how much does it cost to run an online business

Summary

I get this question a few different ways. what does it actually cost to start an online business, and what are the hidden expenses nobody warns you about. here’s the real answer from someone who’s been doing this for over a decade.

1. start with what’s appealing about online. there’s no brick and mortar lease, no commercial space. the trade is that being found online is hard and the upside of a physical space is real, people drive by it. pick the model on purpose, not because grass looks greener.

2. front end costs. when I started, I paid for a year or two of hosting up front so I couldn’t bail on a monthly fee when money got tight. a laptop, hosting, a domain. that was it. WordPress on the back. you can do the equivalent today.

3. the platform recommendation depends on what you’re building. for content creators with a podcast or YouTube and an audience, Kajabi has it all in one spot, runs roughly $120 to $400 a month depending on annual vs monthly. if you don’t need creator tools and you just need a site, a place to manage leads, and a newsletter, HubSpot’s starter tier is around $50 a month. not sponsored, I just use both.

4. back end, the book that changed my financial life as an entrepreneur is Profit First. I’d make money all year and refuse to spend any of it because I was terrified of what the IRS would say in April. Profit First gave me a structure. money set aside for taxes, operating, owner pay, profit. I run a simplified version of it. if you do this, you’ll feel rich at a much lower revenue.

5. insurance varies wildly by business type, a general liability policy can be $20 a month for $1M coverage. shrinkability is what I optimize for, every recurring expense gets evaluated on whether I could cut it fast if I needed to. and set aside money for marketing from day one. you don’t have to spend it yet. you have to be used to spending it. that’s how the business grows. try harder.

Transcript

the question i keep getting asked

The most impactful business is the business that genuinely improves another human, a better human business. And to grow a business like this, you have to continually improve yourself. This podcast is a documentation of that thesis, scaling businesses and also personal growth. My goal is for you to shortcut this journey.

So if you’re ready to try hard, subscribe, if you like what you’re hearing, please share and enjoy. Hey, welcome to the Better Human Business podcast. Today, I’m going to be answering a question or I would say a theme of a question. So if you remember, I will answer questions on the podcast if you just email me directly Jerred at better human business dot com.

I have a whole list here. I just haven’t actually been doing questions on the podcast, but I had two or three come in along the same lines, along the same line of what it costs, like what are the real costs someone can expect of an online business? So one person was, you know, specifically asking the financial investment necessary on the front end to get going.

Other questions involved, you know, kind of are there any hidden expenses someone should plan for, like insurances, taxes, those kind of things that you don’t think about. So I’ll definitely give you my experience here. Um, when I started things, you know, I just I started to feel older every single day when I kind of answer these questions because I have had an online business for a long time, but a lot of the platforms like didn’t exist.

Instagram was I think I actually started before Instagram started online. So it’s just kind of crazy. Like the world is so much different from day one of me starting an online business to what it looks like today. But it was it actually is minimal cost. I mean, I think that’s why online businesses are.

hosting and a website

So appealing to a lot of people, because you don’t have to take that leap of getting a lease or, you know, brick and mortar space, but I will say there everyone thinks grass is greener on the other side, like, oh, you don’t have to you don’t have to get physical space. It’s like, well, physical space is somewhere that people can go and they can see and they can walk by and they can drive by.

It’s very hard to be found on the Internet. So they both have their pros and cons to which one that you want to be or what you want to do. But for me, when I started, all I had to do was pay for hosting and I used WordPress and that was literally it. I had my laptop. If we’re considering that a cost, I guess that’s another cost in there.

So we call it a thousand dollars for the laptop. And I paid for a bunch of hosting. Like, I think I paid for one or two years of hosting up front because I wanted to make sure that I didn’t like, you know, money was very tight back then. And so I did not want to have an excuse to cut a monthly fee.

And so I signed up for a very long time period where I could give myself some a runway to give this whole online business thing to work. So if you have something like that, a place where you can produce content, a place where like you and your team can manage customers and leads. And also a place where customers can go, that’s what you’re looking for.

And there are a lot of options out there, the one I recommend most often because it just has everything in one spot is Kajabi, which right now is ranging if you look, I haven’t pulled up. If you go to monthly, it’s like 150 to 400 bucks a month and then it’s 120 to 320 a month, dependent on if you want to go annual or if you want to go monthly. So that’s what you’re looking at there just to have an online business.

kajabi vs hubspot

And platforms like Kajabi are awesome. I’m not sponsored. I’m not getting paid to say anything about that. I’ve just used Kajabi in several businesses now and I like that it has all these things in one spot. Another phenomenal platform, but it’s not quite the same. It’s not specifically built for creators as HubSpot.

It costs like 50 bucks a month. You can get your website on there. A great place to manage leads. I actually, if you’re not going to be like a content creator, like you’re not going to have a podcast, I could care less about a podcast. I don’t want to do all those kind of things. Like I just need a website and a place to send a newsletter and manage my leads and customers. HubSpot would probably even be better than Kajabi.

But if you’re a content creator and looking to go heavily in that space, then I would go with Kajabi. And these are minimal fees. I think the starter for HubSpot is like 50 bucks a month. And so that’s kind of what you’re looking at just to get started. Now, this isn’t a podcast on getting leads and acquisition and all those kind of things. I’ll save that for another podcast.

And I’ve already talked about that, you know, quite a bit over the course of this podcast. But it does not cost a lot. Now, if you’re worried about like a lot of those back end costs, hey, I’m scared to be an entrepreneur. There’s you know, there’s taxes, there’s insurance. The book I recommend for kind of the financial side.

And really, I will say the book that changed my financial life as an entrepreneur is Profit First. Profit First is such an such an awesome book because I didn’t know I was always so scared of the IRS and I didn’t know what. Like we wouldn’t even spend money like I would basically make money all year and we would spend very little of it until I paid the IRS that next April, whatever my accountant said I had to pay.

And then I’d say, OK, we do have some money to spend. But like we felt poor all the time because all I would do is say this money scared because I never truly knew what I was going to end up paying the IRS. I didn’t really know how that stuff worked. I know it a lot better now. And also just using some of the profit for systems, which I’ve kind of distilled down and made a little bit more simple and run my own way.

profit first for the back end

But it helped me a ton. So if you’re worried about any of that stuff, I would just say follow the Profit First system. And if you do that in your entrepreneurship, you know, entrepreneurial career, you’re going to be doing really well. You’re going to have money set aside for your operating expenses.

You’re going to be saving money. You’re going to pay yourself and you’re also going to have money set aside for taxes. And it’s going to all be pretty spot on, you know, pretty close to what you actually end up needing in all these different areas. So definitely recommend reading that book. Now, there are other things that, you know, you can kind of get nickeled and dimed on, like all these things that you think are going to revolutionize your business with different softwares that come up and, you know, people that you could pay.

But ultimately, you really just need a platform, like I said, for a place for people to come, a place for you to manage these people. And that’s the bulk of what your cost should be surrounded in. And then as far as the back inside of it, Profit First will take care of all of the kind of your financials and you do need some insurance.

But depending on your career field and what you’re doing, like insurance can vary greatly. Like you can get general liability policy for like 20 bucks a month for, you know, a million bucks, but like a million bucks worth of coverage. But that’s going to vary so greatly on what you’re doing and how you’re doing it and, you know, why you’re even in business.

So definitely something you want to want to consider. But other than that, like the thing I look at in finances with business is shrinkability. And so we will pay for a lot of things. We’ll try a lot of services out. We’ll try a lot of new stuff. But the ability to shrink down is what I’m always looking at just in case we’d ever need to. So whenever we take on a new expense, just making sure it’s not something that’s going to be forever and something that is forever, kind of if they’re good, you know, as an employee.

set aside money for marketing

So making sure that you make sure that you have enough money to actually hire an employee because you don’t want to be in the position where you actually hired a good employee, but you miscalculated your profit or something, you actually can’t pay them. You know that those are the mistakes that you can make early on that you’re going to want to make sure that you have the money to be able to hire that first employee and get started in those things.

And then one thing I recommend to all entrepreneurs, I don’t care if you’re starting out, you’ve been in business for 10 years. Go ahead and set some money aside for marketing and start getting accustomed to spending some money on marketing. That could be Facebook advertising, Google ads, and you know, I don’t want you to just waste this money, but you need to set it aside and start spending it because that’s just, it has to become a part of your overhead.

That’s how your business will grow. If you just want to stay small and word of mouth or, and you don’t want to expand, cool, you do you, but that’s not what I want to do. And I, anyone who really wants to scale, you definitely want to start setting aside for some money for some, you know, advertising, marketing in general.

So it doesn’t have to be online advertising, but just maybe it’s a marketing event or something like that. So those are just some of the factors and costs and resources I recommend for getting started in online business. I don’t have a concrete what it costs, but I’ll tell you right now, I have multiple online businesses and the shrinkability factor, like we could go down to a few thousand dollars per month for just, this is excluding payroll just to run like the software services that we need to like keep an online business going.

All that is very inexpensive, but if you want to grow, you have to start taking out payroll, you have to plan for taxes, you’re putting more towards marketing. So you can, you can expand these things out quite a bit, but if you build on a good base where a place where you have a website, customers can go and you can also service these customers, you’ll be in a good place to start and then you just got to start funneling people into your system.

And I’ll save that one for the next podcast. Try harder.