Starting Up Your Online Business

Whether you intend to sell your own goods online or to provide goods by drop shipping (taking online orders and passing them on to the manufacturers or wholesalers to dispatch) the world of online sales looks set for continued success. It’s estimated that (by 2020) 90% of transactions could either be influenced by the internet or actually take place online.

How to get started

While websites have been a useful marketing and positioning tool for the last couple of decades, the use of the internet for sales is a growing industry. There’s much to be learnt when starting out in business.

Removing the need for the heavy overheads of a physical store or business premises trading online can be a cost, time and effort efficient way of doing business.

Before getting started you’ll need to do the research that’s involved in the effective setting up of any new business including:

Of course, you’ll need to have your website in place and well tested before you get started. While some skilful entrepreneurs have the know-how to create their own website, with the intricacies involved in setting up online trading, it’s often wise to outsource this to experts. This makes sure you get the best results and that your site won’t let you down. You’ll need to make sure you have a shopping basket function and a way for your customers to enter their credit card details and pay securely. Some online sellers use merchant accounts, such as Paypal, to do this for them or your bank may offer a similar service.

You’ll also need to do a lot of online (and traditional) marketing to ensure you’re driving the right traffic to your site, and that that traffic is then converted into sales.

Legislation

You shouldn’t need a licence to trade online, but there are rules and regulations that you’ll need to adhere to.

As well as the standard legislation that all businesses have to comply with, such as Health and Safety legislation from the Health and Safety Executive (HSE) and the need to have your portable appliances, such as your pcs, printers, scanners and the like, Portable Appliance Tested (PAT) by an electrician every two years.

You will also need to comply with the Data Protection Act 1998 – protecting your customers’ personal information that is stored and used during the course of your business – and the Sale of Goods Act.

You are also obliged to provide certain information to your customers when selling online both before and after their order is placed.

Before…

Before they order you must make them aware of:

  • Your business name and contact details
  • The steps involved in placing an order
  • A description of your goods or services and the price, including taxes
  • How they can pay
  • In what way the delivery will take place
  • How much it will cost and how long goods will take to arrive
  • The minimum length of their contract
  • Any conditions for terminating contracts
  • Information about their right to cancel within 14 days, and that they will be responsible for paying for the return of goods if they cancel.

After…

As soon as possible after your customer has ordered you should:

  • Acknowledge receipt of the order electronically
  • Take reasonable steps to allow customers to correct any errors in their order
  • Let customers know what languages are available to them
  • Make sure customers can store and reproduce your terms and conditions. For instance, can they be downloaded and printed?
  • Give details of your email address
  • Your VAT number and clear prices and delivery costs for your products.

You must also contact them in writing (this can be electronically) before the delivery date. This is to explain:

  • Details of what they have purchased
  • The total cost
  • Delivery arrangements
  • The minimum duration of any contract and arrangements for terminating it
  • How and when they can cancel an order and who will pay for returning goods
  • An address to direct any complaints
  • Any guarantees or after-sales services you offer
  • The conditions for terminating contracts
  • And any helpline call charges that are above those charged for calling an 01, 02 or 03 number, or a mobile or free number.

There are additional rules for selling overseas.

If you employ staff your business is also legally required to have employer’s liability insurance.

Qualifications needed

You don’t need any specific qualifications to start an online business. However, having a solid understanding of the business world, and specifically in the area of online trading, can be worth its weight in gold. You’ll also need to have a good understanding of how your website works, how to fix it when it goes wrong and how to do some online marketing. Many online retailers also find that the ability to write compelling sales content and create the offers that grab people’s attention is essential.

Finance

Without the overheads involved in a physical shop front, starting an online business can be relatively cost efficient. Your website will be a big investment and should not be done on a shoestring. You’ll also need to invest in online marketing each month, which can seem costly but should also reap rewards.

Your business costs may include:

  • Your domain name.
  • A well built, fit for purpose, and secure website.
  • A business premises from which to base your office.
  • A warehouse for storing your goods to sell.
  • Rates, utilities and other services.
  • The tools and equipment you’ll need to work.
  • The stock you wish to sell.
  • Insurance.
  • The costs of employing staff.

Postage is also another financial consideration as, while some is exempt from VAT, this can depend on the type of courier. This means you’ll need to look into this thoroughly before passing on charges and when doing your returns. And of course, if you’re sending goods overseas, this will also need careful attention.

Setting up your online business as a limited company

When you’re setting up shop as an online business starting out as a limited company can be a good idea. Many investors and customers will see this as an indication of permanence and reliability, and it will also protect your business name from being copied as well as limiting your own personal liability.

You can use a formations agent to register your limited company. With The Formations Company, you’ll be guided step by step through the process and have your Companies House registration completed in as few as three hours, taking much of the hassle and cost away.

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