You'll pay a lot less to start an online business than to open a traditional brick-and-mortar store. Let's look at why more people are launching new businesses online as we answer the question, “How much does it cost to start an online business?”
The introduction of more user-friendly online store builders and managed web hosting makes starting an online business easier and cheaper than ever before. In this post, we look at the average cost of starting a business online compared to opening a physical location and how you can quickly and affordably launch your own ecommerce business.
How Much Does It Cost to Start an Online Business?
Online businesses can be launched with little up front — as low as $300 and upwards of $1,000. That’s much less than a typical business, which can range from a couple thousand to several hundred thousand dollars. While other businesses with traditional brick-and-mortar locations must invest large sums in buying and leasing space, equipment, and inventory, how much you'll spend starting your business depends on what type of business you want.
Common startup expenses for traditional businesses include:
- Retail or office space
- Equipment and fixtures
- Phone, internet, and other communication methods
- Electricity, water, gas, and other utilities
- Professional services such as accountants or lawyers
- Business and building licenses and permits
- Employee salaries
- Advertising and marketing
- Web and email hosting
Use this template from the U.S. Small Business Administration to calculate your startup costs.
Starting an online business is much cheaper than starting a business with a physical location because you don't have to lease or buy the space. But the high costs are not due to the real estate alone. You also need to buy furnishings and shelves for the space, inventory to put on the shelves, and hire employees to stock the shelves and run the cash register.
Benefits of Starting an Online Business
An online business eliminates many costly aspects of operating a physical storefront. Cheaper startup costs, lower overhead, better inventory management, and ease of setup are the main advantages of starting a business online.
Cheaper Startup Costs
Businesses that operate exclusively online have lower startup costs. You can launch a website from any place you have a computer. You don't have to set up a physical location. Many people start and continue to operate ecommerce businesses out of their homes. Operating an online business also requires fewer licenses and permits. Read our step-by-step guide to getting a business license for ecommerce for more details.
Online businesses have lower startup costs, and ongoing operating expenses are much lower than traditional businesses. An ecommerce website is open 24/7 to accept sales. A brick-and-mortar business requires space, staff, and utilities to open. You have to pay the electric bill and your employees even if you don’t make a sale all day.
Better Inventory Management
One of the challenges of operating a brick-and-mortar store is identifying what items to stock. Order too much of the wrong thing, and you could end up selling it at a loss in an end-of-season clearance sale.
With an ecommerce store, you can invest in smaller quantities of items and then buy more once sales start to take off. You also could utilize dropshipping where you don't keep any of the inventory on hand. You list the product on your website and pass the order information to the drop shipping company that packs and ships the order. You only pay for what you sell instead of buying inventory upfront.
Ease of Setup
Setting up an ecommerce store has not always been simple or cheap. In the early days of ecommerce, you might have spent countless hours or thousands of dollars trying to integrate credit card payments into your website. Thankfully, those days are long gone. Setting up an ecommerce store is mostly plug-and-play with modern ecommerce platforms.
Ecommerce Startup Cost
So what do you need to start an online business? Most ecommerce businesses will need an ecommerce platform, domain registration, and web hosting. If you're using drop ship fulfillment, you won't even have to buy inventory. You could easily build an online store for less than $300 in your first year.
But keep in mind, that's only your hard costs for the website. That doesn't include paying for your time. The low cost of entry makes launching an ecommerce store a great option for people who already have another job. Many entrepreneurs build up their business on the side before they quit their day jobs.
The Most Affordable Way to Start an Online Store
StoreBuilder by Nexcess offers an affordable and easy way to build an online store. You can launch your store in days, not months. The online store builder offers secure managed hosting from Nexcess and an easy-to-use WooCommerce-powered online store. WooCommerce is the most popular and powerful open source ecommerce platform.
StoreBuilder makes WooCommerce more approachable with a guided setup wizard and pre-installed plugins. With a price of only $19 per month, StoreBuilder helps aspiring entrepreneurs keep their ecommerce startup costs to a minimum.