My Online Store: How Much Will It Cost Me?

Building an online store is one of the less risky ventures in terms of startup capital required to make it operate. Most of what you need to become successful involves time and patience. Especially if you're not planning to buy a bunch of inventory and warehouse it to begin with, you can become profitable building an online store within a matter of months, maybe even less. However, there are some costs involved. Here's what to expect.

Domain Registration - $8/year
Registering a domain costs next to nothing. I register my domains with NetFirms.com. They are the cheapest I've seen. Yes, you could register your domain with GoDaddy, but then you'd be putting money into the pocket of one of the biggest perverts (Bob Parsons, who owns GoDaddy) on the planet. If you have any sense of morality, use NetFirms instead.

Web Hosting - $8/month - $200/month
The reason there is such a wide range here is because there are greatly varying levels of hosting available. For $8/month, you can get an account on a shared server, which means that your website shares resources with likely hundreds of other websites, any and all of which could (and likely will) affect the accessibility of your website. If you're just starting out and on a limited budget, shared hosting is not a bad way to go. However, if you want something much more reliable, you can get a dedicated server, which gives you much more flexibility. A dedicated server (with a dedicated IP address for your store) will cost you close to $200 per month.

Merchant Account - $25/month
Merchant accounts typically charge a monthly fee for their services. I set up my merchant account with Elavon, who has a partnership with Costco. Since I have an Executive Membership with Costco, the monthly fee is waived. I've heard that Sam's has a similar deal for merchant account services, and there are likely other ways to set up a merchant account without incurring a monthly fee.

In addition to the monthly fee charged by merchant accounts, there is also normally a per transaction fee, which is usually in the neighborhood of 25 cents per transaction. If you are incurring transaction fees, it's a good sign for your business because it means you're making sales.

Payment Gateway - $99 setup + $20/month monthly gateway fee
I use Authorize.net for my payment gateway. Their fees are pretty standard, $99 to set up your gateway and $17.95 per month to use your gateway. There is also a $0.10 charge for each transaction you put through your gateway. The good news is that the $17.95 per month gateway fee is waived if you have enough transactions (180) in any given month.

SSL Certificate - $75/year
You'll need an SSL certificate to secure your site and protect your customers' data. I bought my latest SSL certificate through Register.com, and it cost me $54 for two years because I found a coupon. The reason I put $75.00 as the cost of an SSL certificate per year is that number is pretty standard for SSL certificates. There are varying grades of SSL certificates, but you can get by just fine with the cheapest one. The more expensive ones ($200 - $1000 per year) from Thawte or VeriSign are usually used by larger corporations. From my experience, there's not a legitimate reason to spend any more than you have to for an SSL certificate.

There are obviously other costs to anticipate such as telephone, internet access, and other costs, many of which you would probably be facing through your normal lifestyle anyway. A good first goal in the development of your online business should be to hit the break even point where the margin you make on your sales exceed your monthly expenses. As you can see, it shouldn't take many sales in a month period to become profitable. There's a surge of morale that comes with knowing that your new business is profitable.

A Quick Overview of How to Establish an Online Store

I began building a new online store while I've been documenting how I built my online sporting goods business. I set up ProHealthcareProducts.com about three weeks ago. I found a supplier who would drop-ship medical products for me, and I've added (so far) 700 of their products to my store. In contrast to my first venture, RandomDeals.cc, it took me less than two weeks after I began building the store to get my first order. I installed a Zen Cart store and shopping cart system, and then began adding products to it on September 9th. My plan was to start getting orders by the middle of October. My three-month goal is to build the site up to the point where it makes $5,000 during the month of December. It was a pleasant surprise to start getting orders before the end of September.

I'm saying these things not to boast, but instead to relay some information to my blog readers about what I did to get my new online store operating and producing sales so quickly. You might evaluate your strategy and gain some insight from what I did.

I originally started my new online store using Magento, but I quickly found that it was a bit more complicated than what I needed. The deal breaker for Magento was that it was just too slow for me, even though my site runs on a high performance dedicated web server that I administrate. It took too long to add products to my store. When you're planning to add thousands of products to a new store, every second makes a difference. Besides the administration part of Magento, there was even a visible difference in the storefront section of my site. I decided to go back to my old standby, Zen Cart.

Here's a strategy that includes what I've done so far on my medical products store, along with what I intend to do to reach my December goal for profit.

• Determine which products you want to sell, and find a supplier or suppliers who will drop-ship for you. If you are planning to keep an inventory of products, the drop-ship aspect of the equation can be omitted.
  
• Set up a web hosting account for your site. I host mine with HostGator. They've proven to be pretty reliable, and their hosting plans are competitive.
  
• Set up a shopping cart system for your new website. I use Zen Cart. I've tried others, including osCommerce, Magento, and VirtueMart (for Joomla), and I think Zen Cart is the best free shopping cart system available.
• Start adding products to your store.
• Customize your shopping cart system so that it looks like something customers would be willing to buy from.
• Regularly submit products feeds from your store to Google Base. I've been adding about 30-50 products to my store each day, so I submit a new feed to Google's product search at the end of each. Zen Cart has a nice add-on that can be installed to facilitate the creation of a product feed for your store with the click of a button. Any shopping cart worth using nowadays should have the ability to create a Google products feed automatically.
  
• Submit a new sitemap through your Google Webmasters account after making updates to your site, whether the updates include adding new products or creating new pages. Especially for new websites, getting your sitemap to Google is a good way to get indexed more quickly than you would otherwise. Again, Zen Cart has a good add-on that can be installed and used to create sitemaps.
  
• Start getting links to your site. There are lots of different methods for doing this. Getting links from a good variety of solid websites is crucial for your new store. I'll be writing more blog entries with some ideas on what I've done to get links. For the intent of this entry, I'll just list a few ideas for getting some quick links: 1) Start off by asking friends or colleagues who have websites to post links to sites they maintain; 2) Write some articles related to your new online store, and submit the articles publishers such as ezinearticles.com; 3) Contribute to online forums or the comments sections of blogs, and include your website's link with your comments; just remember not to act like a spammer by making sure you are actually contributing to the website on which you're commenting; 4) Submit your online store to local business directories and other directories for which your site is relevant.
• Merchant account and payment gateway.
  All the while you're making consistent efforts to build up your store's product offering, increase your site's reputation with the search engines and establish some traffic to your site, there are some administrative things you'll need to do, including setting up a merchant account and a payment gateway. I use Elavon for my merchant account, because they have the best discount rate I've found. The most widely used payment gateway (which provides an interface between your merchant account and your website) is Authorize.net. I've used them for years, and I've found no reason to shop for a different gateway account.
• You'll need to secure your website so that customer's can place an order on your website without having their credit card information intercepted by one of the many hackers out there. Setting up an SSL certificate can be kind of tricky, but your web host should be able to help. In the past I've had the HostGator support people install my SSL certificates for me until recently just because it was convenient. Recently I've figured out how to do it myself, so I install my own now.

All of the bulleted items mentioned above may sound like a lot of work. In reality it does take some effort to accomplish all of this. However, I hope I've provided you with a sufficient checklist so that you can at least gauge what you need to do to get your online store to the point where you can start having sales come in and your business will be profitable.