Anyone own an online business?

[EricaDoula]

Does anyone own an online business? I'm interested in starting one. I'm curious about start up costs, and getting the word out, along with tax info, etc. If anyone can give me some info that would be great! I googled it, but didn't find quite what I was looking for!
Thank You

[Galatea]

In general: wildly expensive, and a ton of work (40 hours.) Not something you can do half-buttocked or in "spare time."

Web hosting can be very cheap, depending on features you need (we paid $13/month for our first year but are switching b/c we outgrew that cart.)

Hopefully you can use your current computer and printer.

If you are retailing, inventory is the big expense. Most retail businesses require you to carry the inventory yourself (i.e., don't figure on being able to drop-ship b/c many companies just won't do it and customers won't wait that long.)

Tax info: ask a lawyer or accountant, but if you aren't going to make very much money and don't have much liability exposure, being a sole proprietorship is generally fine. Your profits and losses go on your personal tax return and are taxed at your tax rate. You can lose some credibility with banks and other entities for not being incorporated or LLC, but this usually doesn't matter.

Getting word out depends on what you're selling. What are you selling? Where do those people go? Advertise there. 10% of sales is a common ad budget.

Other start-up costs: registering a fictitious name (if you are staying a sole proprietorship - this was $70 in my state), registering a domain name (~$10), any software you will need (Quickbooks is about $200). For us, the biggest one was inventory. That was a lot of money but it varies depending on your product.

Aside from these details, my best advice is to really think if you want to work a full-time job. I thought I would sell diapers and make some spending money for myself and the kids. Wrong! To do it and be successful, I have worked full-time since day 1. It really changes the home dynamic and there are a ton of adjustments.

[dogmom327]

It is definitely way more work than I'd ever considered but then it's also become a larger business than I originally planned. I work odd hours which helps but it's taking a toll for sure as not only do I have to give 110% poor DH comes home from his 45-50 hour a week job and has to work on the business too.

We started very small with a dinky website and so start up was cheap. If I tried to start from scratch the business I have today--that's a different matter--it would be very very costly (inventory, web design, advertising, etc.).

[EricaDoula]

I was really interested in opening a baby boutique. Cloth diapers, wraps/slings, breastfeeding pumps, etc. And I would also like to have homemade things made by other WAHM. I'm confused as to how I would get a state tax ID number, and how the website making works! Thank You so much for your input!

[Galatea]

My state has a website that is "PA open for business" that has all the info needed. BUT the sales tax license and creating the website are easy. What you should think about is the expense of the products.

[poppyseed]

Originally Posted by Galatea

In general: wildly expensive, and a ton of work (40 hours.) Not something you can do half-buttocked or in "spare time."

From my own experience I would completely disagree with this statement. DH and I set up our own business 20mths ago, when we were both working full time (50hrs a week each) in other jobs.

Our business cost an initial investment of £3500 to set up, including the cost of setting up the website and buying all our initial stock - we are an online retailer who keep all of the stock on site in our family home.

Our business is now worth in excess of £60,000 and I am now due with my first baby. The business is going to provide me with a part time job which I can do with baby, and enable me to be a sah/wahm .

[Michigan Mama]

Originally Posted by Galatea

In general: wildly expensive, and a ton of work (40 hours.) Not something you can do half-buttocked or in "spare time."

Web hosting can be very cheap, depending on features you need (we paid $13/month for our first year but are switching b/c we outgrew that cart.)

Hopefully you can use your current computer and printer.

If you are retailing, inventory is the big expense. Most retail businesses require you to carry the inventory yourself (i.e., don't figure on being able to drop-ship b/c many companies just won't do it and customers won't wait that long.)

Tax info: ask a lawyer or accountant, but if you aren't going to make very much money and don't have much liability exposure, being a sole proprietorship is generally fine. Your profits and losses go on your personal tax return and are taxed at your tax rate. You can lose some credibility with banks and other entities for not being incorporated or LLC, but this usually doesn't matter.

Getting word out depends on what you're selling. What are you selling? Where do those people go? Advertise there. 10% of sales is a common ad budget.

Other start-up costs: registering a fictitious name (if you are staying a sole proprietorship - this was $70 in my state), registering a domain name (~$10), any software you will need (Quickbooks is about $200). For us, the biggest one was inventory. That was a lot of money but it varies depending on your product.

Aside from these details, my best advice is to really think if you want to work a full-time job. I thought I would sell diapers and make some spending money for myself and the kids. Wrong! To do it and be successful, I have worked full-time since day 1. It really changes the home dynamic and there are a ton of adjustments.

This has been my experience exactly. To get license/tax info here, I just went to Michigan.gov. Wasn't too hard to find info on starting a small business.

Just think hard. I've heard wahms say recently and totally agree - you think wahm-ing will be the best of all worlds. Often it's the worst of all worlds. Always more work. Hard to have quality time with family even though you're home. I would suggest really investigating in your local market to see if it will sustain a business like yours. The internet market is beyond saturated at this point. Not to be a downer, but I suggest to really weigh the costs and benefits.

[Galatea]

Originally Posted by Michigan Mama

I would suggest really investigating in your local market to see if it will sustain a business like yours. The internet market is beyond saturated at this point.

Yes, way beyond saturated. Look at diaper pin, for example, to see all the new online businesses that have to give ridiculous discounts to get customers. There are too many online businesses and local is where it's at right now.

[EricaDoula]

Thank You all for your input! I really appreciate your responses!

[nursingmom]

I designed my own website. So, the major cost of startup was the inventory. ($20,000). I started the website thinking that I can work and take care of my baby. But I was wrong. I just got way too busy and now my 2 year old daughter is in daycare. I put 40+ hours into my work.

I had $0.00 in my bank account as end of last year (2 years of starting a business). I paid off all my debt by begnning of this year. I have not paid my self a single penny yet. I did over $110,000 in sales last year, and my profit was $28,000 (only in paper). (Like I said, I had $0.00 in my bank account even though, on paper, it looked like I made $28,000)

My tax accountant called me and said it's probably better if I dont' work. Because with making $28,000, we paid half of that in taxes because of our combined income (my husbands and I). So, we ended up paying $18,000 in more taxes this year than last year. We paid it with the money that I don't have from my business, but from our personal savings. And the other half of income from my business basically goes to paying daycare (which again is coming from our personal savings, not from business because I had $0.00 in my bank account as of last year).

When I first started the business, I thought that it would be so easy and I would be making profit right away. The reality is that I ended up paying taxes for money that I don't have (because all the unsold inventory by the end of year is considered an asset, and I pay tax on them).

I'm lucky that I have a husband who makes enough income to pay for our daughter's full time daycare as well as $18,000 in taxes that we had to pay this year. Though it looks like I'm doing well in my business (doing $10,000 in sales per month) and all debt paid, I have worked hard in the past two years with no income and I will only be making $2000 a month (which again, half goes to taxes, and half goes to daycare) when I do start making profit.

But I am doing what I love, my daughter loves the daycare which she started going when she was close to 2 year sold, and I have flexible hours.

[Galatea]

Nursingmom's story is interesting. My accountant and I talked on the phone and this year we should get a tax refund b/c dh didn't make that much at his day job and all our credit card loans to ourselves to buy inventory will be on 2009, thus making us take a loss for 2009 and getting a refund. But I can see that once we have paid off our inventory (probably in two years, also), it will be a different situation.

[nursingmom]

That is funny. According to my tax account, it didn't matter about my credit card loans. That didn't count as negative. Rather, the unsold inventory were counted as asset, thus considered income.

Cost of good sold = Cost of good + beginning inventory - ending inventory

So, even in my first year, despite the fact that I had a big credit card debt, I still had to pay taxes because I was making a profit (in papaer) due to unsold inventory.

[oma to 9]

A PP mentioned that the internet market is saturated. I think that depends on what you are looking at selling/marketing.

I make and sell cloth mama pads for plus size mamas as well as for mamas with dysfunctional uterine bleeding or heavy periods and for those with incontinence issues. I only work part time, which is what I wanted to work because of my disability. My inventory is limited to what I make. I generally do a complete turnover in about 6 months.

I will admit that I have a very specialized market. It is far from saturated because people don't look for plus sized mama pads or for pads for heavy bleeding or incontinence unless they have it themselves, and because most people aren't aware that the products exist. I don't advertise except in my Yahoo siggy line and on my blog and Facebook. We simply don't have the money.

You can make as little or as much as you want if you research what the market is looking for - supply and demand is important as it is everywhere else.

Trisha, Oma to 11 now