I recently attempted to start my own online business with a friend, forming a Limited Liability Partnership.  It didn’t succeed, not because we didn’t have the right plan in place or resources available, but rather because we both just didn’t have time to dedicate to the business.  In fact, we had everything in place, the website was ready, the supply chains were setup, our operations were setup, and all we had to do was, in essense, flip the switch to accept payments and open up our website.  The entire business venture ended up costing a total of about ~$1,100, $700 was my part, the rest was my partner’s.  I think it was worth it.  We had our “business” for about 9 months.  And YES, we are still good friends.  We discussed the priorities before we started the business up…our friendship was #1.  Maybe I’ll talk about that later.  We never made a penny, but we learned a lot, at least I know I did.  Since we spent so much time researching and getting this setup, I might as well share what I learned so that maybe someone else will be able to start up their own business or, at the very least, I’ll have recorded the process so if I decide to start something up in the future, I’ll remember what I did.  :)

The reason I’m calling this the ‘extremely rough guide’ is because it’s not complete, nor do I want my readers to take this as the all inclusive final word on starting something up.  Hey it’s important!  A business is a serious matter.  So here we go…

  1. Formulate a plan, another plan, another plan, and a final plan (aka exit strategy).  What benefit can you provide consumers?  Do you have the resources and time to dedicate to a business?  What are you going to sell?  What if things don’t work out?  I strongly recommend getting the resources committed, both financial and technical.  Consider everything possible.
  2. Are you doing it on your own (Sole Proprietorship)?  With a partner (General Partnership or LLP)?  Forming a corporation?  Check out this article on Wikipedia for more information.  There are many benefits to each type, here’s a chart that’s sweet and simple.  One thing I do recommend is the “LL” part.  Limited Liability is important because, from my understanding, it will shield you, personally, from lawsuits that would take everything, thus ‘limited liability.’  It’s important because you don’t want to lose your house because of somebody accidentally spilling hot coffee on their lap.
  3. Decide on your business name!  Be sure to search your state records…You don’t want to have a name issue down the line.
  4. Register for your for Federal EIN and your state ID, each state has it’s own site to do this.  Hawaii has a site known as Hawaii Business Express.
  5. Open up at least a basic business checkings account.
  6. Find a host.  I’d recommend Dreamhost (referral link), but shop around.  This is the part your technical resource would be extremely critical.  There are many advantages and disadvantages to using certain hosting services, not to mention pricing can vary wildy.  Look at their business accounts, some include free “shopping cart” software, or basically an online store application.  By the way, you could always go with something like Yahoo! Small Business which has a really simple “cookie cutter” type store available.
  7. Setup SSL.  This step really sucks, but not as much as the payment part.  There are tons of SSL Certificate providers, the more well known ones being Verisign and Thawte.  Verisign is a rip off!  But if you’re a giant corporation, you want the well respected “Verisign” logo on your site, so maybe it’s worth it.  The selling point of SSL Certificates is that you want one that’s recognized on all browsers.  An SSL Certificate basically assures the ‘customer’ that this site is authentic and encrypts data from the customer’s browser to your website.  It does not mean that the site won’t defraud you, it just guarantees the site is real and the data is going to get to the website safely.  I paid about $100.00 for 1 year.
  8. Assuming you will be accepting online payments, you’ll need a couple of things:
    • Just a note, this step is the most confusing of all steps.
    • Find a Merchant Account provider (MAP).  A MAP will be your online ‘bank’ sort to speak.  They will accept payments on your behalf and pay you.  Don’t do this without doing your homework!  Your MAP takes a cut of all your transactions, which in turn they pay Visa, Mastercard, AMEX, Discover, etc.  They also charge all kinds of fees, many which are hidden throughout their website.  They charge fees if you close your account too early, monthly fees, chargeback fees (when a customer calls Visa and disputes a charge), etc.  So be sure to look into your MAP.  Some also include AMEX and Discover services with their plan, others charge extra to accept these.  I paid $10 per month for this service.  Plus $5 to American Express, so that I could accept American Express payments.
    • Next you need to find a Payment Gateway.  Some examples of payment gateways are Authorize.net, Paypal.com, and Cybercash.  Payment gateways actually accept process the payment on your behalf.  If you think of an online business like a brick and mortar business, then the Payment Gateway is like the card swiping terminal.  The MAP is the “bank.”  Deciding which one you use depends on the MAP AND the “shopping cart” software that you will be using.  I’ll get to that next.  I paid a $15 monthly fee to Authorize.net.
    • EDIT:  Often a MAP and a Payment Gateway provider will be blended together.  They are separate though, and you don’t have to go with the Payment Gateway that the MAP recommends.  It’s just simpler that way.
  9. Decide which storefront/shopping cart software you are going to be using.  I used Miva, because it was a fully support application included with my Dreamhost account.  If I had to do it again, I wouldn’t use it though.  I like the idea of using an open source application just because it’s much more customizable, but I didn’t do much research on storefront software, so I won’t go in too much depth here.
  10. Setup miscellaneous things like shipping accounts with UPS, FedEx, USPS, etc.
  11. Integrate and get your store ready.
  12. Run through trials and make sure everything is working properly!  Your payment gateway can be set in ‘test’ mode, which will allow you to do everything except actually ‘charge.’  This is the switch that was never flipped in my case.
  13. Good luck!  Send me a note, I’d love to check it out.  Maybe we can workout something to help each other out!

Here are some additional resources: