You’ve been working on your online business idea for months now, and you’re ready to take the plunge to make your dreams a reality.
There’s just one last thing holding you back:
You think to yourself, “Am I doing the right thing?”
Some other questions that come to mind are:
- How do I know I have a good business idea?
- Will anyone buy from me?
- Do I have the budget for starting my online business?
- Can I really do this on my own?
Before you second-guess yourself, rest assured being a solopreneur doesn’t mean you have to come up with all the answers alone.
Today, we share with you vital details for success, beginning with what you need to know before starting your online business, then covering five proven online business models, and wrapping up with key resources and tools.
Ready to get started? Great, let’s dive in.
What do I need to know before starting my online business?
Before starting your business online, or even your offline side-hustle, the most critical step is to ask yourself the hard questions before launching your business -- like if you're ready for it or not -- and then, if you decide you are, determine if there's a market need for your idea. The last thing you want is to launch a business, poised and ready to go, with no customers in sight.
The best way to identify if you’ve landed on a profitable niche is to validate your business idea through market research first.
(A profitable niche means serving a particular need within a specific, rather than broad, audience. If you’re in the idea generation phase of starting your business, you may find these 10 online business ideas helpful while brainstorming.)
How should you conduct market research?
Simply gather data from your audience to find out their biggest problems. Then, confirm that those problems align with your business idea.
It’s easier than it seems. You have two main options for doing research into those problems:
#1. Gather primary data (aka new data) using surveys and interviews
If you have a growing subscriber list or audience, you’re ahead of the game. All you need to do is send an email or publish a social media post linking to your survey to start generating primary data right away.
The linchpin to make your survey, and thereby your research, is effective is to keep it short. 52% of respondents say they won’t spend more than three minutes on a survey and by the 20-minute mark, the quality of data and attention of respondents greatly diminish.
It’s also crucial to keep resolutions and devices in mind for surveys, creating a frictionless experience for both mobile and desktop users. While one-third of surveys are carried out on mobile devices, survey completion rates are better on larger screens.
You can take your surveying a step further and set up interviews with prospective clients using the phone, video chat, or even in person.
Whether in a survey or interview, some question categories worth asking are:
- Demographic - Age, gender, household income, location, or profession.
- Behavioral - Interests, hobbies, lifestyle, preferred resources, or communication channel preference.
- Demand - Knowledge about competing products, past related experiences, product pros and cons, or recommendations.
- Willingness to pay - Low, high, and fair price points, or detail on what drives value for individual customers.
During your questions, dig deep to find out your target audience’s main priorities, concerns, and the emotion behind their answers. The more you can find out about the people in your market, the easier it will be to create products and marketing that resonates with them.
But don’t stop at just getting primary data. While interviews and surveys can deliver a wealth of fresh insight, secondary data can fill in the gaps and is often far easier to source, which brings us to your second research option.
#2. Collect secondary data (aka existing data) by searching the internet
To build up your secondary data, search the web to find relevant conversations about your business idea on social media platforms, online forums, and discussion threads.
Specifically, use social platforms like Reddit to hunt for data. For example, if you’re looking to start an online business targeting gardeners, try searching terms like “vegetable gardening” to narrow in on your winning idea.
As you can see, the Reddit “vegetable gardening” community is 10,500 members large with hundreds of “subreddits” to peruse through. You can find a multitude of questions, concerns, and even conversations to join in a matter of minutes.
Another effective option for finding secondary data is to search for related discussions in Facebook Groups.
For instance, a quick search for “vegetable gardening” pulls up numerous Facebook groups with thousands of members. These make for great online dialogues to read through and join.
Plus, with such plentiful search results for this particular topic, you can tell there’s likely demand in the market. All you have to do is narrow in on the parts of the demand people are willing to pay to have answered.
The key takeaway:
Your job while researching is to find a deeper problem your business solves or adjust course until it does solve it.
Otherwise, pay close attention to your audience’s biggest problems and desires while validating your business idea. They’re the star of your show, after all -- the more of a spotlight you put on them, the more you can tailor your business for them.
Now, once you have a validated business idea in hand, it’s time to decide on a business model.
5 proven online business models
#1. Use advertising to drive revenue
Let’s start with the quintessential online business model, advertising. Whether as a primary or secondary source of income, you can use an ad program like Google AdSense to earn revenue from a website.
While the intricacies of AdSense warrant their own article, the long and short of the service is this: AdSense allows you to publish relevant ads targeted to your site’s audience in exchange for a payment per 1,000 views (aka cost per thousand or CPM).
You can choose from a variety of ad types to display on your website including text, display ads, rich media, animated images, and link units.
Top performing ad formats include large rectangle, medium rectangle, leaderboard, half page, and large mobile banner.
Note, however, that this business model requires significant traffic to be either sustainable or profitable.
For those with the resources and experience, people like Jerry Banfield who earned over $100,000 in a year on Google AdSense, it’s a model well-worth its challenges, but for those in the earliest days of business growth, the sheer scale required may not be tenable yet.
If you’re in that position, or if you just don’t want to clutter your website with ads, our next business model is another way to earn money from outside entities and far easier to break into.
#2. Use an affiliate marketing program
Another proven business model is to use affiliate marketing to drive revenue. To use an affiliate marketing program, partner up with outside businesses and promote links to their products and services in exchange for a commission on each earned sale.
This is also a profitable option if you have a growing blog, podcast, or video channel audience.
For example, popular podcaster and founder of Smart Passive Income, Pat Flynn, earned over $3 million in affiliate revenue.
A quick but important word of caution for affiliate marketing: If you’re interested in becoming an affiliate, you’ll need to keep any legal requirements in your country in mind.
Specifically, you’ll want to look into regulations around disclosure. In the US, the FTC requires affiliates to disclose their relationships to their audience as you see Pat do below in his blog article.
Of course, outside of legal obligation, this disclosure is also important for your overall brand image. By disclosing that he earns a commission from any links that lead to purchase, Pat solidifies himself as a trustworthy resource for his audience while still netting (big) profits.
So if there’s any doubt about whether or not you should disclose, err to caution. It can only benefit your bottom line.
Prefer to steer clear of outside links and relationships? No problem. The next business model accommodates that preference perfectly, though it’s not without its own challenges, as well.
#3. Set up an ecommerce site to sell physical products
If you have physical products to sell, setting up an ecommerce or dropshipping site is a viable option for you.
You can create an ecommerce site using marketplaces or your own site to sell your goods.
As an example, Warby Parker, a philanthropic eyewear company, sells and ships their products to customers directly from their site.
Another option is to set up a storefront using a marketplace as Rebekah Hemmer does on her Etsy site.
Or, if you’re looking for a middle-ground solution, you can pursue a dropshipping business and sell, but not ship, the goods from your own operation.
If you’re unfamiliar with the term, dropshipping is a model where products are shipped to your customers on your behalf from the manufacturer. This setup means you don’t package, or indeed, house, any inventory at your physical location.
Sounds almost deceptively easy, right?
While it’s true that dropshipping is one of the fastest and lowest-risk ways to enter online business, it’s also one of the most competitive and lowest-yielding options. You’ll pay the bulk of your revenue to the third party or manufacturer who handles your inventory and shipping.
In other words, your profit margins won’t be wide or high with dropshipping, and because it’s so easy to enter, you can anticipate ample competition from other dropshippers.
Regardless, if you’re interested in selling physical goods but want to dip your toes in before wading into the deep end of inventory, insurance, and taxes, dropshipping is an excellent solution for first-time business owners.
If you’re not deadset that your goods have to be physical, however, there’s another option with high profit margins, easy entry, and zero inventory maintenance.
#4. Sell digital products to productize your business
One of the most profitable and scalable business models is selling info/digital products like online courses, digital downloads, and membership sites.
Remember what we said about inventory frustrations? Selling info products takes it out of the equation altogether, allowing you to sell to an unlimited number of customers. Once your product is created and published for sale, the bulk of your work is complete.
Check out Sef Chang’s Product Licensing Masterclass online course for an example of an info product in action.
You can follow in Sef’s footsteps and create an online course of your own or explore the multitude of other popular digital download formats like written, audio, and video products.
Still, all of these examples answer the ‘how’ behind digital products but do little to satisfy the ‘why’. Digital products are a great solution for new businesses for a few reasons, but the most important are these:
- You have limitless inventory, and hence, earning potential
- Once you’ve got your storefront up and running, your business is simple to maintain
- You don’t have a lot of overhead costs
- Likewise, you have minimal (if any) startup costs.
Best of all, however, is the maintenance behind digital products -- after you’ve done the legwork to create and publish your product, your only obligation is marketing to your customers.
Which means you can leverage your time and focus on growing your business rather than getting lost in the administrative minutia.