Topic overview

Starting an online business

A happy entrepreneur starts his online business

Consumer habits have changed dramatically. The share of online retail sales in the UK has risen from just 12% on 2011 to 28.9% in 2021.

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.

Starting 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 customers. You also need to produce a business plan.

If sales are likely to exceed £85,000 in any 12 month period (from 1 April 2017), 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.

The best software tools to grow your start up

Using the right software tools is essential when starting your business and can save you time, money and frustration. We want to help you get started, grow and succeed. To improve your productivity and help you run your business smoothly, take a look at these tools from our Donut partners:


Creating a business website

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. Another option is to use one of the many online marketplaces to sell your goods such as Amazon, ebay, notonthehighstreet and etsy. These online platforms can allow you to bring your goods to, and test, the market for your goods before committing to a fully-fledged ecommerce site.

If you decide that setting up your own online shop is the way forward, there are many ready-made online solutions that allow people with little experience to create their own website.

Or you may decide to use a professional website developer. This will cost around £300-£600 a day and will include design, build, domain name registration and hosting of your site. The total cost will vary depending on your requirements - setting a budget and a clear brief can help you minimise the costs.

Information you must include on your website

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 will provide this facility, 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 secure 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.

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.

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