Some people seem to be born to be entrepreneurs. Their eyes glimmer when opportunities arise and they dream of being their own boss. Maybe you are one of them. Unfortunately, there are a lot of risks associated to starting a business and not every entrepreneur can take the required leap to build a successful enterprise. Are you one of those business-ridden people looking for an opportunity that does not come with the fear of losing large amounts of money? If so, then you will most likely appreciate this low cost business idea: you can start your drop shipping e-business.
An e-Business: the Ideal Cost StructureAn e-business has the advantage of lowering significantly what is called the “fixed costs”. Fixed costs are everything that you have to pay wether you make sales or not. In a standard retail business, for example, you would need to rent (or buy) a commercial space, pay for employees (they get paid even if no client show up in the store) and for utilities like heat and electricity. So even if not a single article from your store is sold (which means earning no money at all), a “standard” business has a lot of expenses that needs to be paid.
An e-business has very low fixed-costs: pretty much the only thing you have to pay is your website fees, including web hosting and advertising. Webhosting can be really cheap if you know where to look. As for building a website, today, you do not need to hire a professional programmer since there a plenty of templates available that anyone can use to build an interesting and attractive website. Therefore, starting an e-business allows you to reduce fixed-costs drastically, which in turn reduces the risk of losing money drastically.
Drop Shipping: No Worries about InventoryA drop shipping e-business can help you reduce even further the risks you incur. Drop shipping is a specific supply chain management technique that consists in having the goods delivered directly from your supplier to your clients. Doing so implies that you never have to hold the goods. So no storage place and no initial investment in beginning inventory are required.
In theory, inventory is a variable cost: you buy what you will sell and therefore every cost incurred will generate revenues to your enterprise. In practice, though, inventory management is hard work: you have to anticipate the sales you will make and calculate the orders that will give you the maximum benefits in order to be successful. If you are wrong, you can stay stuck with left-over inventory and therefore loose the money used to buy those goods. Furthermore, in a standard supply chain management, you need to invest in a beginning inventory because you need to have something available for sale. So you have to spend money before earning even a penny. And depending on your business’ field, it can be an important investment.
With drop shipping, your supplier is keeping the inventory for you. You do not have anything to manage, you do not need to use your garage or basement as a storage unit and you cannot make a mistake. If you do not sell, you do not need to buy anything. Basically, when you get an order from a client, you get in touch with your supplier and order from him. A drop shipping e-business might therefore be the best low cost business idea you can have, as it is totally risk-free!
Getting Started: Few Simple Steps
1- Get the knowledge you need to properly start your business
If you have never built a website or used a drop shipping supplier before, I highly recommend that you acquire some basic knowledge before making any decision. There are a lot of people that are willing to share their tips and experience available on the Internet for a reasonable fee. You can choose one you feel comfortable with – I would choose someone that has a money-back guarantee – and read or watch the learning material that you have at your disposition. Remember, a small investment in knowledge is really worth it: you can learn which partners have the best services and lowest prices and gain money and time using that knowledge.
2- Choose your niche
Decide what you want your drop shipping e-business to be about. To make the right choice, I believe you need to consider two things: the market and your interests.
I would recommend choosing a market that is likely to attract virtual customers and, ideally, in which there is not too much competition. This is an important process that you do not want to neglect as it is likely to have a big impact on your business’ success. So gather information and see what industries or type of goods are more likely to sell on the Internet.However, do not make your decision based solely on what you think is the best-seller if you have no interest in it. Even with reduced start-up risks, a business will require time and efforts and if your heart is not into what you are selling, it is highly likely that you will give up before getting the expected results.
3- Choose your supplier(s)
There are more than one drop shipping suppliers. I would suggest starting your business with a partner you feel you can trust. Look at their websites, try to find independent reviews and see which one works best for you. In the beginning, you will have many tasks to accomplish, so starting with a single supplier to deal with can make it a bit easier for you – as long as he is reliable.
4- Find your domain name, hosting and create your website
This step is a bit technical; it is about getting your basics tools up. It will require a small investment. Preferably, get a domain name that is easy to remember and match your website design with the niche you have chosen.
5- Get people to see your website
This is most likely the hardest step to achieve. It is also were you will need to invest the most: in your advertising fees. However, if you test your campaigns on a small scale before spending a significant amount of money into them, you can chose the advertising that works best for your website. The sales result resulting from advertising should then easily cover the fees you have incurred. If you use knowledge acquired at step 1 to successfully design a web marketing campaign and follow the preceding steps, you will most likely have a successful drop shipping e-business. Congratulations!
Have you always dreamed of having your business but always thought you could not spare the money to get something started? Well, a drop shipping business is a great option for you! I would say initial costs could be as low as 500$ to 1,000$, depending on the marketing you decide to do. You can finally become your own boss, without taking any significant risk!