Starting an online business is exciting times. There's a whole slew of things to do, learn, and experience. The sky's the limit and the possibilities are endless, but at the same time, there are some serious pitfalls you can fall into as a new entrepreneur. Surprisingly enough, here are 3 things you should hold off on doing when starting an online business.
1. Coming up with a business name
During the initial stages of your business, you might have an idea of what you want to do with your business, but the idea hasn't translated into a full-fledged plan yet. Knowing that you'll be changing things up as you go, it's actually not smart to come up with your business name right away.
For instance, your company name should match the brand identity of your business. That's going to be hard to pull off if you're not even sure what your company brand is going to be yet. If you want to market yourself as a premium brand that offers high-quality products at high prices, you'll want a business name that exudes that sort of premium feeling. However, if you want to go the cheap and affordable route, you might want a name that reminds everyone of just how much of a bargain your prices are.
It's also hard to come up with a company name if you don't know the exact scope of what your company is going to sell. For instance, you might have your mind set on starting a video production company aimed at creating promotional videos for other businesses. The problem is, there are a lot of different types of promotional videos. Are your services going to focus on creating animated videos or live action ones? These are the type of questions you might not have answers to just yet, and it could have a huge impact on whether you want to go for a more generic name like "VideoYouToday" as opposed to a name that emphasizes your animated video services such as "AnimationNation."
2. Hiring employees.
Every business needs employees right? Well no, not quite - at least not on the first day anyways. Online businesses tend to ramp up in popularity more slowly than brick and motor stores. Don't expect customers to come flooding onto your website the moment it's launched. In fact, chances are you'll have close to zero visitors on your website until you find a consistent source of web traffic, which is something that isn't going to just happen overnight.
Also, when you do eventually get your first customers, don't jump the gun and think, "oh, so now's the time to start hiring!" Unless your business is truly killing it right from the get-go, chances are you're only going to get a couple customers here and there. It's not going to be a steady stream of sales coming in day in and day out the way you might have imagined. With that in mind, it's usually best to handle your initial few customers yourself or use an online freelancer as a one-time sort of deal. If you hire a full-time employee to fulfill your orders, chances are your first employee is going to be sitting around doing a whole lot of nothing for the majority of the time.
3. Choosing a business location.
Deciding what state to incorporate your business in can be really complicated stuff. For various reasons, instead of incorporating in your home state, you might find it more beneficial to incorporate in business-friendly states such as Delaware, Wyoming, or Nevada. However, there's really no need to decide on a business location right away.
By default, without filling out any complicated forms or officially registering your company, your company will be considered a sole proprietorship. The revenue you earn from your business will be filed under your 1040 individual income tax form just like everyone else. Once your business is more developed and you get a clearer idea of what your needs are, then you can go ahead and better assess the benefits of filing in each state.