How much does it cost to start up a new online business?
How much should you set aside for this project?
Can you start up for free and then wait until you’re making some money before you spend any?
Truth is… getting started from scratch can feel pretty daunting. You might have an idea which inspired you to start an online business, but you can’t help but have those doubts pop up:
- Is my idea going to work? Will I actually make any money?
- What happens if it doesn’t work? Will I end up wasting every dime I spent?
These doubts will often then result in this rather difficult quest to try to not only bootstrap your new business, but to even try to do it with zero startup costs.
- Free hosting (a really bad idea)
- Free themes
- Free plug-ins
- Free email list hosting
It seems attractive. It probably even feels quite doable. You see all those free themes and free WordPress plug-ins and it may seem as if you could eventually be the owner of a profitable online business without any startup costs. Just build that sucker up out of thin air, right?!
It is much easier said than done.
In fact, after all these years of helping others start up online businesses, I will tell you that I’ve never seen anybody build one up that actually succeeded without any startup costs.
All Businesses Have Some Startup Costs
Go out into the real world and spot any business in your local city or town. All of them had some startup costs. Perhaps the cost of inventory, equipment, office space.
In the real world, the thought of having no startup costs wouldn’t even come up. It is common knowledge that a business owner or entrepreneur takes on certain risks to put in startup capital and see their idea through. Some win and some lose.
[click_to_tweet tweet=”In the real world, the thought of having no startup costs to a business wouldn’t even come up. It shouldn’t be different just because we’re talking about an online business.” quote=”In the real world, the thought of having no startup costs to a business wouldn’t even come up. It shouldn’t be different just because we’re talking about an online business.”]
Even something as small as a lawn mowing business requires that you buy a lawn mower. Even a service business as simple as babysitting might seem as if there’s no startup costs, but in reality you would have at least few in order to let people know you exist (aka marketing costs).
Startup costs are part of the equation here. All business have some cost to spin up from zero so that things can even happen.
Now, when we go online, things don’t change. However, the startup costs are usually much smaller. That’s the beauty of online business is that the risk-reward ratio is much, MUCH better. For much lower startup costs, you can potentially start up a business which will profit back to you many times over.
This doesn’t mean, however, than you can start it up for free.
Online Business Startup Costs Are Mostly Reusable
One thing about most physical businesses is that your risk of capital investment is much higher. Not only are the numbers bigger, but often the asset being purchased has a single use.
For instance, buying a lawn mower in order to start a lawn service business makes sense. However, that lawn mower can only be used for one thing: mowing lawns. If your business doesn’t work out, that mower can’t be used for other things. Only sold off.
If you are trying to start an online store or ecommerce business, then you have that cost of inventory. Inventory is often an upfront investment. If you have a tough time selling that inventory, then you’re stuck with it.
For the kinds of business that WE are building together, things are pretty different. Much of our initial startup costs are spent on things that can be reused for other businesses if our initial idea didn’t work out as we hoped.
[click_to_tweet tweet=”The startup costs of an online business are usually lower risk because they can be reused for other ideas if your first idea doesn’t pan out.” quote=”The startup costs of an online business are usually lower risk because they can be reused for other ideas if your first idea doesn’t pan out.”]
For instance, web hosting is absolutely a startup cost for an online business. But, you can do any number of things with that web hosting account. If one business idea doesn’t work out, you can try another one with that same hosting account. It isn’t as if you’re stuck with a one-purpose asset.
Most of the startup costs in the beginning are like that. You’re often buying software. That software can be used for any kind of online business. If one doesn’t work out, you can try another one. Therefore, your capital risk is much lower.
What Are The Baseline Startup Costs To Expect?
Generally speaking, there are 3 primary assets that I believe you will need if you are starting up a blog-based, digital business. They are:
- Web hosting
- Email list hosting
- Landing page creator
These things are like electricity and water for your home. You just need them. I’ll explain my thoughts and recommendations for each below.
This doesn’t cost you thousands of dollars. I think, however, that a safe number to expect for initial startup capital is about $500. For around $500, you can acquire all of the baseline tools you need to get started and have the money in your account to pay for those tools for many months while you do the work required.
[click_to_tweet tweet=”I suggest putting aside a minimum of $500 in startup capital to start a real, blog-based business. Here’s how I would spend that…” quote=”I suggest putting aside a minimum of $500 in startup capital to start a real, blog-based business. Here’s how I would spend that…”]
If you can afford it, put aside about $1,000 for startup costs. This gives you a lot more breathing room for any other optional things that come up. Plus, it will give you the ability to test ideas much faster using paid advertising.
My recommendation would be to simply take whatever amount of money you decide on for your project and stick it into a separate bank account. Just park it aside and earmark it for the purposes of building your online business. I have found that when you get that initial “spending” out of the way by transferring it that it helps alleviate the backoff when it comes time to spend it.
If $500 as a minimum for startup costs just seems too high for you, then I encourage you to seriously look at your own motives and your level of seriousness about what you’re doing. Simply put, you are intending to build a money-making asset. It is unreasonable to expect to do that without spending any money upfront.
This is practically physics. Just look up the Law of Conservation of Energy. It says that energy cannot be created or destroyed. In terms of business, I would actually argue that this isn’t true. Businesses actually create new wealth all the time. This is how economies grow. It requires both time and money to do it, coupled with the human entrepreneurial spirit to turn it into something more. But, the idea that you can do it out of nothing? No.
The 3 Primary Pre-Requisite Tools
Now, let’s look at what you actually need to get going, here.
#1 – WEB HOSTING
Obviously, any business requires a place to operate. In the real-world, that’s an office or storefront. Online, we’re talking about your website. And that website requires web hosting to even exist.
After 20 years in this business, my top recommendation for web hosting for all my new students is Siteground.
In almost all cases, their cheapest Startup Plan will serve just fine. You can lock it in for only $3.95/month if you pre-pay upfront. I believe it may be about a 2-year upfront pre-payment. After your initial pre-paid period is over, it will run $11.95/month.
If you think this is expensive, then once again, perspective is in order. If you pay $3.95/month and pre-pay for 24 months, you’re only paying about $95 for 24 months of hosting. Over that 24 month period, you can test all kinds of things and do quite a bit. And even when it renews, $11.95/month for what is essentially your “rent” is a drop in the bucket compared to what most businesses have to pay for a place of business. You can spend more than that in a fast food restaurant.
#2 – EMAIL LIST HOSTING
Your absolute most important asset as you build up is going to be your email list. You HAVE to host it with a service which is dedicated to good (and legal) email marketing practices. Never try to self-host your email list. It will backfire on you – I promise.
Among the blogger crowd, I’ve seen a lot of interest in the free email list accounts offered by Mailchimp. While this is better than nothing, I do not recommend them. It is really only suitable for basic newsletters. If you want to do any of the real stuff (like building real email marketing campaigns), then you would be forced to upgrade to a paid Mailchimp account. Once you get into paying for a solution, you can do better than Mailchimp.
There are two companies I most recommend:
Both are solid companies. Aweber is a standard bearer because they’ve been around for a long time. ConvertKit is much newer to the market, but I’ve been impressed with what I’ve seen, their attention to the needs of blog-based marketing, and the automation capabilities they offer.
Aweber starts at $19/month and ConvertKit at $29/month. If you pre-pay for a year, both offer discounts.
#3 – LANDING PAGE CREATOR
This one may require a bit more explanation than the other two. Simply put… WordPress was not designed with marketing in mind. Also, most themes are not designed with marketing in mind. Themes are built for blogs.
But, when it comes time to get people to DO things (opt into your list or purchase something), you’re going to need to create pages with specific marketing purposes. You don’t want to be confined by what your theme can do. You don’t want to have things like headers and sidebars on these pages.
You also don’t want to be in this situation where you’re trying to hand-code some landing page or fight the WordPress editor to try to make one without it messing up your handiwork.
To do most anything in terms of online business, you need to be able to craft landing pages without the limits of a blog theme. You also want it to be easy enough so that you can make a high-converting page without knowing HTML coding or programming. For this, you need a landing page creator that attaches to WordPress as a plug-in.
There are expensive third-party services that can do this stuff outside of WordPress (ClickFunnels, LeadPages, etc.), however I don’t recommend that you get yourself into one of these services until you are generating real revenue. You’re at the beginning and you need to bootstrap. You need to get more for your money so that your initial startup fund doesn’t get spent too quickly. My online business makes a healthy six-figures per year and I still don’t use these expensive services.
What I personally use – and my absolute, hands-down, top recommendation is to pick up a Thrive Suite membership. For one single purchase of just $19/month (paid upfront, so it will be $228 total), you get:
- Thrive Theme Builder (a full theme building platform, where you can take full control over your entire theme without knowing any of the technicals. Read my review. )
- Thrive Architect (their top-notch landing page creator)
- Thrive Leads (for all of your listing building needs across your entire blog)
- Thrive Quiz Builder (making awesome online quizzes with WordPress)
- Thrive Ultimatum (for countdown timers to help drive more sales)
- Thrive Ovation (for collecting and managing testimonials)
- Headline Optimizer (for testing different blog post headlines)
- Thrive Apprentice (Display online courses on your site. Read my review.)
- Thrive Comments (a robust replacement for WordPress comments that will serve your marketing goals)
Bar none, Thrive Suite is one of the best investments you can make to stretch your initial startup investment quite far. It is the best bang for the buck I’ve seen in this space in quite some time.
Just In Time Purchases (And Avoiding Shiny Objects)
I know it can be pretty tempting to buy other things. When you get into this world of online business, there are a ton of different services, tools and courses that all promise to be the best thing ever.
All too often, however, I see people confuse the act of buying a new tool or a new online course with the actual work that it takes to build that online business. Unfortunately, I’ve seen way too many people who spent a lot of money on tools they never end up using.
Please don’t do that.
[click_to_tweet tweet=”Buying a new tool for your online business should never be confused with actually DOING something that grows your business.” quote=”Buying a new tool for your online business should never be confused with actually DOING something that grows your business.”]
If you’re going to be efficient in the use of your initial startup capital, then you have to have the discipline to not go on a shopping spree. The way that you do this is to ask this question about every potential purchase:
Does this purchase solve an immediate problem for me?
In other words, do you know where you will apply it? Do you know the outcome you intend to get with it? If so, and it makes sense for your budget, then go ahead and buy it. Don’t buy it until you need it… hence the idea of “just in time” purchases.
But, don’t be a collector of tools. Don’t be a collector of online courses.
Never confuse the act of purchasing something with actual forward movement in your business. The initial 3 investments I mention above are the only 3 core ones that I think you need to have to get started.
Don’t Get Into Debt
One final word, but I strongly recommend that you avoid getting into debt to start your online business. Don’t buy things on the hope that it will pay off later.
Many people look to build an online business precisely to help them alleviate debt, so why acquire new debt to build it?
So, I recommend that you set aside actual cash to fund your initial investments. While you may conduct the actual purchase with a credit card, be sure to pay off the balance (at least for that new charge) on your next statement so that there’s no new debt associated with your business.
Tools Aren’t The Business. Here’s What’s Next…
If you’ve purchased those initial tools needed to get things started, then it’s now time to firm up your idea and start building and testing things. It is time to make those initial investments actually mean something.
What I don’t recommend that you do is install WordPress and just start blogging. I make no secret of the fact that blogs don’t make money – businesses do. If all you do is start guessing on cool blog post ideas and spend all your time writing, then you stand a much higher chance of not seeing any real income from this new venture.
You’ve got to focus on the right actions, at the time right, in the right order.
This happens to be what I’m good at. In fact, I have the Online Business Roadmap inside THE LAB which walks you through every step. You can also dip your toes in the water by checking out my free 90 Day Plan for starting up from scratch.
If you think my approach is right for you, I’d love to see you inside THE LAB so I assist you in your project. I’ve had many aspiring online business owners work their membership in THE LAB into the startup costs of their business (something I am honored by). The LIFETIME membership to THE LAB is particularly a solid investment because that means you’ll have the resources of the Blog Marketing Academy to help you the entire way.