How much does it cost to set up an Internet business?

When I’m talking to people about what I do one of the questions that crops up from time to time is “How much does it cost to set up an internet business?”.

Now, the answer to that particular question is “how long is a piece of string”, because it depends to a large degree on what that Internet Business actually does, and of course at what stage the business is considered to be “set up”.

Facebook probably didn’t cost much to get going, but subsequently required investment of hundreds of thousands of dollars to get to a significant stage in its development (I believe that buying the domain name facebook.com for example cost around $200,000 in 2005!).

Other well known internet businesses, auction sites, online dating sites etc, will all have significant levels of initial expense and investment requirements.

 

The Real Question Though

What he was really asking was – can you set up and run a viable internet business for next to nothing as many people think?

Well, my answer was that it might not cost zero, but that it is possible to get underway for relatively little outlay and make a profit. The caveat is that it will cost you time.

 

Minimum Costs to Establish an OnLine Business

Let’s look at the basic requirements though.

 

Basic Hardware

We’ll assume that because you’re reading this, you already have a computer, modem and internet access. Strictly speaking though, you ought to add those costs, so say $500+ for a computer and $300p.a. for internet access.

 

Website Name

Although you can establish a presence on the internet for free using a blogging platform like WordPress.com or Blogger, these services are really aimed at people who want to blog about their thoughts and experiences, not run a business.

So you’ll need a domain name – a website name (there are ways and means to run an internet business without, but that’s another story).

You don’t actually ‘purchase’ a domain name – you just register it, meaning you own the rights to use it for a given length of time and you purchase it through a domain name registrar such as Namecheap.

This will cost about $10 per annum for a .com name. Costs for other domain types may vary.

 

Website Hosting

You’ll then need somewhere to keep all the files that make up your website. This is called a web host server.

There are several levels of options for web hosting, ranging from a shared web host, where you share the same web server with several (often hundreds) other sites, to having your own dedicated server (much more expensive).

Typically you might pay about $60 – $100 a year for shared hosting which is fine while you’re getting established (the more expensive options will let you host more than one website which is likely to be a good idea).

If you’re going to want to run several sites (for example if you have many affiliate sites for different market niches) then a reseller account is likely to be more useful and will cost about $300p.a. Different Web hosting options are discussed in another post on what is web hosting.

So, if you’ve got a computer, internet access, a website name and somewhere to host it, then you’re ready to start and you don’t actually need to spend any more money than this, although it’s probably a good idea to do so!

 

Internet Business Models

After that the costs will depend to a large extent on what type of online business you want to run; what you intend doing for yourself, and what you intend paying others to get done for you.

There are many different models for an internet based business such as:

  • adding an online store for an existing physical business,
  • reselling another company’s goods online,
  • referring people to make purchases at another company’s site in return for a commission or referral fee (called affiliate sales)
  • referring people to request information for another company’s services in return for a referral fee (called CPA or Cost Per Action)
  • selling your own goods online
  • generating revenue from advertising on your site(s)

In most cases, they involve building one or more websites.

That means paying someone to develop them for you – or developing them yourself. We’ll look at the do-it-yourself options and costs.

 

WordPress and WordPress Themes

Unless you both know how to, and want to, program a site yourself using a full-on website development product like Dreamweaver, you’re likely to be better using something like WordPress as a platform for building sites around. It’s relatively straightforward to use and helps you build search engine friendly sites!

WordPress has two options, both free.

The shared hosted option at WordPress.com is for people without their own web-hosting and is really designed for diary style personal blogs.

The ‘host-it-yourself’ option, WordPress.org, allows you to develop and manage a site on your own web host server as detailed above. That’s the one you’re going to want.

WordPress allows you to have pages, like any normal website, and  blog pages containing posts – updated information etc. This is what makes it powerful for the search engines as each post is treated as an additional page, and it allows Google to build up a good picture of what your site is all about especially if the posts are on the same general or related topics.

Blog style pages are where you’d put ‘news’ style or additional new content in the form of ‘posts’. Google loves fresh, original and unique content, so will reward you for that too.

You can have as many ‘normal’ pages as you like – most sites include them for things like “About” “Contact” etc…

You can have your homepage as a normal ‘static’ page, or as a blog page.

Some WordPress sites only contain static pages, some only blog type pages.

It’s easy to add photos and videos to WordPress posts and pages. There are also a gazillion (often free) plug-ins to help you do virtually anything with it too.

 

WordPress Themes

WordPress provides the framework that links pages together and produces the code. It then requires the use of a ‘theme’ to display how your site looks – the layout, colours, graphics, content etc.

Different themes allow for different ease of customising. Some often require coding to achieve an effect while others use simple selection boxes etc. Some allow you greater control over page and post titles, keywords and so on which all help for better SEO (search engine optimization).

There are many free themes and premium (paid for) themes.

My favourite theme is CatalystTheme for WordPress. It’s flexible, easy to use and powerful for SEO. It’s one of the best premium WordPress themes there. There is a choice fo three licensing options – all of which allow it to be installed on unlimited sites.

 

Building a List and a Business Asset

As part of your business plan, it’s likely that you’ll want to develop a client mailing list, both customers and potential customers, as a means of keeping in touch and maintaining their awareness of what you have to offer.

To manage this properly you will need email list management (autoresponder) software such as AWeber which currently costs less than $20/month or $200/yr (for unto 500 email names)

Building a list like this is a great asset for your business.

 

Costs to Run an Internet Business

Let’s look at the costs so far:

  • Website domain name – $10p.a.
  • Web hosting – $100 – $300p.a.
  • WordPress – free
  • WordPress Theme – $100
  • List Management – $200

 

So, even allowing that you might have several sites (if you’re an affiliate internet marketer say) and need a more expensive hosting option, the cost involved is less than $1000 or so (plus computer and internet plan).

These are the basic costs that would enable an internet based business to get established and operate with some degree of effectiveness.

 

In reality, there are likely to be some additional costs depending on your business model.

You may decide to rely on free visitor traffic from search engines like Google. That requires that you spend time and effort optimising your site to be better than the those of the competition. Or you can outsource it for a cost.

Alternatively (or as well as), you can generate traffic through advertising – again at a cost.

There are several tools and solutions to assist with things like keyword research that help you focus on the target market for your site more effectively. This helps drive more free traffic through search engines as well as benefiting costs involved in Pay-Per-Click advertising.

And, of course this all assumes that you do virtually everything yourself! Much of what is required may be better outsourced or you may want to hire staff, depending. But that probably counts as the next stage of business development.

 

Invest in Yourself!

It is also worthwhile considering investing in yourself. So books, training, forum memberships, courses, workshops, coaching and mentoring services etc may all be additional costs, but also a means to understand more and expand the horizons of both you and your business.

And as with any business, there will also be costs for accountancy, legal, company incorporation, banking etc.

 

So, although it is unlikely you can claim to start an internet business for (almost) nothing, the financial costs involved can be very small compared to many other markets.

While that can be a good thing, in that it allows you to start a business more easily, it also means it is possible for others to do the same too!

 

You just have to do it better!!

 

About David

2 Responses to “How much does it cost to set up an Internet business?”

Read below or add a comment...

  1. sam says:

    How much do the below list cost approximately ?
    ” costs for accountancy, legal, company incorporation, banking etc. ”

    So any website ( say like craigslist) which can generate any revenue needs to file for LLC ? and at what stage do we need these above items. Can we do them once we know we have enough traffic or even before the launch of the site ?

    • David says:

      Fair question – and the answer depends to a large extent on where you’re based and the status of your business.

      I don’t know the rules for the US, but in the UK you can establish yourself with sole trader status to start with (reducing/eliminating company incorporation costs – and typically lower fees for accountancy as there is less filing required). Many banks here provide initial free banking to start-ups too.

      For tax, I believe you only need to declare you are operating a business within 3 months of commencing trading…. so if you fail to commence trading….. etc… Once you are generating revenue though, you should be able to offset set-up costs and costs for investigating/exploring your ideas etc against that.

      If not at the outset, you will however likely want to change the status of your business to a Limited Liability company at some point to help safeguard your personal liabilities – it may also be financially better to do so too as well. You may also feel that a Ltd company is perceived with more authority in your marketplace.

      Note – The above does not constitute legal or accounting advice (which we are not qualified to give) – and in all cases you should verify your own scenario and circumstances with a qualified accountant / tax advisor etc in your own tax jurisdiction.

Leave A Comment...

*