What is the Best Online Business to Start? [An Analysis]

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Have you ever asked, “What is the best online business to start”? If so, it’s likely, you’ve been looking around online and seen lots of different business models. There is:

  • e-commerce
  • dropshipping
  • selling services
  • selling products
  • affiliate marketing
  • blogging
  • sponsorships
  • running ads
  • and the list goes on

It can take years to learn how to do each, try them all out, and decide what “fits”.

I’d bet…you probably don’t want to take that long.

In this article, we’ll be taking a step-by-step approach to analyzing what is the best online business to start.

What are the Different Types of Online Businesses?

There are several types of online businesses you can start, but in the online space, there are typically a few different business models that everyone builds upon: affiliate marketing, e-commerce, dropshipping, selling services, selling products, and membership sites. Over time, many online businesses stack various business models on top of one another and have a hybrid, but this is only after successfully building one and reinvesting into adding other income streams.

What is Affiliate Marketing?

Affiliate marketing is basically a partnership between three parties: an affiliate, a merchant, and a tracking software or affiliate network. In the partnership, the affiliate will build an audience with a common interest and recommend the products and services of the merchant in exchange for a commission. The tracking software or affiliate network will make sure the affiliate’s referral is credited to them, and they’re paid as agreed upon. The merchant will make sure the customer receives the products or services the affiliate recommended and they’re satisfied.

This business model is typically low risk to start because affiliates can partner with merchants with good reputations and good products. There’s very low startup costs, and the skills to be a successful affiliate translate into the other online business models.

What is e-commerce?

E-commerce is the process of making commercial transactions online. In other words, it’s any transaction you make online with the hopes to achieve a business goal.

There are many ways to go about e-commerce. Most people are using e-commerce software, negotiating with manufacturers (or becoming manufacturers) to create products with their own branding, and using the internet to attract potential customers and sales.

What is Drop-shipping?

Like e-commerce, many people are setting up sites that look like they manage the customer fulfillment, but instead, they take the orders that are placed on their website, and they input the orders at another website who will fulfill them. For example, some people will list products on their websites that are sold on Amazon, they mark up the price, and when a customer buys the product from their website, they will place the order at Amazon for delivery to the customer.

What is Selling Services?

Let’s say you are an accountant. You could sell your services using the internet. Many people who have a skill or trade build websites that can attract customers and sell their services online.

The services can range. You can find people selling services online like:

  • Legal
  • Accounting
  • Home renovation
  • Catering
  • and more

What is Selling Products?

If you have a product-based business where you make products (digital or physical products), then you can attract customers using various traffic generation methods, and sell the products online. The product types can range from:

  • Online courses
  • Printables
  • eBooks
  • Handmade Products
  • Manufactured products
  • Imported Products
  • etc.

What are Membership Sites?

If you have a product or service that people will demand on a reoccurring basis, then setting up a membership site could be a good option. Nowadays, membership sites are offering access to things like:

  • Online courses
  • Intellectual property (like Hulu, Netflix, Crossflix, etc.)
  • Online networking communities
  • Ongoing services (like SEO, bookkeeping, legal reviews, social media management, etc.)
  • Subscription boxes or recurring product shipments

What are the Most Important Factors to Consider When Choosing a Business Model?

In this article, I can provide general advice, but it’s important that you take this and think about how all of this would suit YOU.  It’s important to look at several factors including:

1. Startup Costs

Knowing the startup costs of each business model can help with making the decision because the startup costs typically have to come from your personal finances or a cash infusion from somewhere or someone else. It’s important to know how much each business model may cost you so you can evaluate which is suitable for the budget you have.

Many people do this without planning it, and it becomes harder for them to sustain the bandwidth needed to bring the business to profit. If you plan realistically, it’s more likely you’ll be able to withstand the challenges and get the business to a profitable stage. When you’re considering startup costs, you want to make sure to include:

  • Education costs
  • Consulting costs
  • Customer Acquisition Costs – Advertising, Labor, etc.
  • Labor Costs
  • Tools and Equipment
  • And other things you suspect you may need

2. Your Background and Knowledge

While many marketers use terms like “quick” and “easy” to explain business opportunities, it’s important to know that the timeline for the business to produce results will range from person to person. Each person has their own background, natural skills, professional skills, talents, and a network that can be a benefit or disadvantage to their business pursuit.

For example, I’ve seen many people who want to start affiliate marketing businesses, but they don’t like creating content or they don’t have good command of the English language. It’s going to take them a little longer to get results than someone who has full command of the English language and the skill to write or speak well.

It’s important to take note of what the most successful business owners (succeeding with the business model you’re considering) are doing, evaluate the skills they have, and what skills you may need to develop. When you’re setting your goals, you want to be realistic with where you’re starting and what skills you need to develop in order to be successful. Skill development, implementing new routines, and changing habits is a big part of succeeding in any business.

3. Your Network

They say “birds of a feather flock together”, so successful affiliate marketers surround themselves with other successful affiliate marketers, and it’s the same for the other business models. When you’re starting out, you might not be connected to anyone who’s doing what you want to do, but it’s important to find a group that’s relatable, polite, and makes you feel at home, so you feel comfortable asking questions, sharing when you’re discouraged, and celebrating your wins.

I’ve been blessed to surround myself with lots of great entrepreneurs by being a part of a community of online business owners.

4. General Business Growth Stats

Regardless of which business model you decide to start, it’s important to know that businesses usually take 2-5 years to reach a profitable stage. They have to invest first with labor, tools and equipment, education, advertising and getting customers, legal, and accounting costs, etc.

Depending on the business model, you may spend more or less on all of the expenses, and even when the business is making money, it may take time before every dollar you’ve invested (in courses, domains, hosting, ads, etc.) comes back to you. It takes even longer for all of the money to come back PLUS more–this is what usually takes 2+ years for a new business to reach.

What are the Pros and Cons of Each Business Model?

When asking, “What is the best online business to start?”, it’s important to analyze the pros and cons, and how that applies to you. Let me break down some of the pros and cons for you…

Affiliate Marketing

Pros

  • Very lucrative
  • Lots of income growth opportunities
  • The business model can be started for less than $1000
  • Lots of networking communities
  • Low-cost education
  • Low tools and equipment costs
  • Low labor costs (if you do the work)
  • Not much customer support, shipment, refunds to worry about, or variable costs
  • Lots of success stories
  • Location freedom
  • Time flexibility
  • Passive income components

Cons

  • It can take more than 1 year to generate a consistent income
  • It can take more than 2 years to generate a consistent full-time income

E-Commerce

Pros

  • Can be lucrative
  • Can have lots of growth opportunities
  • Many niches to choose from

Cons

  • Higher startup costs because of product development and testing
  • Higher tool and equipment costs than other business models (like affiliate marketing or selling services)
  • Higher education costs than other business models (like affiliate marketing)
  • May take awhile to generate the traffic to get sales and income, so you may need to afford the higher operation costs for a longer stint of time
  • It can take more than 1 year to generate a consistent income
  • It can take more than 2 years to generate a consistent full-time income
  • You deal with traffic generation, sales, customer fulfillment, refunds, and more

Dropshipping

Pros

  • Can be lucrative
  • Can have lots of growth opportunities
  • Many niches to choose from

Cons

  • You can sometimes be “sandwiched” in the middle when a customer requests a refund and you have to request the refund from the vendor
  • Customers can get frustrated because of the time communication takes since you’re the middle man
  • Higher tool and equipment costs than other business models (like affiliate marketing or selling services)
  • Higher education costs than other business models (like affiliate marketing)
  • May take awhile to generate the traffic to get sales and income, so you may need to afford the higher operation costs for a longer stint of time
  • It can take more than 1 year to generate a consistent income
  • It can take more than 2 years to generate a consistent full-time income
  • You deal with traffic generation, sales, customer fulfillment, refunds, and more

Selling Services (including Lead Generation)

Pros

  • Typically higher ticket sales
  • Can be lucrative
  • Can have lots of growth opportunities
  • Many niches to choose from
  • Requires lower sales volume for lucrative incomes in most cases
  • Lots of platforms (like Upwork or Fiverr) that make it easy to find clients

Cons

  • Requires more laborers to scale in most cases
  • Higher concentration of workers to customers than other business models
  • May have higher tool and equipment costs than other business models (like affiliate marketing or selling services)
  • Typically requires mastery of a skill, so the education costs may be higher than other business models (like affiliate marketing)

Membership Sites

Pros

  • Recurring revenue
  • Predictable income
  • Great for building long-term relationships

Cons

  • You have to consistently manage expectations and deliver enough to get people to stay
  • More may be required with customer support (than a model like affiliate marketing)
  • Higher Tools and Equipment cost
  • High education costs because people pay for mastery and services, continuous education, or great entertainment

Recommended Resources: 

How Long will it take to Get a Return on Investment?

There is no sure-fire way to say how long it will take you to make money or break even in your business. Everyone is different.

If you have relevant skills to transition into entrepreneurship and relevant skills to run the business you’re considering, then it’s an advantage. Also, if you’re conscious about how to keep expenses low (relative to the revenue), raise the sales volume, and price well, then it’s more likely, you’ll reach a profitable stage sooner.

Each entrepreneur has their own learning curve with:

  • Managing expenses
  • Selling in volume
  • And, Selling products or services that are priced well

Which requires the Most Skills and Training?

In my opinion, affiliate marketing requires the least amount of unique skills. What I mean is the skills you need to sell affiliate products are the same skills you’ll need to sell your own products, memberships, or services online.

You need to know:

  • How to choose an audience to serve
  • How to build a website
  • How to attract customers
  • and, How to Convert the Interested Prospects into Buyers

If you know how to do each of those 4 things, you will be successful with any of the business models, however, if you intend to do these 4 things online, it’s a bit of a learning curve.

Each business model will require skills and training. It’s important for you to be aware of the learning curve each business model may require because the learning curve can delay the process of making money, however, if you already have relevant skills, you may be able to expedite the learning curve in one business model versus the other.

My Recommendation for the Best Online Business to Start

In my opinion, affiliate marketing is the best to start because it has the lowest barrier to entry, however, if you are in a rush to make money, you may want to consider selling services as well. Affiliate marketing is low cost and simple to learn, but it takes time to practice and make the process work for you.

If you’ve mastered a skill, you may be able to get people to pay you a higher ticket price for a lower sales volume, and this could benefit you short term if you need to make money quickly. I only recommend e-commerce after you’ve developed the basic digital marketing skills you’ll learn from studying affiliate marketing.

Conclusion – “What is the best online business to start?”

Hopefully, this has helped you answer the question, “What is the best online business to start?”. There are many options to choose from, but it’s important to analyze all of the important factors I’ve told you here. If you have any other questions about this, leave them in the comments section below and I’ll get back to you.

Also, what are your thoughts? Is there a business model you’d recommend new online entrepreneurs start with? Why or why not?

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