Before you decide to open an online store, you might want to consider these six online startup business expenses. While running an online store can generally have less overhead than a traditional brick and mortar operation, there are still plenty of expenses to consider and build into your business model. Before you open your e-commerce store, be aware of all of the startup costs associated with such a venture.
- Website Design/Hosting
Website design and hosting will vary greatly in cost, depending on the provider/designer. Many hosting sites charge only a few dollars per month for website hosting, but if you’re running an e-commerce store, the cost may actually be higher.
You’ll also want to hire a website designer to ensure you’re creating a functioning, aesthetically-pleasing website that your customers will enjoy visiting. There’s nothing more distracting than a website that doesn’t work right, and customers will tend to navigate away from the page rather than try to stick out slow loading times or multiple crashes.
Stay away from DIY site builders for e-commerce stores. While these sites are great for personal websites, you’ll want a customized experience when you’re building an e-commerce store. The level of customization and personality a professional designer can bring to the table is unmatched by DIY builders.
A good designer can set you back anywhere from a few hundred to a few thousand dollars, depending on your specific needs and the designer’s rate. This investment will be well worth it when you have a beautiful, functioning website for your customers to purchase products from.
- Logo Creation
Your web designer may or may not also design logos. If not, you’ll want to hire a professional graphic designer to create a stunning logo that fits your brand perfectly. This is another aspect of your brand recognition you don’t want to trust to DIY graphics sites. Hiring a designer will ensure that you get a crisp, professional logo for your business in a timely manner.
The cost of a logo will vary per designer. Some designers charge on an hourly basis, whereas others will charge on a per-project basis. Depending on the size, file type, and deadline, you could potentially pay more. Either way, an investment into a professionally designed logo is just as important as a well-designed website and can seriously boost your brand recognition.
- Shipping Options
Shipping will likely be one of your greatest expenses as an online retailer. With so many shipping options available, from UPS to USPS to FEDEX, you should be able to easily locate the right provider for your product and budget. You can also opt to simply allocate the cost of shipping to the customer, as many online stores do.
Even major online retailers like Amazon still charge a shipping fee (unless you have Amazon Prime). Shipping is simply an expense that most online retailers won’t want to cover, and if they do, the customer usually has to pass a certain payment threshold first.
You’ve probably seen sites that offer “free shipping on orders over $50” or something similar. This is one option to consider when choosing a provider; you can give your customers free shipping, but only when they spend a specific amount in your store. This helps cover the cost of your overhead and generate customer loyalty with free shipping options.
- POS System/Payment Processor
When you open an online store, you’ll need a way to process payments. What better way to do so than with modern POS systems? When you get a POS system, you’ll want it to support multiple payment methods, and you’ll also want to carefully read up on the cost of using the software.
Some POS options, like Square, charge on a per-transaction basis; while others offer monthly subscription services. Be aware of the full cost of the system you choose before making the decision to buy. The last thing you want is hidden fees for payment process popping up!
- Equipment
Even with an online store, you’ll still need to operate a space to produce your products. This can mean extensive startup costs for production equipment, electricity, etc. It’s important to remember that not having a brick and mortar store doesn’t mean you won’t need a physical location to produce your items.
You’ll want to consider all the equipment you’ll need, even down to things like pens, office chairs, and toilet paper for the facility bathrooms. These seemingly small items can add up rather quickly, forcing you to cover the cost of something you may not have even considered during your business planning.
- Insurance
At last, we come to insurance. This is an expense that every business has to incur. Whether it be general liability insurance, rental or property insurance, or some other variation, you’re going to be carrying some kind of insurance on your business and its property.
General liability insurance helps cover the costs associated with any liability for failed or malfunctioning products. This is pretty much a necessity so your business is protected financially from any mishaps that could occur. It’s usually helpful to also have an attorney on standby for these types of issues, as they can escalate quickly into major legal problems.
Conclusion
Opening an online store comes with its own overhead and startup costs. You’ll want to consider all of your expenses and account for them in your business plan before you try to seek out investors or bank funding. They’ll want to know you’ve researched the costs and possible profits associated with your business in order to feel good about lending your project money. Pay close attention to these six startup costs for a better idea of what it will take to start your online business. If you’re not great with finances, you can hire a financial advisor to help you identify expenses and create a better budget. Use the Careful Cents site to compare the best financial advisors in San Francisco.
