Ina Steiner EcommerceBytes Blog
News and insight focusing on ecommerce.
by Ina Steiner, Editor of EcommerceBytes.com
Mon Nov 3 2014 20:48:15

Fund Me: How Much Do You Need to Start an Online Business?

By: Ina Steiner

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A reader sent me a link to a listing on a crowd-funding site in which someone was trying to raise $250 to start an online selling business using Fulfillment by Amazon.

It's not a typical Kickstarter-type campaign where people are "investing" in the project - rather, it's a solicitation for donations. And the would-be seller doesn't make a compelling case for why anyone should send him a donation. I can only imagine he set up the page to share with friends and family who know him.

In listings on Kickstarter and other crowd-funding sites where people have tried to raise money for a startup, they usually explain what the person giving the money will get in return for their investment. It can be part ownership in the project, or a free product, or a discount on a future purchase, or acknowledgement somewhere on the site that they're a sponsor.

Nevertheless, the listing got me thinking about how much it takes these days to start selling online. What are the essentials you need to get started, and is the premise that you can start a business selling through Amazon FBA with $250 realistic?

If you had to start from scratch today, what would you do the same and what would you do differently? Is it harder or easier today than when you got your start?

And what would your "fund me" message be if you were raising money to start your ecommerce business?




Comments (21) | Leave Comment | Permalink

Readers Comments

Perminate Link for Fund Me: How Much Do You Need to Start an Online Business?   Fund Me: How Much Do You Need to Start an Online Business?

by: Cloud This user has validated their user name.

Tue Nov 4 00:41:57 2014

I started my business over a decade ago by selling a PC game I was no longer using on eBay. When I realized how easy it was to sell online (the game cost me $39.99 new and I sold it for $39.95) I invested the $39.95 back into inventory and slowly kept pouring all the profits back into the business. I now have a business that pulls in 6 figures and I sell on 4 different venues including my own website. So I'd say you need $39.95.

Perminate Link for Fund Me: How Much Do You Need to Start an Online Business?   Fund Me: How Much Do You Need to Start an Online Business?

This user has validated their user name. by: thehosst

Tue Nov 4 01:06:34 2014

It all depends, the type of products, the supply structure and the goals. I'll say thousands if you are really serious, if you only want to sell your used DVDs, then there is no much investment needed.

One of the things I notice among our competitors is the short life they enjoy for 2 main reasons, one, the new businesses think that people will buy from the cheapest seller, I found that being number 3 or 4 not only is more profitable but also creates more sales. It is hard for many buyers to trust someone selling 5, 10 or 20% cheaper than the second cheapest. A lesson that is still hard to accept by most new sellers.

The second big cause of business deaths today is the Google Tax (we now have to pay directly or indirectly much more to Google than to state or federal taxes), is like a luxury toll that almost nobody can avoid if you want to sell online.

The best thing a new business can do is Research, a lot of research before starting to sell, that will minimize the investment and will extend the life of your venture.  

Perminate Link for Fund Me: How Much Do You Need to Start an Online Business?   Fund Me: How Much Do You Need to Start an Online Business?

by: Moonwishes This user has validated their user name.
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Tue Nov 4 01:16:44 2014

About 13 years ago now, I got very ill with my doctor more or less shrugging his shoulders not knowing what was wrong with me. For someone that had been reasonably healthy for most of my life, I literally thought I was going to die and so did my husband. So thinking of what a time he would have getting rid of all my sewing books etc., I would try to list some on line on half.com to get them out of the house. Then some sold and then more sold. I was in business without planning to be. I obviously didn't die, but have had chronic ill health since that time, but I shoe-stringed my business and reinvested any profits from the sale of my personal sewing library stash. When I was feeling up to it we hit yard sales and I bought more books to sell. It took a few years before there was any notable profit other than enough money to go out to eat once in a while. And then there was enough to pay a few bills. I found that having a reason to get out of bed daily even when I wasn't feeling good was my occupational therapy. While we haven't gotten rich by any means, we are making money. We have always been in the black over all even when we switched to selling sewing patterns as handling and packing books got to heavy for me to handle. We got a major opportunity when a fabric store went out of business and was able to buy out the remainder of the pattern stock. But it was all paid for by sales.

So it literally didn't cost us a penny to get started as we had a computer, scanner and printer at that time. Could I do it now  for 'free'? Probably, but I would like to put in more planning and the knowledge that I have gained over the last 12+ years as that experience is more valuable that dollars!

Perminate Link for Fund Me: How Much Do You Need to Start an Online Business?   Fund Me: How Much Do You Need to Start an Online Business?

by: Moonwishes This user has validated their user name.
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Tue Nov 4 01:30:28 2014

As to the new seller to be, I wonder what he intends to do with that $250? Does he plan on spending it for new office furniture, new computer or printer (assuming he has a working one), etc.? In other words stuff to make him feel like he is in business or is to be spent on the bare necessities that the business actually needs. The one big thing that any new seller should have and probably doesn't is a scale. I've seen many newbies not bother to buy a scale for years that seems to waste them time and money when guessing how much a packed item will run.

I'm not even sure how much inventory a person can purchase for $250. To buy inventory they have to have some clue as to what will sell at what price point and how much of it will sell. I've made bad guesses over the years and at least had profits to compensate for sales of other items, but someone starting out and buying inventory assuming it will all sell within a certain time is taking a huge risk. I ran into a newbie that had started a store on ecrater and he wondered how soon he would be getting sales and how many of them. When I asked how many sales he wanted to make in a month, he said 60 and I pointed out to him he had less than 40 things listed. At that point I had over 8000 items listed and wasn't usually selling 60 items a month on one venue. The chance of selling out your entire inventory in a month is about zero and then what do you sell the next month?

Perminate Link for Fund Me: How Much Do You Need to Start an Online Business?   Fund Me: How Much Do You Need to Start an Online Business?

by: comet This user has validated their user name.

Tue Nov 4 02:03:44 2014

@ MOONWISHES---

Once upon a time in the Land Of Ebay Before The Evil Came I WAS selling thru most of my inventory EVERY MONTH.  

Now--I am and was a small seller but I am talking about selling a few things every day or so.  Sports wear; jewelry;  vintage items inc vintage skis; kids stuff; whatever I could "source"  from yard sales thrift stores and excess house stuff.

And I was making enough to pay our insane NY property taxes!  

Now--however--with the SAME sort of "inventory" and obviously the same "eye"  I am lucky if I sell ONE ITEM PER WEEK

Can't be "worse photos" have worked up in cameras and have good pics; can't be unwanted brands as I keep an eye on that stuff and try to get the top ones I see out there;  can't be "The economy"  as in "This economy" people SHOULD be flocking to ebay for these sort of things as buying something NEW is prohibitive.

Nope---it's Evil Ebay.

SO--I would say--that a $250 investment in ==what??---iPhones like ebay WANTS you to sell (and be ripped off on!)???  Fake Coach (which we legit sellers are constantly under fire for)???  Not a good business model!  

We need to know MORE of this story---

If it were ME--I would be looking for a heck of a lot MORE crowdsourcing $$$ and setting up a REAL ON LINE AUCTION SITE.

Who's with me?

We here know MORE than ebay EVER will about this BUSINESS---

 

Perminate Link for Fund Me: How Much Do You Need to Start an Online Business?   Fund Me: How Much Do You Need to Start an Online Business?

by: IndyTom This user has validated their user name.

Tue Nov 4 09:16:51 2014

This question is like "how much is a house?".  There is no simple answer.  Depends on what you are selling.  I would experiment with diffeent types of products to resell, because you will make buying mistakes. But do spend the money on inventory, not office supplies.

Perminate Link for Fund Me: How Much Do You Need to Start an Online Business?   Fund Me: How Much Do You Need to Start an Online Business?

by: L This user has validated their user name.

Tue Nov 4 09:28:23 2014

You have to crawl before you can walk. Starting with FBA is like trying to start with running.

But maybe they're already selling a few things online (which means they should earn the $250) and they are asking for funding to buy the product packaging materials.

I made FBA my priority for two years, had just found (and purchased) the best packaging materials for my products and ran into insurmountable problems with the program. I'm now in the process of pulling my items out of the Amazon warehouses, at $1 per item.

The next step is I can close out my sales tax accounts with the states where my inventory resided. That's a king-sized pain I won't miss every quarter.

Two questions:
1. Can you let us know if they were successful on the fundraising?

2. What is Google tax?

Perminate Link for Fund Me: How Much Do You Need to Start an Online Business?   Fund Me: How Much Do You Need to Start an Online Business?

by: Toledo Maude This user has validated their user name.

Tue Nov 4 10:30:03 2014

If one is looking for a “hobby” of selling online, the $250 investment is a good start.  

But the idea of reinvesting all the profits back into the business is simply not true.

The ugly truth is that bills must be paid.  My once somewhat thriving eBay business which once paid some and in the good years maybe most of my bills now pays next to nothing.  14 years invested in this blood sucking company, and all I have to show for it is one lady who left with billions and her protege will have to settle for pocketing mere millions when he finally leaves by the backdoor in the “middle of the night”.  

Take the $250 and buy uniforms for that snappy new part time job at the “Golden Arches”.

Don’t quit your day job either....

Perminate Link for Fund Me: How Much Do You Need to Start an Online Business?   Fund Me: How Much Do You Need to Start an Online Business?

by: Moonwishes This user has validated their user name.
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Tue Nov 4 10:51:40 2014

@Comet "Once upon a time in the Land Of Ebay Before The Evil Came I WAS selling thru most of my inventory EVERY MONTH"

There is a big difference between someone that knows what they are doing selling and one that doesn't have a clue and with less inventory than your sales goal, you really need to hustle to acquire and list inventory to be able sell more that what you have monthly.

When I think of selling out my entire inventory in a month, I know I would have a heart attack. I have 9000+ items between two venues. I would not be able to keep up with the orders although the money would be great! :)

Those of us here all seem to look at that $250 in a different way, each from our unique procpective. I also look at it from a non-ebay prospective since I don't sell there yet many posters here at ecommercebytes (and not just this discussion) always assume immediately how you would handle something in relation to ebay.

@Toledo Maude "But the idea of reinvesting all the profits back into the business is simply not true."  Since I did it, I know it is possible. Not everyone starts out a business expecting enough profits at the beginning to live off of them. We grew our business with the cash the business produced. It has only been in the last 6 years that it has brought in a significant amount of income to make a huge dent into the bill and grocery pile, but then I sell on ecrater and Amazon where you can still make money.

Perminate Link for Fund Me: How Much Do You Need to Start an Online Business?   Fund Me: How Much Do You Need to Start an Online Business?

This user has validated their user name. by: The End

Tue Nov 4 11:36:31 2014

If you have to ask others for money, then you should NOT be in business.
Being in business requires innovative thinking.
So, asking for handouts is a RED FLAG !
KEEP AWAY.

Perminate Link for Fund Me: How Much Do You Need to Start an Online Business?   Fund Me: How Much Do You Need to Start an Online Business?

This user has validated their user name. by: Puck

Tue Nov 4 14:23:49 2014

$250 wouldn't go far in funding a kid's lemonade stand in the front yard.  

Perminate Link for Fund Me: How Much Do You Need to Start an Online Business?   Fund Me: How Much Do You Need to Start an Online Business?

This user has validated their user name. by: Tula

Tue Nov 4 14:42:58 2014

It's an interesting question. I think it depends on what kind of sales model you want to have. If you're only looking to sell on venues like Ebay, then you can start with next to nothing and slowly build on it. If you want a full-blown business, then it gets more complicated.

It used to be that anyone could throw together a web site and sell stuff online. That's still true, but the technology of web sites has changed and gotten more complicated. While you can still put something simple online, customer expectations have increased to the point where they expect web sites to have all the newer features and they won't give the time of day to anything that doesn't look as professional as what the "big guys" have to offer. With the advent of tablets and other mobile devices, it's become even more difficult to put a site together that can handle all of that well. It's not something the average amateur can easily do for themselves anymore.

In contrast, some aspects of online sales have gotten easier. Most people now have access to some level of digital photo capability via use of their smart phones. When I first started out, camera phones were rare and had lousy resolution, so you had to spend more than a few dollars buying a decent digital camera.

It was the same case for other equipment. I work in computers for my day job, so I already had equipment, software, and scanners, but newbies would have to buy much of that.

You can get away with little investment if you just want to sell on a venue like Ebay, since they have all those fast listing options with smartphones and the like. But to really have a full business, you have to be able to scale and those "easy" tools just won't cut it. Add in other venues and you find you can't grow without putting some kind of business infrastructure in place.

Bottom line is if you just want to dabble and make a few extra bucks, you can certainly do that on the cheap, but if you want a real business that might support you, it's going to cost more and require a lot more time and effort.

Perminate Link for Fund Me: How Much Do You Need to Start an Online Business?   Fund Me: How Much Do You Need to Start an Online Business?

by: DIANE1104 This user has validated their user name.

Tue Nov 4 15:03:36 2014

I have been reading all these articles and comments for a couple of months now. I am considering setting up my own web site. Recommendations from you guys that have already done it would be greatly appreciated!

Perminate Link for Fund Me: How Much Do You Need to Start an Online Business?   Fund Me: How Much Do You Need to Start an Online Business?

by: Ebay Seller-Ebay Buyer This user has validated their user name.

Tue Nov 4 16:15:46 2014

I think the amount of money needed depends mostly on what someone is selling. But on average I would think a few hundred dollars for low priced items and a few thousand dollars for higher priced items. And then this amount would have to be reinvested to buy more inventory every 2 or 3 weeks depending on how many sales are being made.  Making a full time living from online sales or a website is not easy despite what anyone might say. This is why I'm sure the vast majority of ebay sellers are part time and have a full time job. Or some are on welfare and get extra income from ebay.

Perminate Link for Fund Me: How Much Do You Need to Start an Online Business?   Fund Me: How Much Do You Need to Start an Online Business?

This user has validated their user name. by: iheartjacksparrow

Tue Nov 4 19:19:52 2014

I needed $0 to start my eBay business.

I registered on eBay on April 1, 2000. (April Fool's Day; I wonder if that was a warning of what was to come). I discovered dolls from a brand that I collected but was almost impossible to find locally, plus many other things that I wanted but had no way to obtain otherwise. Both myself and my husband had full-time jobs at the time, but I thought if I could sell on eBay, I could have more money to spend there. So approximately one year later, in 2001, I became a seller. I assumed it would be hard to list items, but then I remembered all the sellers I'd dealt with that couldn't have had more than one functioning brain cell. And I got help from my husband, who's a computer programmer with a major corporation, with things like uploading photos. I started with one rare anime book that I didn't really need, which sold, and I kept going from there, pulling stuff from toy, movie, and music collections that I didn't care about any longer.

If a prospective online seller is a pack rat, all that's needed is money for envelopes, boxes, sealing tape, etc., and a business is born!    

Perminate Link for Fund Me: How Much Do You Need to Start an Online Business?   Fund Me: How Much Do You Need to Start an Online Business?

This user has validated their user name. by: Don Wagner
Web Site

Tue Nov 4 21:12:00 2014

Have been a registered eBay member since 1998, so I already had a digital camera, photo editing software, and spreadsheet software for managing my business. When I decided to minimize selling on eBay, costs were as follows:

Collecting Forums Membership fees: $25 a year (Some forums required a yearly fee to be able to post for sale listings. Forum members are SERIOUS Buyers – whenever possible I offer lifetime guarantees of authenticity and have NEVER had a return – knock on wood).

Website Domain Name: $10.00 a year.

eCommerce Website with shopping cart, inventory management, mailing lists, email, image hosting etc. - $9.95 a month.

Label Printing Software & Shipping Insurance Provider – Free, up to $14.95 a month, depending on how fancy you want to get with labels.

Time to learn and configure ZenCart and bring up a customized website with one item in inventory – 2 Weeks.

Time to load the entire inventory database with photos and descriptions approx 150 items – 2 Weeks.

Time to learn and configure phpList (mailing list for newsletters) – 3 Days.

Perminate Link for Fund Me: How Much Do You Need to Start an Online Business?   Fund Me: How Much Do You Need to Start an Online Business?

This user has validated their user name. by: Shop and Ship

Wed Nov 5 09:20:46 2014

None of those questions can be meaningfully answered in the abstract. I split the cost of shipping a pallet by weight with a business associate and my share was over $300 with surcharges, so without better data the $250 figure itself is meaningless. I see plenty of Amazon sellers who have very limited inventory of a few dozen disparate articles. The author of the original comment may very well have been a young entrepreneur working for minimum wage with a casual selling interest trying to upgrade to an Amazon presence. Since Amazon escrows sales proceeds including shipping costs for at least 2 weeks then the author could have easily projected a need for a small cash infusion to stay in the mix. Let's not kid ourselves: sure, selling items and meeting new people is fun, but long term we're all in it for the money. And that's what all the commiserating is about on and off of eBay: little fun and less money.  

Perminate Link for Fund Me: How Much Do You Need to Start an Online Business?   Fund Me: How Much Do You Need to Start an Online Business?

by: slinginparts This user has validated their user name.

Wed Nov 5 20:09:25 2014

The answer is about $40K.  
Everything else is a hobby business or destined to fail.  Margins are not great.

Barriers to entry are very low.

Perminate Link for Fund Me: How Much Do You Need to Start an Online Business?   Fund Me: How Much Do You Need to Start an Online Business?

by: DonC This user has validated their user name.
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Mon Nov 10 00:48:28 2014

I need to see their business plan in order to even give a vague guess.  

Perminate Link for Fund Me: How Much Do You Need to Start an Online Business?   Fund Me: How Much Do You Need to Start an Online Business?

by: Flying Childers This user has validated their user name.

Tue Nov 18 09:43:02 2014

Don Wagner- can you recommend a good e-commerce/ store website builder for $10 a month, as you mentioned? Many thanks for all the great info!

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