Sometimes, rapid growth ends up being the downfall of businesses. But in most cases, it’s a good thing.
Regardless of how you look at it, it comes with a number of challenges.
And¬†one¬†of those is various tax considerations.
Here’s some tax challenges to consider as you grow:
1. Watch out for Having a “Nexus of Business” in Another State
In layman’s terms, a “nexus of business” is a “sufficient physical presence” in another state. If it’s determined you have a nexus of business in a state, then you have to collect sales tax in that state.
And what a business nexus is varies by state (This is getting fun, isn’t it?). Generally, at a simple level, a “nexus of business” is an office, place of distribution, warehouse, or storage place. You can own this place directly or hold it through a subsidiary.
It’s your job to know the laws for each state. So before you establish a physical presence in that state, learn the tax implications.
2. Contractors Versus Employees
Speaking of employees, in most states they qualify as a “nexus of business.” That simply means you’ll have to pay income and withholding tax based on their state’s laws.
It’s not a huge deal. But you will want to hire a company to do payroll for you in that state. Those laws always change, and so do their deadlines for paying.
Best to let accountants handle all that.
However, you can get around it with contractors. But, there’s some challenges with contractors too. For example, you can’t hire a contractor and then treat them like an employee.
If you do, the IRS can fine you big time. And they’re cracking down on this practice because it’s growing fast and they’re missing out on tax revenue.
3. Product Taxes Change Rapidly – Too Fast For Any Human to Keep Up With
For starters, 20 states can tax out-of-state businesses with their sales tax.
That’s just the tip of the iceberg. Did you know product tax laws change about 9 million times every year?
And then there’s 12,000 tax jurisdictions in the US. Then you have all your products, plus exemptions you may also qualify for.
Fortunately, there’s tax automation software to track and adjust all of this for you.
You Can Probably Handle All Your Taxes Now, But Consider Having an Advisor
As you grow, think about hiring an expert to advise you on taxes. It’s unclear and boring work anyway.
You’re best off learning from a pro and making decisions based on their information.
So you’ve decided to take the leap and become an e-commerce entrepreneur…
It’s a good decision because e-commerce is catching on now more than ever, and part of entrepreneurial success is being in the right place at the right time.
But before you actually do it, what should you know first?
Here are a few questions and their answers:
1. How Much Money Do I Need to Get Started?¬†
The nice thing about the web is you can start any business with next to no budget. You can get all the e-commerce website features you need for $9.95 per month.
You’ll also have to figure your own costs as far as initial products you’ll need to purchase and have on hand, any additional staff beyond you, shipping costs, a computer, a domain name ($12 per year) and that’s really about it. You may need to hire additional services too for things you can’t handle like internet marketing/SEO.
2. How Quickly Can I Start Making Money?¬†
That depends on a lot of factors. One of the primary is if you use PPC marketing (those paid ads you see when you search on Google that appear at the top and sides of the Google pages). That can bring in quite a bit of business in a month. But you have to watch it carefully (or pay someone else to) because your costs can quickly go out of control.
If you aim to get found in the 10 organic search results on page 1 of Google, that takes lots of time and hard work. It takes literally months, and maybe years before you rank.
3. What’s the Biggest Barrier for Customers Buying Online?
According to this post, 30.8% of survey respondents get frustrated because they can’t see or touch your product. If it’s possible at your business, send them free samples and make it very clear on your website that you offer this.
4. Is It Easy to Make Money Online?
No – it’s hard work. If someone’s telling you that it’s easy to do, they know you’re very new to running a business online. Most likely, they want to sell you an e-book, coaching, or course of some kind if they’re telling you it’s easy.
5. How Do I Increase My Sales?¬†
If you’re new to business altogether, what makes selling easiest is finding your unique selling proposition. Also called your “USP,” it’s what makes your products different than all the other similar ones available.
You have to research it very carefully before launching. You may think your product is different, but to your market that may not be the case.
You can test your product before you even have it made. Launch it on one of the crowdfunding sites like Coin did. They raised their goal of $50,000 in 40 minutes!
Wrapping it Up…
If an e-commerce website will be your first business, just know it’s not a straight road. And it’s not easy either. If you’ve run your own business for years and are new to e-commerce, just prepare for many more rapid-fire decisions!
Some people take the “try and fail” approach, while others learn from the mistakes of those who traveled the road before them. If you’re going to do it on your own, it’s going to take an awful lot of time to “fail your way forward.”
Instead, check out these common questions and answers about e-commerce, and cut your time to success in half:
1. Should You List Products on Amazon and eBay?¬†
You can, but their fees eat up your profits. It’s very hard to make a living only selling products on these websites. And, if you’re trying to sell these products, they’re very rarely high-margin. Competition is intense too.
You should avoid selling your products on these websites, even if they seem like a good idea.
2. Which Shipping Service Should You Use?
It doesn’t matter, but what you should know is they do lose packages with regularity. This is true for all major companies. Make sure you get insurance when shipping all items.
3. Does Fraud Happen?
It does, and to e-commerce companies of all sizes. If you’re getting a bunch of orders, and one suddenly looks strange, don’t be afraid to cancel it if things don’t add up.
4. What’s the Best Thing You Can do to Help Your Customers Immediately?
You absolutely need to be very clear on your offers and shipping policies. Nothing’s too obvious to say anywhere on your website. Make things crystal clear – so clear that even a 6th grader could understand what to do.
5. What Security Steps Do I Need to Take?
Your website must have its own unique SSL certificate. All you have to do is Google the term to find issuers of this, and plenty of options will come up.
6. How do You Charge Enough for Shipping?
This is actually fairly difficult. First, you have to know which companies you’re going to use. They do offer tools that integrate with your website to help you make these calculations automatically.
You don’t want to calculate the shipping at the time of the sale, as that makes customers angry. What you’ll have to do is come as close as possible, but then add in some room for error as well.
7. Can You Stop Customers from Abandoning Their Shopping Carts?
You cannot control this, but you can make it less likely it will happen. By making their shopping cart experience as smooth and simple as possible, that helps reduce shopping cart abandonment.
You can also install a feature that sends them an e-mail a few days after they abandon their shopping cart, asking them if they remember that they did this. You could also offer them a 10% discount for following through on their order to encourage them to buy.
Hope those answers to common e-commerce questions help, and think about all the time (and stress) you could save!
“Think it through before you say and do,” was one of the quips my high school math teacher made so regularly. ¬†And, he very much hit the nail on the head.
It takes some experience in life before you really get what that means. ¬†How does that apply to e-commerce? ¬†Here are some things to think through before you actually open your store:
1. ¬†How do You Start Building the Store?
There’s a number of ways to do this. ¬†You can build it yourself (if you’re a very skilled programmer and have a lot of time available). ¬†You can hire someone to do it (very costly). ¬†Or, you can use a template that you set up with a few clicks, like the one Fortune3 has available. ¬†Then, when revenues increase, you can think harder about more custom modifications.
2. ¬†What Payment System Should You Use?
Paypal is the easiest to use, ¬†and the most trusted, but it has pretty killer fees. ¬†You might also consider using Authorize.net, which charges a $99 setup fee, $20 per month, and 10 cents per transaction. ¬†If you want to accept credit cards, set up a merchant account with each individual company.
3. ¬†How Should You Calculate Shipping Costs?¬†
With the larger shipping companies, they can calculate this for you at no additional charge. ¬†You can even have these costs calculated right into the prices of your products. ¬†If you can offer free shipping over certain purchase amounts, then do so – it could be a competitive advantage that gets you more business.
4. ¬†How Do You Convince Customers to Purchase Your Products?
Make sure your products have clean, crisp images viewable from all angles. ¬†Don’t use the manufacturer’s product descriptions! ¬†They stink. ¬†Instead, either hire a copywriter to create better ones for you or write some yourself, making sure you highlight the benefits they provide and the features that make those benefits possible. ¬†If you can add videos, do that too. ¬†Reviews are also helpful as well.
5. ¬†How Should You Handle Returns?
“The customer is always right…even if they’re wrong.” ¬†Follow this mantra when doing returns. ¬†Even if the customer is being ridiculous, do what it takes to make them happy at least twice. ¬†If it’s anything more than that…well you can’t make everyone happy.
A gracious return policy makes customers feel at ease when purchasing from you, which makes it more likely that happens. ¬†Additionally, when people realize you honor your return policy, that builds your reputation.
6. ¬†Should Customer Reviews be Allowed?
The answer is a resounding “Yes!” ¬†Good and bad feedback help your store. ¬†Good feedback shows other customers what products to buy, and you get to know what you’re doing well too. ¬†Bad feedback is an opportunity to make your store a better place for more customers. ¬†If people consistently give certain products negative reviews, remove the products and find better ones. ¬†It’s invaluable market research physical stores simply cannot get.
So if you consider these six things prior to creating your e-commerce store, you’ll be better off when it launches. ¬†Enjoy a smoother running business and more profits!
Got questions? ¬†Let us know in the comments below:
Getting started, and remaining competitive in any industry is a challenge.
How do you do that in the e-commerce industry?
Here are the answers to some commonly asked questions:
1. ¬†Q: ¬†How do I get my first customers?
A: ¬†That’s never easy, but there are a few things you can do. ¬†The fastest way is through PPC. ¬†Those are the paid ads you see at the top and right of Google searches. ¬†You can get a campaign going in a day or two and customers start coming right away. ¬†Be careful though, as it can get expensive fast. ¬†Monitor your costs constantly.
Option two is to use organic SEO to rank for keywords that people use to find ¬†your products and services. ¬†That takes time though – sometimes upwards of 6 months or more, and possibly even 12. ¬†Once you rank on the first page of Google, however, it’s very cost-effective.
Option three is to become a seller on popular websites like eBay and Amazon. ¬†As you build up a reputation there, people will click through to your website. ¬†Again, that’s more long-term though.
2. ¬†Q: ¬†Should I use a custom or template web design?
A: ¬†Template designs are much cheaper and custom designs can easily cost $10,000 or more. ¬†If you don’t have a huge budget for starting out, use a template design that you can customize on your own. ¬†Eventually, you’ll want a unique brand online because that’s what people buy from the most.
3. ¬†Q: ¬†How do I make sure I’m charging enough for shipping?
A: ¬†That’s a tough one! ¬†Ideally, if you can, just build it into the price and offer free shipping both ways. ¬†Zappos does that and it works well. ¬†But, they sell a premium product so they can afford to do that.
It’s something you need to calculate out and decide your own approach on it. ¬†For example, if someone buys 10 books from you, you’ll be shipping them as one unit, which could cost less than shipping each individually. ¬†Figure out the worst-case scenario, speaking in terms of cost, and assume that cost will always happen. ¬†That way, you’ll end up with money you didn’t initially figure on having.
4. ¬†Q: ¬†Can I Prevent Customers from Abandoning their Shopping Carts?
A: ¬†No you cannot, but you can reduce the chances of this happening. ¬†Use a light cookie to store what your customer had in their cart. ¬†That way, they don’t have to supply you with their contact information right away, which can be a turn off to many customers. ¬†At the same time, if they choose to come back, everything they were considering purchasing is sitting right there.
5. ¬†Q: ¬†How much should I budget to start my site?
A: ¬†That is a very, very broad question. ¬†At the entry level, you can pay a low monthly fee with an e-commerce template seller. ¬†That’s good for getting started, especially if you have absolutely no money to begin with. ¬†Then, as you grow revenues and need more powerful hosting and additional custom features implemented, you can purchase more features.
Fortune3 Offers an E-Commerce Solution with a Risk-Free 30-Day Trial
Packages begin at $24.95, which gets you up and running in no time. ¬†And, we offer every possible service ¬†you could need in order to get your online store off the ground. ¬†Check out our e-commerce solutions.
Q: Our website has been hit with either the Panda algorithm update or the Penguin algorithm update, we‚Äôre not really sure. What can we do to get our websites rankings up or improve the current keyword rankings?
A: Great question. As you may know, many websites were hit or I should say affected by the current algorithm changes by Google. We choose this question as our last post was exactly about this. [SEO for Ecommerce: Understanding Panda and Penguin Algorithm Updates.]
Being penalized is never an easy thing to overcome ‚Äď actually ‚Äď it‚Äôs a real challenge but you really don‚Äôt have any other choice but to analyze your website and see where there is room for improvement.
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Q: How long will it take for search engines to list our ecommerce website once we set everything up and go live with our domain online?
A: ¬†There‚Äôs two ways to look at this question as there may be two insinuations from most people who ask this very question.
As far as Google or any search engine actually listing your domain once it goes live it can take a few hours to maybe 1-2 days. This really depends on what you do yourself for the search engine to find your website, crawl it and list it.
HOW TO GET IT LISTED FAST:
Links are everything. If you add a link to a website that Google crawls, then Google will follow that link into your website, crawl it and index it. So, for example, let‚Äôs say you decide to launch right now and your website is live but it‚Äôs brand new. What can you do? One thing you can do immediately is go to Twitter and tweet about your website and add a link.
Another thing you can do is create a Google Webmaster Tools account and there is a feature there that allows you to send the Google bot to fetch your website thus indexing it. Visit the Google webmaster tools here: www.google.com/webmasters/tools/
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Tags: index website, search engine optimization, seo Posted in
Q: We‚Äôve launched our website about 10 months ago and started with heavy PPC advertising to drive traffic. Over the last few months our SEO has improved but not enough to let PPC go. What are some ways we can attract more customers to our website? We care more about conversions than traffic.
A: That‚Äôs a great question and one that every internet retailer that launches has. How to drive more traffic, right? That seems to be the holy grail to success and sales, of course.
You have the right focus and mentality when it comes to making sure it‚Äôs mostly about conversions and not just traffic.
Pay-per-click is a great way to generate traffic and launch an ecommerce business. After a few months, you really need to analyze the data and make sure you‚Äôre getting the best possible ROI. Analyze what keywords are converting best and what ads are getting the best click through rate. This all comes into account with how much you‚Äôll be paying per click.
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Q: I received a call from a company called ‚ÄėEcommerce Positioning,‚Äô about getting better search engine placement for my website and said they work with Fortune3 and their customers. Is Fortune3 affiliated with this company? Is Fortune3 affiliated with any other SEO companies to help the SEO of their clients?
A: Fortune3 DOES NOT work with any other third party or affiliated with any SEO companies to serve its customers for search engine optimization. At Fortune3, we have our own search marketing and search engine optimization team to help our customers with their online marketing needs.
Fortune3 highly recommends that you perform searches and due diligence before engaging in business with any 3rd party, particularly with “marketing” companies that contact you, as these are known to be largely fraudulent or scams, charging excessive amounts of money for unnecessary and worthless changes, and no results produced. Performing a Google search for Ecommerce Positioning will provide you with their BBB ranking of D- for having a large number of complaints and several horror-like stories on sites like ripoffreports where customers have been ripped off to the sums of tens of thousands of dollars.
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Q: We‚Äôve had our ecommerce website for a little over two years and have had the same design for some time now. When is it the right time to change the design on the website or when should you consider a website redesign?
A: Website redesigns are something to strongly consider and I believe to be different for many industries across the board. In general, it‚Äôs important to always keep changing the look of your website as you do not want to look like a ‚Äėstagnant‚Äô website or business to consumers that may be coming back to visit your website and see the same ‚Äėol.
Changing your websites design lets consumers know you are an active company. Also, as it goes for any ecommerce business, certain products, not all, have seasonalities. Sometimes you have new products you want to really showcase, sometimes you may have sales that you really need to showcase.
A redesign should be implemented as your business demands it. Always keep an eye on your competitors and see how they are changing things up. That is to say, look at the biggest players in your niche, not the small websites that you are competing against.
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