CAN I START A "REAL" BUSINESS ON THE INTERNET?
by: Cary Christian

If you've been marketing MLM or other affiliate programs on the Internet you may feel, at times that you're not involved in a "real" business. The truth is you can create a business out of just about anything, including MLM and affiliate programs. In an MLM or affiliate setting, your business is that of a sales representative who earns commissions and overrides on those salespersons you introduce to the business.

But we understand why you might not consider this a "real" business. You don't actually own these businesses and you are not making the lion's share of the earnings from their activities. On the upside, you are also insulated from sustaining large losses, which is what makes them good for most people. You have less risk but still have a good opportunity to make a decent living or supplement your regular income while working the hours you set for yourself.

It has been said that the Internet "levels the playing field," making it easier for ordinary individuals to build businesses that can compete with the big boys. This is true to a certain extent, but the massive amounts of capital large companies can invest in their website, in product research and development, in building relationships with other influential enterprises, and in formulating their advertising budgets gives them a powerful advantage. But you can still carve out your niche and reach a substantial number of potential customers without breaking the bank.

So if you want to build a "real" business on the Internet and you don't have loads of capital to throw at it, is it possible for you to do? Absolutely yes! Let's take a look at what it will take and what it is likely to cost you.


-Commitment

First of all, understand that this new business is going to require mass quantities of your time, at least in the beginning.  You are going to have to be totally committed to it to make it work. The most important fact you can glean from this is that you need to choose a business that you enjoy. If you enjoy it, you will naturally learn more about the subject matter of your business and be better able to become an expert in your field.

It won't be enough to just search the Internet for an niche market that isn't being properly served and attempt to serve that market. If you are not personally excited about the market, you will not do well with it. If you can find a niche market that is not being properly serviced and it is a business you love, you are in a perfect position to make your move to capture that market.


-Product Research

Before you actually start your new business, you need to do plenty of research. Find out what the ranges of selling prices are for your products paying attention to the average sales prices for your products and the highest prices being charged.

Is there anyone selling the products at especially low prices?  If someone is selling your potential products at very low prices, can you determine how they are able to do that? Do they have special deals with distributors that you won't be able to cultivate? Is it strictly a matter of volume?

Understanding the pricing of your products is only half the battle. How much are these products going to cost you when you buy them at wholesale prices? Which companies wholesale your products and can you buy them inexpensively enough to compete with the low price sellers in your market?

You'll need to carefully evaluate all your potential costs to determine the profit margin you need to be profitable. You'll probably need at least a 15 percent profit margin on your products, including shipping charges, and your goal should be a much higher margin.

Make sure you include all your costs in your evaluation, including your Internet service, online and offline advertising and marketing, postage, increased phone and fax bills, web site charges, and any other cost you must pay in order to continue running your business. Depending on the level of sales you project you might be tempted to believe you can get by with less than a 15 percent profit margin on your products. Don't do it! If your profit margin on a product is less than 15 percent, don't sell it.

Chances are good that you can buy the products at the same prices your competitors pay as long as you are buying from a real wholesaler and not some middleman company that buys at wholesale and marks up the price to you. Never buy from middlemen!

You can search the Internet to find prospective wholesalers, but make absolutely sure they are REAL wholesalers. (If you need help finding legitimate wholesalers, we'll be happy to help). Anyone can buy wholesale as long as they are organized as a legitimate business formed to resell the products. Beware of lists of wholesalers you can buy for five bucks that you'll find all over the Internet. Most of these will be middleman-type organizations. You'll find out you pay almost retail to buy from them.

Consider only wholesalers who will drop ship products for you.  You do not want to buy products and maintain an inventory. This would be prohibitively expensive and make you bear far more risk than you need to. Almost all wholesalers will drop ship for you. When you receive an order, you email it or fax it to the wholesaler for processing of the order. They will notify you when the product ships so you can stay in touch with your customer with shipping information or information about backorders.


-Business Organization

It is absolutely necessary that you organize your business properly. The following are a few of the things you'll need to do:

You'll need to have a sales tax resale certificate from your state to buy products without paying sales tax. Your wholesaler will require you to have one and send them a copy. This is very inexpensive, usually $5 to $10, and is good for one year.

Plan on opening a business account at your bank. You should be able to find one that is relatively inexpensive, say $10 to $20 per month. If you write a lot of checks, you may have to pay more.

You will need to either incorporate your business or file fictitious name (DBA) papers with your state before you can open the business account in most cases. Even if your bank doesn't require this, some wholesalers might and it is a good idea anyway. You should be able to incorporate for $75 to $150 depending on the state you organize in. If you find it will cost you more than this, get in touch with us and we'll help you do it less expensively.

Consider filing an S Corporation election on Form 2553 with the IRS. By making this election, you will include the earnings or losses of your corporation on your personal income tax return and your corporation will not have to pay tax. This will protect your earnings from double taxation that can arise when you are organized as a corporation and will make your business affairs administratively easier to manage.

This is not a difficult thing to do. If you're nervous about it or unsure about what to do, just ask us and we'll help you perform this step. There is no cost to this election unless you pay someone else to do it for you. The form is simple to complete and the instructions contain a fax number for you to send it to. But if you want to make this election, you must file this form within 75 days of starting your business for it to be in effect for your first year of operations.

You might also consider organizing your business as a Limited Liability Company (LLC) which gives you the protection of a corporation but will allow you, if you are the sole owner, to report your income on Schedule C of your 1040 rather than filing a separate return.

Check with local government to see if you need a business occupational license to run your business out of your home. If required, the license or licenses could cost you from $10 to $200. Since such fees are set locally, they may vary a great deal. They also usually vary depending on the type and size of your business. An occupational license for a home-based business, if required at all, should not cost more than $25. You may need both a County and City license.

Check local zoning restrictions to make sure you actually can run your business out of your home. Since you won't be having customers come to your home and won't be putting a sign outside, you should have no problem with this, but it never hurts to check.


-Setting up Your Store

You will need a website complete with a storefront and the ability to accept credit cards to sell your products. In the past this could have been the single most difficult part of setting up your business, but no more.

There are many companies on the web that will help you with this. If you already have a website, you can add the storefront and merchant account capabilities to your existing website.

There are companies that will host the storefront for you and provide you with a seamless interface from your website. There are many options for your storefront and merchant account ranging from very inexpensive to very expensive. You'll need to evaluate your options carefully to determine which type of storefront will work best for you.

We offer a storefront option from GoEcommerce that costs just $59.95 per month and includes your hosted storefront which can be integrated with your existing website or used as a standalone website, your merchant account and some very good sales tools. There are also no setup fees and you are guaranteed to be accepted for your merchant account. Do some research on the Internet to find the plan that works best for you.


-Cost Considerations

You should be able to set up your business legally for under $300 if you choose a low cost storefront option. In terms of starting a business this is incredibly inexpensive. You probably spend that much each month joining and promoting MLM and other affiliate programs. You will still probably spend as much or more each month promoting your new "real" business, but now you will be doing it for yourself. You will be keeping ALL the profits rather than earning a small piece of someone else's
pie.


-Other Considerations

If you're serious about running your own business on the Internet, you must have your own domain. Using a free website to run your business marks you as a novice and someone who is not serious about their business. Even if you're using a storefront package hosted by another company, the gateway to your store must be through your own domain. There is absolutely no way around this.


-Need Help?

If you have an interest in starting your own business, we can help you with all of the above steps. If you would like more in-depth information about any of the above steps, send us an email at  mailto:support@peakconsultinginc.com with your specific questions and we'll be happy to provide you with answers.


-Too Much for you Right Now?

For another excellent, and simpler, idea on how to start your own business read our guest article below.


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