Practical Ecommerce

Ecommerce Know-How: Seven Steps to Starting Your eBusiness in a Recession

The United States and much of the world is experiencing a large and deep recession that many economists believe is far from hitting bottom. But in spite of economic uncertainty, some entrepreneurs will find the current recession an opportune time to start their own ecommerce business.

A recession is simply a reduction of a nation’s gross domestic product. That reduction means that maintaining a business won’t be as easy as it was, and business owners will need to pay careful attention to how they operate. But a recession is not a cessation of commerce. There are still lots of potential customers who are willing and able to spend billions of dollars each month at ecommerce outlets.

In the fourth quarter of 2008 as recession rhetoric was running full steam, U.S. ecommerce sales grew 6 percent to $130.1 billion, according comScore, an Internet monitoring firm. For many ecommerce entrepreneurs, capturing even a tiny share of the total available market would be a huge success.

So what steps should a startup ecommerce business take? In this “eCommerce Know-How,” I describe the seven steps toward starting your own ecommerce business in spite of the current recession.

Video: Seven Steps to Starting Your Business in a Recession

Step One: Plan, Set Goals, Don’t Rush

Before you worry about incorporation documents, logos or website layout, take time to plan and dream. There are millions of products that can be sold online, but don’t try to sell all of them. Look at your interests. If you love baseball, is there a niche market related to America’s pastime that you could address? If you’re a designer, can you find a special focus? Have you always wanted to sell antiques online?

Once you have identified the market you want to focus on, set some real goals. Will your ecommerce business be your primary source of income or a part time effort? How much money will you need to generate? And how long can you wait for your business to ramp up? How much can you invest?

Step Two: Create a Business Plan

Whether you doodle it on a series of cocktail napkins, write it out on legal pads, or use the most cutting edge business planning software, it is vital to create a serious business plan. A business plan helps you (1) vet your business’ viability, (2) consider your market, (3) communicate your business to investors, vendors, and employees, and (4) create a road map for managing your business once it is running.

Step Three: Choose a Legal Structure

Should your ecommerce business be a corporation, a partnership, a LLC, or a sole proprietorship? Each of these legal entities has advantages and disadvantages that may impact your success. For example, operating a sole proprietorship will make your taxes a lot easier, whereas incorporating can protect your personal assets. Contact a lawyer or accountant for help choosing the right legal structure for your business. Be sure to follow through with all of the proper legal documents, including getting your state’s tax certification.

Step Four: Locate Suppliers

At heart, most ecommerce retailers are resellers. While some businesses operate as both manufacturer and retailer, most online stores purchase items wholesale and resell those items.

Finding the right suppliers can greatly assist your business. So look carefully and check for industry associations. Don’t forget that your suppliers are experiencing a recession, too. International entrepreneur Brad Sugars wrote in his excellent article, Top 10 Reasons to Start a Business in a Recession, “Because the credit markets have virtually shut down, the B2B [business to business] credit flows are keeping money circulating out of sheer necessity. That means a bullish outlook for companies looking for good terms on stock and/or inventories. The main advantage is that all parties have more incentive than ever for finding true win-win situations that allow for cash and stock flow. When everyone is looking to survive, great deals can be had.”

Step Five: Hire Experts

An ecommerce entrepreneur does not have to be a graphic artist, a search engine swami, a wordsmith, or a coding guru. In a recession, designers, writers, and developers—many of whom are self employed—can be hired at favorable rates.

You can place free ads on sites like FreelanceSwitch and craigslist. Browse freelance marketplaces like Guru.com, or seek recommendations from friends and associates.

Although professional freelance services are available at bargain prices in a recession, they are not free. Expect to pay $40 to $100 per hour depending on experience and the size of the project. A professional will provide you with a statement of work and a project schedule.

Finally, watch for developers that are also affiliates for particular software vendors. For example, some coders get paid by shopping cart makers to sell you a particular shopping cart. It may be that the recommended cart is the right choice for your store, but just be aware of possible affiliations.

Step Six: Market Your Store

Once your inventory is in place and your ecommerce site is operating, you will need marketing. Good online marketing could include the search engine optimization you established as your site was being developed; a pay-per-click advertising campaign with Google, Yahoo!, and MSN; and any number of other tactics. This might be another opportunity to hire a consultant or expert and actually save you money and time in the long run.

Whatever marketing you do, measure it. Find out what is working and what is nibbling away at your bottom line.

Step Seven: Provide Amazing Customer Service

Providing amazing customer service is not technically a step in starting a business, but it is vital if you want your business to succeed. Be quick to provide great customer service to help your business flourish.

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Armando Roggio

Armando Roggio

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Comments ( 2 )

  1. Massimo Arrigoni March 13, 2009 Reply

    One of the big decisions to make is whether to use a <b>hosted</b> (e.g. Volusion, MonsterCommerce, 1ShoppingCart, etc.) or <b>licensed</b> (e.g. Magento, AspDotNetStoreFront, ProductCart, etc.) e-commerce solution. Even if a consultant will mostly make the decision for you, it’s good to have an idea of the pros and cons of both approaches. Which way to go really depends on your specific needs.

    This has been covered in the past right here on the Practical eCommerce Web site. For example, see these two articles: <a href=’http://www.practicalecommerce.com/articles/552-Debate-Hosted-Shopping-Carts-Perfect-For-Most-Entrepreneurs-‘>hosted</a> vs. <a href=’http://www.practicalecommerce.com/articles/551-Debate-Licensed-Carts-Offer-Flexibility-and-Portability’>licensed</a>.

    Cheers,
    massimo

  2. Jared Brickman August 27, 2009 Reply

    This pretty much just how to start a business 1-0-1. There are a couple of good morsels specific to the current economic environment:

    "In a recession, designers, writers, and developers—many of whom are self employed—can be hired at favorable rates."

    "When everyone is looking to survive, great deals can be had."