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Starting an online business

Consumer habits have changed dramatically. By 2020, some experts predict that 90% of transactions will take place online or be internet-influenced.

Many businesses have long used their websites to generate additional revenue, yet in recent years there has also been significant growth in businesses that start up exclusively online, which can involve less risk, cost and effort.

Creating an online business

As with any small business, the first steps to starting to trade online involves conducting market research to identify your target market, assess demand, competition and reaction to your prices from potential punters. You also need to produce a business plan.

If sales are likely to exceed the annual threshold (81,000 in 2014/15), you must become VAT-registered. You’ll also need to pay tax, in accordance with your status as a sole trader, limited company, etc. Online traders must also observe data protection legislation, of course, when storing important information about customers.

Marketing will largely determine your business website’s success and search engine optimisation (SEO) is crucial to this. Basically, it means using words on your website that ensure high placing in lists on search engine (eg Google) results pages. You could also use paid-for advertising services such as Google Adwords, for which you’re charged on a pay-per-click basis.

Getting your site up and running

You must decide whether to create your own business website or get someone else to do it for you. Doing it yourself can save money, but the results might not be great.

There are many ready-made online solutions that allow people with little experience to create their own website. However, these are only likely to provide you with a couple of formulaic template pages with stock text and photos. With this in mind, you might prefer to pay a professional website designer. This should give better results, and will cost around £300-£600 per day. For around £2,000 you should get a service which includes design, domain name registration and arranging hosting of your site by an internet service provider. Setting a budget and a clear brief can help you minimise the costs. Read more about creating a business website.

Website information you must include

Your business website must include your address and contact details, privacy policy, terms and conditions, exchange and refund policy, quality commitment and information about delivery and payment. Stock availability and pricing should be kept up to date and you must state how much VAT and post and packaging is payable per item.

To collect payments you need to include a shopping cart function, as well as a secure means by which customers can enter their card details when paying. Most website designers provide a shopping cart function and payment facility as part of their service. Online website-building packages do, too.

You also need a merchant account to collect payments. Providers such as PayPal are popular, but you should also enquire at your bank. You pay a service charge on each transaction, a set-up and monthly service fee.

Test and protect your website 

Be sure to test your website site thoroughly before you launch. Ask potential customers what they think, too, and act on their feedback if valid.

And remember – running an online business isn’t without risk. Serious technical or security issues can have a disastrous consequence, so make sure you protect your website from online threats and back up important data.

More on this topic:

Find more articles, videos and tools in the Resources box on the right.

You can also find more information on selling online on our IT Donut.


NOTE: If you are generating an income from your website, you may be classed as self employed or employed depending on the form your business takes. You may need to register with HM Revenue & Customs as self employed, complete a self assessment tax return and pay tax on your earnings. Check your employment status using the guidance and tools on the Tax Donut.