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eBusiness Primer: How To Set Up An Online Store

Introduction

Starting your own online business is not as difficult as you may think. However, it does take a bit of time and investment as well as careful planning. We will take a look at the items you will need to start your own online store, and how to go about setting it up.

Careful planning is essential to a successful business. Start with a business plan. You'll want to at least know what type of product or service you want to sell, and be sure you can have an inventory in stock before you go online live, or can devote the time to provide the services you are selling. You'll also need to decide whether or not you'll want to run your business under your own name or pick a special name for your business. In addition, be sure you have enough funds saved up for the initial startup costs. A good source to help you plan is the Pandecta E-Business Checklist. This checklist will help you determine the type of product you could sell, pricing ideas, information on types of customers you'll want to attract, and more.

You'll also want to keep good records and remember not to spend all the money you earn from your site. You may need some of it to pay other fees, sales taxes, etc.

What You'll Need

There are two main types of businesses you can start. One way (and probably the least expensive) is to go by your own name (such as, for example, "Betsy Blue's Gifts"). We'll refer to this business type as a "Personal Business" (or abbreviate it as "PB"). Another way is to choose a name for your business, ie. an assumed name, such as, for example, "American Gifts". We'll refer to this type of business as "DBA" or Doing Business As. Note that in either case, you can still run the business by yourself as a sole proprietor if you wish. Depending on which way you want to go, and your local laws, there are some things you'll need before you can start your business online. The chart below gives you an idea of some of the things we'll cover. Click on any item name to learn more about each item.

Item Personal Business Assumed Name (DBA) Business
Business Name is Your Name & Product Type Yes No
Assumed Business Name No Yes
Sales Tax ID Yes 1 Yes 1
Personal Bank Account Yes No
Business Bank Account No Yes
Business Address/Phone # Yes 2 Yes 2
DBA Certificate No Yes
Product or Service Yes Yes
Shipping Yes 1 Yes 1
Store Logo Yes Yes
Web Hosting & Web Site Yes Yes
E-Mail Address Yes Yes
Shopping Cart & Payment Processing Yes Yes
Advertising Yes Yes
1. Depending on product or service offered.
2. Depending on Local Zoning Laws.

Business Name

One of the first things you'll want to do is choose a name for your business. If you are just putting up a personal business, which is probably the easiest and least expensive, you will be using your own name, along with the product name. For example, "Betsy Blue's Gifts" would be an example of a business using a personal name. However, you can also pick a different or assumed name for your business, such as "American Gifts" for example. If you go this route, you can see by the chart above that you'll have a little more paperwork and a few other items to take care of. However, this option may be preferable for those who expect their business to grow or would like to develop their own brand name some day. Assumed business names are also easier for customers to remember and may be more descriptive of the products or services you have to offer.

Sales Tax ID

Depending on where you live, you may need to get a sales tax ID and collect and report sales tax. Some items or services may not even be taxable, and thus you may not need to collect and pay sales taxes. Other items you may need to collect taxes only from those in specific areas of your state, at certain percentages. All this information is available from your State Tax Office. Whenever you collect sales tax from a customer, be prepared to keep a record of the taxes they paid and keep these records for reporting and future records. When it comes time for you to report or pay your collected sales tax, you then write a check for the amount of taxes you collected and pay it to your State Tax Office.

Bank Account

If you are not going under an assumed name, you could have all income from your online store deposited to your own personal bank account. However, you want to be very sure you have enough money to pay any sales taxes, fees, etc. that are incurred from running your business. Sometimes it's helpful to have a second personal non-business bank account so that you may keep your profits separate. After you have paid all the taxes and fees for a given period, you can then always write a check to yourself to deposit the net profits to your own personal bank account. Do keep in mind that your gross profits (before taxes, fees, etc.) you may also have to owe income and self-employment taxes on when you file your income taxes at the end of the year. Saving a percentage aside for this is also a wise choice.

If you are going to use an assumed business name and not your real name for a business name, then you'll need to have a Business Bank Account that is in the name of your business. This will allow any checks, money orders, and/or credit card payments to be made to your business name. Most banks may require you to have a DBA Certificate and maybe even a Sales Tax ID for you to open an account. You may even have to maintain a minimum balance or pay a monthly fee. Check with your local banks for Business Account options and requirements.

Business Address/Phone #

Depending on the zoning laws where you live, you may need to rent a PO Box or a mailbox such as those provided by The UPS Store and Mailboxes, Etc. If, for example, you are not to have a business in your residential area, having a business address as a mailbox will let you still run your business from home since everything else is going to be run via internet. Any offline mail (including registering for a domain, merchant account, DBA, etc.) can be sent to your business address to comply with your local zoning laws. Talk to your local zoning department (usually at your town offices) for more information.

DBA Certificate

If you will be doing business under an assumed name and not your real name, you will more than likely need a DBA or Doing Business As Certificate. This certificate can be obtained from your County office or an attorney. If you do this yourself, you would have to go to the County Clerk, pay a fee for forms, check to see if your business name you chose is available, fill out the forms and file them for an additional fee. You'll then be sent or given a document for you to use in obtaining other business services and to keep for your records. Be sure to ask about how many copies of the Certificate you can obtain and any extra fees, so that you have what you need. You may need one to obtain a Business Bank Account, a Merchant's Account/Payment Processing Service and Sales Tax ID, for example. Find out ahead of time which services will require you to present a DBA.

Product or Service

This is obviously the most important part but we're mentioning it as it does take some thought. What type of product or service do you intend to sell? This may also determine whether or not you will need shipping services or even to collect sales tax. Be sure you choose a product or service you know you can deliver on time, and one that is popular or unique enough for consumers to want to buy. Do some research and see what people are buying.

If you are selling a product, be sure to have items in stock or that you can easily have a manufacturer drop ship the item on demand. If you are selling digital media such as eBooks, Computer Software, Images, etc. be sure that the customer can get the product immediately after payment either via a special download link or other means. Always be sure to state in your store how the item or service will be delievered.

If you are providing a service, be sure you have ample time to fill any orders that come in. Can you handle 100 orders in a reasonable amount of time? Will your customers know when you'll be able to fulfill their order for your service? Is it a subscription service? Are the fees recurring? Be sure you have everything you need to fulfill any commitments and that the customer knows ahead of time when you can provide services to them.

Be sure to price your product or service competitively. Determine the lowest income bracket of your target customer base. Are they corporations with large amounts of money to spend? Mid-size companies that may be on a strict purchasing budget? Consumers who are in good-paying jobs? Consumers who may be at middle or low income levels? Think about the product and what type of customers the product may attract. Research similar products and see if you can offer lower or competitive prices. If your product is unique, this can also help you earn more income than selling a product or service that is quite popular or common.

Shipping

Be sure that you have some information on your web site to answer customers shipping questions. Determine if you will be delivering the item via internet download, or via non-internet delievery such as Postal Service or UPS. Determine which services you'll provide, and whether you'll charge a standard base rate for entire orders or shipping by piece. Also be sure to include any handling charges, such as cost of materials for packing and labeling, and maybe even gas to get the item to the shipping service. But be careful not to over price your shipping costs. Also keep in mind that if you have to collect sales tax, you will also have to tax the shipping costs as well.

Most shopping cart and payment processing services will calculate sales taxes and shipping for you. You may or may not need a special account with the shipping service of your choice. Check services such as UPS, Fed-Ex and US Postal Service, for example, for their rates and services.

If zoning laws in your area will not let you have regular UPS or other shipping services pick up products to ship out, you may have to take your products to a shipping service or post office. Talk to your local zoning department (usually at your town offices) for more information on what your options are for running an internet business from home.

Store Logo

Any online business will need some kind of store logo to identify the store. Customers will find it easier to remember you by your logo. If you are using your real name and product name, you could have your text surround a picture of the product. For example, "Amy Brown's Hot Sauce" may have the words in a circle around a picture of a bottle of hot sauce. If you are using an assumed business name, you could use fancy lettering, shapes, product picture, or anything to identify your unique product or service. If you need someone to design a logo for you, please check out our Professional Services listing for designers who may be able to help you. You can also do a search on Google for "Logo Design".

Web Hosting & Web Site

Once you have the basics taken care of and are ready to go live, you'll want to have a web site that clearly displays and gives information to your customers about your product or service. Here at Active Web Hosting, we provide full-service web hosting and even have monthly, semi-yearly and yearly billing plans. Keep in mind we do not provide SSL or secure servers. However, once you sign up with a payment processing service, you'll find that this will be taken care of for you and is easily integrated into your web site.

Pick a domain that will best represent your product. Please be sure it will not interfere with current brand names or intellectual property. Check with WHOIS and registrars such as Network Solutions WHOIS TuCows WHOIS Look Up Remember, when you sign up for hosting with us, you get your own domain name FREE!

If you want to design the site yourself (which is not that hard to do, and is less expensive), please check out our Web Site Creation and Design tutorial. At least, you'll want to have the following pages:

  • Home:
    The main or home page your customers can return to. This page should be a general introduction, some related photos and pictures, and updates or news.

  • Products (and/or Services):
    Here is where you can link to an online catalog of describe the different products or services you have available.

  • Support or FAQ:
    A page where your customers can get help and answers to common questions such as shipping, etc.

  • Downloads (or Free Samples/Trials):
    Do you offer free trials of software or updates to your products? This would be a page where your customers can download your programs.

  • Sign Up For Newsletters/Updates: If you wish, you can have users sign up for a free email newsletter or updates on new products, prices, etc. This can be an excellent marketing tool. However, never send out email to your customers advertising your products without their consent and always provide a way for them to opt-out should they wish not to recieve further emails. You may need to keep record of their signups and opt-out requests as well. The only email that you should send to your customer otherwise is anything that has to do with their order up until after they have recieved it and are happy.

  • About (Company/Business Info):
    Tell people a little about your company or business, and what type of products or services you provide.

  • Contact Us:
    Provide a way for your customers to contact you if necessary, including email, fax, phone numbers (toll-free and local), physical address/location, etc. Customers will feel more secure knowing where a business is and that they can contact a live person should they have problems with their order or questions about the product or services. Do be sure to state when your business hours are and have an answering machine ready as well.

  • Terms and Privacy:
    It's best to also have a Terms and Privacy page, so that your customers know what is expected from them, what you provide, and what you do with the information you collect from them. Be advised that in some instances, this may even be required by law. You will also have to be sure to state that anyone under 13 must have a parent or guardian make the purchase for them, especially if you are selling products that will appeal to younger age groups.

If you decide to let someone else create an online store for you, please check out our Professional Services listing for web designers that may help. You can also use templates to create your own store. Here are a few places to find web site templates:

For each item you sell, you'll want to add a button for "Add To Cart" or "Buy Now". You'll also want a "View Cart" button on each page as well. Keep in mind that when you sign up for a payment processing service, they will give you code that you can add to make these buttons add the items to the customer's shopping cart and complete the order.

E-Mail Address

You will need an email address for customer orders which will be sent to you via a payment processing service, and to communicate with your customers. Here at Active Web Hosting, we provide unlimited email accounts, web and POP email, autoresponders, filtering and more. You can set up an info@ and an autoresponder to give information to customers who request it, support@ for customer support, sales@ for orders and other sales related emails, and even a news@ for newsletters.

Shopping Cart & Payment Processing

What You'll Need

Collecting payment from your customers can seem rather confusing. Mainly, you need to integrate a shopping cart into your web site so that your customers can add, change the quantity, remove and view their order at any time. It's also best to be able to collect credit card payments, since a majority of business is done using credit cards. This must be done in real time, not collected and then processed at a later time/date. If you opt out of this, you could be losing out on a lot of potential income. However, due to strict laws regarding the collection of payment information online, it is illegal in many areas to collect payment information on a non-secure web site. Active Web Hosting does not have secure or SSL servers. You will need to collect payment using a Secure Payment Gateway. You will also need a Merchant Account to process credit card and other payments. The Gateway and Merchant Account should be provided by the same company. In addition, you'll also need a Shopping Cart in order to allow your customers to add, remove, change and view items they wish to buy, and be able to calculate sales tax and shipping charges.

All In One Package

This may seem quite confusing and you'll probably wonder where you can get all of these items. However, most Payment Processing Services will provide packages which can provide all of these services (and sometimes more) for a fee. This will give you everything you need and fraud protection without having to worry about putting together individual services to collect payments. These services provide a safe, legal, and very secure way for your customers to pay you via internet, and for their payment to reach your bank account. It is very important that your customers feel safe purchasing from you and that you are safe from potential fraud. This is why you must have a Payment Processing Service do the financial transactions for you. The data is also never stored on your own system, which will keep the transaction legal and safe.

These services will provide a secure gateway outside of your hosted domain for collecting payments, allow you to collect credit card, money order, cash, and even debit or electronic transfer payments (depending on the service) securely, offer fraud protection, calculate sales tax and shipping, allow you to collect donations or recurring payments such as subscriptions, pay you directly to your bank account, and provide you with easy to configure item "Buy It" and "View Cart" button HTML code (often fully customizable) which you can paste into your web site HTML code. Once a purchase is made, you are paid right away after the customer's payment is checked and approved by the Payment Processing Service. Then you will be emailed information about the order such as the amount that you were paid, the customers email, name and address so you can ship the item out and notify the customer about their order as necessary. This is why it's best to get a complete package from a provider rather than try to piece together the parts yourself. It's simpler, easier and much more secure.

Choosing A Payment Processing Service

When choosing a Payment Processing Service, you'll want to investigate what their fees are, and determine if the income you bring in will cover the fees that the service will be charging. Some require an up-front fee, and may charge an additional monthly fee. In addition to these fees, they will charge you a small fee per transaction and a percentage of each total sale. Accepting certain credit cards (like American Express or Discover) may also require extra fees on top of what you currently would be expected to pay. Be sure to read the terms carefully, and know what you might have to be paying. In addition, check to see if there are any long term contracts, such as a commitment to sign up and pay a monthly fee for 1 or 2 years. If so, determine if you expect to be in business that long and generating an income to cover the fees and make a profit during that contract term. Also research the reliability and security of the Payment Processing Service. If you shop online, go to your favorite stores and see what system they use. Usually, by hovering your mouse over a "Buy It" type button and looking in your browser's status bar at the bottom of the window, you may see an address different from the store's domain. This is usually the Payment Process Service. Also there may be links to or button ads that announce what service a store uses. Sometimes, a store may use their own shopping cart, so using the "Submit Order" button may be the only time you will see the Processing Service URL. Keep this in mind and take notes next time you make a purchase online. Then go to the service's web site (just type in their domain name only in your web browser) and see what services they can provide.

Starting On A Low Budget or New Store

When you are just starting out fresh and have not sold anything yet, it's best to start with a low-budget Payment Processing Service that gives you just the basics for a very small fee. For example, PayPal will let you start up for free, allow you to collect credit card payments, and provide you with a shopping cart which can be customize to match the look of your site, Buy It and View Cart buttons for your site which are completely configurable. You can also have them calculate sales tax and shipping. They also will email you when someone made a purchase so you can ship the product to them. In addition, they offer a secure site which the customer can complete their transaction and low discount rates (fee you pay per transaction and percentage of total sale you also pay). You won't need to pay anything until your customer makes a purchase. Then the fees are automatically deducted and you are paid the rest into your PayPal account. At intervals, you can then transfer the funds from your PayPal account to your own bank account. PayPal is just right for those who want to start an online store but have little money to invest, especially if your store is new and not generating enough income to cover merchant account startup and monthly fees.

Upgrading Your Payment System: Direct Payment To Your Account

Once you have a good customer base established and have been making a good enough income, you may want to open up a merchant account. Usually you can get this, a gateway and all the same services from a service such as goEmerchant.com, which is a very secure, and highly respectable service. They provide you with a merchant account, secure payment gateway, shopping cart, buttons, tax and shipping calculation, low per-transaction rates, fraud protection and even help with advertising. As with most other such services, they do require you to pay a fee up front and you will have to go through an approval process. Once your approved, you then just pay a monthly fee, per transaction fee and a percentage of each total sale. Be sure that your monthly income will be able to compensate for these fees. Furthermore, they do not have any contracts or leases so you do not have to worry about committing to paying for a year or two. They also provide marketing tools, inventory management, free search engine submission, and will work also with a shopping cart of your choice or provide one for you that will seamlessly integrate and match the look of your web site. goEmerchant.com will let deposit the funds to your Business bank account. However, you don't have to have a DBA or a Business bank account. If you are doing business under your own name, and want your income paid to your personal bank account, they can do that as well. This way you don't have to log onto the service every so often and transfer the earned income to your bank account yourself, saving you an extra step. They have other features which may help you in your business.

Advertising

Some Payment Processing Services such as goEmerchant.com provide you with free search engine submission and marketing tools to help you bring in visitors to your site which will hopefully turn to customers who make purchases. There are also other ways to advertise, such as directly through search engine link programs, word-of-mouth by telling your friends, link banner exchanges and asking sites to link to you in return for a link to their site. Affiliate programs are also another way to advertise. You can also print out business cards, brochures, fliers, etc. and pass them around to friends, family, local bulletin boards and the like. Whichever way you choose, be sure you have the funds to cover the advertising campaign and a good plan. It's also helpful to be able to track your ads to see which ones are bringing in the most customers. In addition, newsletters to your web site visitors may help. However never send anyone email that they did not ask for. If you are caught spamming, your domain may be taken offline. You could also be held liable financially and otherwise, and it can ruin your business reputation (as well as your own), making it hard for you to gain sales in the future. Plan your advertising campaign wisely and you'll have the most success.

Other Options

There are other options which you can use to sell your products. Each one may cost more or less depending on the service.

CafePress

This service will let you build up your own store, provide the merchandise, ship to your customer, collect payment, shipping, and pay you the rest. You simply open up a free online store, submit your artwork and attach it to one or more of their products, set the price above the base price (the base price covers manufacturing and printing of your artwork on the product), and you're all set to go! You can even integrate the store into your own site if you choose. CafePress takes care of virtually everything else. You then get to keep the amount of the mark-up above the base price as profit which you can have them send you a check after you accumulate at least $25.00 within a month. Keep in mind though that if you make under $25 in 6 months, what you have accurred in that time will not be paid to you as it will be kept to cover their services. Please see the CafePress web site for full information.

eBay Stores

You can get a lot of marketing exposure via eBay and one way to do that is to open an eBay store. Though this isn't exactly the best for those just starting out, it can be valuable for already-established businesses to gain a larger customer base. eBay charges anywhere from $15.99 for a basic store front to almost $500 for high-volume, high-sales type of stores. You may have to pay additional fees as well, and will still need a payment processing service. For eBay stores, this is done via PayPal. You can also sell via eBay's normal auctions as well, though this also has selling fees associated with the process.

In Summary

Starting an online business is not as hard as it may seem. You'll need to know what type of product or service you'll be selling. Also you'll want to know ahead of time what your business name and address will be and get the appropriate documents ready (if any), and have a bank account of some kind to collect the income generated by your online store, and any sales tax reporting you may have to do. Once you have all that information handy, you can go online and sign up for a payment processing service such as PayPal or goEmerchant which will provide you with everything you need to securely collect payments from your customers, and provide you with a shopping cart as well. Next create your store's web site and online catalog and host it here with us at Active Web Hosting, cut and paste the HTML code your payment processing service gives you for your items and View Cart button. Then you're all set to go! All you'll have to do next is advertise your store (be sure not to spam) and bring in the customers.

It may take awhile for your store to take off. Give it some time. Some stores may take a few months before you see a profit or an increase in visitor traffic. Tracking your ads and where your visitors are coming from may help you determine what type of advertising is working best.

Best of all, relax and have fun selling your product or service! From here, you will want to check out our FAQ titled How To Advertise Your Web Site.

 

Please Note: Active Web Hosting can not provide secure or SLL gateways. This is why you must chose a payment processing service to do this for you. We do offer a CGI account so you may use your own shopping cart. However, be sure that no personally identifiable information or payment information is transmitted from Active Web Hosting's servers. Be sure that the resulting order is transmitted to a payment processing service's secure site for the customer to fill in the identifying details and payment information.

Active Web Hosting can not guarantee any information provided herein as accurate or complete due to the changeability of services and prices of different providers and other information changes. We do try to research and bring you the best information available as of August 2005. If you have any questions, comments or suggestions on any of our documents, feel free to email us at support@activewebhosting.com.

We also can not provide support for your store or any shopping cart or other scripts or pages you may have on your site. Please contact your payment processing service for support with any shopping cart, gateway, or payment system you are using.

 


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