From the May 2008 issue of Startups
Here are three questions I've recently received at AskJim.biz from budding entrepreneurs like you. Take a look and see if the answers help. And remember: Always seek excellence, not perfection. --Jim Blasingame, The Small Business Answer ManT

Question: How do I start an effective business that sells exclusively online?

Answer: The good news is that your online business will be open to millions--perhaps billions--of pro-spective customers. Very exciting, right?

The bad news is that thousands--perhaps millions--of businesses, including those that have a traditional storefront, already sell products online that are just like the ones you plan to sell. Very intimidating, right?

So how do you make sure your offerings find their way to customers? Here are three basic methods:

  1. You're not big enough to intimidate, so you must differentiate. Your value proposition must separate your business from all other competitors. Don't start your business until you know how you'll differentiate it. And remember, being the price leader isn't a successful differentiator for a startup.
  2. Make sure your website design is based on these priorities (in this order): Your value proposition and product must be very easy to find; and your product platform must work and be simple to navigate--every time. Also, keep in mind that reliability and functionality are cooler than a cool design.
  3. Become at least a semiexpert at search engine optimization. And if you don't know what SEO is, you're not ready to start an online business.

Question: How do I know when to incorporate my startup?

Answer: All businesses begin life as either a sole proprietorship (one founder) or a general partnership (more than one founder). There are a number of reasons to incorporate or form an LLC, but one good rule of thumb is to do so when business activity could put your personal estate in jeopardy as the result of a lawsuit filed against your business.

A properly formed and maintained corporation or LLC is a legal entity and therefore should provide a veil of liability protection for your estate when it comes to claims made against your business. Of course, always consult with your legal and financial advisors about the best ownership structure for you and your business.

Question: Will I need a business license for my new company?

Answer: It all depends on local laws and the kind of business you have. For example, many municipalities require a retailer, but not a consultant, to have a license. Some require a homebased business to have a license--others don't.

If you ask your city's license office whether you need a license, it'll probably sell you one, so spend some time learning about local laws and codes first. Your chamber of commerce can also offer help with local license laws.

As with any expenditure, it's best to acquire as much information in advance as possible.

Jim Blasingame is the award-winning host of The Small Business Advocate Show and creator of the small-business knowledge base AskJim.biz. You can also find Jim at smallbusinessadvocate.com.