How To Start an eCommerce Business

Ecommerce, Dropshipping

Shopify offers a free workshop every week that takes you step-by-step through the process of setting up an online business that uses dropshipping to fill orders. You’ll discover where to rapidly import fantastic products into your shop so you can start selling them right away. Cannot attend? When the event starts live, register to receive the recording.

Sign up for a webinar.

The Required Commitment
Building a successful dropshipping business requires a big commitment and a long-term outlook, just like any other type of business. If your expectation is to make six figures from six weeks of part-time work, you will be sorely let down. You’ll be much less likely to become disappointed and give up if you approach your firm with realistic expectations regarding the investment needed and your profitability.

You’ll need to make a sizable investment utilizing one of the following two currencies when launching a dropshipping business: time or money.

Spending Time
Our advice is to start your firm from scratch and put in sweat equity, especially if you’re a first-time dropshipping entrepreneur. We choose this strategy over making a significant financial investment for a number of reasons:

You’ll get knowledge of the inner workings of the company, which is essential for managing staff as your company expands and flourishes.
Knowing your market and clients very well will help you make wiser selections.
You won’t be as likely to spend a lot of money on pointless endeavors that won’t help you succeed.
You’ll learn a number of new abilities that will improve your entrepreneurship.
Realistically, the majority of people are unable to leave their jobs and dedicate six months to setting up a new online business. Even though it might be a little more difficult, you can start dropshipping even if you’re still employed in a 9-to-5 job, provided you set realistic expectations for your clients regarding customer care and delivery schedules. As your company expands and becomes more profitable, you can eventually switch to working on it full-time.

Although every business and entrepreneur is different, it is feasible to develop a business and earn $1,000 to $2,000 per month in as little as 12 months by spending about 10 to 15 hours each week.

It is best to work on your business full-time if you have the option to do so in order to increase your chances of success and possibilities for profit. Putting all of your energy into marketing will be especially beneficial in the beginning when gaining momentum is essential. According to our experience, it typically takes a dropshipping firm at least 12 months of full-time work with a focus on marketing in order to replace an average full-time income of $50,000.

Even if it could seem like a lot of work for little reward, keep these two points in mind:

Once your dropshipping firm is up and running, keeping it operating will probably take far less time than working a 40-hour week. Because of the efficiency and scalability provided by the dropshipping model, a large portion of your investment pays dividends.
More than just an income stream is created when a firm is built, right? Additionally, you are creating a resource that you can sell in the future. When calculating your true return, be sure to take into account both the cash flow generated and the equity value you are accruing.
Spending Cash
Although investing a lot of money can help you start and build a dropshipping business, we don’t recommend it. We’ve tried both methods of expanding a firm (bootstrapping it ourselves versus outsourcing the process), and we’ve found that when we’ve done the majority of the work ourselves, we’ve had the best success.

Being built from the ground up by someone who has a strong stake in the business’ success is essential in the early stages. You will be at the whim of expensive programmers, developers, and marketers who will soon eat up any profits you are making if you don’t grasp how every aspect of your organization operates. Although you don’t have to handle everything alone, we want you to be the main proponent of your enterprise at first.

However, to get your company up and running, you will need a little financial reserve in the $1,000 level. You’ll require money to cover any incorporation fees, which we’ll cover below, as well as small operating costs (such site hosting and suppliers).

Making a Business Structure Decision
Note: The material on business structures and EINs (employment identification numbers) described below is for entrepreneurs in the United States alone and does not apply to business owners in other nations. Please refer to the notes at the end of this chapter for information on how to incorporate a firm with a U.S. basis from outside the country. This guide about Canadian incorporation should be useful if you’re from Canada.

If your business venture is something you’re serious about, you should create a reliable corporate entity. We can give you a summary of three frequently utilized business structures but we are not attorneys and cannot provide legal advice.

Is it a sole proprietorship? Although this business form is the simplest to operate, it does not provide any personal liability protection. Therefore, if your company is sued, your personal assets could also be at risk. The only paperwork needed is to record your business’s earnings on your personal taxes. Other federal or state business filings are not necessary.

LLC, or limited liability company? By creating your company as a distinct legal entity, an LLC offers greater security for your personal assets. It offers more liability protection than a single proprietorship, even though it isn’t completely foolproof. You will need to pay incorporation and recurring costs, as well as any filing procedures that might apply.

? C Corporation The majority of large firms are set up as C corporations, which provide the most liability protection when done correctly. Due to the fact that income does not pass directly to the shareholders, they are probably more expensive to establish and are liable to double taxation.

So, which structure should you pick? Again, we are not attorneys, therefore we strongly suggest that you get legal counsel before deciding how to incorporate. The majority of small business owners typically choose a sole proprietorship or an LLC. For our own dropshipping operations, we’ve always chosen an LLC since we believe it provides the best value in terms of liability protection, independence from personal funds, and costs.

Learn more about C corporations, LLCs, and sole proprietorships.

asking for an EIN number
Employer identification number (EIN), which functions as your company’s Social Security number, is a requirement of the IRS for all firms. This number is required to open a bank account, file taxes, apply for wholesale dropshipping accounts, file other business-related paperwork, and pretty much anything else.

Thankfully, obtaining an EIN number is quick and cost-free. Applying online for an EIN number is simple.

Organizing Your Financial Situation
Combining personal and corporate money when starting a firm is a common error made by entrepreneurs. This leads to confusion, complicates accounting, can result in the personal assumption of business responsibilities, and raises serious concerns with the IRS in the event of an audit.

Your personal and corporate funds should be kept as distinct as possible. The most effective way to achieve that is to create new accounts in your company’s name. You should start a new:

Checking Account for a Business? You should use one main checking account to manage the funds of your company. It should be credited with all business income and debited with all expenses. Accounting will become considerably simpler and cleaner as a result.

Your PayPal account You’ll need a second account for your business if you intend to accept PayPal (which you probably will).

Card of credit You ought to have a business credit card that is exclusively utilised for investing in dropshipping supplies. With the correct rewards travel cards, you can earn some substantial rewards because you’ll be purchasing a lot of goods from suppliers. According to our research, Capital One has the greatest cash-back program, while Fidelity Visa/American Express has the best travel rewards program.

Receipt of Sales Tax
Only if both of the following are true will you be required to collect sales tax:

The customer places an order AND you are based in a state where sales tax is collected
for each and every order put in by citizens of different states? despite the fact that those states levy their own sales tax? There won’t be any taxes to collect. The tax laws for small internet retailers are currently quite beneficial, but there is a good likelihood that they may alter in the upcoming years.

If your state does impose a sales tax, be ready to collect it on the few orders placed by clients from your home state. To register as a retailer and learn how regularly you must submit the tax you collect, get in touch with your state’s Department of Commerce.

Regional Business Permits
Most cities and towns demand that companies obtain a business license, which must be periodically renewed. For dropshipping firms, many of which are likely to be run from home offices, this criterion can be different. You should research local rules and ordinances to determine what, if anything, is necessary.