How to start an ecommerce business

Want to sell online with ease? If you’re looking to learn how to start an ecommerce business, but are unsure of what to do, this article is for you!

We’ll walk you through everything you’ll need to find customers, handle payments and stay tax compliant while operating. Discover:

• How to choose an ecommerce platform
• How to find customers, manage inventory and receive payments
• Six logistics questions to consider
• How to stay tax compliant when setting up your business
• How to build your business with Countingup

Read on to find out more about the ecommerce business environment and how Countingup can help you navigate it. 

As an ecommerce business, you can use two methods to sell:

• Selling from your own website
• Selling products through other platforms like Amazon, eBay, Etsy or Instagram

Importantly, there’s nothing stopping you from doing both. Having listings on big sites like Amazon or eBay allows you to build your business using a pre-existing base of customers. Each day, millions of people search for offers and soon your product could be one of them! Many successful small businesses exist only with seller accounts on websites like Amazon or eBay without the need for a website. 

However, drawing all your income from one source can be risky for your business: as the saying goes: don’t put all your eggs in one basket. Having your own website can provide your business more flexibility if your sales dip for a period of time. Additionally, customers like to see businesses with a website as it makes them appear more transparent and trustworthy than those without.

Therefore, when choosing an ecommerce platform, consider how much control you’d like over your online presence versus the effort needed to advertise to customers. Use the links above to find out how to sell on each of the platforms listed and find out more about building your own website in our article How to make your own website.

As an ecommerce business, it’s important to prioritise online sales and attracting customers to your platform. This can be done by using online advertising and clever marketing to grow your customer base. If you’re using existing platforms like Amazon or eBay to sell products on, each site will have advertising portals to use. You can also attract customers by having as many high-quality customer reviews as possible. This helps potential customers find out whether your products are good and why previous customers have bought from you before.

Contrastingly, if you’re creating your website, take particular care to think about your customers’ experience while purchasing online: 

• Can they find important information easily? 
• Have you provided high-quality product images and information?
• Can customers contact you with questions easily?

This will require you to have a well-designed business website and potentially a strong social media presence. If you’d like help with creating these tools for your business, read our articles How to create a marketing strategy for a small business and How to use social media for business.

As customers purchase from your business, you’ll need to consider how you’ll handle inventory and orders. Depending on the type of your ecommerce business, you may be manufacturing products yourself or operating as a wholesaler and relying on deliveries and imports. 

When setting up your business, make sure you maintain enough stock to keep pace with customer demand – especially if it dips for a period. Many businesses struggle if much of their funding is tied up in products that aren’t selling. Therefore, finding a good balance is important.

Receiving payments from your sales is easy when you sell products on big platforms like Amazon, eBay, Etsy, etc., as almost everything is automated. 

However, if you’ve built your own website, you’ll need to include an ecommerce section so customers can pay online. Website building platforms like Shopify specialise in creating ecommerce websites and therefore make receiving payments to your account easy. 

Additionally, you can also help customers more by making sure your website accepts major credit and debit cards and includes further financing options like Klarna or Clearpay.

As a business with goods, you may have to think about how you’ll manage and protect your stock. As you’re setting up, consider the following:

• How are you storing products: can you use your home or will you need warehouse space? If you are using your home, do you need a business licence?
• How are you delivering stock to customers; will you deliver items personally or use a third party?
• Do you need business contents or car insurance?
• Do you need to manage customs for international orders or customer shipments?
• Do you need to hire staff to help with orders?
• Is your packaging environmentally friendly?

As you launch your business, you’ll need to register with HMRC and pay tax on the profits you make. To do this, you can either register as a sole trader or set up a limited company with Companies House. 

As a quick overview, both business structures are able to keep their profits and gain access to support like business bank accounts and loans. However, limited companies are considered legally distinct entities. Therefore, if you have debt or assets (like the products you sell) tied up in company finances and they don’t sell, your own personal finances are protected.

Sole traders enjoy less financial admin and flexibility when running their business, however, they can’t access the same favourable tax rates that limited companies do. Therefore, if you’re looking to specialise in a particular type of ecommerce and grow your business long-term, you could also consider setting up a limited company. 

Find out what’s best in our article How to set up your business: Sole trader or limited company?

Whatever business type you choose, at a minimum, you’ll need to keep records of the following:

• The income and expenses of your business
• Records about your personal income
• PAYE records for anyone you employ
• VAT records (if registered for VAT)
• Grant money you may have received in 2020-2021 if you claimed through the Self-Employment Income Support Scheme because of the COVID-19 pandemic

You’ll be required to keep these records for at least five years after the tax year deadline. 

For example, tax returns submitted for the 2021-2022 tax year by 31 January 2023 must be kept until at least 31 January 2028.

Over the next few years, businesses are expected to transition to digital bookkeeping. This means you’ll need to have accounting software for submitting tax returns four times a year. Therefore, consider accounting software like Countingup to help future-proof your business. 

Ecommerce businesses take time and effort to set up. Using Countingup can save you hours of time-consuming financial admin. 

Countingup is the business current account and accounting software in one app: you can use it to automate your business’ financial admin and gain insights into your performance – keeping your finances on the right track from day one. 

Find out more here and sign up for free today.