How Much Capital Should You Devote to an Online Business Venture

There are many reasons why you may be considering a venture into the world of online retail sales.

Perhaps you are attracted by the freedom to pursue your dreams or you are enticed by the notion of setting your own hours.

While these are but a handful of the benefits to be enjoyed, we also need to remember that any online business requires capital to succeed.

Although the levels are generally lower when compared to a brick-and-mortar operation, it is inevitable that you will incur costs along the way.

This brings up an important point. How much money might you need to devote and are there any general guidelines which should be followed? If these questions are slightly concerning, you will be happy to know that the associated answers are only moments away.

Calculating Initial, Ongoing and Predicted Costs

We first need to stress that every business is associated with its own level of capital outlay.

For instance, those who are offering intangible services (such as paid bloggers and social influencers) will enjoy a greater level of fiscal freedom compared to freelancers who are producing a physical item (such as t-shirts or jewellery).

Thus, the exact expenditure is dependent upon your speciality. There are likewise a handful of additional costs which are normally unavoidable:

• Website development
• Dedicated marketing campaigns
• Obtaining a viable e-commerce solution

This third point should be highlighted in greater detail, as open-source packages such as WordPress are sometimes unable to meet modern retail requirements.

This is why a growing number of freelancers are choosing to work with cost-effective platforms such as shopifyplus.com. While this will require a slight financial commitment, price and value are often one in the same.

All About Proportions and Comfort Levels

Assuming that you have calculated the costs highlighted above, you need to determine whether they are economically viable.

It is normally wise to devote no more than 15 per cent of your total working capital towards any project. You could otherwise begin to place your long-term liquidity in jeopardy.

Many entrepreneurs make the mistake of going “all in” when developing a website and establishing an online presence.

Although this may appear to represent an admirable approach, it is also quite dangerous.

Those who are bereft of any type of financial buffer could encounter real problems if an unexpected event arises (such as delay in product development or the need to devote more funds towards marketing research).

In other words, always try to find a comfort zone in terms of how much you are willing and able to fiscally commit at any given time.

Financial prudence is key if you hope to leverage the power and scope of the Internet. This type of discipline will often be the main factor in regards to the success or failure of your venture.

Keeping the suggestions mentioned above in mind and knowing your personal limitations will enable you to make informed decisions while minimising your overall fiscal exposure.