You’ve likely already read online articles, such as this verfacto article, on what dropshipping is and the basic principle behind it that makes it work. Now, you might be thinking you would like to take the next step and set up your own dropshipping business. And that’s great! However, you shouldn’t let your excitement let you rush through the entire process.
It is vital to plan your business accordingly and make sure you’re aware of the various aspects of starting dropshipping. There are some things you may want to consider and plan in more detail to figure out if you have both the finances, commitment, and time to manage it.
Dropshipping requires consistent effort
The most important thing is that you need to set realistic goals and expectations for your business. Though it is possible to get a high income from dropshipping, it will take a considerable amount of time and effort in order to make it happen. This is important because when you have realistic expectations, it is easier to maintain your motivation and keep pursuing your dropshipping dream.
Investing time and money
You will have to put in both time and money to build up your dropshipping business. However, you can choose to invest more of one over the other.
It is best that you invest more time into your dropshipping business wherever you can. Not only will it help you save money, but it will also give you greater insight into market trends and customer behavior, and it also helps you understand what works and what doesn’t for a business. This will ultimately make you a better business owner and entrepreneur, and allow you to take that growth to apply to new sectors and markets with little difficulty.
It is difficult to find time to invest in your dropshipping business, and that may make you feel discouraged. However, it is definitely possible to get your dropshipping business off the ground while also holding a normal job. By setting your target goals accordingly, you can build incremental steps to setting up your business and meeting the needs of your customers. You don’t need to hop over into doing dropshipping full-time until you have secured a regular cash flow and sustainable profits.
If you can afford to do dropshipping full-time, we highly recommend that you skew your efforts towards marketing your business. Especially at the very beginning, getting a lot of marketing in is vital to drawing in customers and getting the ball rolling for your business. It will also introduce people to your site and what you can offer! It often takes a year working on your business full-time to get your annual income to $50,000.
Though it may not be a lot of money, it is important to be cognizant that most of the effort to set up a dropshipping business is in the beginning stages, and that your business will be easy to scale up when needed. Your business is also an asset that you’re developing, which means that you could also sell it off to someone else if you choose to.
Putting in the money
You will need to put in some money in order to get your dropshipping business going, but you can put in a lot more money in the place of time. We do not recommend this approach, particularly for first-time entrepreneurs, as this will not allow you to have your fingers on the pulse and not help you understand the market or your business as well as you should.
It’s important to be deep in touch with your business and invested in making it succeed. If you aren’t fully clued up on how much you’re making and all your expenses, you will soon find your business falling under you. Hiring people to do the difficult parts for you is sometimes necessary, but you need to make sure that the cost of having them under you isn’t eating away at your bottom line. Doing it yourself allows you to cut the fat off of your business and allow it to run as efficiently as possible, especially so at the beginning of the business when your cash flow is still fluctuating and inconsistent.
Keep some money on hand in order to sort out the minimal operational costs like hosting and supplying as well as any fees for setting up your business.
Legalizing your business
Once you’ve done your research and have assessed that dropshipping is a viable opportunity for you, you will need to decide on legalizing your business and what business structure you want to register as.
The simplest structure to register under is a sole proprietorship. This offers minimal personal liability safeguards, which means that your personal finances and assets are also liable if your business gets sued. With this structure, you report your business earnings on your own taxes.
Registering as a Limited Liability Company (LLC) is an option that offers greater personal liability protection, as it makes your business a separate legal entity. This option is taken by a lot of dropship business owners, but it does require you to abide by filing requirements and additional fees.
C corporations offer the largest amount of liability protection but are expensive to set up and also potentially more expensive to run as well.
It is best to consult a lawyer on which structure is best for you before deciding. You may also need to apply for a local business license depending on where you live and what laws apply to dropshipping.
It is important to draw a hard line between your own finances and business finances. If done well, you can make accounting for your incomes and taxes a lot easier, and keeps you out of trouble of audits conducted by authorities like the IRS. We highly recommend that you set up a business checking account to keep all cash inflows and outflows through one source. Also, consider a business credit card to use for just business expenses. By making purchases through a credit card, you can also benefit from cashback and travel rewards, stretching your dollar further.
When starting a dropshipping business, it is important to know how much time and money you’re willing to pour into it, particularly at the beginning stages. It is often better to invest more time as opposed to money, as it allows you to better understand the flows of the market and the operation of your business, and will lower much of the financial expense of setting one up. Make sure to do your due diligence and check on what laws and regulations you will need to abide by when setting up your dropshipping company.
Starting a business isn’t easy but there is plenty of opportunities to make it rewarding for you, both in your personal development as well as a financial stream!