How much does it cost to start an Internet Business?

  Posted on 11/16/2011
How much does it cost to start an Internet Business?

Many people are looking for alternatives to the traditional job market. Since many are looking toward the internet, there is strong demand for information on what the cost to start internet business is and what the odds are for success.

The cost of starting a virtual business depends on the kind of business being started. Surprisingly enough, just about every type of internet business can be plugged into one of three types:

  1. Building or managing websites for other businesses
  2. Selling Products
  3. Selling Advertising

Every kind of internet business requires at least one computer and an internet connection, or at least $400 plus another $50 per month. Beyond that, each type of internet business has different requirements but, surprisingly, the startup costs aren’t all that different. Selling products and advertising are relatively accessible for beginners. Building and managing website, however, requires substantial expertise, which doesn’t come quickly or cheaply. It will be excluded from the remainder of this discussion.

Selling Products

Selling products on the internet requires a variety of tools beyond a computer and internet connection. First, the seller needs a web outlet for sales. Websites are generally cheap if the seller uses an established sales channel like eBay or Etsy. Second, the seller will need shipping materials. Third, they may need a few other tools, like a digital camera to photograph items. Last but not least, a business needs inventory to sell. That may come cheap or not, depending on what items will be sold.

Overall, costs excluding the inventory are probably less than $1000 to start out, including computer. Thus, the cost of selling a product on the internet is mostly determined by the cost of the inventory. With that in mind, the key to success of the business is the profit margin on the product and the number of sales per month.

From there on out, determining the cost of a business and whether or not it can be profitable gets murky. If a business sells an item with a margin of 50 percent, investing $5000 in inventory per month would yield a return of about $2500 a month. However, not many off-the-shelf items sell for a 50 percent markup. If another business also sells the product, there’s nothing to stop it from cutting the markup to 45 percent and undercutting other sellers.

The product seller is left with one of two options: sell a unique item or sell in large volumes. Selling a unique item usually means that the business owner makes the item themselves, but that also means the quantity is limited. On the other hand, selling in large volumes means spending more on inventory.

Either way, when it comes down to it, the cost to start internet business selling products is relatively low. The real difficulty is figuring out how to make it profitable.

Selling Advertising

There are several different ways to earn money advertising on the web. Each has its own nuances but the costs are similar. While all can be profitable, none are simple or certain, nor will they necessarily be profitable immediately.

All advertising businesses require two things: a web site and traffic to that website. The first is easy and cheap. The second isn’t easy, and how cheap it is depends on how it is created.

Getting a website started is cheap. The established option for getting started quickly and cheaply is to build a site on WordPress. WordPress offers tools to create blogs/websites for free. The site can be hosted either on the company’s server or another server, and hosting on the company’s server is also free. Users can create just about any kind of website with the tools the company offers, an it is easy to upload photos, create multiple pages, or post to a blog.

Building a really powerful WordPress website may require modest investment. Many bloggers purchase “themes” that allow both more attractive formatting and greater customization of the site. Others use self-hosted WordPress sites. Whatever the case, adding bells and whistles to the website itself is cheap. Overall, the cost of creating an advertising site with WordPress will probably land at well under $1000.

However, an advertising site needs traffic to make money. Building traffic is the key to success in internet advertising, and how that is done largely determines the cost of creating a successful business.

The least expensive way to drive traffic to a website is to create content for the website that will drive it to the top of the search rankings on Google or Bing. Generally, providing “content” means providing written articles that rank high for a particular topic in the search engines. Driving a site up the search rankings takes commitment and patience, but it can be done. The key is to continuously provide new content that is optimized for search engines using sets of key words related to the topic of the site. This is known as SEO, or search engine optimization.

There are plenty of alternative methods of generating traffic. The most direct way is to advertise the site. Another way is to buy content from “content mills” to post on the site. However, as these methods are added, the cost of getting started and turning a profit rises.

The Bottom Line On Starting an Internet Business

Overall, the cost to start internet business isn’t high. Businesses that sell advertising are probably less expensive to start than businesses that sell products, but both can be up and running for less than a thousand dollars. The main question isn’t how much it costs to start the business. The main question is how much does it cost to start the business and make it become profitable? That’s the harder question.