My spouse and I come up with business ideas on a regular basis. We often start with “wouldn’t it be cool if…”, “what if we could create…”, and so on.
Some are ideas are great and some are not so great, but either way, we are stopped in our tracks due to start-up costs.
Most businesses have high start-up costs. Even the lower cost start-ups can still start in the thousands of dollars.
When you’re on a budget and don’t have the credit to obtain a loan, it is no surprise that you begin searching for the best online business to start with little money.
The good news is that there is hope. If business start-up costs have stopped you in your tracks, this business model may be the answer you’re looking for.
The Average Costs of Starting a Business
There are various types of businesses to start and each have their own start-up costs.
To give you a rough estimate, here are the average start-up costs for different industries:
Food service – $125,000
Service businesses – $14,000 – $18,000
Retail – $32,000
Healthcare – $27,000
Real estate investing – $75,000
Arts/entertainment – $16,000
Not only are you dealing with high start-up costs, you are also dealing with high risk.
Many businesses fail within the first few years of operation:
About two-thirds of businesses with employees survive at least 2 years and about half survive at least 5 years. – SBA.gov
At that rate, it doesn’t seem like the odds are in your favor. An online business can last well beyond the ten year mark.
If you put the time and effort in, your online business will be working for you and not the other way around.
Why Choose an Online Business Model?
For one thing, an online business doesn’t require the same overhead costs of a brick-and-mortar style business.
You don’t have to worry about paying rent for a space. There is no commuting because you can work from home.
There are no separate utilities to pay for since you won’t require another location outside of the home.
An online business is also convenient. You can work from anywhere with a WiFi connection.
You can focus on your business before work, after work, or whenever you make the time.
Best of all, you can get started with your online business immediately. You don’t have to take out a business loan or borrow money from friends and relatives.
An online business is affordable. You can start most online businesses for under $100. That is unheard of with most business start-ups.
Four Types of Online Businesses You Can Start
There are all kinds of businesses that you can run online. However, there are four main types that you are likely to come across.
These four types are low-cost to start but some can be a bit more expensive than others. I’ve tried three out of the four and only one has been the best fit for me.
I’ll start with the three models that were not a good fit for me and end with the one I currently use.
1. Selling Online Using eBay or Amazon FBA
After I was laid off from my previous job I was hustling to make ends meet. One of my hustles was selling items on eBay and Amazon.
We started off with eBay first. We sold items around our home we no longer used. Things were selling fast but we began to run out of our own inventory.
We began sourcing at local thrift stores. A lot of the stuff we thought would sell did not. Eventually, we got lucky discovering that men’s clothing were good items.
However, that too became short-lived as many of our listings were not being found on eBay and with all of the competition, our items were not hot sellers at all.
Also around that time Amazon FBA was being talked about a lot online. We wanted to start off easy so we bought a bunch of used books and shipped them off to Amazon.
The books were not flying off the shelves and in fact, we still have a bunch of them leftover. I ended up requesting they all be shipped back to avoid the storage fees.
Here are the reasons why selling via eBay and Amazon did not work out for us:
- Fees add up fast (eBay, PayPal, Amazon)
- A lot of competition between other sellers
- Difficult to find items to source
- We lost money on items that wouldn’t sell
- Thrift store prices were not truly bargains
Don’t underestimate thrift store pricing! Most of them look up an item’s value online and charge what they’re currently worth. Therefore, your markup won’t make much of a difference or it will cause your item not to sell at all.
2. Selling Online Using Dropshipping
Dropshipping is hot right now. You may find tons of courses available to that hype up the profit potential of dropshipping.
What makes dropshipping so enticing is that there is no inventory to buy and store. You list items from a dropship company on to your online store.
When customers place orders, you forward those orders to the dropshipper who then ships them out to your customers using your business name.
Sounds easy right? Well, the concept is easy enough, but dropshipping is not without its issues.
For one thing, finding reputable drop shippers requires some trial and error. Many people start off using AliExpress.
The items are shipping from China which can be a long wait for many customers. It is something you will have to disclose on your store.
Another issue is customer service. You’ll be handling customer complaints, refunds, and returns.
The biggest obstable will be traffic. Your online store is useless without visitors. Those visitors will not come overnight.
Almost all dropshippers utilize some form of paid advertising. Facebook has become a popular traffic generating source.
You must have a monthly budget to pay for advertising, otherwise, your chances of making sales are pretty slim.
Here are the reasons why we haven’t pursued dropshipping:
- Sourcing products from overseas (trial and error finding legitimate dropshippers)
- Customer service (refunds & returns)
- Relying on another company to ship for you
- No control over inventory
- Expensive to advertise your store
3. Buying Inventory and Selling within Your Online Store
Some online business owners opt for buying and stocking their own inventory and selling items using their own online store.
The great thing about this approach is that you are not relying on dropshippers who may or may not get your orders out in a timely manner.
You have better control of how much inventory you have and when items ship out. The problem is figuring out what the best items are to buy.
Not only that, you will also need to pay for storage space. Otherwise your home will be filled with items you are trying to sell.
Imagine paying for hundreds of items that you think will sell well and realize that no one is interested in them? This is a risk that you take with this business model.
You end up paying a lot of money up front for inventory, storage, as well as the monthly fee for your shopping cart software.
When you are on a budget, this online business model is not ideal for most.
Here are the reasons why we haven’t pursued having our own online store:
- You have to invest in a lot of product up front
- No gaurantee the products you choose will sell
- Customer service (shipping, returns, refunds)
4. Earn Commissions with Affiliate Marketing Using Niche Websites
This is my absolute favorite way to earn income online. Unlike the other methods above, this is the lowest cost method to get started.
In fact, you don’t have to pay a dime to get started! When I became serious about creating a legitimate online business, I sought out training and landed on Wealthy Affiliate and became a free starter member.
Their method of building an online business involves creating a niche website and monetizing it using affiliate marketing products and/or services.
Affiliate marketing is the process in which you promote another company’s products or services in exchange for a portion of the sale (your commission) when the product sells.
The affiliate company provides you with special links that you place on your website. These links track when one of your visitors click on it and makes a purchase.
Here is a graphic representation of how it works:
This is my favorite method for creating an online business because:
- No customer service
- No buying or shipping inventory
- Unlimited earning potential
- Tons of affiliate products to promote
- Joining affiliate programs is free
- No shopping cart software needed
- Very low cost to start (even free in this case)
- It’s fun – build a niche site around a topic you enjoy
- Easy to learn and to maintain
Is this online business model perfect? Of course not. However, if you are seeking to build a legitimate online business for very little money, this is one of the best ways to get started.
The biggest downside to this approach is that it takes a lot of time and patience to grow your business.
I wouldn’t let that deter you from getting started. Ask yourself how long you have already devoted to various employers with nothing to show for it?
You’ve likely spent years working for someone else. Don’t you think you deserve to devote 6 months to a year to grow your own online business?
I haven’t let anything stop me from pursuing my dream and neither should you. The tools and training are yours for the taking.
I hope I have helped to shed some light on the various ways to start an online business with little money.
Which method do you like most? Would you pursue one or all of them? Leave your feedback in the comments below.