach. Content on this kind of site is usually completely free for the site user, providing them either with information or entertainment.
Subscription – similar to the advertising model subscription sites generally provide information or entertainment, but the difference is the user pays to access all or part of that content.
Freemium – with this business model, you offer a basic service for free but customers can pay for premium features.
You can of course base your site around a combination of these internet models.
Everything about your online company revolves around your domain name. It’s the gateway for your customers to enter your business and consume either your products or service.
In a literal sense, your domain name is what the user types into their browser to reach your site, but it’s also your brand, your business identity and your most important marketing tool.
When the internet was in its infancy, picking up a domain name was easy. With millions to choose from and more generic names such as business.com, early internet adopters had few problems registering the names they wanted. Nowadays, it's a different story. All businesses, from sole traders to multinational conglomerates are encouraged to have some kind of online presence, making the process of securing a decent domain name increasingly difficult.
Mitesh Soma launched his online pharmacy ChemistDirect.co.uk in 2007.
“It can be really difficult to find good domain names as time goes on,” he says. “Securing ours was important because it’s one of our biggest assets. I haven’t got the dot com, but I’m trying to buy it. However, as we’re only based in the UK it’s not so bad. You’ll often have to pay a premium for a good name now, but you need to make sure it’s something memorable, easy for people to find and does what it says on the tin.”
Mitesh advises buying a few domains and trying them out to see what works and what proves more popular. That way you can drop the ones that aren’t successful.
There are plenty of success stories on start-ups detailing how web entrepreneurs purchased their domain for about £10. Truffleshuffle is one example. However, depending on what kind of term or wording you’re after it could cost a lot more.
Check out what domains are available before doing anything as drastic as registering your business’ name with Companies House. Some people hang on to domain names for years without actually using them for a website, so securing your place on the web doesn’t mean you have to start trading straight after.
There are even companies that will give you a free domain name as part of their package of services. However, they may be more limited in services and you should make sure you can take the domain with you should you wish to move service providers before you build up a business around that web address.
It’s not enough for your website to have a catchy domain name and some interesting content. People need to be instantly engaged when they land on a page, and much of that will stem from design, layout and how easy it is to navigate between, and find, different content. Depending on the size and scope of your business you may find you don’t need to hire expensive web designers when you first get started. Bear in mind that your domain name is just an address, and you can change the look and feel of your site as many times as you want.
“I built our first site myself. I had a basic understanding of what I was doing because my job involved working with IT systems,” says Pat from Truffleshuffle. “I’d never been a programmer but I taught myself the bare essentials of how to put the site together.
“I’ve met a number of people in the industry who’ve been fleeced by web developers because they don’t understand the technology. We didn’t want to pay someone £500 to do it. When you’re a start-up that’s £500 you could be spending on advertising or renting an office.”
The Truffleshuffle duo successfully grew their business from a basic site they built themselves, but admit it only ever started as a hobby. As their business scaled up, they brought developers in to build subsequent versions of the site.
Mitesh brought the developers in pre-launch for Chemist Direct, but still made sure he had a big hand in every aspect of the design. He says:
“I worked closely with the designers to create a specific look and feel to the site. I wanted the navigation to be as good as possible with clear separation of categories, security information and our phone number prominently displayed. When it comes to setting up a website you can get one designed for a few hundred pounds but the difficulty is making sure it’s scalable.”
Sophie from Notonthehighstreet.com says there was a huge learning curve involved when they built their site.
“We’d both worked on sites before and although we weren’t highly accomplished we knew what a CMS was and a bit about how e-commerce worked. I probably could have written the code for a basic HTML page if you’d held a gun to my head, but it was nothing like what we learned over the next six months.”
Basically you’ll want to strike a balance between a site that looks good, gets users to return and doesn’t cost the earth to build. Shop around for the best deal, perhaps even get companies to tender for the job based on a list of your requirements.
For more information on web design and functionality, read our article on What makes a good website
Although websites can be accessed from anywhere in the world, the information on them still consists of data which is stored on a physical server somewhere. Depending on the scale of your website and the amount of data, images, animations etc that you have on it, you’ll need a varying amount of server space.
“We started with a smaller cheaper company for our server, but once we brought the web deign in-house we upgraded to a better one that had faster response times and more back-up,” says Sophie of Notonthehighstreet.com.
“We don’t exactly have the Rolls Royce package but I’d say we have the highly engineered German car of the server world. It’s well worth the money and defiantly something to invest in.”
You can host a basic business website for free with some packages. However, if you’re business primarily operates online then you’ll need something a bit more dedicated to your requirements.
A basic shared server web-hosting package will generally cost around £40-50 pounds per year, although it really depends on the size of the site.
A dedicated server can cost you in the region of £40+ per month depending on your requirements, but as with most internet related packages, it pays to shop around.
Mitesh from Chemist Direct took a novel approach to comparing hosting packages. “I pulled together a list of all my requirements and sent it to hosting companies inviting them to tender.” In the end I went with a company that offered the right balance of features and price, but it’s still an area I review regularly to check I’m getting the best deal.”
For more information on web hosting, check out our section on hosting your site
A shop or restaurant in a busy part of town can survive on passing trade alone. However, you need to take deliberate efforts to get your business noticed when it’s solely based online. You can take traditional marketing routes such as print or broadcast advertising but with an online business, the most logical place to focus your marketing efforts is on the internet.
Search engine optimisation (SEO) involves getting your site picked up as high in results pages as possible on search engines such as Google, Yahoo! and Bing. These are known as organic search results and are generally more welcoming to consumers. There are no guaranteed search engine tricks but to improve your chances there are a number of methods that you can employ. These include website and page quality (your site needs to be structured in the right way and your content should be relevant, readable and searchable), ethical link building and avoiding deliberate spamming (excessive use of a single keyword or phrase).
If you want to take this a step further there are consultants you can employ that will recommend and implement SEO within your site.
Another popular way of increasing your online presence is pay-per-click (PPC) advertising. Unlike print or broadcast advertising, with PPC you are only charged when someone actually clicks on your ad. The big player for this type of advertising is Google’s AdWords, where companies bid for certain keywords relating to their site. Depending on how much they’ve bid, their ad will come up with varying prominence on the listing pages when someone does a search using those keywords.
However, as the market becomes saturated, certain keywords are extremely expensive to get high results for and you may find this is not the most cost-effective way of advertising your site if you want to buy popular search terms such as florist or gift shop.
“We advertised ever so slightly more as revenues increased,” says Pat from Truffleshuffle. “We started off spending £5 on Google one day and if it worked we’d spend £7.50 the next day. We now spend about £300 a day.”
“When we started we couldn’t afford to advertise with Google,” says Notonthehighstreet.com’s Sophie. “It’s really not cheap. We later appointed a company to take care of all our SEO and PPC and now rank really high for some of our key search terms.”
“Marketing is our single biggest expense,” says Mitesh of Chemist Direct. “We have a mixture of banner ads, ppc and partnerships with other sites. The good thing about an online business is you can test out what works relatively cheaply. Start small, see what gets results and go from there.”
For more information, read our article on how to use pay-per-click advertising
Never underestimate how effective some good PR can be in getting visitors to your site. Sophie says Notonthehighstreet.com managed to bag so much free pre-launch coverage in papers like The Mirror, The Daily Mail and the women’s monthlies that it would have cost around £7m to buy that much print exposure in terms of advertising. As a result the site had 16,000 on its launch day.
You can hire a PR company to get you coverage in the media, but you may find this is beyond your budget during the early stages of the company. “When we started we couldn’t afford a PR company so instead we’d cheekily call up the magazines ourselves,” says Claire of Truffleshuffle.
“You might need to call up 10 magazines to get featured in one but at least it doesn’t cost you any money. That way any revenue you bring in from it goes straight into your pocket.”
For more information, visit our section on PR
As an online trader you are subject to the same regulations as any vendor, and a few specific ones relating to distance selling.
If you’re planning to sell online you will need to be familiar with the
Electronic Commerce (EC Directive) Regulations 2002. Nearly all commercial websites are covered by these regulations so there’s no getting away from them, and no excuse for not knowing them.
To comply, your customers must have certain information including your business’ name, physical address and email address. You must also give details of any professional body with which you are registered, and display your VAT registration number if you have one.
You can find more detail on this in the article entitled Regulations for online selling.
Even if you don’t sell a product or service to your customers and are not bound by acts such as the Sale of Goods or the Supply of Goods and Services Act, there are other rules to consider.
If you’re registered as a Ltd company you must state the company registration number, place of registration, and registered office address on your site. You do not have to display this information on every single web page. It is commonly placed on the ‘About us’ section of the site.
“Triple your cost projections. It always costs more than you first budget for and so many things crop up that you could never have accounted for.” – Sophie, Notonthehighstreet.com
“We never chucked large amounts of money into the business. We grew at the same pace as the website which allowed us to gradually learn things and also meant there was no risk involved. Don’t do things outside you means. Grow organically.” – Claire, Truffleshuffle.com
“If you can find a business partner with complementary skills then you’re 90% of the way there.” – Sophie, Notonthehighstreet.com
"Stick to what you know and do it well. By keeping our niche we’ve managed to head off the competition.” – Claire, Truffleshuffle.com
“The good thing about an online business is the web lets you test out business models cheaply. Don’t spend too much when you start out. Start small, see what works and build on that.” Mitesh, Chemist Direct
“Don’t expect to be an online millionaire overnight. Everyone I’ve ever met who expected that to happen has failed or got themselves into debt.” – Pat, Truffleshuffle.com
For more information on setting up an online company visit our Setting up a website channel.