How to start your own internet business

There's more to it than putting up a site and waiting for the orders, says Esther Shaw

If you've ever had an idea for a product or service that you think could net you a fortune, you may well have considered setting up an internet business with the aim of sitting back and watching the money roll in.

After all, in 2006, consumers spent £30.2bn on online goods and services, according to IMRG, the industry body for global e-retailing. Over the past 10 years, the growth of the internet has resulted in the high-profile successes of many internet-related businesses. Just a few weeks ago, for example, price comparison service Moneysupermarket.com became the second-biggest internet float in the world since the dot.com implosion, after that industry behemoth, Google.

The internet has certainly revolutionized the way we live our lives, and offers a place where individuals can compete with global organisations. But just how easy is it to get started?

Your business plan

The starting point for any new venture is to create a business plan, says Tony Cohen, the head of entrepreneurial business at Deloitte.

"You need to know your target market, know your competition, attract funding, secure good resources, build consumer loyalty – especially blogger coverage – and forge alliances with strategic partners," he says. "Preparation and research are key."

Jeffrey Macklin from FDUK, a company that provides part-time finance directors to start-up businesses, says the objective of the business plan is to tell a simple yet compelling story that leaves the reader wanting to meet the management team and find out more about the proposition. "It should be as succinct and accessible as possible, and around 20 pages at most," he says.

Finding a market

One of the most important elements of setting up an online business is finding out if there is a market for your idea.

"It's all about finding a niche," says William Berry, a self-made internet millionaire. "Hampers, for example, are a niche of food retailing, but there are already market leaders in this area, so you either need to aim for a niche which doesn't already have a market leader, or attempt to become even more niche – by offering Christmas hampers, say. "

Financing

There are many different financing options available to aspiring entrepreneurs. For many businesses, raising funds may involve several sources.

Bank finance in the form of a loan or overdraft is usually cheaper than selling shares or equity in your business, says Macklin. But he adds that equity investment is ideal for those businesses that do not want to increase their level of borrowing, or are unable to provide the necessary security.

If you're considering equity investment, two options are so-called " business angels" and venture capitalists. Business angels are wealthy individuals who look to invest in growing companies wanting to raise between £10,000 and £250,00. They will also offer contacts and advice. Venture capitalists will only invest – usually a minimum of £2m – if they can see a significant return in three years, say.

For internet start-ups with a sound business proposition but without the necessary security to obtain conventional lending, the Small Firms Loan Guarantee is another option, according to Steve Jennings, director of business banking at Alliance & Leicester Commercial Bank. He says cash-flow analysis is vital.

"A common error businesses make is to ask for too little financial support in the hope of getting at least some of the funding they need," he says. "But this is potentially a recipe for disaster."

Your website

Websites will set you back varying amounts. "The cost is relative," says Berry. "While a basic one could cost as little as £500, a really good one that dominates the market could cost up to £20,000."

If building your own website is not an option, try searching for web designers online, or ask friends and colleagues for recommendations, says Nick James, a small-business consultant and the founder of Nick-James.com, an online club for entrepreneurs. Keep the site clean and simple: people will buy from you if they trust the site and can find what they want.

"Make sure you update your website's content constantly, as innovation, imagination and invention are essential if you are going to succeed in the longer term," he says. "Also make it easy for people to get in touch: your business needs to present a human face."

Marketing

One area where internet businesses often fail is marketing, according to Lisa Richards, a partner at accountants Smith Cooper.

"Too many people fall into the trap of developing their product or service and then expecting orders to come racing in," Richards says. "But with no 'shop window' through which to promote yourself, how are potential customers going to find you?"

Sites such as Google AdWords can be a cost-effective way of advertising, she says. These operate on a "pay per click" basis, so you only pay when someone clicks through to your website.

James also recommends emailing your friends and family with details of your site. "Look out for chatrooms and discussion forums, and let people know you're there," he adds. "Network with others and get referrals."

You may want to get a company to do search engine optimization (SEO) for you to ensure that you catch any potential customers searching for your type of product on the likes of Yahoo! and Google. "But try to get them to work on the results," says Berry. "SEO isn't that important if you have spent money effectively on online ads. A lot of people try to get to the top of search engines – and there can only be one."

Customer transactions

Make it fast and easy for customers to order, as a site with a difficult sales process is likely to lose customers, says James. "Fulfil every order as fast as you possibly can," he adds.

Websites should be easy to navigate so users don't get frustrated and leave without making a purchase. Security should also be a priority, and potential customers should be assured their details will be kept safe.

"How you treat customers matters," says James. "Talk to them as often as possible and help them to get to know you and build confidence in you and the services you provide. Ask them what they want from you and react to what they tell you."

Start small and have patience

Don't give up your day job too soon, as it will take time for your internet venture to grow – and in the meantime there may not be much incoming revenue. As a budding online entrepreneur, you'll need lots of energy, enthusiasm, determination and passion; but you also need to be realistic. "Success on the web is rare," warns Cohen. "While many businesses are launched, few make a profit, and most will never see a return on investment. That said, while starting up an internet business can be one of the toughest things you ever do, it can also be the most rewarding."

From baby steps to big success - A matter of development

Julie White, 38, of Milton Keynes, set up her own internet business, Truly Madly Baby, in 2005 after she had given birth to her son, Samuel.

The business has been a great success, and Julie can now boast a six-figure turnover.

It was after starting out working for Ann Summers as a party planner for home events that Julie identified a gap in the market for a "buy in your own home" service for baby products and accessories.

"I looked at what else was out there, and the types of products I might be able to sell, and then I got started designing my own online model," Julie says.

A few weeks after she started the company, she appeared on Dragons' Den, the popular BBC reality TV programme for budding entrepreneurs.

After making a strong pitch, she received two offers from the dragons. But in the end, she decided to turn both of them down.

Instead, Julie opted to go with a different backer, who offered her a £75,000 investment. After that, the business took off.

"I had experience of accounting and customer service from my previous career," she says. "But it was a very steep learning curve – and I made some mistakes along the way, but nothing too detrimental to the business. Overall, it's been a very positive experience."

Julie now has four employees on the payrole and some 260 consultants who co-ordinate the parties.

"There are now plans to extend into Europe," she says. "My advice to anyone thinking of setting up their own business is that if you believe it's good enough then you have to go for it."

Graham Hobson is the founder of the online digital printing website PhotoBox, which now has 2 million members.

He started it in 2000 after he noticed the lack of online storing and printing websites in the UK, compared to the vast number of similar sites in the US.

"I'd always worked in technology but I'm an accidental entrepreneur," he says. "I wrote a business plan, got financial backing and a partner to join me in the business."

Graham gave up his day job in 1999. The first three years, he admits, were "painfully slow."

"We expected it all to happen quickly, but in reality, it was about steady growth," he says. "We were naive about marketing in the beginning and had to learn a lot of lessons."

Viral marketing has helped PhotoBox, and last year it merged with Photoways, a French firm.

"If you want to set up an internet business, you have to convince all the people around you it's a good idea," Graham says. "Put in your own time and energy, but other people's money – and take as much advice from other people as you can."

Save on utility bills with The Independent's price comparison service

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
Finacial products from our partners
Property search
In too deep? Travel cover is among the benefits offered by packaged bank accounts

Claims firms blamed as complaints soar over packaged bank accounts

Many customers complained they were switched to the accounts without their knowledge

Finger on the interest rate trigger: the Bank of England

The best deals on personal loans: Peer-to-peer providers are more competitive for smaller sums

Meanwhile, high-street lenders continue to cherry-pick and be more competitive on larger loans

China stock collapse: Five things you need to know about 'Black Monday'

The market plummeted this week, losing all the gains made for the year

Which? warns sports fans about Rugby World Cup ticket scams

GetSporting.com offers deals that may be too good to be true

Could it be the time to focus on Japan? Some believe the country has no choice but to boost consumption and the economy will get back on track

Investors told to travel the world in the search for higher returns

Assets have risen in value across the board and volatility isn't going away. Rob Griffin asks where we should put our cash
As rising house prices push up demand for renting, so tenants are having to dig deeper than ever

Starter home initiative is urgently needed as rents go through the roof

Rents in England and Wales rose by 1.9 per cent in July to an average of £804

Peer-to-peer lending rates put Nisas to shame

The returns from P2P providers look more attractive than ever

Questions of Cash: Log-in problems turned eDreams booking into one-way ticket to nowhere

The company failed to provide our reader's flight ticket - or a refund

Hot property: business has been booming in estate agents this month, even though it’s the height of the summer holiday season

Heat rises for mortgage deals as UK homeowners sense a rate hike coming

The housing market should go quiet in August but instead people have been acting like cheap loans won't last. Do we really have to rush, asks Simon Read
Phones have now overtaken personal computers as the most used way of accessing the internet

Who you gonna call? The Complaints Busters

Unhappy customers have been given their own Ombudsman to help fight for them.

Undergraduates are being tempted with freebies by banks

Students should give freebies a wide berth and focus instead on cheap borrowing

An interest-free loan far outweighs the value of any of the bank's incentives

The Spanish carrier changed a reader's flight from Madrid – to a time before she was due to land

Questions of Cash: 'A connecting Vueling flight was cancelled and all my travel costs were left hanging in the air'

Our reader encountered problems when flying from London to Ibiza in May to take part in a charity ride

Complacency about rising rates could prove to be costly

Interest rates stay at 0.5% for now - but don't wait to get a better deal on your savings and mortgage

The years of ultra-low rates are coming to an end

The elderly are being targeted by fraudsters with postal scams such as fake prize draws

Fraudsters are bombarding older people with dangerous pension scams: here we reveal the warning signs

Many people are being repeatedly targeted by crooked schemes

Football and credit cards aren't always a good match

A football club-branded credit card could end up being a financial own goal

It may be a great talking point when you get your football club plastic out in front of your mates, but these deals aren't the best option for all fans

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Content Writer - Global Financial Services

    £25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

    Recruitment Genius: Web Developer - PHP

    £35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

    Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

    £15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

    Recruitment Genius: Loan Underwriter

    £18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

    Day In a Page

    The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

    The Silk Roads that trace civilisation

    Long before the West rose to power, Asian pathways were connecting peoples and places
    House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

    The honours that shame Britain

    Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
    When it comes to street harassment, we need to talk about race

    'When it comes to street harassment, we need to talk about race'

    Why are black men living the stereotypes and why are we letting them get away with it?
    International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

    International Tap Festival comes to the UK

    Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
    War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

    Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

    Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
    Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

    'A subversive brothel keeper and Communist'

    Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
    Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

    BBC heads to the Californian coast

    The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
    Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

    Victorian fraudster who shook the Bank of England

    Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
    Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

    Car hacking scandal

    Security designed to stop thieves hot-wiring almost every modern motor has been cracked
    10 best placemats

    Take your seat: 10 best placemats

    Protect your table and dine in style with a bold new accessory
    Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

    Cook not the only one to be caught in The Oval mindwarp

    Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
    Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

    Can Benitez get the best out of Bale?

    Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
    Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

    Beijing witnesses new stage in the Jess and Kat rivalry

    The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
    Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

    Jeremy Corbyn interview: A shrewd operator desperate for power

    His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
    Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

    Isis executes Palmyra antiquities chief

    Robert Fisk on the defender of the ancient city's past who was killed for protecting its future