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1. Breaking down the costs of starting an online business:

How much does it cost to start an online business?

Starting an online business can be an excellent way for aspiring entrepreneurs to earn an income on their own schedule. But before you quit your day job, it's essential to understand what it will take to bring your business idea to life.

While setting up your own online store is a far cheaper option than doing business in a physical location, it isn't without startup expenses. How much does it cost to start an online business when you break down all the upfront costs?

You've come to the right place to find out. We'll break down the everyday startup expenses that go into launching a successful ecommerce business to help you decide if it's the right choice for you.

Main takeaways from this article:

  • How much does it cost to start an online business? The truth is it depends on various factors, each of which we'll walk you through.

  • Some online businesses can be launched for just a couple hundred dollars, while others may require much more money to get started.

  • The print on demand model makes it possible to start an online business or ecommerce store with much lower startup costs.

  • The key to launching a successful ecommerce website often lies in understanding the overhead costs a business requires and researching options within your budget, all while maintaining a sense of quality control.

Breaking down the costs of starting an online business:

Breaking down the costs of starting

It's important to understand that the answer to how much it will cost to start an online business can vary, depending on several factors. From what type of ecommerce store you want to create to your home state and business model, some of the expenses you encounter may differ.

When mapping out a budget, you'll want to consider both fixed costs, which you'll work into your business plan from month to month, and variable costs, which can change based on things like how many products you sell. As we go through each of the following expenses, you'll discover there is often a range of different price options to consider.

Business license costs

If you want to become an online business owner, you may need to look into any licenses or permits required at the state or federal level. This can get a bit tricky because the type of license you need - or whether or not you need one at all - can depend on your specific business type.

For instance, if you just want to sell a few products here and there on Etsy, you may not need to worry about obtaining a small business license. But suppose you plan to hire employees, rent office space, or bring in a significant amount of income from your online store. In that case, it's definitely worth looking into registering your company as a small business like an LLC.

Requirements can also vary from state to state, so it's best to reach out to your local clerk's office with any questions. Small Business Development Centers (SBDC) offer plenty of great resources, and IncFile also has a handy quiz that can help you select the correct type of business structure for you.

The good news is that once you know what licenses you need, you can quickly secure them at sites like IncFile or ZenBusiness. Costs of licenses and renewals vary by state and can be anywhere from $50 to a couple hundred bucks.

It's also important to look into any tax requirements in your state to make sure your business remains compliant. Regulations can vary and get particularly complex if you intend to hire employees.

If you do register as a business, you'll also want to create a separate bank account to keep your business cash flow separate from your personal savings and checking accounts. Investing in quality accounting software can also go a long way for many small businesses when it comes to keeping their finances in order.

Web hosting & ecommerce platform costs

If you want to start an online business, you'll need a reliable online storefront. There are a few different options here, each with its own set of costs.

Build your own ecommerce website

If you want to build your own website, you'll need to invest in a web hosting service and domain name. Web hosting costs can vary but tend to be around $3/month, and domain names can run anywhere from an average of $10- $20/year plus any initial fees.

You might also consider website builders, like Wix and Weebly, that also offer web hosting. While you can get started on both for free, Wix Premium Plans and Weebly Upgrade Plans offer tools for anywhere from $10 - $80/month that may prove valuable as your business expands.

Use an ecommerce platform or marketplace for your online store

Many entrepreneurs use ecommerce solutions like Etsy or Shopify to start online businesses. While both are great options, each has its own unique perks, price structure, and setup.

Etsy is an online marketplace where you can set up your own online store among millions of other sellers. While there are no monthly fees, Etsy charges a small $0.20 listing fee for each product you list, a 6.5% transaction fee for each sale you make, and payment processing fees for certain types of payments made through Etsy Payments.

Shopify is designed to help you create your own stand-alone ecommerce business and offers a website builder, complete with free themes to help you get started. While Shopify is a great web hosting and payment processing solution for ecommerce businesses of all shapes and sizes, it does charge monthly fees starting at $39/month or $29/month if you pay annually.

Product sourcing and shipping costs

Shipping costs

Product sourcing is one of the leading fixed expenses for small business owners. These are simply the costs you'll pay for products you intend to sell in your online store, so they vary widely depending on what products you offer and which suppliers you use.

Some suppliers may also have minimum order requirements, which can get costly quickly. If you want to open an online clothing brand, for example, you might come across upfront costs for:

  • Blank shirts, hoodies, or tank tops

  • Designer or design software costs

  • Printing equipment costs

  • Shipping costs

  • Shipping materials

This is where partnering with a print on demand (POD) partner like Gelato can significantly reduce the cost of buying inventory upfront. Rather than consistently dealing with inventory management issues, Gelato can supply everything you need for your online store products for a single, transparent price.

Simply upload your designs to the Gelato platform, choose which of our high-quality products you'd like to feature them on, and connect your account to your online store using one of our easy integrations. When an order is placed, we'll take care of everything from printing your product to shipping it straight to your customer.

We work with over 130 local producers to offer fast, sustainable shipping options to customers worldwide. As your business grows, you might even consider one of our subscription plans, each with discounted shipping features.

Design costs

Design costs

Design costs are one of those startup costs that may or may not apply to you, depending on whether you intend to offer customized products featuring your own designs. Your designs are a critical aspect of your product offering that can make or break the success of your online store. Unique, aesthetically pleasing, and professional-looking designs will differentiate you from your competitors and attract new customers. Below are the two most common ways to determine your design costs:

  • Use design software: Create your designs yourself with access to millions of royalty-free stock images, image filters, and graphic images using design software like Gelato's design editor. Our premium product creation tools are included with your Gelato+ subscription for only $24/month or $239/year.

  • Hire a freelancer: Some online store owners outsource their designs to a freelance designer, which can cost anywhere from $15 - $150/hour on sites like Upwork.

Marketing costs

If you really want to start your own business, marketing costs are one of those areas where you won't want to cut corners. There are now so many ecommerce businesses online that finding ways to make yours stand out from the pack is vital.

Marketing costs tend to be variable, especially as you experiment with different approaches to attracting potential customers. You'll definitely want to create social media accounts using your business name and spend time creating regular posts to promote your products.

Many entrepreneurs use scheduling software to stay on top of their social media posts. Options like Buffer offer a free plan and upgrade options for additional costs.

Many businesses also choose to invest in marketing strategies like:

While some larger businesses choose to hire a marketing agency, this can easily cost several thousand dollars, depending on the size of your campaign. If you're willing to spend a little time and money upfront, you can substantially cut down on marketing costs in the long run by signing up for an online ecommerce business marketing course.

HubSpot even offers a great online marketing course for free. Such courses are an excellent idea for aspiring entrepreneurs because they'll teach you what you need to know to create and promote your own brand.

So, how much does it cost to start an online business?

Payment processing costs

As you can see, the business startup costs of launching your new business may vary widely. The exact cost of launching your own ecommerce business can depend on everything from the business model you choose to the type of products you intend to sell in your ecommerce store and how you plan to promote them.

On average, launching your own ecommerce business can cost anywhere from a couple of hundred dollars to over $1000. We hope this overview of common startup costs has helped give you a better idea of what type of things to work into your overhead budget.

If you want to start an online store for a lower upfront cost, the print on demand business model is a great way to go. Read on to discover how POD providers like Gelato can help you significantly lower startup costs.

Launch a profitable online business without breaking the bank

POD can help aspiring entrepreneurs start an ecommerce site without worrying about product fulfillment, inventory management, or shipping. POD providers like Gelato make starting easy with very little startup capital because you don't have to purchase any products until they are sold.

While you'll still want to ensure you budget for other typical business startup costs to ensure you stay within your budget, POD can help combine sourcing, production, and shipping expenses into one easy price. Ready to launch an ecommerce business with Gelato's sustainable and high-quality print on demand services?

Sign up for a free Gelato account today for a cost-effective solution to creating one-of-a-kind custom products. Be sure you also check out the Gelato Academy and Resource Center, where you'll find plenty of great resources for your new business.

Online business FAQs

How much does it cost to start an online clothing store?

Much like any other type of business in the ecommerce industry, how much it will cost to start your own clothing brand depends on several factors. If you plan to manufacture, design, create, and ship your own products, you can easily be looking at startup costs of several thousand dollars.

Working with a print on demand partner can significantly lower these startup costs, as POD providers like Gelato provide high-quality shirts, hoodies, and even kids and baby clothing. Simply choose the products you want to offer, and we'll print your custom designs each time a customer orders.

What is the cheapest online business to start?

The startup costs involved in starting an online business are less about what type of products you sell and more about your business model. Print on demand makes it easy to start an online business that sells anything from wall art to custom phone cases or reusable drinkware without purchasing any inventory until it's already sold.

Is setting up an online business expensive?

physical storefront. While there's no easy answer to how much it costs to start an online business, the key lies in doing plenty of research into various options when it comes to everything from payment processing providers to ecommerce and web hosting services.

Your exact startup costs will come down to what your unique business requires based on your company's revenue and size. We hope this has helped give you a better idea of what it takes to start an online business and how to get more information that can help you set up a thriving ecommerce venture.


Next steps

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