How to start an online business in seven steps

Running an online business lets you reach countless customers and work from anywhere. But in a competitive market, a strong start is key. With the right idea, a clear brand, a solid plan and an understanding of legal requirements, you can launch confidently and avoid common pitfalls. This guide shows you how.

Step 1- Find your idea 

Online startups span a range of industries and activities. Start by choosing a business idea that aligns with your strengths and interests. Whether you want to create and sell your own products, share your expertise or offer your services – there are endless possibilities. 

Struggling for inspiration? Let’s break down some common online business ideas: 

E-commerce

If you are interested in entering the retail market, you could set up a business selling goods on platforms like Etsy, eBay, Amazon, or Vinted. You can sell handmade products, like knitted scarves or baked goods, or resell items for a profit. Many sellers start small by using these platforms and then expand with their own online store later. If you prefer selling without managing inventory, consider dropshipping. This involves partnering with a third party that handles storage and shipping, letting you focus on sales.

Freelance services 

If you have skills in areas like copywriting, graphic design, web design or social media management, why not offer your services as a freelancer? Networking helps you find and retain clients, but platforms like Fiverr and Upwork are good places to find work at first. 

Content creator

Platforms like TikTok, YouTube, Twitch and Instagram offer plenty of opportunities for hosting content. If you enjoy being on camera and have something to say, you can earn money as a content creator through brand deals, advertising or sponsorships. The market is competitive, but getting started is inexpensive and straightforward.

Online coaching

If you have expertise in a subject, consider working as an online coach or tutor. You could work with individuals as a personal trainer or become a private tutor and teach academic subjects. You can provide one-on-one sessions through platforms like Zoom or create and sell online course materials to multiple clients.

Step 2 – Research the market

With your online business idea ready, the next step is to research the market. This helps you identify gaps your business can fill, understand potential customers and their needs and gain insights to compete effectively.

Here are three simple ways to carry out market research for your new online business idea:

Understand your target audience

• Identify your ideal customers based on demographics, interests and behaviours

• Then use tools like Google Trends, social media insights or surveys to learn about their needs and preferences

Analyse your competitors

• Research businesses offering similar products or services

• Evaluate their strengths, weaknesses and pricing

• Identify the areas where you can offer unique value

Test and validate your idea

• Create simple prototypes or test versions of your product or service

• Gather feedback through surveys or focus groups to help validate your idea

• Use these insights to refine your idea before fully committing

Step 3 – Write a business plan

Now it’s time to write your business plan. It should be made up of several key sections which outline every aspect of your business. This is essential for guiding your strategy.

Start with your business name. Choose one that’s unique and not too similar to existing business names. Avoid suggesting affiliations with the government or other authorities. If you’re not registering as a limited company, avoid terms like “plc” or “ltd.” Remember, your business name appears on your website, social media, business cards and emails, so choose carefully.

Next, clearly explain how you intend to make money. Include your market research, target audience and sales strategy. Provide financial forecasts and cash flow projections. You should also detail future goals or objectives. 

Keep in mind that your business plan isn’t just for you. Lenders may request it when you apply for loans or credit. Potential investors - whether angel investors or equity crowdfunding platforms – will almost certainly ask to review it, too. Take the time to create a detailed, thorough plan and ensure you understand it fully so you can answer any questions you may face with confidence.

Step 4 – Register your business

Whether your online business ambitions stretch to setting up a limited company or you plan to run it as a sole trader or as a side hustle, you must meet legal requirements and pay the correct taxes. Here’s what you need to do: 

Sole trader

This term applies if you’re going to run your online business on a freelance or self-employed basis, or as a side hustle. All sole traders earning more than £1,000 in a financial year must register as self-employed with HMRC. You can do this as soon as you start trading and no later than 5 October of the second tax year in which you trade. For example, if you start trading in 2025, register by 5 October 2026. This process ensures you receive your Unique Taxpayer Reference (UTR) and lets HMRC know to expect a self-assessment tax return. 

Limited company

If you choose to run a limited company, register it with Companies House. You need to provide a company name, a registered address, details of the share structure and appoint directors. This process can take time, so prepare accordingly. Once registered, you must also notify HMRC of your new company’s corporation tax obligations within three months of starting to trade. 

Step 5 – Plan for payments and logistics 

Next, create a plan for handling payments and managing logistics. There’s no one-size-fits-all approach, but here are some general things to consider: 

Set up secure payment options

• Choose online payment gateways that suit your business model and customer preferences. PayPal or Stripe are popular payment facilitator options. Merchant accounts – provided by banks and companies such as Worldpay – are another possibility

• Offer multiple payment methods, like credit/debit cards and digital wallets, to reach more customers

Determine shipping and delivery methods

• Research reliable shipping carriers or fulfilment centres based on your product type

• Choose between options like flat-rate shipping, weight-based shipping or free shipping. Consider what works best for your customers and profit margins

• Plan your delivery times, packaging and how to handle returns and exchanges

Set up systems for service delivery 

• If you offer consulting services, coaching or graphic design, establish systems for service delivery. Platforms like Zoom, Trello or email automation can help streamline service bookings and communication

• If you sell digital goods, set up an automated system to provide instant downloads or access once customers make a payment

Step 6 – Build your online brand 

You can’t sell anything if customers aren’t aware of your business, so now it’s time to build your online brand. Branding isn’t just about bombarding random people with marketing; it’s about showing what your business stands for and what it offers. 

Think about common branding elements like a logo, fonts and colour schemes. Use these consistently when creating your business website and in communications so people can easily recognise your brand. If the creative side overwhelms you, consider working with a graphic designer. If you’re on a tight budget, there are free apps and sites like logo.com that you can use to design logos and fonts. 

Once you're happy with your brand, share it with the world. Social media is a powerful tool in helping you achieve this. Platforms like Facebook, Instagram and TikTok are free to use, and you can pay for advertising on some platforms too, giving you the potential to expose your brand to millions of people. 

It’s wise to develop a social media strategy to plan your posts and timing. Stay engaged with your audience, responding to both positive and negative feedback. This shows you care about your customers’ experience. If you're not a fan of constant social media activity, you can schedule posts in advance when you’re in the mood to do so.

Step 7 – Launch, track, improve

Launching your online business is an exciting milestone and a proud achievement, but the hard work is just beginning. 

It’s important to consistently track and monitor your online business’s performance. If sales are slow, identify the missing element that’s stopping you from reaching your target market. If engagement is low, reassess your social media strategy. 

As you build a customer base, encourage feedback through surveys or reviews. Ask clients specific questions about their experience and use any input to improve your business.

Tools like Google Analytics, social media insights or e-commerce platform data can help you to track customer behaviour, sales and website performance. You should use the data to adjust your strategy accordingly. 

Monitor other metrics, like conversion rates, traffic sources and customer retention, to spot areas for improvement. Take a data-driven approach and refine your marketing efforts, sales strategies and products to better meet customer needs and keep improving your business.