How much does it cost to start an online business in 2024?

Starting an online business is an excellent way for aspiring entrepreneurs to earn an income on their own schedule. But before you quit your day job, it's important to understand what it will take to bring your business idea to life.

While setting up an online store is far cheaper than a brick-and-mortar store, it isn't without startup expenses. So, how much does it cost to start an online business when you break down all the upfront costs?

In this blog post, we will discuss the costs of starting an online business and explore how leveraging tools like Gelato's print on demand model can help minimize expenses and enhance flexibility for new entrepreneurs.

• Startup costs for an online business vary widely based on business model, location, and scale.

• Initial expenses include business licenses, taxes, web hosting, ecommerce platforms, and custom website design.

• Marketing is crucial for visibility and growth, with costs ranging from social media content creation to paid advertising.

• Freelancers, micro-influencers, and free tools can help manage costs while maintaining a professional business image.

• Product sourcing, shipping, and design can be expensive, but using a print on demand service like Gelato reduces upfront costs.

The answer to how much it will cost to start an online business can vary, depending on several factors. From what type of ecommerce store you want to create to your home state and business model, some of the expenses you encounter may differ.

When determining your budget, consider both fixed costs, which you'll work into your business plan from month to month, and variable costs, which can change based on how many products you sell. As we go through each of the following expenses, you'll discover there is often a range of different price options to consider.

Business license costs

To become an online business owner, you may need to look into any licenses or permits required at the state or federal level. This can get a bit tricky because the type of license you need - or whether or not you need one at all - can depend on your specific business type.

For instance, if you want to sell a few products here and there on Etsy, you may not need to worry about obtaining a small business license. But suppose you plan to hire employees, rent office space, or bring in a significant income from your online store. In that case, it's worth looking into registering your company as a small business like an LLC.

Requirements can also vary from state to state, so contacting your local clerk's office with any questions is best. Small Business Development Centers (SBDC) offer plenty of great resources, and IncFile also has a handy quiz that can help you select the correct type of business structure for you.

The good news is that once you know what licenses you need, you can quickly secure them at sites like IncFile or ZenBusiness. The cost of licenses and renewals varies by state and can be anywhere from $50 to a couple hundred bucks.

It's also important to look into your state's tax requirements to ensure your business remains compliant. Regulations can vary and get particularly complex if you intend to hire employees.

If you register as a business, you should create a separate bank account to keep the business cash flow separate from your personal savings and checking accounts. Investing in quality accounting software can also help many small businesses keep their finances in order.

Taxes and business registration costs

When starting an online business, taxes and business registration costs are essential factors to consider. These costs can vary based on the state where you register your business and the type of structure you choose, such as an LLC, corporation, or sole proprietorship. 

The fees for registering your business can range from $50 to several hundred dollars, covering state filing fees, name registration, and other administrative expenses. Services like IncFile and ZenBusiness can streamline the registration process, often including additional services like compliance alerts and document filing for a fee.

Web hosting and ecommerce platform costs

To start an online business, you'll need a reliable online storefront. There are a few different options here, each with its own set of costs.

Building your own ecommerce website

If you want to build your own website, you'll need to invest in a web hosting service and domain name. Web hosting costs can vary but tend to be around $3/month, and domain names can run anywhere from an average of $10- $20/year plus any initial fees.

You might also consider website builders like Wix and Weebly, which offer web hosting. While you can get started on both for free, Wix Premium Plans and Weebly Upgrade Plans offer tools for anywhere from $10 - $80 per month that may prove valuable as your business expands.

Using an ecommerce platform or marketplace

Many entrepreneurs start online businesses using ecommerce solutions like Etsy or Shopify. While both are great options, each has unique perks, price structure, and setup.

Etsy is an online marketplace where you can set up your own online store among millions of other sellers. While there are no monthly fees, Etsy charges a small $0.20 listing fee for each product you list, a 6.5% transaction fee for each sale you make, and payment processing fees for certain types of payments made through Etsy Payments.

Shopify is designed to help you create your own stand-alone ecommerce business and offers a website builder, complete with free themes to help you get started. While Shopify is a great web hosting and payment processing solution for ecommerce businesses of all shapes and sizes, it charges monthly fees starting at $39/month or $29/month if you pay annually.

Custom website design costs

If hiring a professional web designer, you should expect to pay anywhere from $500 to over $5000 for a fully custom, responsive site. This includes both initial design and any necessary branding elements to ensure a cohesive appearance across all devices. For more complex ecommerce sites that require customized features, such as advanced search functionality, custom product pages, or third-party integrations, you may need to allocate more of your budget. 

Another option for a customized site is to use freelance platforms like Upwork or Fiverr, where designers offer a range of packages to suit different needs and budgets. Be sure to review their portfolio and client testimonials to gauge the quality of their work. Hiring a freelance designer can cost anywhere from $30 to $150 per hour, depending on their experience and your project requirements. 

Payment processing costs

Whether using a dedicated ecommerce platform or building your own website, you'll need to account for payment processing costs. These are the fees charged by companies like PayPal, Stripe, or Square for managing credit card transactions and other payment methods. Payment processing costs can vary based on several factors, including the type of card used, the total sale amount, and whether the card is present at the point of sale. 

The typical transaction fees for Visa and Mastercard range from 1.43% to 2.6% per transaction, and these rates can vary depending on the type of transaction. Discover's transaction fees typically range from 1.56% to 2.3%, which is comparable to Visa and Mastercard. American Express generally charges higher fees, ranging from 2.5% to 3.5%, depending on factors such as the card type and transaction method.

Product sourcing and shipping costs

Product sourcing is one of the leading fixed expenses for small business owners. These are simply the costs you'll pay for products you intend to sell in your online store, so they vary widely depending on what products you offer and which suppliers you use.

Some suppliers may also have minimum order requirements, which can add up quickly. If you want to start an online clothing brand, for example, you might come across upfront costs for:

• Blank shirts, hoodies, or tank tops

• Designer or design software costs

• Printing equipment costs

• Shipping costs

• Shipping materials

This is where partnering with a print on demand (POD) partner like Gelato can significantly reduce the cost of buying inventory upfront. Rather than consistently dealing with inventory management issues, Gelato can supply everything you need for your online store products for a single, transparent price.

Upload your designs to the Gelato platform, choose which of our high-quality products you'd like to feature them on, and connect your account to your online store using one of our easy integrations. When an order is placed, we'll take care of everything from printing your product to shipping it straight to your customer.

We work with over 130 local producers to offer customers fast, sustainable shipping options worldwide. As your business grows, you might even consider one of our subscription plans, each with discounted shipping features.

Product design costs

Design costs are one of those startup costs that may or may not apply to you, depending on whether you intend to offer customized products featuring your own designs. Your designs are a critical aspect of your product offering that can make or break the success of your online store. Unique, aesthetically pleasing, and professional-looking designs will differentiate you from your competitors and attract new customers. 

Below are the two most common design costs to consider:

• Design software: Create your designs with access to millions of royalty-free stock images, image filters, and graphic images using software like Gelato's design editor. Our premium product creation tools are included with your Gelato+ subscription for only $24/month or $239/year.

• Freelance designer: Some online store owners outsource their designs to freelance designers, which can cost anywhere from $15 - $150/hour on sites like Upwork.

Marketing costs

If you want to start your own business, marketing costs are one of those areas where you shouldn’t cut corners. There are so many ecommerce businesses online that finding ways to make yours stand out from the pack is vital.

Marketing costs are variable, especially as you experiment with different approaches to attracting potential customers. You'll need to create social media accounts using your business name and spend time creating regular posts to promote your products.

Many entrepreneurs use scheduling software to manage their social media posts. Options like Buffer offer a free plan and upgrade options for additional costs.

It's also crucial to invest in marketing strategies like:

• Content creation

• Search engine optimization (SEO)

• Paid social media advertising

• Influencer marketing

• Email marketing

While some larger businesses choose to hire a marketing agency, this can cost several thousand dollars, depending on the size of your campaign. If you're willing to spend a little time and initial investment, you can substantially reduce your marketing budget in the long run by signing up for an online ecommerce business marketing course.

HubSpot offers a great free online marketing course for all skill levels. These courses are an excellent idea for aspiring entrepreneurs because they'll teach you what you need to know to create and promote your own brand.

As you can see, the startup costs of launching your new business can vary widely. The exact cost of launching your own ecommerce business can depend on everything from the business model you choose to the type of products you intend to sell in your ecommerce store and how you plan to promote them.

On average, launching an ecommerce business can cost anywhere from a couple of hundred dollars to over $1000. These common startup costs should give you a better idea of what to include in your overhead budget.

Starting an online business requires careful financial planning. To help you navigate this process, here's a step-by-step guide for identifying and summing up all relevant startup expenses, including both one-time and recurring costs:

1. Identify initial setup costs: These are one-time expenses incurred when you start your business. They may include:

   • Business license and registration fees

   • Website design and development

   • Initial inventory purchase

   • Office supplies and equipment

2. Determine recurring costs: These are ongoing expenses you must regularly cover. Examples include:

   • Web hosting and domain renewals

   • Subscription fees for ecommerce platforms or software

   • Marketing and advertising costs

   • Payment processing fees

3. Estimate variable costs: These costs fluctuate based on sales and other factors. Key considerations might be:

   • Cost of goods sold (COGS)

   • Shipping and handling fees

   • Freelance or contractor payments

4. Compile all expenses: Create a detailed list of initial, recurring, and variable costs. This comprehensive list will provide a clear overview of all potential expenses.

5. Set a realistic budget: Use the combined expenses to outline a budget. Here's how:

   • Focus on essential expenses, such as web hosting and inventory.

   • Allocate extra funds for unexpected costs.

   • Align your budget with short- and long-term objectives, like scaling up marketing efforts or expanding product lines.

6. Monitor and adjust: Review your financials regularly to ensure you're staying within budget and making adjustments as your business grows.

Setting your budget

Once you have calculated your startup costs, setting a realistic and manageable budget is the next step. Here's a simple yet effective way to do it: 

1. Analyze your costs: Break down your startup costs into fixed and variable expenses. Fixed costs, such as web hosting or software subscriptions, remain constant regardless of your sales volume. Variable costs, such as marketing or inventory, fluctuate based on your business activity.

2. Prioritize essentials: Focus on the critical expenses that are absolutely necessary for your business to function. This could include website development, ecommerce platforms, and essential marketing efforts. Secondary costs, such as high-end web design or premium marketing tools, can be added once your business generates revenue.

3. Estimate revenue: Project your initial revenue based on market research, targeted sales, and pricing strategies. Craft a conservative estimate to ensure you’re not overestimating your yearly income.

4. Create a cash flow plan: Develop a monthly cash flow plan that outlines when you expect to incur each expense and when you anticipate receiving revenue. This will help you ensure that you have enough cash on hand to cover your essential costs.

5. Allocate funds wisely: Set aside a portion of your budget for unexpected expenses. Having a financial cushion is essential to navigating unforeseen challenges without disrupting your operations.

6. Monitor and adjust: Regularly review your actual expenses versus the budgeted amounts. Adjust your budget based on real-world performance and ongoing financial analysis. This will help you stay on track and make informed decisions as your business evolves.

7. Align with business goals: Ensure your budget supports your short-term and long-term business objectives. Whether it's scaling up operations, entering new markets, or improving product offerings, your budget should accommodate these goals without compromising financial stability.

For aspiring entrepreneurs, managing startup costs is crucial to ensure sustainability and growth. Here are some practical tips to help you launch your online business without overspending.

Leverage print on demand

With print on demand (POD), you eliminate the need for large upfront investments in inventory. POD allows you to produce and ship items only after a customer orders, substantially reducing financial risk. 

Platforms like Gelato handle everything from printing to shipping, allowing you to focus on creating designs and marketing products. This model reduces costs and helps you scale your business more efficiently as demand grows.

Use free tools and software

One of the smartest ways to keep costs low when starting your online business is by leveraging free tools and software. From Google Workspace for email and document management to Canva for graphic design, numerous cost-effective solutions are available. 

Platforms like WordPress offer free plugins for everything from SEO to social media integration, making it easier to manage your business without breaking the bank. Experiment with these tools to find what works best for your specific needs.

Start with a minimal viable product (MVP)

Focus your initial efforts on creating a Minimal Viable Product (MVP) to test your business idea with minimal investment. Concentrating on the core features allows you to launch faster, save on development costs, and gather valuable user feedback. 

This lean approach helps you refine your product based on real market needs and avoid the pitfalls of over-investing in unproven ideas. An MVP strategy is especially useful for startups with limited budgets.

Utilize freelancers

Turning to freelancers to create an external team can be a cost-effective way to access professional skills without the long-term commitment of hiring full-time staff. 

By leveraging platforms like Upwork or Fiverr, you can find experts in various fields—such as web design, social media marketing, and content creation—who can help you scale your business efficiently. This approach allows you to control costs by paying only for the services you need when you need them, making it ideal for startups budgeting carefully.

Partner with micro-influencers

Micro-influencers, with their highly engaged and niche audiences, can be a cost-effective way to boost your brand's visibility and credibility. Collaborate with these influencers to promote your products through authentic content. 

Compared to macro-influencers, their rates are typically more affordable, ranging from $100 to $500 per post. By building strong, long-term partnerships with micro-influencers, you can drive targeted traffic to your online store and build a loyal customer base without breaking the bank.

Owning an online business in 2024 is both an exciting opportunity and a complex challenge. Reducing the various startup costs can help you better prepare for what lies ahead and set yourself on the path to success. 

To help you with this, Gelato's print on demand solution is here to significantly minimize upfront investments and maximize your flexibility. 

With our print on demand solutions, you can offer customers a diverse range of products such as t-shirts, wall art, phone cases, tote bags, and photo books, without the burden of holding inventory. Enjoy the flexibility and ease of scaling your business as you grow with solutions designed to minimize upfront costs and simplify logistics.

Ready to take the leap? Sign up for Gelato today and choose a subscription plan that suits your needs.

The cost to open an online store varies widely, typically from $200 to over $1000. Factors influencing this include the type of ecommerce platform, web hosting, domain names, and whether you use print on demand services like Gelato to reduce upfront inventory costs. Planning and budgeting accordingly can help keep startup expenses manageable.

You can start an online business without money, but it will require creativity and resourcefulness. To minimize initial expenses, utilize free platforms and tools, such as social media for marketing and free website builders. Opt for business models like print on demand or affiliate marketing. Success will require time, diligence, and wise resource leveraging.

Starting the cheapest online business often involves a business model like print on demand. This allows you to sell products such as wall art, custom phone cases, or reusable drinkware without purchasing inventory upfront, making it a cost-effective way to start your online business.

Running an online business comes with challenges, like managing inventory, marketing, and customer service. However, with the right tools and strategies in place, it’s a manageable endeavor. Leveraging resources like print on demand, effective marketing, and reliable ecommerce platforms can simplify operations and enhance your chance of success.

Don't neglect to create a solid business plan. Avoid overspending on unnecessary tools or inventory. Steer clear of skimping on marketing—it’s essential for growth. Don’t ignore legal requirements, like licenses and taxes. Finally, resist the urge to do everything yourself; delegating tasks to experts can save time and improve efficiency.