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Types of Businesses to Start

3 Types Of Ecommerce Business Models

There’s more than one way to run an ecommerce business. Find out which one might be best for you.

Shelby Larson

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In Moonlighting on the Internet, internet entrepreneur Shelby Larson presents the most reliable and proven ways you can create an extra pay checque for the short term and establish a continual revenue stream for the long term with your own website. In this edited excerpt, Larson takes a closer look at three ways you can earn money with an online business.

There are several types of ecommerce business models you can easily get up and running quickly: Drop-shipping, wholesaling and warehousing, and white labelling and manufacturing.

It’s not by accident they’re listed in that order. In my opinion, those options are listed in order of complexity. Each is a legitimate, solid choice. However, if people getting started in ecommerce for the first time are looking to start with the easiest model and progress from there, they’d start with drop-shipping. But just because I’m telling you drop-shipping is the easiest way to get up and running quickly doesn’t mean you have to start there.

Related: The Top 5 Ecommerce Trends You Should Look Out For

Here’s a look at all three methods:

1. Drop-Shipping

dropshipping

Drop-shipping is when you sell items on your website that are manufactured, fulfilled, and shipped to your customers by someone else. Generally, these relationships are established between you and a manufacturer or a wholesaler who has a warehouse full of the items you’d like to sell.

Once the proper agreements are in place, the manufacturer or wholesaler will send you images of the products you wish to sell along with pricing. You’ll then place those items for sale in your ecommerce store. Your job is to sell the items, and the manufacturer or wholesaler will fulfill the orders and ship them to your customers.

Here’s a quick drop-shipping example. My family and I run a nonprofit reptile rescue out of our home. Because I have a passion for bearded dragons, I happen to know that people who own beardies are so crazy about them that they put women who carry little dogs around in their purses to shame. Bearded dragon owners go nuts for items for their health care and habitats and even frequently buy costumes and clothing for their animals. So for the sake of this example, let’s pretend I opened an ecommerce store that sells items for bearded dragon lovers using the drop-shipping model.

If my supplier can sell me a 40-litre breeder tank (a common enclosure for bearded dragons) for R500, I would list it on my website for R1 000. Then I would market my product through my awesome online store. Once a customer placed an order for one of these tanks, I’d turn around and pay my supplier R500 of the R1 000 I collected and supply them with the order and shipping information.

They would then ship that tank to my customer as if it came straight from my ecommerce business. Some of the benefits people love most about the drop-shipping model is that there’s very little upfront investment to be made. You don’t buy any of the products until one is ordered and paid for.

Related: This Software Is Making Ecommerce Companies Even Smarter

Once your foundation is set up with the platform you’re selling from, and your relationship with your drop-shipping partner is in place, your primary focus is driving targeted buyers to your store and providing an amazing customer experience.

Once the sale is made, that is when you pull money out of your pocket to pay for the item sold. This is a low-risk, high-reward model. You don’t have to stock any inventory or deal with the headache of order fulfillment.

Some of the drawbacks are that you have no control over the shipping and fulfillment, and sometimes your suppliers let you down. If a supplier is running behind or forgets to provide you with a tracking number, that increases your customer service responsibilities. Also, since you’re not keeping any of the inventory, you don’t always know if an item is running low. You could end up unknowingly selling something that’s out of stock. Then you have to deal with the customer service and reputation ramifications.

The good news is, if you don’t feel the supplier you’ve chosen is living up to your standards, it’s pretty easy to get out of a drop-shipping contract.

Your assets are entirely digital. It’s much easier to transition an ecommerce business that uses drop-shipping as its fulfillment model than it is if you have a warehouse full of items that have already been manufactured for you.

2. Wholesaling and Warehousing

warehouse

This model is when you buy products in bulk and store them in a warehouse somewhere. Usually people who prefer this model are selling product in volume. People most commonly use this in a B2B market as opposed to a B2C model.

Using my previous example of an ecommerce store selling bearded dragon supplies, in this case, I’d be the wholesaler who sold the tank to a B2C business owner for R500, and they’d sell it individually on their website for R1 000. Whether or not I would also fulfill the order would depend on the type of business I’m in.

With this model, you get better pricing because you’re buying in bulk instead of making one-off purchases, as in a drop-shipping business. If you’re buying in bulk and selling the items individually on your website to consumers, you also have better margins than you do with drop-shipping.

However, if you’re like most people using this model, you’re selling in bulk to businesses who are selling to consumers, which has lower margins. In most wholesale businesses, you need to create enough sales volume to make up for the smaller margins. This model also requires high upfront investments for purchasing and housing the product.

3. White Labeling and Manufacturing

manufacturing

Manufacturing is when you’re actually paying to have the items created for you. In white labeling, you aren’t manufacturing the product, but your licensing contract allows you to put your name or brand on it as if you are the manufacturer. So with this scenario, you are either manufacturing products overseas or importing them from overseas and putting your brand on them. You’re the top of the product chain at this point.

Related: 6 Tips For Converting Leads Into Clients

When you’re importing or manufacturing overseas, your margins are much higher. You get to create the product for a very low price and then sell it online for a much higher price. You also control all the shipping and fulfillment yourself; while it’s more work, it has a lot of benefits, too.

You get to control the entire cycle and always know what’s going on with the product. Also, at this point, you can take advantage of wholesalers and drop-shippers to retail your products for you.

This model isn’t for the commitment-phobic. There’s no easy way to end a manufacturing contract. You had the products made, you’ve imported them into your country, and you have them sitting in a warehouse somewhere. You also have to develop a process to monitor and maintain quality control. This is definitely an advanced model. There’s almost always a large cash investment required upfront, so you need to have a financial plan.

This article was originally posted here on Entrepreneur.com.

Shelby Larson is the founder and co-owner of Content Divas, an SEO, content marketing, and outsourcing firm started in 2007 to provide work-from-home opportunities to stay-at-home moms. This venture has since blossomed into a full-service digital marketing agency, Ember Dragon, and Moonlighting on the Internet, both of which Shelby is the owner and founder. She is the author of Moonlighting on the Internet, 2nd Ed (Entrepreneur Press, March 2016).

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Types of Businesses to Start

A 7-Step Guide To Starting Your Own Trade Business

With that sorted, it is time to get on with the more exciting operational stuff.

Morné Stoltz

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Skilled tradesmen are always in demand. Whether you are a plumber, electrician, cabinetmaker, refrigeration expert, tiler or builder, there is a ton of work out there. For many, the best way to make the most of the opportunity is to open your own business.

Where do you start? The first step is to register your business with the Companies and Intellectual Property Commission (CIPC). Look for a catchy name that is easy to spell and memorable – you do not want customers to struggle. The CIPC will tell you which names are taken. It is also a good idea to do a trademark search before deciding on a name. Register with SARS and make sure that all your tax affairs are in order.

It is a very good idea to get a good accountant right at the early stages of the game. They can also help you set up the legislative requirements for running a business. The National Small Business Chamber is a non-profit organisation that offers a range of services to its members that aim to help them grow faster, save money and receive the support they need.

With that sorted, it is time to get on with the more exciting operational stuff.

1. Finding customers

You want to find customers in order to grow your business beyond the ones you already have. These days, that means a website and some smart online marketing.

This can be as simple as setting up a Facebook page and any one of several other social media sites (like Instagram and LinkedIn). These services are at no-cost to you and allow you to quickly build up a following of loyal customers. You can share ‘jobs well done’, so prospective customers can see what you are capable of, while your contact details are easily accessible. In due course, consider some paid averts on relevant social media platforms and perhaps a website of your own. It is a good way to get potential customers on board.

At the same time, list your services in community newspapers, noticeboards and newsletters so everyone in the area can easily see that you are available and what it is you do. Also, keep your eye on social media community groups – and ask family, friends and existing clients to refer and/or recommend your services when an opportunity arises.

Finally, there are many government initiatives and non-profit organisations whose aim is to help small businesses succeed – with a particular emphasis on black-owned businesses. This help could range from facilitating access to finance, all the way to mentorship. Spend some time finding out what help is on offer. The SME Movement site also has this kind of information.

Related: How To Start Your Own Artisan Business

2. Stay focused

For those just starting out, there might be a temptation to take any job that crosses your path. Rather stick to your area of expertise to build a reputation based on proven skills. If you are an electrician with a little plumbing experience, for example, tackling a piping job could cause more trouble than it is worth. Every trade is different and you are an expert for a reason.

Leave the other work for experts in those fields – but build up relationships with them so that you can refer work to each other.

3. Ride on your qualifications and references

You have spent a lot of time getting certified. Let your customers know about your qualifications and experience by putting it on your Facebook page, your invoices, e-mails and other communications. The same goes for references; these are valuable and provide evidence of your ability to get the job done. Ask for a reference when the job is complete and then on to social media it goes. The good news with social media, by the way, is that these references do not ever go away.

4. Stay on top of the paperwork

The good old days of doing business on a handshake may be behind us. Providing quotes, contracts, invoices and records of payments electronically makes paperwork a whole lot easier by creating a digital archive where physical copies aren’t needed, but it serves the same purpose, when it is formally recorded, it is far easier to see what has been agreed to, done and paid for. Do not skimp here, even the best customer service provider relationships can go awry if verbal agreements are all you have to go on.

5. Register with your trade association (and invest in CPD)

Being a member of a trade association (like Master Builders, the Institute of Plumbing or other professional bodies) lends credibility to what you are doing. It also provides access to new customers should larger contractors need to sub-contract. Your trade association also formalises training and continuous professional development (CPD).

Related: 6 Tips For Launching Your Global Brand

6. Get business insurance

All too often, this crucial coverage is ignored by those starting out on their own. You want to protect tools and equipment on the one hand and you also want broadform public liability to safeguard yourself, your employees and your business against third party claims should something go wrong on the job. It provides cover in connection with your normal business activities and also your liability if any employees are injured in the course of work.

Putting the right insurance in place can mean the difference between staying in business for the long term or folding the minute the tools grow legs and disappear.

7. Deliver good service

Do not forget that every job is a potential reference and, at the very least, is your entry into that client’s network of friends or business associates. Concentrate on giving good service and actively request feedback so you can remedy any shortfalls. A take-it-or-leave it attitude may be relaxing, but it will prevent your business from growing to what it potentially can be.

MiWay is an Authorised Financial Services Provider (Licence no: 33970)

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Types of Businesses to Start

The Ultimate 101 List Of Business Ideas To Start Your Own Business In South Africa

Want to boost your income on a part-time basis? Looking for a new business to start and grow into an empire? You’ve come to the right place. This list of business ideas will help children, adults, men, women and even people in rural areas think about ways to become an entrepreneur.

Diana Albertyn

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the-ultimate-101-list-of-business-ideas-to-start-your-own-business-in-south-africa

Are you looking for that one idea to spark a business that will make you money? We have one hundred and one just for you!

Whether you’re a stay-at-home mom or dad looking to pursue your passion part-time, a nine-to-five employee seeking a side gig, a creative who’s keen on innovative and flexible moneymaking methods or a student at any level in your education, looking to start your entrepreneurial journey early…we’ve got the best ideas for you to choose from to kick-start your very own business, today.

This comprehensive slide show below is just what you’ve been waiting for to take your first step into financial independence. Read on to find your perfect fit and discover more about how to get started.

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Types of Businesses to Start

What You Need To Know When Starting A Tech Business

For the tech entrepreneur, the majority of your intellectual capital will reside in your software, code, databases, websites or mobile applications.

Damian Michael

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Protecting and managing your intellectual capital starts with finding, identifying and classifying your most important human and intellectual assets. Once you know what you are looking for, you can then determine whether you have the rights you need over those assets. If you don’t, you can then go about securing those rights and then select the best methods of protecting them.

Terminology

Intellectual capital, intellectual assets and intellectual property 

In the industrial and manufacturing industries, the conventional forms of capital needed to start and grow a business were real estate, factories, plant and equipment. But in today’s knowledge economy, these physical assets have largely been replaced by ideas, knowledge and creativity as the new drivers of value.

Related: High-Tech Marketing Sample Business Plan

This new type of information and knowledge-based capital is known as intellectual capital. Your intellectual capital is basically all the knowledge, skills, capabilities and work product that you and your team have to offer, together with the relationships, reputation and brand equity that your business is able to attract and maintain in the marketplace.

Intellectual capital is made up of the following:

  • Your ideas, insights, knowledge and creativity (intellectual assets)
  • The talent, skills and capabilities of your team (human capital)
  • Your contractual relationships and connections with investors, customers and other stakeholders (relationship assets)
  • Your unique brand and the reputation and goodwill you have built around it (brand assets)

In the same way as we as individuals have a whole lot of information and knowledge, some useful, some useless and trivial; your business’s intellectual capital can also be categorised according to its uniqueness, usefulness or value.

Where your intellectual capital displays these additional qualities, it may qualify for statutory legal protection. These special assets, commonly referred to as intellectual property, are bestowed with rights and protections which give the owner a period of time (limited) to commercialise or exploit them without any undue or unfair interference from others. The trade-off is that after that period of time expires, the asset becomes part of the public domain for anyone and everyone to use.

Discovering what intellectual capital you have and need

For the tech entrepreneur, the majority of your intellectual capital will reside in your software, code, databases, websites or mobile applications. Copyright law without the need to register rights or comply with any further formalities automatically protects most of these assets. However, it is still necessary to identify and categorise those assets because the ownership rights and the ways to protect them may differ between the different types of asset.

At the same time, there may also be a wealth of other intellectual assets tucked away in your filing cabinets and hard drives, waiting to be discovered. These may include valuable trade secrets, know-how, methodologies, customer learning, and market research.

Related: Tech Implementations In Africa – Staying Ahead Of The Game

Once you have linked the value drivers and competitive advantages in your business with the assets that produce them, list those assets and classify them according to the structure that they take.  Are they people-based or embedded in technology or documentation. Do any of them qualify for statutory protection?

The outcome should be an inventory of all your intellectual capital, classified according to the different levels of protection available as well as their importance to your business.  You probably don’t have the time, energy or budget to protect everything, so taking the time to do this exercise will ensure that you separate the wheat from the chaff which will save you in the long run.

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