You and me, we are all little guys. We aren’t Amazons, eBays, or Walmarts. But honestly? We would never wanna be those guys. Amazon, eBay, and Walmart are all machines. We are people.
And you know what? People love to buy from people.
So even if we don’t have the multi million dollar budgets those guys have, we have an asset that those guys don’t.
We care. We care about each and every customer. We care about our business, because it is the result of our blood, sweat, and tears.
And that’s how we can beat them. That’s how we can have the life we want from running an online business.
Still, running an ecommerce business costs money, but done rightly, it can cost as little as possible. Let’s get started!
To make this new hypothetical store, let’s assume we are selling “artificial honeycombs.” The business model you want to go for when bootstrapping is drop-shipping. With drop-shipping, we totally eliminate our inventory costs.
We’ve done our research, contacted our suppliers, have a good idea of what we want to do. Now all we have to do is get a store up and running.
To start out, we will first need a legal business! These are pretty easy to set up in the United States, and cost around $100-$150. These will last forever, so remember to choose a generic name.
Next comes a domain name. You could theoretically skimp on this, but it’ll be the worst few bucks you save ever. Domains are essential for branding and professionalism.
So the cost of registering a domain on GoDaddy(my preference) is $12 per year, assuming it’s not a premium domain name. You can get most .com domains or .net domains for that much money.
So far, we’ve spent $12.
Next up comes hosting your website. There are a lot of choices for this – you can either host it on your own server(using a service like BlueHost) and install an open source shopping cart, or you can sign up for companies like Shopify or BigCommerce and they will take care of hosting and the shopping cart software.
Let’s have a look at both options:
Option 1) Your Own Hosting
If you are tech savvy and know a little bit of coding and graphics, go for your own hosting and install an open source cart like Magento. Bluehost has a starting package at $3.95 per month.
Cost of hosting so far: $3.95 x 12(for one year) = $47.40
Option 2) Hosted Shopping Carts
BigCommerce: $24.95 x 12(for one year) = $299
Shopify: $29 x 12(for one year) = $348
Both BigCommerce and Shopify’s basic packages allow for up to 100 unique products.
While you are actually shelling out only the monthly fee up front, it’s always safer to calculate the entire cost of the year when planning, because it’s going to take at least a year for your store to get some traction and become self-sufficient.
Next up comes design. Again, if you are code and graphics savvy, this won’t be a problem for self hosted carts, but if you aren’t, you will need to spend a little bit here. While it’s not ABSOLUTELY necessary, it’s recommended, because you want to give your store a little bit of personality.
You can find someone on Freelancer or Odesk to do this for you for less than $300, depending on the scale of the work. Regardless, you shouldn’t spend more than $300 when you are doing this. This should include a logo and a site design.
Cost so far: $300
If you are using a hosted solution like BigCommerce and Shopify, their out of the box themes are pretty good to start out. You will need a unique logo and some graphics, though. You can find people on places like Fiverr that will do it for you for somewhere between $5-$40.
Cost so far: $40
Think this is a lot? People have spent $5000 on their templates – and it doesn’t guarantee conversions. Stay cheap. Stay smart. Sometimes:D.
There are three final steps you need to take before your store is ready to launch. You need an SSL certificate, a payment method, and a phone number(not necessary, but good to have).
SSL certificates are available from GoDaddy at $60 per year, but for the first year, there’s almost always a coupon code that gets you one for almost 80% off.
Cost so far: About $20.
Payment methods used to cost a lot of money to set up and get going, but now that has changed. Setting up a merchant account and payment gateway usually meant set up fees upwards of $100 and then a hefty fee per month just to accept cards.
Thankfully, with solutions like Stripe and Paypal Website Payments, you can get started with no monthly fees – although the commissions they charge are a little higher, at 2.9% + $0.30 per transaction.
Still, it’s better for the early stages of your store when you probably won’t be receiving so many orders to really justify the monthly fee and the savings you supposedly get from paying a lower percentage.
Finally, a phone number. This isn’t a must, but it’s good practice, and usually conveys a feeling of trust and genuinity. You can get a phone number for free with Google Voice, or you can get a toll free number for just $10 to start out.
Cost so far: $10.
That covers all of the stuff you need to pay for. All the other stuff, like email accounts, file storage, and the like can all be found for free using tools like Google Apps and Dropbox.
Ok, so now that ArtificialHoneycombLand.com is set up and running, we need to keep the cost of running this business as low as possible. Keeping your overheads as low as possible is essential for bootstrapping!
If you are running your own hosting, life is good – your monthly costs are just $4-5 per month, if you are doing all of your marketing in-house.
If you are using a hosted package, you are looking at $30 per month if you have 100 products or less, or about $40-50 per month if you have between 100-500 products. If you have more, you are probably in over your head! Start relatively small!
Just because your business is running on a shoestring budget DOES NOT mean you skimp on everything. When it comes to business, don’t be cheap-cheap. Be smart-cheap. Remember: if it sounds too good to be true, it probably IS.
A guy that claims to get you ranked on page one of Google overnight for $100 is, simply put, LYING!
A guy that is willing to write you 10,000 words of content for $20 probably can’t speak English.
A guy promising you instant success for $200 should have gotten his success himself and has no need for your hard earned $200.
There will be some things in the course of running your business that you will NEED to spend on. Often, we become penny wise, pound foolish. I remember thinking ten times about buying a legitimate $50 service that would really help, but pulling the trigger blindly on a $200 hit or miss gambles.
The thing is, the hit or miss gambles are always marketed more cleverly than the genuine ones. For a quick reference, here are a few money-sucking-monsters in online marketing that you should either a)avoid completely if you are really tight or b)utilize ONLY if you absolutely and truly know what you are doing.
PPC Advertising: Can make or break a business. PPC marketing is an incredibly powerful tool, but only when you know what you are doing. If you don’t, you will flush $1000 down the toilet chasing keywords that aren’t relevant and using ad copy that isn’t appealing(like I did once). PPC advertising means Google Adwords, Bing Ads, and other search engine ads.
Blog Advertising: Frankly, I’ve never had good click-throughs with blog ads. When you are really niche, similar blogs are going to be niche, too. Even if the top blog in your field gets 20,000 visits per month, blog ads have click throughs of less than 1%. That’s less than 200 potential visits.
Let’s say 150 for good measure. If your store converts at between 1-2%, that’s going to be 3 orders that you get from that one blog. If you pay upwards of $60(the going rate on many high-caliber blogs), and your average order profit is $20, you break even. Not sensible, unless you have a consumable product that people come back for more of.
Web Design Companies: These guys are crazy. They charge $5000 for a design that you have no idea how to customize. Take it from Andrew Youderian of eCommercefuel. He ditched his expensive design for a homegrown one and saw an increase in conversions!
Cheap Ways to Market
Honestly, the best way to market your store is good old fashioned SEO. SEO is free, continuous, evergreen traffic. Even though SEO takes time and effort to see a satisfactory result, SEO is FREE! During the 6-12 months you spend in generating organic traffic to your store, your low overheads will help you get through without breaking your bank account.
Solid on-page optimization, good keyword targeting, clean, white-hat link building, and establishing a social media presence are all free ways to drive potentially tons of traffic to your website.
While these expenses are enough to get the skeleton of your store up, you need to put in a lot of work. You need to write descriptions, create content, and do your research. Outsourcing these things will cost money – but the advantage of doing it yourself is that you learn your niche inside out.
While you can outsource each of those things, it’s always better to do it yourself. The amount of things that you will learn is amazing. On this blog, I hope to share what I have learned. For me, they were expensive lessons. For you, I hope they won’t be.
Let’s recap what we have spent.
Self-hosting: $150 for legal stuff + $12 for a domain + $3.95 for first month of hosting + $300 for basic designing + $20 for SSL + $10 for a toll-free number = $495.95
Add to that 12 months of hosting for $47 and your grand total for year 1 is…(drum roll)…$543
Hosted solution: $150 for legal stuff + $12 for a domain + $27 for first month of hosting + $40 for some design work + $20 for SSL + $10 for a toll-free number = $259
Add to that 12 months of hosting for $324 and your grand total for year 1 is…$583
Using either solution, $600 is more than enough to get you started. Of course, as your store gains traction and starts making steady sales, your store’s revenue will offset the cost AND bring you profit.
Are there any ways you can shave off more money from the process? Or something I missed? Share with us in the comments!
If you enjoyed this post, please share it.