Hopefully by the time you are reading this, you have already discovered that drop shipping as a business model is very easy to do and requires a minimal capital outlay. However it is very important to remember that this is still business so should be treated as such. Just like any other business, a dropship business does require a few things before being set up.
Even though a dropship business model is very easy to set up and can be operated provincially anywhere with a minimal amount of capital outlay, it does still require some commitment to grow it.
If you are one of those people expecting to be making six figures within a few weeks, you had better rethink your plans, otherwise you will become discouraged and properly quit. Yes you can make a lot of money with an e-commerce dropship business however this generally will not happen overnight and will take a lot of advertising to accomplish.
The time commitment.
One of the best ways to build an online business is to use what is commonly called ‘sweat equity’. Is basically bootstrapping your business with a minimal amount of spending. This is a great way to get started, especially if you are new to e-commerce as gives you a very hands-on approach and costs less money.
The benefits of this are:
- You will learn how to run and operate a successful business from being hands-on and not just reading about it.
- If you are personally involved you take a greater interest in your customers in that order is a place.
- You will be less likely to get distracted by other shiny objects that are critical to your success.
- You will develop a number of new skills and be able to create another new business in the future far quicker.
Unless you’re one of the lucky few who is already working for yourself, you will probably not be able to devote a full time effort towards your new business. This will make it a wee bit more challenging but still very possible especially as a dropship business requires very little effort to manage.
Ultimately the best way to get your business established is to focus on customer support if needed, and most importantly marketing and advertising your business.
Advertising is the one area that will take the most time and effort. Creating as much high-quality unique content as possible will go a long way in gaining more customers. The best option is to ensure that each product has a unique description, high-quality photos and has correct on page SEO. A newsletter or blog is also a must for a successful e-commerce store.
These things do take time, how ever you should remember that a dropship business offers far more efficiency and far more scale compared to any other e-commerce opportunity.
It is very possible to grow a dropship e-commerce store very quickly if you have enough money, however some people seem to have more success from doing all the work themselves as they are emotionally invested in the project.
The same processes as above still apply i.e. unique high-quality content, great looking photos and on page SEO, so if you have the funds you could hire someone to do this for you either part-time or full-time.
Just make sure that they can create decent, readable content before hiring them.
If you have enough money, the other way to quickly generate sales is via paid advertising. This gives you instant gratification as you can quickly receive new visitors to your store, however can become very expensive. The main issue with paid advertising is that as soon as you stop paying for it, you no longer receive any visitors.
The structure of your online business.
The structure of your business will depend upon where you live. Generally there are a few different options however if you are serious about this feature you should consider setting up a legitimate business entity.
Below are some very general information about the different types of entities available. Please note that we are not professionals in this field so you should engage some sort of professional advice to make sure you have the right set up to suit your situation.
This is generally the simplest form of business entity, as you essentially trading under your own name. The downside is that there is no personal liability protection and the business and your own finances are intertwined. If you sell an item that hurts someone or damages something you run the risk of getting sued. A sole proprietorship means you get sued personally not just the business entity so all your personal property is at risk. Normally you can report your business earnings on your own financial return says hiring an expensive accountant.
Limited liability corporation (LLC)
This generally gives you some added liability protection as essentially the business is a separate legal entity to yourself. However this is not always the case. There are more legal requirements for an LLC and there also be corporation and ongoing fees
A C Corporation is one of the most popular entity types as if set up correctly they offer the most liability protection. They are more expensive to set up an LLC and there are additional taxation requirements
One of the main reasons for running an e-commerce business is to make money. So one of the main things you need to consider is how you will accept money from your customers online. You need to make sure that it is safe and secure and easy for a customer to use.
PayPal is one of the easiest ways to accept money online. Make sure you have separate PayPal account for your business (unless you are a sole proprietor). Most e-commerce platforms let you simply enter the PayPal email address at the for details. Fees range from round 2.5% upwards depending on the dollar volume you process monthly.
The easiest way to keep financial records is to run all your business transactions through some sort of checking account. Again if you have’s created the individual or entity you will need a checking account set up in that entity’s name.
A credit card will let you pay for items online and also possibly pay your suppliers online as well. Another great reason to have a credit card is that if you are purchasing a lot of stock online you can very quickly receive a lot of credit card reward points. Once again make sure this is set up in the business entity’s name if needed.
If you need to make sure you add any tax to products price before collecting payments from customers. Most e-commerce platforms can do this quickly and easily.
The amount of tax you will need to collect will depend on the state or country you are based on and where the person purchasing the goods is from.
Make sure that you keep any tax collected set aside so that you can pay the tax bill we needed.
The website itself.
When running a dropship website you want to make sure that it is as automated as possible. Ideally you want a platform that allows you to import a range of products quickly and easily, you also want the platform to automatically update these products as well (for price changes, out of stocks etc)