How to Start an Online Business

Starting an online business can change your life. It did mine.

I ran brick-and-mortar stores for years and enjoyed doing it, but I craved the geographical freedom only an online business provides. 

Fast forward and I’m writing from a remote Italian island overlooking the warm, crystal-clear Mediterranean Sea. 

Sure, it didn’t happen overnight, and the road had unexpected twists and turns. But my journey taught me that starting an online business isn’t that different from a physical one.  

It takes knowledge, hard work, the right tools, and tenacious perseverance. But you know what else helps? Knowing which steps to take and in what order. 

I’ve got them and I’ll break them down in this simple how-to-start an online business guide so you can begin your journey.

Step 1. Choose a Business Model

Your online business model is how you plan to make a profit. For example, will you sell physical products, offer an online service, or software?

Your business model also helps identify your target market, estimate set-up costs, choose sales and marketing platforms and get legal.

So, when starting an online business, the first step is to choose your business model. Here are 6 that cover most online businesses:


A freelancer is a self-employed person who sells a skill to another person or business on a project basis, such as writing, programming, advertising, and design. 

Coaching and consulting

A coach or consultant offers their expertise, recommendations, and guidance to businesses and individuals to help improve performance and learn new skills.

Affiliate marketing

Affiliate marketing is a popular first-time online business model because of the low investment costs and risks. You become an affiliate marketer by creating a website to promote another brand’s products or services, receiving a commission for every sale made. It’s also a great way to earn a passive income!

Information products

You can create informational products like worksheets, templates, online courses, and ebooks, then sell them on 3rd party platforms like Amazon, eBay, Apple iTunes Store, Udemy, YouTube, or Vimeo.


E-commerce is a business model where you sell products or services to people using a website or 3rd party platforms such as Amazon, Etsy, or eBay. You can create an e-commerce website using a platform like Shopify, and the rewards can be passive and lucrative. 


Dropshipping is when you build an e-commerce store to advertise and sell other people’s products. It’s a less risky way of entering e-commerce because you don’t pay for stock or shipping and earn your income by agreeing on a purchase and sales price with your supplier.

Software as a service (SaaS)

Programmers can create a piece of software that helps others do business and charge them a recurring subscription fee. 

With your business model chosen, step 2 is how you establish your new online business in a busy marketplace.

Step 2. Choose Your Niche

Your niche is an area within your market where you choose to do business, such as a specific product or service you’ll offer to a particular demographic of society. You must pick a niche before starting your online business to ensure your idea is viable and worth pursuing.

How to find your market niche:

1 – Consider your passions and interests

2 – Identify a consumer problem you can solve

3 – Ensure your competitors aren’t solving it

4 – Confirm there’s an audience willing to pay for your solution

5 – Validate the niche is profitable

We’ll cover those in this post, but first, you need to ensure people need your business idea.

Step 3. Start a Business That People Need

One reason 90% of online business start-ups fail is a lack of consumer want or need for the product or service. In business, you need a problem to solve before you can provide a solution people will pay for.

Begin by researching your target marketplace to find a group of people with a problem you can solve. 

To do so, research online forums related to your niche to see what questions people ask and which problems they need to solve. You can also check out competitors’ websites and how they’re filling consumer demand, and look for missed product or service opportunities you could bring to market.

Once you’ve found a problem to solve, you must evaluate your product or service’s viability to ensure it’s the right solution.

Step 4. Evaluate Your Product/Service Viability

Once you have a market, niche, and product/service in mind, your next step is to evaluate it to confirm if there is a need, market size, and profitability.  

You evaluate the viability of a product by analyzing specific data about your market niche, product design or service structure, competitors, and target audience.

You use software validation tools and other sales platforms to do it, including:

1 – Google Trends: Google’s keyword search volume tool provides online data about the number of people searching for a specific product or service, enabling you to validate whether your target audience is growing, flatlining, or shrinking.

2 – Amazon has so many sellers and buyers that you can use it to determine a product’s popularity and profit margin based on its category, product ranking, reviews, and the number of businesses selling them. The more there are, the more popular the product.  

When validating your product, your goal is to answer questions like:

1 – Are other successful online brands already selling products like mine?

2 – Is demand for my product consistent or temporary? 

3 – Does the product sell at the right price point? Will I make a profit?

Remember, you might think your product or service is the best thing since sliced bread, but all that matters is what your target audience thinks.

Speaking of which:

Step 5. Define Your Target Audience

To make sales, provide a service, and sustain your new online business, you must identify and define your target audience. When you know who they are, where they are, and what they want, you can build your business to suit them.

To do this, you must research 2 things: Their demographics and psychographics.

1 – Demographics: Your target audience’s demographics include their location, age, gender, job, income, and ethnicity. You can find out who your audience is using tools like Google Analytics, looking at social media analytics, and Facebook insights.  

2 – Psychographics: Audience psychographics include their values, interests, beliefs, and opinions. 

When you combine these insights, you’ll know your ideal client’s product preferences and purchasing triggers.

But suppose demographics and psychographics are too much at this early stage. In that case, you can also find out who your ideal clients are by analyzing your competitors:

Step 6. Analyze Your Competition

Your competitors are those businesses you’re in direct competition with when trying to sell your product or service to your target audience. Direct competition means any 2 brands selling similar products/services to the same type of people. 

You find your direct competitors by searching Google using keywords (terms) relative to your business. 

Analyzing your competitors enables you to discover why and how they’re successful by identifying their strengths and weaknesses so you can design your product or service in a way that makes it better than what they offer. 

Here are some competitor analysis tips:

By analyzing their customer experience and how they engage people via content, you can identify tactics your competitors use to drive sales. 

Step 7 is for entrepreneurs selling physical products; if that’s not you, skip to step 8:

Step 7. Choose Your Sourcing Strategy

Anyone starting an online business using e-commerce or drop shipping will need to source products to sell online.


With drop shipping, you must sell popular products to make a profit. You can find them using tools like Kickstarter, Wish, and Google Trends. 

Next, you’ll need a supplier. You find those by either searching Google using your product name and drop shipper or on websites like Printful,, Automizely, and DropnShop

Sourcing products from manufacturers

The most profitable way to source products is directly from manufacturers on platforms like Alibaba or directories like Sourcify and Kompass. 

These platforms connect you with manufacturers who’ll design products and branding to your requirements and ship them to you while cutting out intermediaries like wholesale suppliers and distributors. 

Product or service in place, you’ll next need somewhere to promote and sell them:

Step 8. Create Your Sales Platform

A sales platform can come in several forms depending on what you’re selling.

For example, those selling products will need an e-commerce platform like Shopify, Magento Ecommerce, 3DCart, BigCommerce, WooCommerce, or Squarespace to host their website, advertise products, take payments, and arrange delivery.

These platforms enable you to create websites with zero code and have integrated systems such as shopping carts and delivery capabilities. Some, like Shopify, even provide dropshipping products you can sell from their platform. 

Freelancers and consultants should build a website but don’t need one to start an online business. Many use social media platforms like LinkedIn or Facebook to promote their service or join job-finding websites.

Job platforms such as Outsourcely, ServiceScape, Toptal, Truelancer, Fiverr, Upwork, and WriterAccess connect us with businesses, independent professionals, and agencies hiring freelancers or consultants hourly for single projects and full-time contracts.

Step 9. Choose Your Marketing Method

Whether you have an e-commerce store, a basic informational website, a LinkedIn account, or a job platform profile, you’ll need to develop a marketing strategy to attract and engage your target audience and land those ideal clients. 

There are many different marketing methods you can employ (some free, others with a fee). Still, the ones you choose must suit your niche and target audience to have any value. 

As your online business grows, you can expand your marketing methods to include search engine optimization (SEO), search engine marketing (SEM), content marketing, and email marketing.

But there are 4 you can use right now to promote your online business and skill sets.

4 start-up marketing methods:

1 – Direct outreach: Many online businesses, like freelancers and consultants, can find their first clients for free by reaching out to companies and individuals and pitching their services. 

When using this approach, ensure you have your sales pitch perfected so it highlights the value you bring to them.

2 – Social media marketing: Social media enables you to create and share content, build an audience, engage with your target audience, and drive visitors to your sales platform. 

3 – Influencer marketing: You can team up with influencers who’ll promote your products to their communities for a fee. 

4 – Paid advertising: To increase brand awareness and sales, advertise on platforms like Instagram, Google, Facebook, and YouTube.

Step 10. Choose Your Online Payment Gateway

Payment gateways are electronic payment systems that allow your clients to pay for your products or services online. There are numerous gateway options available, but the one you choose often depends on your business model.

For example, the most popular gateways for e-commerce include PayPal, Stripe, Amazon Pay,, WePay, and Square. 

The Shopify e-commerce platform even allows users to integrate their Shopify payment gateway that accepts most payment methods with a 0% transaction fee. Gateways that work well for freelancers and consultants include Stripe, Payoneer, Transferwise, and 2Checkout.

Step 11. Cover Your Legal Requirements

U.S. business laws apply to online operations as they do traditional brick-and-mortar ones. These laws affect how you register your business, pay taxes, secure intellectual property (brand names and logos), commercial entities, and transactions. 

As an online business, you might require fewer licenses and permits than a physical operation, but you must comply with other regulations such as:

There’s a lot to learn about online business laws. As each state and country has its own regulations, it can be unclear.

You can, however, contact your Secretary of State’s website, visit the U.S. Small Business Administration website, or seek legal advice to gain clarification before you start an online business.ration, but you must comply with other regulations such as:


If you want it bad enough, get your head down, work hard, and never give up, you stand every chance of starting an online business that could change your life.

It can give you the geographical freedom to become a digital nomad. Or it might be a side hustle that provides that much-needed extra cash. Or perhaps a business that frees you from the 9 to 5 grind and gives you more time with the kids.

Whatever your reason, my advice is to learn from others, outsource whenever you can, not overextend yourself, and enjoy the ride.

This portion of our website is for informational purposes only. Tailor Brands is not a law firm, and none of the information on this website constitutes or is intended to convey legal advice. All statements, opinions, recommendations, and conclusions are solely the expression of the author and provided on an as-is basis. Accordingly, Tailor Brands is not responsible for the information and/or its accuracy or completeness.

Terry is a serial entrepreneur with over 25 years of experience building businesses across multiple industries – construction, real estate, e-commerce, hotelier, and now digital media. When not working, Terry likes to kick back and relax with family, explore Taoism’s mysteries, or savor the taste of fine Italian red wine.