Simple financial advice. Because life doesn't have to be so complicated.

How to start a small business. Part 1

Written by on Dec. 27, 2017 in entrepreneurship.

Last update on March 4, 2018.

How to start a small business.  Part 1

Have you been considering running your own small business?

There are a lot of opportunities to run a small online business right from your home! All it takes is some research and some elbow grease.

In this read, I'll cover the four biggest trends in online businesses in 2017 and 2018.

Drop shipping

Drop shipping is where you create a website, find a supplier, and work on getting people to buy items from your website. Drop shipping is particularly good for those who like stay-at-home work, don't have a lot of money to get started, and have niche hobbies where you can find a couple items that people really want.

Since you don't hold onto the items (the supplier ships it directly), you don't need a warehouse or to manage shipping. It saves you time and you make money on every purchase.

To set-up a drop-shipping website, you need to create an e-commerce website. You can learn to write your own website, but it's a lot of work for no good reason.

Shopify is getting more and more popular in this space too. It handles the website creation, putting up items to sell, handles taxes, and even gives you analytics on which items sell the best! You can get a free trial here:

I've found this guide to be a great guide on how to build a business on Shopify.

Amazon FBA

Amazon FBA is one of the fastest growing ways to build a new business. It is similar to drop shipping, but instead of having the supplier ship, you have Amazon ship instead. It has the added benefit of allowing you to list your item on Amazon. More and more online shoppers go to Amazon every year, which means your income will go up year after year.

One of the downsides is, you are beholden to Amazon. If Amazon decides to ban you or delist you for any reason, you're going to run into serious issues. This is why we recommend you also build your own store with Shopify to diversify your risk.

Amazon FBA is pretty common for drop-shipping companies to do as well. It's hard to get right, but if you are the top-rated and ranked item on Amazon, you can make a lot of money. Amazon FBA is a great place to start if you have an existing product that you like to ship, if you already own a store or have connections to the suppliers to build products, or if you are a very competitive person. Getting top-ranked on Amazon isn't easier or for the light-hearted.

To learn more, I've found this book to be a phenomenal help. It goes over step-by-step, what you need to do to build an Amazon FBA account. It covers how to get ranked to the top of Amazon (very important for sales!), how to find the right products to target, and how to grow the business over time.

Affiliate Marketing

Affiliate marketing works by referring new customers to products. Imagine if you had an Amazon FBA store and you needed new customers to come buy your product (maybe it's a ping-pong ball table?). You would reach out to popular ping-pong blogs or websites and ask them to embed a link to your FBA store so they can buy the table when they click on it.

Affiliate marketing is really great for people who like to work from home, who are good at understanding what people want, and have some basic understanding of SEO (search engine optimization). This is especially great if you have a hobby that you are really into. The more special the hobby, the better off you will be.

Examples of affiliate marketing websites are:
Note if you see the "Check Price" on Amazon button, that is an example of affiliate marketing. If you buy the ping-pong table from that link, the website gets a cut of the revenue you bring in.
This is a cologne reviews website. When you click on one of the colognes, it takes you to Amazon.

Buying an online business

Buying an online business can be scary. It's not a physical thing that you can touch, so it makes a lot of people uneasy. But it's also a great way to save time and make money.

When you build a business for the first time, it takes a lot of time. You need to set-up billing, accounting, figure out ads, get suppliers and negotiate price, set-up the website, and all sorts of work that takes time and isn't always fun.

Buying a business gets around that. All of those pieces are set-up for you already. The only downside is you don't get to make your own ideas, but you start with someone else's. That said, you can always buy a business in an area that you really enjoy and use that business to build up your other business. There's a lot of options and ways to mix-and-match here to grow your business.

So if online businesses are so great, why would their owners sell them? That's a good question, but we can answer it by thinking about the online business like a house. When you buy or build a house, you like it. It's got what you like, it's in a place you like, and you enjoy living there. But other time, you build up money, you get tired of living in the same place, or you'd just like some change. Maybe you'd like to move around the country a bit. You go to sell your house then and people don't really ask why someone sells a house. An online business is the same. There's a bunch of reasons why someone would like to move on, but would like to make some money instead of letting a nice business die.

This is your opportunity to let your dreams go! You just need to execute well, grow the business, and have a strategic view of how you want to run the business in a couple of years.

But you should also be careful! Online scams are still there and there are still websites where the traffic is faked, and the sellers are scammers trying to take your money.

I recommend two things when buying a website: use a broker, and do your research.

Website brokers do a lot of the legwork for you. They research the revenue to make sure it's real. They look at the profit and loss statements, the advertising accounts, and research the website to see if anyone bought links to it to artificially inflate the growth. They do a lot of the research for you, so you know the websites are mostly ok.

My top three brokers are:

FE International is the most reputable and legit of all three brokers. They do extensive research and I've personally found the websites I've looked at to be good quality websites. They have a higher price point for their website, so if you don't have 20k+, you're going to have a hard time buying anything on FE International. That said, the websites on FE International are rock-solid websites with consistent traffic. Their fees are 1% of the website cost, up to 1K max, and you split the rest of the fees with the buyer. They specialize in content websites, affiliate websites, and SaaS websites (we'll take a deeper look at SaaS in the next article in this series).

Empire Flippers is another option. I like empire flippers because they have great videos. Check out this video where they talk through the history of the website, why the seller is selling, what you should look out for as the buyer, and strategic opportunities to grow the website.

They mostly deal with affiliate and e-commerce websites. They especially specialize in e-commerce websites, so if you're interested in drop-shipping or Amazon FBA, this is definitely the place to go. Their website is professional and high-quality as well.

Flippa is the earliest of the three and uses a bidding model where you bid against others. Flippa also sells domains, mobile apps, and a couple other internet properties. The website is pretty slick, and you can find some cheap websites to buy here. Personally, I find the bidding model to be really annoying, especially when you don't meet the reserve (you bid for it, you win, and you still don't get it?). I've also found most of the low quality websites to be on Flippa and they don't do a great job of actually vetting the websites or apps. You can find some quality apps on Flippa, but you really need to look hard and do your research.

If you plan on buying a website, please do your research. Semrush is a tool that I used a lot to research if the traffic was real, what the growth looked like, and if the website was real or a scam.

In general, you need to do a lot of research to separate the gems from the scams. One of the best ways here is to use common sense. Most websites or apps will sell for about 2-3x their annual profit. This is a reasonable number (but is really high compared to, say real estate) for an online business. If you see someone selling a mobile app that purportedly makes 10k a month and they are selling it for 5k, the numbers just don't line up. It's probably a scam. But if you are paying more than 3x, you're probably overpaying and you can negotiate the price down.

This book is a great book as well on buying established websites and making passive income. I highly recommend it as a detailed read that covers a lot of the errors that first-time buyers run into.

Hopefully you found that useful and good luck in the new year! Hopefully you find or build that business that you've always wanted to build.


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