Starting a business online, whether as an extension of an existing brick and mortar operation or as a stand-alone business, requires some financial planning as well as accepting a number of unavoidable startup costs. Just because your business is now fully or partly digital does not mean that you are not subject to many of the same financial pressures and considerations as a physical business. Additionally, there are also unique revenue streams and costs you are exposed to online. With that in mind, below are 4 financial considerations for online businesses.
Taxes and Setting Up Your Company
When we talk about tax we are talking about two things: how you will stay on top of tax-related paperwork and information and how you will go about controlling and minimizing your tax liabilities. The first is simple enough. If you are a small business, you should look into something like QuickBooks Online to make sure that your accounting is always up to date and that you are set up to easily complete and file your taxes come tax season.
The second concerns what kind of tax-saving measures you will and will not be able to take advantage of as an online business. One of the major determinants of how you will be taxed as an online business is the kind of legal entity you become. Many online businesses choose to incorporate because this legal structure allows for things like social security and benefits deductions. Others choose the LLC, LLP, sole proprietorship or partnership routes. In addition to your business structure, other factors like where you conduct business and whether you have full-time or freelance employees working for you will determine how you pay taxes.How Your Website Will Earn Money
Whatever your primary business operations are--whether you are selling a product or a service for yourself, or affiliate marketing them on behalf of other companies--there are always additional ways to monetize your website. You can publish sponsored posts and product reviews, accept donations, put some of your content behind a paywall, and sell ad space. You can also monetize your expertise.
If you are an expert in a certain product or service, or in creating and selling that product or service, imparting your knowledge and experience in the form of virtual classes or courses is a great way to create evergreen content that produces steady passive income over time. Make sure that whatever monetization strategies you pursue, you don’t compromise your user experience.Web Design Costs
It is important to bear in mind when starting an online business that you are likely going to have to pay for web design one way or another. If you outsource the entire project to experts, the cost of a brand new website with the various functionalities you will need to conduct business online will likely run in the thousands of dollars. This is what experienced web designers charge for their work. Be careful not to pay for what you don’t need, however.
The alternative (i.e., doing it yourself) will also cost you money. Free templates, page builders and plugins are very useful and it is entirely possible to build a high-functioning website without upgrading to premium anything, but if you want to create something that looks a cut above, without any coding experience, you are going to need to shell out on at least a few web building tool. This is not to mention the opportunity cost involved--hours of your time spent learning by trial and error how to build a website from the ground up.
Hosting and Domain Expenses
If you are running a business website, a simple WordPress blog likely won’t cut it for you. You will likely want a “.com” or related domain name that reflects your brand or business name. This will cost you money. It could potentially cost you a lot of money, depending on how flexible you are about your domain. Anyone who has arrived at a place like Name Cheap or Go Daddy with a great idea for a domain, only to find that it is already owned or is for sale and the seller is asking for thousands of dollars can attest to this.
Once you have decided on a domain name and price you are willing to accept, you will then need to consider where you want that domain hosted, which represents another cost. Your SSL certificate, which indicates to visitors that their data will be encrypted and protected when they do business with you, represents another cost and important website security component.
Conclusion
Setting up and running an online business requires time, effort, planning and capital, just like any other business. There are costs involved in building out your digital infrastructure that, while certainly less than the cost of renting and maintaining commercial space, nonetheless represent monthly expenditures and worries. Know what the financial implications, responsibilities and opportunities of running an online business are before going digital and make sure you are prepared for everything involved in online commerce.