Setting up an online business | Do your figures add up?

The vast majority of businesses are started with the goal of making money. When considering starting an online business knowing your figures is paramount to making a profit. Assumptions are dangerous. Ensure you've thoroughly researched every possible costs to avoid a lot of work for not a lot of money!

There are costs to get the products to you, such as:

  • Buying the goods from your supplier
  • Shipping costs (establish the shipping terms early to keep these under control)
  • Do you want to insure the products whilst they’re in transit?
  • UK Customs fees – UK Duty and VAT on the taxable import (and on occasion other costs such as an anti-dumping fee)
  • Are you paying to store them?  If not, is there any cost associated with keeping them in a spare room or garage etc.?

Then there are the selling costs.  E-Commerce stores are great, you don’t have to pay for rent and they can provide the volume of visitors per day compara

ble to any high street or shopping centre.  However there are associated costs in addition:

  • Cost to sell goods on the planned platforms – often a percentage of the sale price
  • Will it cost you money to receive payment?  PayPal, credit card fees etc.
  • Do you have to pay a fee to be a member of the site?
  • Does it take more time to complete a sale on one site compared to others?

Don’t forget to do some research into getting the product to your customers.  Postage and packaging can be expensive.  Some people charge th

eir customer for this separately. Most buyers go with traders offering free postage, so you must try and include the postage cost in your unit price.

  • Packaging costs – how much is the right box, a bag, some bubble wrap etc.?  Will the costs go down as if you sell at a certain rate?
  • Postage fees – will you use the post office or a courier?  Websites such as www.parcel2go.com could give you a few options.
  • What happens if your customer doesn’t receive what they were expecting, are there associated costs?
  • Are you valuing your time?  Do you have to drive to the post office?  If so, will you go once a day or once a sale?

You must be able to take all costs into account and still sell your goods at a competitive rate or you will be without customers.  If your total selling cost minus all expenses (buying, importing and selling) leaves room for profit when selling at a reasonable price, you are onto a winner.  What’s stopping you? Go for it!


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