How Creating an Online Business Works

Creating your own online business is a great way to make a buck. See more computer pictures.
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You've got a great idea for a business, and you think it would do well as an e-company, not a brick-and-mortar joint. Great -- that will save you a lot of money in rent, utilities and the like. Plus, it can be open to customers all over the world 24/7. You can also start out small and see whether your business will catch on with the public before you have to spend a lot of money.

But how the heck do you create an online business? And namely, a successful online company? It's not as simple as slapping up a website. You'll need to think about everything from shopping carts to security measures to merchant accounts. And how will customers know you exist? Before your head starts spinning, let's break the process down into some simple steps. This article will teach you everything you need to know about setting up a website yourself or finding a designer for it, as well as all you need to know about online security.


First, consider what tools you'll need to make your dream happen.


Tools of the (e)Trade

There's no one definitive list of tools you'll need to create a successful online business. Everything depends on the product or service you're selling and how your website fits into the picture. So first ask yourself the following questions.

Are you going to design your site yourself? If so, you'll need:


  • Experience and/or training in Web design, unless you use the template or wizard-based tools that many all-inclusive services offer (WordPress, for instance offers several free ecommerce designs).
  • A good computer with plenty of RAM and hard drive space
  • Web-design software -- either WYSIWYG (What You See Is What You Get) or a text editor (if you know HTML)
  • A digital camera or smartphone to create product or service photos
  • Image-editing software
  • Illustration software to create graphics
  • FTP software for uploading files to your website

Are you going to sell products from your site? If so, you'll need:

  • A merchant account, or some way to accept payments
  • Shopping cart software, or another means for shoppers to enter and monitor their orders
  • Secure servers if you're accepting credit/debit card payments or collecting other personal payment information online
  • Software to keep track of inventory and orders

Do you have a large number of products or services that need listing on your website? If so, you'll need:

  • A database of product names, descriptions, pricing and photos
  • A system for establishing product numbers
  • A system for inventory management
  • Technical know-how for incorporating the database into your website

Would your website benefit from sound, video or animation? If so, you may wish to hire a specialist to incorporate these features. If you want to add them yourself, you'll need:

  • Equipment to capture audio/video
  • Software for editing your audio/video clips
  • Software to create animations


E-commerce Tools: Merchant Accounts

If you want to sell products and collect payment electronically, you'll need:

  1. A merchant account to allow you to collect payment via credit or debit card
  2. Software to collect information, aka shopping cart programs
  3. Software to process transactions and send information to all of the involved parties (your bank, their bank)
  4. A secure server.SSL -- Secure Sockets Layer -- is a standard security technology that encrypts data and sends it to a secure server where it can't be intercepted by a third party.

A merchant account allows you to accept and process credit and debit card payments either manually, by swiping the card or keying in the card number, or through your website. Be aware there are many charges associated with accepting credit cards. Here are some of the more common ones [sources: Brooks, TransFirst]:


  1. A discount rate (typically your highest fee), which is a percentage charged on each transaction you process
  2. A transaction charge, generally 0.5 to 5 percent per processed transaction, plus 20 to 30 cents for each transaction made, whether approved or declined by the card-issuing bank
  3. A monthly minimum fee averaging $25; this fee is assessed if your site doesn't generate a certain dollar amount in processing fees each month
  4. A statement fee, or fixed monthly charge, aka a support or service fee
  5. A one-time application or set-up fee
  6. An automated clearing house (ACH)/batch fee, assessed daily when you settle that day's business transactions

While these fees can add up, you'll be turning away most of your business if you don't accept credit cards. Some electronic payment companies offer discounted rates, so check around to get the best deal.

If you have problems obtaining a merchant account, try going through an independent sales organization (ISO) for electronic funds processing. These firms usually provide many options for transactions, both electronically and in-person. FirstData is one vendor, but many others exist.


E-commerce Tools: Electronic Payment Options

Already have a merchant account with your brick-and-mortar business? Then simply take the credit/debit card information received online and process the card manually via your existing merchant account. No additional account is necessary for Web transactions.

Processing cards manually gives you the advantage of being able to hold the card information and charge customers when their purchase ships. Most people don't like to be charged for something they haven't received yet; the automated card processing on websites does just that, transferring funds from customers' accounts within hours or a few days, rather than when the order ships. Remember, though, that if you're not able to ship the product within 30 days of the order, you must notify the customer of the delay [source: Federal Trade Commission].


If you're not sure a merchant account is the way to go, there are alternatives such as PayPal and ProPay. These types of companies handle the checkout and payment processes for you, meaning no merchant account and associated fees. You have to pay for their service, of course, but the fees will be less. PayPal, for instance, offers a transaction fee of 2.9 percent or lower plus 30 cents per processed transaction, but no monthly fees (as of May 2015).

Besides processing credit cards, you may wish to accept electronic checks, or e-checks. Customers wishing to pay via e-check input their checking account information into your site, and your payment is pulled from their checking account and deposited into your banking account through the ACH process. You'll need to contract with a company like Authorize.Net to incorporate this feature into your website [source: PracticalEcommerce]. PayPal and ProPay also offer e-check options.


E-commerce Tools: Shopping Cart Software

Shopping cart software allows website viewers to select their items, add shipping and credit card information and purchase.
Tetra Images/Getty Images

Let's assume you now have a merchant account, or an alternate method of processing payments. Next up is creating a way your customers can select the products they want from your website, preview the sale amount, edit their selections and enter in payment and shipping info -- or cancel the order completely. (Hopefully they won't do the latter!) These functions come via shopping cart software. You want something good; the easier and more intuitive you make it for your shoppers, the more sales and repeat business you may have.

Most shopping cart programs offer features like inventory control, tax and shipping calculations, and social network marketing options. Quality shopping cart programs also offer professional templates with customization options so you can set up the ordering functions the way you want them, and/or design the ordering pages to have the same look and feel as the rest of your site. In addition, look for programs with these features [source: Top Ten Reviews]:


  • Bulk editing, if you have a large inventory
  • Built-in blogging capability (blogging is important for marketing, and for your site to be easily found by search engines)
  • Live chat for customers' questions
  • Customer reviews
  • Marketing tools such as promotional emails and abandoned-cart notices
  • Order management tools; look for programs that easily integrate with your accounting software
  • Comprehensive support for you, since everyone needs technical support at some point

Before you plunk down any money, test-drive a few programs by visiting sites that use them. Watch for products or services that take the shopper away from your site. And make sure you know which payment services a program is compatible with (e.g., To get started, check out 3dcart and Shopify, two programs that received positive reviews in 2015 [source: Top Ten Reviews].

If this seems all too complicated, there are companies out there that will not just create your website, but register your domain name(s) and even host your site if you'd like.

If you go this route, do your due diligence by checking out several vendors and asking about any hidden fees. Make sure to look at several of the sites the vendors have developed for other companies to see if you like what they've done. Go through an ordering process to see how it works, and assess its level of intuitiveness. Before you sign a contract, show your preferred vendor your list of site functions to make sure the company can accommodate your wants and needs.

Two vendors you can visit to get a sense of what's out there are Blue Fountain Media and Web Intellects.


Security Issues With Websites

In the Internet's early days, people were afraid to shop online. Specifically, to give out their credit card information. Eventually they became comfortable with the security issues in place, and online shopping flourished. But in the early 2010s, retail hacking became somewhat commonplace. By 2014, 62 percent of consumers reported being more nervous about online security than ever before, while 23 percent said they're so worried about the issue they're cutting back on their online shopping [source: Thompson]. This means you need to make sure visitors feel your site is professional and secure.

People trust each other more than an anonymous website, so adding an "About Us" page with your photo and bio can help. If you have a team of employees, include their photos and biographies as well. Customer testimonials are useful too, especially video clips. Make sure your site includes info about return policies and satisfaction guarantees, which also calms nerves. And, of course, make sure you display your SSL certificate symbol so customers know your website is protected by standard security protocol [source: Ward].


The No. 1 reason customers abandon shopping carts are high shipping and handling fees. Mitigate that objection by prominently listing your shipping fees, particularly if you can offer a flat rate (or free shipping) for large purchases [source: Ward].

Shoppers often look for a trusted third party (TTP) to approve your site and your methods. Companies like Symantec can provide your site with a digital security certificate that says that you are who you say you are. This helps give visitors the confidence to become buyers, and will often make a big difference in your perceived credibility. Another security watchdog organization is TRUSTe. TRUSTe sets policies for the use of personal information, as well as the protection of consumers. Both of these TTPs control the use of their logos through various embedded links. For example, if you click on the TRUSTe seal on a given site, it should link to an active TRUSTe validation page hosted on If it doesn't, you may have visited a fraudulent site.

The use of SSL (Secure Sockets Layer) and a digital certificate provider ensure your customers' sensitive data is protected during its transmission to your secure server. This protection comes via encryption. Encryption involves encoding the information through a public key in your customer's browser, then decoding it through a private key held only by you (or those you authorize). By using a digital certificate provider (like Symantec), the holder of the decryption key is validated as the correct owner and can then use the data as they need.


BBB Online Seals and Privacy Policies

Once you have been in business for one year, you can apply for inclusion in the Better Business Bureau's Online Reliability Program. In 2010, it had 70,000 participating merchants. To get into the program and display its seal, you had to do the following things [source: Barlow]:

  • Agree to abide by its communications standards, which call for truth and accuracy (no deceptive or misleading ads)
  • Agree to share info about your business and its operations with consumers (no surprise fees, for example)
  • Clearly state your privacy policy, safeguard customers' information and abide by their email preferences
  • Honor any representations you make to customers, respond to their questions and follow the BBB's dispute resolution procedures
  • Take precautions when marketing to kids

Keep in mind the BBB doesn't endorse companies, so don't add any text to your site saying you're BBB-endorsed.


You must have a privacy policy and a usage policy for your new business website. These policies state how you intend to use the information, personal and otherwise, that you've collected from product orders. When writing your policies, make the language easy to understand and clearly state how customers' information will be used. It's generally recommended to give consumers the option of not sharing their personal information (assuming you're planning on sharing the data you collect with others).

If you will definitely be sharing their information, state with whom you will be sharing it. Remember to include a statement about how you use cookies. Many people are still not clear about how cookies work, and are not comfortable with the idea. You may also want to set up your system so that it doesn't rely on cookies, since many people have them disabled in their browser.

Once you've written your policies, place links to them in conspicuous spots on your home page and ordering pages. Finally, keep in mind there's no messing around here. You have to follow your own policies to the letter or you may be in violation of the FTC Act, which bans unfair or deceptive business practices [source: Federal Trade Commission].


Website Merchant Security

OK, so we've talked about how to make your customers feel more secure, but what about you? What about your liability? What about your losses? Merchants and financial institutions are the ones who pay when credit/debit card fraud occurs. According to the August 2013 Nilson Report, this fraud amounted to a staggering $11.3 billion in 2012; card issuers had to cover 63 percent of those losses, while merchants ate the other 37 percent [sources: Kiernan, The Nilson Report]. There are some ways you can keep such fraud to minimum. Here are a few of the best ones [source: Campbell]:

  • Keep a record of credit card numbers. If one customer enters five or more different ones, especially in one day, it's likely fraud.
  • Make sure your system requires credit cards' security code.
  • Watch out for transactions with different billing and shipping addresses, especially if the order asks for expedited shipping. They're not necessarily fraudulent, but often are. If the order is large, try to match the phone number given with the shipping address.
  • If the customer is -- or appears to be -- a business, check the Web address (often the last part of the email address is the Web address). If the website doesn't match the information you were given, don't fill the order until you can verify further.
  • Check the IP location and credit card address; they should match. Or restrict IP addresses to countries where you ship.
  • Watch out for orders that originate, or are to be shipped, out of the country.
  • Restrict the number of times someone can enter incorrect credit card information.


Build Your Own Website: The Easy and the Hard Ways

You can design your own website using a template, or if you're HTML-savvy, from scratch.

Building and designing your website can be simple or very complicated. It all depends on the tools you use, the functions you need on your site and your skill level. If your site doesn't require a lot of interactive features or complicated graphics, you might wish to use one of the template- or wizard-based design tools available for sale, or offered free by many Web hosts. If you go this route, make sure you get software specifically for designing a storefront so you'll have shopping cart and commerce tools available. It may also make sense for you to initially set up your site using this type of software. Then, if your business grows, redesign the site with a program that has more features and gives you more flexibility. Or have your site redesigned professionally. This way you're taking less of a gamble with your time and money.

If you're up to the challenge, designing your site using a traditional Web-authoring software program can give you a lot more control over its look and feel, and even its functionality. You can add a lot of things like rollovers and simple animations using these programs. But -- and this is a pretty big but -- it takes time, skill and a little creative talent. If you've never worked with HTML or Web pages and don't really understand how they work, then it's going to take you quite a bit of time to get a good site up and running. If time isn't an issue, then you may be fine. But it will definitely be worth the effort to get some training in a specific WYSIWYG Web editor program or in HTML (HyperText Markup Language), the code behind most Web pages and the Web's most common language. You can get free HTML training at


Whether your build your own site or have someone do it for you, you'll want to learn how to optimize it. That means adding certain words or codes that will enable your website to be found by search engines, like Google. All your Web pages should have meta tags, which are hidden from the viewer but give the title of the page and a brief description about it. You can also put similar tags on your page images. The text on your Web pages is also part of search engine optimization [source: SmallBusinessWebsites].

Optimizing your website can be a complicated issue so for more information, read our article How Promoting an Online Business Works.


Build Your Own Website: Digital Images and Graphics

Good visuals are critical to building an attractive website that will entice shoppers to stop and take a look. There is a lot of free clip art out there, but many times it looks, well, cheap. And if visitors see the same graphic on your site and several others, that doesn't give them the best impression about any of the sites. If possible, create some of your own graphic icons and images using a good illustration program like Adobe Illustrator or Corel Paint Shop Pro.

With an illustration program you can create vector images. These, as opposed to bitmap images, are editable, scalable and usually small in file size. While bitmap images can be edited, you need an image-editing program like Adobe Photoshop in order to change individual pixels or add filters or special effects. But the image's size can't be increased very much without loss of image quality and a big increase in file size.


Another option is to purchase some higher quality clip art. Getty Images' PhotoDisc offers high quality photo images and artwork that isn't always that expensive, particularly for the lower resolution images you would need for your website.

Build Your Own Website: Creating Your Own Images and Illustrations

If you're selling products on your website, you'll need photos of them. You can take them on a digital camera or your smartphone. If you're using a camera, set it to low resolution (probably 1280 x 960 pixels) because website pix are limited to 72 dpi (dots per inch). A larger or higher-resolution picture will only make your Web pages take longer to display. Edit your photos so they're the proper size, then upload to your site [source: Small Business Websites].

A few quick photo tips: Use two light sources to avoid shadows and a tripod to ensure crisp pictures. Get two medium-gray foam boards from any office supply store -- one to set your product on, and the other to put behind it. Gray is a nice, not-too-bright, neutral color that will show off your products to their best advantage [source: Small Business Websites].

Most Web-building companies offer templates you can edit to suit your needs. Find a basic look you like, then tweak it to fit your style, changing the color, font, you name it. Or start with an industry-specific template and fill with industry-specific images, which are often offered as well. Remember, though, that the look you create should fit your business' image. You might personally like rainbows and bright colors and big, loopy fonts, but those probably wouldn't be appropriate if your business sells, say, caskets.

Website Design Tips

Whether you're building your site from the ground up or modifying a template, keep in mind the following points.

  • White space is your friend. Websites should never appear cluttered. That's not inviting. They should have a good balance of graphics, text and white space. Less is more.
  • Tell them who you are. When someone lands on your home page, it should be immediately obvious what your company sells.
  • Make navigation easy. Don't make visitors guess where they can find your phone number, or how to narrow down your women's shoes selection. It should be blatantly obvious.
  • Give them what they need. Don't make your site too text-heavy. Keep information short, bulleted and to the point. If you're selling relatively complicated products with a lot of specifications, let them access the info via links, pop-ups and the like. If you're selling a lot of similar products, create a table comparing them. You can also include interactive tools that compare products the shopper has selected from your product line by clicking a check box next to the item, and then clicking on a "compare" button. A table then comes up that compares those items side by side.
  • Put contact info front and center. Make sure customers can find you in the real world if and when they need to do so. Even if your business exists solely in cyberspace, you should still have a physical address or P.O. box and a phone number where someone can contact you if they have a question -- and it should be easy to find, not hidden five clicks away. This gives customers a higher comfort level that your business is legitimate.
  • Don't forget the SEO. Search engine optimization is critical if you want people to be able to find you easily. Incorporate the information search engines look for into your pages as you design them, or hire someone to do it.

Adapting Your Website for Mobile Devices

Responsive design ensures that a website looks good whether viewed on a laptop, tablet or smartphone.

A 2013 report showed that 40 percent of Internet time was spent on mobile devices [source: Sterling]. And that number has only grown since then. So, your website had better look good on tablets and smartphones as well as computers. This can be a challenge, particularly with hand-held devices. Sometimes a design that looks great on a large screen is too cluttered on a small one. So, your first step should be to examine your layout on a smartphone or using the link at Google mobile-friendly test. If you don't like what you see, here are some tips to improve its look [source: Schenck].

  • Use simple page designs and large font sizes
  • Make your clickable buttons large, so the viewer doesn't accidentally hit two of them at the same time
  • Put key information (like the shopping cart symbol or contact information) near the top of your homepage

You can create a mobile version of your existing website that will link to your main site for free or low-cost, using a service like Mofuse. But an even better strategy is to rebuild your website so it auto-adjusts to match the size of the mobile device. This is called responsive design. If you're hiring a design company (and it may seem like the preferred option with all the extra steps you must perform), make sure you tell them you want a site that will look good on a PC, a tablet and a smartphone. Google also offers a guide on how to make your site look good on mobile devices — as well as be found by its search index.

Web Design and Web Hosting Firms

So maybe after reading all of this you've decided your best bet is to hire a professional. Prices vary, and will increase if your site is complex. Remember that while you'll save a lot of time hiring someone to do this for you, you'll still have plenty of work to do. You'll need to provide the person or company with text, images of your products and design ideas. And you'll have to proofread and test the site. Still, it's a lot less work than doing everything yourself.

Your relationship with your website host is an important one. You depend on them, and they depend on you -- and that can be good or bad. Poor customer service and support when problems arise (which they probably will at some point) can cost you a lot of money in lost sales and bad first impressions for the visitors arriving at your site while the problem persists. So make sure you get all of the facts about a host before you move forward.

A Web hosting firm leases space for your Web files on its server, which has a direct connection to the Internet. You can either choose a virtual Web host that allows you to use your own domain name, or a nonvirtual web host that will give you a subdomain name that uses its primary domain name. For example, using a virtual Web host, your address might be, while using a non-virtual web host, your Web address could be There are some non-virtual web hosts, however, that will let you use your own primary domain name, so be sure to ask.

The good thing about non-virtual Web hosting is that it is usually free. But its tools and capabilities are usually limited, which is why most businesses look for a virtual Web host. The most affordable virtual Web hosting is through a shared package, which means your host has a single server serving multiple websites, not just yours. Look for Web hosts offering 24/7 customer support and easy options for expanding your site if and when you grow [source: Rashid and Wilson].

Web Hosting: What to Look for in a Host

Before you can look for a website host, you first need to figure out what you want your site to do -- now, and several years in the future, as your business grows. Once you've determined this, start comparing hosts' packages. Most should provide you with the following [source: Web Hosting Secret Revealed]:

  • Site statistics about how many visitors are coming to your site and which pages they're visiting, plus info on the amount of time they spent on your site
  • FTP software for uploading your Web files to their server
  • Email accounts and auto-responders (for messages like, "Thank you -- your order is being processed.")
  • E-commerce tools like easily-customized product order forms
  • A dedicated IP
  • Regular site backups
  • One-click shopping cart software
  • Secure Sockets Layer (SSL) capabilities and other security measures
  • An easy, intuitive control panel that lets you do administration functions for your site from your browser

There are other features hosts offer, so it's important to investigate your options. It's also helpful to speak with other online business owners to see what their host experiences have been like. See what tools they use and what tools their hosts provide. Ask how many problems they've had with their host and anything else you can think of to help you put a list of prospective host candidates together. Get as many recommendations as you can.

Web Hosting: Screening Potential Hosts

Once you have a list of potential hosts, ask the following questions regarding their services [source: Farin]:

  • What's the cost?
  • Are there any set-up fees?
  • Do you offer design or programming services?
  • What is your support like? (Look for 24/7 full, technical support with guaranteed response times.)
  • Will you have a firewall to protect my site from hackers?
  • How many websites will I be sharing a server with?
  • What's the process for canceling my account, and will I be charged a fee? (You should be free to cancel at any time.)
  • What tools and software do you offer?
  • What is your uptime guarantee, and how will you compensate me for lost time? (You can have your site uptime monitored by AlertSite or NetMechanic.)
  • How much data transfer (or bandwidth) do you offer?
  • What is your backup method and schedule? (There should be daily, off-site backups.)
  • How much space can my site use?
  • What are your upgrade policies if my site grows? (Beware of hosts offering unlimited data transfers and site storage. Those options cost them money, and they're gambling your site won't use as much as you think. But if your usage increases, you may be stuck with additional charges.)
  • Do you have a list of clients I can contact as references?

Make sure to contact all references given and ask about any downtime they've experienced and how closely it matches what they were told is the norm; how they've been reimbursed for this downtime; and about the quality of the customer support and service. Then test the potential host's customer support by sending them an email and seeing how long it takes them to respond. Or call them at random times and see how helpful and accessible they are. The main thing here is to do your homework.

Lots More Information

Related Articles

More Great Links

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  • Brooks, Chad. "Accepting Credit Cards: A Small Business Guide." Business News Daily. May 12, 2014. (April 29, 2015)
  • Brooks, Chad. "E-Commerce Websites: How to Start an Online Business." Business News Daily. April 7, 2014. (April 29, 2015)
  • Campbell, Anita. "10 Tips for Preventing Online Credit Card Fraud." Small Business Trends. Sept. 12, 2013. (April 30, 2015)
  • Farin, Michael. "10 Questions to Ask Your Web Hosting Provider Before Things Get Serious." June 24, 2014. (May 1, 2015)
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