With minimal start up costs and potential to reach millions of customers, setting up an online business has never been more popular.
The number of online businesses opens in new window has skyrocketed in recent years.
From simple eBay shops and information sites to a full-scale online dating agency, there’s an online business for everyone.
Even many traditional businesses can now be set up and run online.
The great news is that online businesses are easily scalable – you can start small to test out a business idea opens in new window, work on it part-time or as hobby before deciding to take the leap and commit yourself to a full-time role.
The bad news is that it can be hard work, and a lot of other people may have similar or identical ideas!
So if you’re ready to join the swelling ranks of the UK’s online business owners, here’s how to get started.
Starting a business doesn’t come with a set of instructions.
We know that understanding the many different types of financial product in the marketplace can be difficult.
Our Making business finance work for you guide is designed to help you make an informed choice about accessing the right type of finance for you and your business.
Different types of online businesses
There are lots of different ways to make money online, but the most popular business models used for successful online business are:
Online store – This is one of the most popular forms of online business. Instead of renting or buying a local store, you sell your products or services direct to customers via a website. Physical goods can be delivered to customers or digital products, such as ebooks, downloaded directly from your site. An online store puts you in direct contact with potentially millions of customers and has fewer overheads compared to a traditional shop opens in new window. You can take payments via credit cards, or use systems such as PayPal to handle transactions.
Advertising – As with traditional media such as newspapers and magazine, advertisers will pay to place their advertisements on your website opens in new window. You’ll need to have lots of visitors to your site – known as web traffic – for this to be profitable. This model works best with websites that freely provide information, entertainment or opinions, such as online magazines, popular blogs opens in new window or help and advice sites. The aim is to attract as many visitors as possible in order to make money from advertising.
Subscription – This business model is used by websites offering information, entertainment or a specific service. Users are charged a subscription fee – monthly or annual – to access all or part of the content or service. Examples of online subscription businesses include Netflix, eHarmony, Weight Watchers and The Times newspaper. Some of our loan recipients have become very successful with this model opens in new window.
Brokerage – A broker website works as a virtual middleman or marketplace, and it earns revenue from bringing buyers and sellers together, typically with fees earned for each transaction it facilitates. Well-known online brokers include eBay opens in new window, Amazon Marketplace and Gumtree, and new online businesses can use these brokerage platforms to more easily sell to customers. For example, a price comparison site might list a number of viable options for a given product such as insurance; the customer chooses an option and is then taken through to the insurer’s website.
Which business model or combination of models is right for your online start-up will depend on the nature of your business.
Come up with an idea, name and business plan
Having a target audience and clear objectives opens in new window firmly in your sights will help get your online business up and running quickly.
Successful businesses start by identifying a customer need opens in new window, rather than focusing on a product.
Find the need and you know there’s a good chance people will want your goods or services.
Do some research opens in new window online to find out what people are searching for and how many other businesses already fulfil that need.
It is always worth conducting market research opens in new window before you take the plunge.
The level of detail will be somewhat dictated by your budget, but there are ways of achieving a good understanding of your market on a smaller budget:
- Use social media opens in new window to reach out to interested parties, or ask trusted followers for advice/feedback on the idea. Be aware that this isn’t the most robust research, but for simple questions it could be an eye-opener.
- Attend relevant events to see what’s popular and trending in your industry, and perhaps speak to entrepreneurs/start-ups to seek advice opens in new window.
- Use SurveyMonkey or similar survey software, which can be used to target specific audience types. You can set the size and scope of questioning, but be careful not to ask ambiguous or misleading questions.
- Check potential competitor opens in new window websites and look at how they sell goods and services and what they charge. Offering unique products or services will help make your business stand out from all the rest online.
- Carry out a SWOT analysis opens in new window to identify your own strengths and weaknesses and see if they apply to your findings.
Choosing a name
You also need to choose a name opens in new window for your business.
You may want to do this in conjunction with registering a domain name for your website, as the best solution is for the two to match exactly.
The right name needs to be short and easy for customers to remember, be available as a domain address for your website and not be too similar to the name of another company.
If you’re starting an online business from scratch, spend some time brainstorming a list of potential names and then whittle this down to just three or four.
One approach is to register a domain name – or web address – that contains the keywords that people will use to find a business such as yours.
For more information on naming your business, see our guide to choosing a brand name opens in new window.
Register your online business domain name
Check if any of your potential online business names are available as a domain name.
The name of your online business should match your domain name as closely as possible otherwise customers will fail to find you when searching online.
You can search for and register your domain name at web hosting companies such as 123 Reg, Go Daddy, Names.co.uk and Nominet, which is the official registry for .uk domain names.
Type in your proposed business name to see if it’s available.
If the name is already taken, the domain register website will suggest variants.
Offensive/sensitive names are not allowed, nor are any names that suggest you have links to external companies or government bodies when this is not the case.
Be careful trying to come up with a solution at this point; it’s better to change your business name than try to fit it awkwardly into an available domain name.
Focus on getting a website address ending in .com or .co.uk.
However, you may want to register variants of an address if they are available.
Check if the name has been registered at Companies House opens in new window – the site is easy to use by simply typing into the box at the top, and clicking the link below.
Hosting your online business on the web
A web-hosting company stores your business website on its computer servers and makes it available on the web for others to see it.
Free services are available but if you’re serious about running an online business it’s best to pay for web hosting that offers all the features you need now and as your business grows opens in new window.
Prices start low, with sites such as Go Daddy offering a basic small business package that includes a customisable website and web hosting for a low fee.
Before you choose a web host consider what support they offer should you face problems with your website, what backup services they offer and their scalability so your business can grow.
If you do wish to scale up, one request to the host and this can be done instantly to support higher traffic volumes or more intensive websites.
Many hosts offer 24/7 support no matter where you are in the world; super fast speed, SSL certificates for added security opens in new window, and assisted set-up opens in new window.
Create a business website
You can create an attractive, functional website yourself, with no need to spend money on hosting, by buying an off-the-shelf solution from free platforms such as WordPress, Adobe Commerce, or Shopify.
You could use a free theme, or pay for a premium theme that may offer more features.
One advantage of these sites is that they often feature Search Engine Optimisation add-ons, which will help people find your site.
Another is that you do not need to have any knowledge of coding or design to create an attractive functional website in as little as an hour or two.
Alternatively, hire a website designer opens in new window to create one for you.
As a start-up, you shouldn’t be spending more than is necessary opens in new window.
Your website should look good and be easy to use and find information.
It should not be overly expensive to create.
In fact, as a start-up it might be better to direct your funds elsewhere, especially if you have concerns about cash flow opens in new window in the company.
Save your money for marketing your business.
Tips for your first website
- When planning your website, concentrate on what’s important. For online stores, for example, a streamlined buying process is vital, with up-to-date stock information and fast delivery of key importance to customers.
- Use one or two fonts at the most, and if possible limit them to one colour. Visitors will put up with a monochrome site, as long as they can find what they need.
- A simple menu containing your homepage, products, contact and history should be enough to get you started. If possible include a ‘contact us’ box so that visitors can make quick enquiries, and be signed up to a mailing list.
- Online stores will need a shopping cart function, a secure payment facility and a way to collect payments. PayPal is popular but most shoppers will want to pay via credit card opens in new window.
- Alternatively, most small online businesses prefer to use a payment gateway provider to handle credit card transactions in exchange for a fee. There are lots of affordable e-commerce systems available that can be bought off the shelf so shop around for one that suits your needs.
- Don’t overcomplicate things. Videos, interactive elements, slideshows and other impressive features can be added at a later date.
- Endorse the principle of ‘finished, not perfect’ – get a website out there and tell people about it.
- Update it as regularly as you need to; reviews and endorsements are a good first thing to add to the site.
- Remember it is also important to try and optimise your website for search engines to allow customers to find you more easily. For a wide range of beginner and advanced tips and tricks on optimising your website, download our free SEO toolkit for start-up businesses opens in new window.
Should I use social media?
This will depend somewhat on the business model you employed, but it’s one of the simplest ways of driving brand awareness and giving your company a voice.
Entrepreneur magazine wrote that start-ups actually have a distinct advantage in the social media marketing realm opens in new window, since users love what’s new – and start-ups are new by default.
Once the website is complete this should be one of your first jobs; setting up a relevant account showing your personality and products, on Facebook opens in new window, Twitter opens in new window, Instagram opens in new window, LinkedIn opens in new window, TikTok opens in new window, Pinterest, and/or YouTube opens in new window.
You’ll be able to engage with customers and answer their questions; promote any new stock or offers; and deal with any complaints.
What online business regulations should I know?
As with any retailer you’re subject to certain laws and regulations when selling goods and services online.
All businesses, including on line businesses, have a statutory duty to comply with data protection and privacy laws, including the UK General Data Protection Regulations opens in new window (UK GDPR) and the Privacy and Electronic Communications Regulations (PECR).
This includes such things as providing a privacy notice, understanding when to carry out data protection impact assessments, mapping the personal data you hold, storing it securely, training your staff, appointing and managing any data processor you use appropriately.
You should take specialist advice on how these laws affect your business and what you need to do to comply with them.
Failure to comply with data protection and privacy laws can lead to substantial fines by the regulator, the Information Commissioner.
You can find relevant information on the gov.uk website about the types of laws and regulations that affect online businesses operating in the UK, such as setting up a business opens in new window, running a limited company opens in new window, and the sale of goods and services and data protection opens in new window.
You should also look into insurance for your business and site, for example to protect you against cyber-attacks, as well as employers’ liability insurance, and other insurable risks.
Register your online business with HMRC
As with starting any business, it’s essential you register your new online business with HM Revenue & Customs to ensure you’re paying the correct amount of tax and National Insurance.
Alternatively, you can set up a limited company opens in new window.
Each has different legal and tax responsibilities, so research carefully which is best for your situation.
You should also investigate whether you need to register your business for VAT at the gov.uk website opens in new window.
Thinking of starting a business? Check out our free online courses in partnership with the Open University on being an entrepreneur.
Our free Learn with Start Up Loans courses opens in new window include:
- Entrepreneurship – from ideas to reality
- First steps in innovation and entrepreneurship opens in new window
- Entrepreneurial behaviour opens in new window
Plus free courses on finance and accounting, project management, and leadership.
Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or its subsidiaries, or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.