What it Really Costs to Start an Online Business

How much does it cost to start an Internet business?

I get this question, or variations on the same theme, every week. Today I wanted to give you just a quick run-down of what it costs to start a SUCCESSFUL online business, while giving you a HEADS UP about the BIGGEST but often HIDDEN cost.

Now, before we go any further, I need to define what I mean when I say a "successful online business". A successful online business is one that makes a profit for the LONG HAUL, not just a few bucks this week. There is a huge difference between the two. You will not make any real long-term income by putting up the latest self-replicating site, or hawking the newest "business opportunity". The kind of business I am talking about is one which will support your lifestyle for years to come.

In order to start an online business, you first need access to a computer and the Internet. That doesn't mean that you need to own a computer, just that you have access to one. That may cost you nothing--especially if you already have a computer and are already paying for access.

A word to the wise: You DO NOT need to have the latest, Pentium 8, running at 6 gigs, in order to start a business. In fact, many people who go this route spend so much on their computer equipment that their businesses grow slowly for lack of capitol.

Next, you need to have a web page. That means a couple of different costs:

You need to have a way to create web pages. By using web templates and Notepad for an editor, this may cost you nothing. But if that is beyond your ability, then you can download a free WYSIWYG editor or you can purchase one to use.

If you choose to hire someone to build your site for you, the rates vary considerably. Shop around for the best price and always check their references to make sure they can deliver you a quality, functional site in a timely fashion.

You need to have a web host. I know that there are still a number of free hosts out there, but sites that are going to be profitable are rarely able to be sustained on a free server. Plan to spend between $10 and $75 for your hosting, depending on the type of site, features and traffic.

You need to have autoresponders. This is the one thing most beginning sites overlook. This is your first line of customer follow-up and one of the best ways to close sales for those who don't buy on the first visit.

Autoresponders are available either through your host or separately. I choose to use a service that provides me with more features than I would get through a hosting company alone. If you do not get autoresponders through your hosting company, plan to pay from $10 to $30 per month for this service.

You need to have advertising.

Before I go any further, I want to dispel a myth. Ready? Here it is: A slick looking site with all the bells and whistles does NOT sell products.

Did you catch that?

People tell me all the time that they have a great site. Usually, they are right. The only problem with putting all that effort (and often money) into a site is that they often have NO MONEY LEFT to get traffic to their site. A MEDIOCRE SITE WITH LOTS OF TRAFFIC WILL ALWAYS OUTSELL THE PERFECT ONE WITH NO TRAFFIC.

So, how much do you have to pay for advertising your product or service? Here is a rule of thumb: For every product you sell, plan on putting 45-50% of the gross profit into advertising.

So, if you want to sell 100 units this month, and your gross profit per unit is $30, plan to put around $1500 into ads THIS MONTH.

Can you do free advertising? Yes, and you might want to start that way if you are strapped for cash. Just know that your business will grow more slowly. In the long run make sure to set aside 50% of your gross profits for NEXT MONTH'S advertising. You will be glad you made the choice.

Now, that about covers it. There are certainly more things you can spend money on, but most of them won't make you very much and can cost you plenty.

But, there is one cost that I haven't yet covered. Here it is:

To start your own business will cost you more emotional strength than almost anything else you will ever attempt. Most people will never have the emotional strength to make it through those first hard weeks and months. Most people will give up just on the verge of success.

Only the strongest of us will make it, and that's the real cost to weigh.