On its face, selling stuff online seems easy: You post an item, someone buys it, and you watch your bank account grow.
But if you want to be more than an occasional seller and have ambitions to start an online business, there’s much more to it than that. Here are four steps to take if you’re serious about making money selling stuff online.
1. Find your niche
The success of your business largely depends on how it fits into the spectrum of existing businesses. If someone else has already cornered the market you’re after, it’s going to be harder to stand out. But going too generic can backfire, too.
“Attempting to start a generic online store is the fastest way to failure,” says Lisa Chu, owner of children’s formalwear website Black N Bianco. “You cannot compete against giant online retailers like Amazon in terms of price, brand awareness, shipping cost and service. Focus on a niche market that you are interested in, because it will motivate you to learn every aspect of the business.”
Scope out competing sites and use surveys, social media, friends and family to gauge if there’s interest in your product. Determine how much money, if any, people are willing to pay for it. Then use that information to calculate how viable that business is. (More on that later.)
2. Consider venue options
There are two main avenues for selling your stuff online: marketplaces like Etsy, Shopify, eBay or Amazon and a website you create. A combo of the two is also a possibility.
Marketplaces are usually easier and faster for starting your business, but they also charge transaction fees that can eat into your profits.
If you build your own website, you’ll have more control over the look and feel of your business, but there are costs for web hosting services and monetizing your site to consider. PayPal, for example, charges a flat rate of 2.9% plus 30 cents per transaction.
If you aren’t sure which option is cheaper, research both and write down the associated costs, then move on to the next step.
3. Do the math
Before you can get your operation off the ground, you need to know if it’s a sustainable business.
To find out, you’ll need to decide how much inventory you plan to sell each month and corresponding prices. That will give you the total revenue per month, assuming you sell everything. Next, take the marketplace transaction or other payment processing fees and figure out how that affects your revenue. Going back to the PayPal example, you’d pay $1.03 for every $25 sale, leaving you with $23.97 per item. If you sell 100 items per month, you’d get $2,397 a month.
Next, add up the various costs associated with your business, including things like the amount spent on creating or acquiring your products, website hosting, marketing and promotion. Break that into a monthly number and subtract it from your monthly revenues.
Then figure out your taxes. You’ll need to estimate your tax liability, using your current annual household income plus the amount you expect to make from your new business. Divide that estimate by 12 to find the monthly portion of your earnings that would be set aside for federal taxes. Depending on your circumstances, you may have to make estimated quarterly tax payments. Also, check with your city, county, state or other local tax authority to find out if you’re on the hook for sales tax or other kinds of taxes.
Once you’ve subtracted all of your business and tax costs from your total revenue, compare that figure to your monthly expenses, including any existing debt payments, like credit card minimums or loan payments. If you have cash to spare, you may be ready to start your business. Otherwise, it might be better as a side project to supplement your income, at least until it gets going.
4. Promote your business
Reaching the right audience in the right way is key for your new business to gain traction. The first step is identifying likely customers, putting yourself in their mindset and using that to formulate an outreach strategy. Often that boils down to a combination of blogging, social media marketing and paid advertising. You’ll have to decide which tactics are best for your business.
“Content marketing generates the highest ROI of any marketing or sales initiative that we’ve seen,” says Pat Ahern, director of traffic generation at Junto, a company that provides web development and traffic generation for freelancers. “Start by identifying popular content in your industry using tools like Ahrefs or BuzzSumo. From there, write in-depth articles that are more extensive than the best article you can find about the topic.”
If you have an email list, test out new content there as well. Try sending out an email or poll asking users for feedback on a few ideas you have. Tracking traffic from emails to your articles will help you understand your audience better, too.
The research you’d do for content marketing could also help you formulate your social media marketing strategy. For example, with BuzzSumo, you can see a breakdown of the number of social shares each article gets. Look at the top five or 10 articles for your main keyword and note which social channels are the most popular. That’s where you should focus your initial efforts. You could also check out the social channels of sites that publish those top-performing articles to discover successful tactics and relevant hashtags.
Be sure to take advantage of services that offer free analytics tools, like Facebook Insights, and explore options like Google Analytics and Sumo, too. Then you can experiment with outreach tactics and improve your strategy as you go.
Devon Delfino is a staff writer at NerdWallet, a personal finance website. Email: [email protected] Twitter: @devondelfino.
The article How to Make Money Selling Stuff Online originally appeared on NerdWallet.