How To Start an Online Business from Scratch – Ecommerce / Dropshipping

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Part 1: Finding a Product to Sell Online
So, you have dreams of starting an online business, working from home, making thousands a month and retiring on a beach somewhere? Awesome, well first things first. If you are new to online / e-commerce business, then you should know that it all starts with coming up with something to sell. When I first started, I was told to build a business around something I am passionate about. Yes, that is great for most people if you are just looking for a hobby. If what you are passionate about pays well, then that may be an option but I will tell you the method I use to find products to sell online and how to start an online business step-by-step.


Method 1 – BTNB Method (Big Traffic No Brand)

One of the best ways to find products to sell online is a method called BTNB which stands for Big Traffic with No Brand. It took me a few years to figure this out but I am going to give it to you for free. Let me give you an overview of what this is and then I will explain step-by-step how to use this method successfully. My number one tip when researching what to sell online is that a product should be something that does not immediately invoke a brand association. Let me give you a couple of examples to demonstrate. If I say soap, what do you think of? Did you think Dawn or Dove? If I say shoes, do you think of Nike, Sketchers, etc?

Now, what brand do you think of when I say Futons? Nothing?? Great. What about glass aquariums?? No brand?? Awesome, that is the first step. There are a few reasons why this is very important.

  1. If people are looking to buy something online and there is a brand associated with it then they will most likely type in the brand name. It is very hard to compete against big brands and you cannot use their brand words in your content to compete with them. One of my current e-commerce stores is selling futons. While I am competing against big name stores, I am not competing against big brands in regards to what customers will search for. If you are looking for a futon you will most like type in something like ‘cheap futons’ or ‘futons for sale’ and not Kodiak futons. Does this make sense? So now I can write content and create product pages to target generic keyword terms and not have to fight to beat brands at their own search terms.
  2. You can become the authority for a ‘general product’ and start to build your own brand. You can specialize in a niche and become the brand people think of. Even though my futon ecommerce website is competing with Walmart, Target, Overstock and many more giants I can stand out by becoming THE PLACE to buy futons which my big brand competitors cannot.
  3. You cannot use big brand names in your internet marketing strategy. You will not win (and you may also be sued). The caveat is that if you are selling these brands then you may be able to use their brand name but that is very different than competing to sell shoes against a big brand such as Nike. Go ahead and type ‘nike shoes’ in Google and see what you find.
  4. Last but certainly not least. There is a lot of money to be made without having to try as hard and spend as much to compete with major brand keywords.

The main thing you want to watch out for when using the BTNB method is that you don’t want to be so generic that you are targeting just research terms and not buying terms – buying search terms are those that customers use when looking to buy a product. I will talk about a way to find buying terms a little later when doing keyword research for your product. While that gets into more of the nitty gritty details, I just want you to be aware of it while you are doing initial product research.

Where to begin researching potential BTNB products. A couple of great websites to search are Wayfair.com and Hayneedle.com. Why?? Because Wayfair started out as a ton of small niche stores that were mostly if not all dropshipping. Over time they decided to consolidate their websites and build a billion-dollar brand. You can search through their store and find a BTNB products. Once you narrow down a product you like on Wayfair, just look in the left side navigation and search for the section that list the Brand. This will tell you all the manufacturers you should contact and build a relationship with to dropship their product. You will start noticing these same brands across top stores such as Walmart, Target, Overstock and more.

Method 2 – Follow the Bouncing Ball (FTBB)
This method for finding a product involves Researching Trends
. This works best for weight loss and fashion. Let’s say you want to start selling products in the weight loss niche.
– Go to google and type in
‘latest weight loss products’
‘weight loss products 2016’ (use the current year obviously. This should bring back all the latest weight loss trending products.
‘weight loss product reviews 2016’
PRO TIP *** Remember to use words such as ‘latest’, ‘current year’, etc to find the latest trending products. For weight loss products, it is typical to do affiliate marketing (which I will not go into here, maybe later). Some will get a product created using a white label company and build their own brand. Just search for ‘white label weight loss products’. These white label companies will allow you to sell the same products other big brands sell but with your own brand name. You can get a large discount on these weight loss products because order the product at wholesale prices in bulk.
When searching for trends you can also use the following tools:
https://www.google.com/trends
http://www.buzzsumo.com
http://www.trendhunter.com

Once you have found a product that seems promising you can then move onto the next step…

Probably one of the most important questions you need to ask when researching a product to sell:
How much money can I potentially make?
Is it worth my time and effort to setup a store and sell this product?
While you may get a 100% accurate answer on how much you will make exactly, you can fairly, accurately determine if the product is worth pursuing based on a quick test I call the Product Value Test or PVT for short. Here is the step-by-step process I use to figure this out. This has saved me tons of time and has also been fairly accurate in determining the potential profit one can make by selling a product that reaches the top of Google. Why Google?? Because it currently owns 63% of all online searches with Bing coming in second at 21% at the time of this writing. Also, if you reach the top of Google, you will most likely rank at the top of Bing and Yahoo as well by default.

Here is how the PVT (Product Value Test) works:
– Go to Semrush.com You could also use Google Keyword Planner but this is the tool I prefer
– Search for the niche/keyword you want to test. I will use ‘futons’ as an example. Type ‘futons’ into the search box:

semrush-search

– Look at the Volume under Phrase Match Keywords. This tells you the estimated Monthly traffic for a given keyword phrase.
Look for Buying Keywords – In this case it would be keyword phrases such as ‘futon mattress’, ‘futon beds’ and not the generic term ‘futons’.

PRO TIP *** Average ecommerce conversion rates are 1% of traffic. That means that 1% of customers that search will buy a product. Also, buying keywords usually have a higher CPC (Cost-Per-Click) amount beside them. That means that advertisers pay more per click because they most likely convert more as buying keywords.
Next is my secret sauce to determine if a product is worth pursuing!
First, add up all Buying Keyword (Phrase Match Keyword) volumes to get estimated total customer monthly traffic.

futon mattress – 60,500
futon beds –        40,500
futon covers –     22,200
____________________
123,200 – total avg monthly customer traffic

*** Product Value Formula
Step 1.
Total # Average Sales = number of visitors x conversion rate
Step 2. Profit Per Sale = cost of product x markup percentage
Step 3. Estimated Net Profit = Profit Per Sale x Total # Average Sales

Step 1 in Action
123,200 (visitors/month) x .01% (1% conversion average rate) = 1,232 average sales/month

Step 2 in Action
Use some common sense to determine a profit margin. For furniture in general it is around 50% but since I know my markup, it is 20%. A typical futon mattress is $200 x 20% = $40 net profit per sale

Step 3 in Action
$40 (profit per sale) x 1,232 (avg total monthly sales) = $49,280 / Monthly Potential Net Profit

So is it worth it to pursue selling futons for $49,280/month?? Well that is for you to decide how much your time is worth.

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Part 2: Keyword Research

After you have found the perfect product to sell it is now time to do Keyword Research. Keywords research will help drive everything from content marketing to what categories to focus on most.

Keyword research is the process of finding keywords and related topics that will drive traffic and eventually new customers to your service and/or product. The more prepared you are in this stage, the better your sales will be later so this is a very crucial step. While keywords alone are not the total solution they should be at the center of your content marketing strategy.

We will cover the basics of keyword research and then move into some more advanced strategies. When you begin keyword research it is easiest to start with the broadest term and narrow down from there. You may miss out on some keyword opportunities if you start too specific. Let’s use FabFutons.com as an example of how to do keyword research. Throughout this process we will determine main, medium and long tail keywords. Throughout this process we will find the most search keywords down to the most specific keyword phrases for our given niche.

Let’s jump right into how to do this:
Typically keyword research begins by going to Google Keyword Planner or some other tool and typing seed keywords in to get started. I want to show you a slightly different technique first. I will use my FabFutons.com website as an example. We begin by finding competitors and then analyzing their keyword data.

Step 1:
– Go to Google and type in a generic keyword for the niche. In this case it is ‘futons’.
– Look for a website that is not a major brand. Major brand websites will not help you get valuable niche keywords at this stage. One of the first results is definitely not a major brand and this is where we will start. The website we will use is: futonplanet.com
Step 2:
– Go to Semrush.com and type in ‘futonplanet.com’ in the search field and click the search button.
– Click on View Full Report button under TOP ORGANIC KEYWORDS section.
– Now sort the results by Volume by clicking the Volume header
This will give you keywords specific to the futon niche with most searched first:

Keyword
Pos.
Volume
KD
CPC (USD)
URL
Traffic %
Costs %
Com.
Results
Trend
SERP
Last Update
1(1) 201,000 86.89 0.78 futonplanet.com/ 70.57 67.77 1.00 23,200,000   3 days ago
18  60,500 76.53 1.19 futonplanet.com/…esses/ 0.13 0.19 1.00 3,270,000   3 days ago
1(1) 60,500 82.72 0.90 futonplanet.com/ 21.24 23.53 1.00 15,500,000   3 days ago
44  40,500 83.77 0.96 futonplanet.com/…esses/ < 0.01 0.01 1.00 140,000,000   3 days ago
43(44) 40,500 73.75 1.00 futonplanet.com/…-sizes < 0.01 0.01 0.15 1,850,000   3 days ago
71(71) 33,100 74.58 3.50 futonplanet.com/…-sizes < 0.01 0.00 0.03 1,200,000   3 days ago
9(9) 22,200 78.63 0.93 futonplanet.com/futon-covers/ 0.49 0.56 1.00 3,040,000   3 days ago
89(96) 18,100 75.29 0.79 futonplanet.com/…-sizes < 0.01 0.00 0.24 3,430,000   3 days ago
87(91) 14,800 79.30 0.91 futonplanet.com/platform-beds/ < 0.01 0.00 1.00 18,200,000   3 days ago
40(47) 12,100 87.62 0.95 futonplanet.com/wood/ < 0.01 0.00 1.00 4,460,000   3 days ago
55(52) 12,100 73.78 1.89 futonplanet.com/…-sizes < 0.01 0.00 0.19 559,000   2 days ago
85(78) 9,900 71.55 2.88 futonplanet.com/…-sizes < 0.01 0.00 0.14 1,550,000   3 days ago
68(69) 9,900 83.25 0.77 futonplanet.com/wood/ < 0.01 0.00 1.00 616,000   3 days ago
49(50) 8,100 72.67 1.48 futonplanet.com/…-sizes < 0.01 0.00 0.08 147,000,000   2 days ago
68  8,100 87.88 0.75 futonplanet.com/…-sizes < 0.01 0.00 1.00 472,000   2 days ago
39  8,100 93.51 0.55 futonplanet.com/…cover/ < 0.01 0.00 0.97 463,000   3 days ago
80(83) 8,100 75.77 5.01 futonplanet.com/…-sizes < 0.01 0.00 0.05 24,700,000   3 days ago
77(77) 8,100 72.22 2.27 futonplanet.com/…-sizes < 0.01 0.00 0.27 8,700,000   3 days ago
8(12) 6,600 80.74 0.80 futonplanet.com/futon-frames/ 0.14 0.14 1.00 2,570,000   3 days ago
62(62) 6,600 78.37 0.96 futonplanet.com/…-sizes < 0.01 0.00 0.09 3,050,000   3 days ago
10(10) 6,600 77.39 0.68 futonplanet.com/futon-covers/ 0.14 0.12 1.00 3,380,000   3 days ago
79(73) 6,600 79.75 1.86 futonplanet.com/…-sizes < 0.01 0.00 0.04 1,630,000   3 days ago
57(60) 6,600 73.59 0.92 futonplanet.com/…-sizes < 0.01 0.00 0.19 1,290,000   3 days ago
85(81) 5,400 75.06 9.85 futonplanet.com/…-sizes < 0.01 0.00 0.02 12,900,000   3 days ago
99(91) 5,400 74.23 1.57 futonplanet.com/…-sizes < 0.01 0.00 0.06 1,300,000   3 days ago
1(1) 5,400 86.89 0.57 futonplanet.com/ 1.89 1.33 0.91 23,200,000   3 days ago
13(13) 5,400 86.22 0.78 futonplanet.com/…hairs/ 0.03 0.03 1.00 725,000   3 days ago
70  4,400 89.92 0.73 futonplanet.com/…overs/ < 0.01 0.00 1.00 660,000   2 days ago
14(13) 4,400 77.39 0.60 futonplanet.com/…-sizes 0.02 0.01 1.00 2,920,000   3 days ago
10(10) 4,400 77.39 0.60 futonplanet.com/…utons/ 0.09 0.07 1.00 2,920,000   3 days ago

Not only will this show you top keywords you should be targeting for your niche but it will also show which pages the keywords are related to on the competitor website. This will help you generate content ideas for your own website.

One of the most important columns is the CPC (USD). This tells you the amount an advertiser is paying per click when using Google Adwords. The higher the amount, the more valuable the keyword is. Most of the time this means that if you rank for these keywords they will convert into product sales.

Also, if you look at the Traffic % column this will tell you how much traffic each keyword produces for the website being analyzed. In this case the keyword ‘futon’ produces 70.57% of total traffic for this website. This is a very valuable exercise.

Click the export button to download these keywords into a csv/spreadsheet file.

Now let’s go through the keywords to see how they can help us structure our futon website. What we are looking for is main products to focus on as well as which product categories we can offer. Looking through this list we can see a few categories such as: futon mattress, futon covers, futon frames. Make sure to use the exact keyword phrase when naming your product categories.

The purpose of this initial keyword research is to determine what products and categories we want to focus on to structure our website. From the data I have determined this:
The homepage will focus on major keywords such as: futon, futons, cheap futons and futons for sale
Category pages will be: futon covers, futon mattress and futon frames. Notice how the volume will determine the exact name of our product category. We could have used ‘futon mattresses’ as a category but that only gets 2,400 searches per month. As you can see it will be much better to use ‘futon mattress’ as this keyword phrase receives 60,500 searches per month. Google does absolutely differentiate between ‘futon mattress’ and ‘futon mattresses’. Be very specific when targeting keyword phrases. The category should be named ‘Futon Mattress’ and when you build links for that keyword you should use ‘futon mattress’ as the link text. This will tell google and other search engines that the category page is targeting that keyword phrase exactly. Google even differentiates between plural and non-plural keywords such as ‘futon frame’ and ‘futon frames’. Remember to be very specific when targeting keyword phrases.

Step 3:
Now we can use Google Keyword Planner to get more keywords. We will use the most valuable and major keywords we found in Semrush as seed keywords in Google Keyword Planner.
Go to: https://adwords.google.com/KeywordPlanner
– Click on Search for new keywords using a phrase, website or category
– Type in main seed keywords and click Get Ideas
start-business-google-keyword-planner
This will give you a large list of keywords. Click the download button to get a spreadsheet of all keywords that the Google Keyword Planner has generated.
We will use these keyword lists later but for now we just need to download them.

Now that we have a list of niche keywords for organic search we turn our attention to finding paid keywords. PPC (Pay-Per-Click) keyword research will tell you which keywords your competitors are paying for and most likely which keywords are producing product sales. This is very important to do up front because just because a keyword phrase has a ton of searches does not mean that it correlates to sales.

There are a few ways to do PPC (Pay-Per-Click) competitor research but I will show you 2 that I have found to be the most productive.

My first choice for PPC research is Spyfu.com.
– Go to Spyfu.com
– Type in a competitor website you want to spy on to get their paid search terms
In this example we will use a competitor of my website FabFutons.com which is TheFutonShop.com. How did I find this competitor? Just type in a decent buying keyword phrase for your niche in Google.com. I typed in ‘futons for sale’. Do not use big brands as the data won’t be as valuable. So in this case I did not use Walmart, Overstock.com, Kmart.com, etc but more of a store I know is not a big brand which is TheFutonShop.com. It is directly related to the futons niche and is definitely not a big brand competitor.

Here is the Spyfu.com homepage search where we start:
spyfu-search

After clicking the Search icon you will see the results page:

spyfu-search-results

From here click on, the “PAID KEYWORDS” number 1,099 under Paid Search (AdWords). This will show you a list of all paid keywords the competitor is currently using in their PPC campaign, what they pay for each click and how many clicks each keyword gets. This is very valuable data as it takes the guesswork out of some of your research. You can use this to determine which keywords are valuable to target in your content marketing strategy.spyfu-paid-keywords-list

This is not by any means an exhaustive list of keyword research tools or all that Spyfu can do for you as this is just to show you the amount of data you can gather in a very short amount of time with various tools such as Semrush and Spyfu.com. For the record, I am not affiliated with Semrush or Spyfu, I just use their products and they have given me invaluable data on my keyword research for all online business I have started.

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Part 3: Find Product Suppliers and Manufacturers that dropship products.
There are many ways to find products to sell online but I will show you have I have done it step-by-step. While the process is simple and straightforward it may be the most time consuming part of this entire process. Get past this step and you are well on your way to dropshipping products and making money as you sleep.

The best way to start out finding products is to visit the top 20 competitor websites in Google related to one of your buying terms. To carry on with the futons example, instead of searching for ‘futons’ for ‘futon’, try something like ‘futons for sale’, ‘cheap futons’, ‘futon covers’. Visit each competitor website in the top 20 as well as in the Ad section of Google. Look for common brands. A lot of times there is a brand filter on the website to search by brand and you can see what brands the competitor carries as well as how many products the competitor sells of the various brands. I have done a search in Google and found a competitor (Hayneedle.com) as an example:

competitor-brands

On the left side navigation there is a section conveniently named Brand. This shows you exactly what I am talking about. While not all niches will be this easy to research, this is the tried and true process I use consistently to find manufacturers. This does not mean that all of the brands dropship but if you find many competitors selling the same brand most likely they do. Just because they are listed on Walmart.com, Target.com and many more big brands does not mean they will not work with you. In fact, I have only had one tell me they can’t work with me that I contacted and I had contacted most before even having any products on my store.

Once you have found a list of Brands that you believe will provide you with the dropshipping products you need it is time to start reaching out to them to get their products. The best way I have found to do this requires commitment on your part to show the manufacturer that you are serious about starting your online e-commerce business. There is some groundwork that needs to be done before actually reaching out to manufacturers. Here are all the steps:

1. Buy a Domain Name that targets the products you are wanting to sell. Remember this is your brand so be picky. The domain name is something like FabFutons.com.
You can purchase a domain name from many online registrars such as GoDaddy.com, MightyDomains.com and a ton more. When you buy a domain name, you can do it for 1 year minimum. I would suggest at least choosing 2 years as Google does use this as a ranking factor. Not sure how much it counts but it does play a small role in organic google rankings.

2. Setup a Business Email Account to look more professional. The last thing a brand/manufacturer wants to see is an email from gmail.com or yahoo.com (no offense google/yahoo).
One you have decided and purchased a domain name you can then buy an email that relates to your domain name. I would suggest the first email business account you buy be related to customerservice or customersupport so the email would look like this: customercare@fabfutons.com or customercare@YOURDOMAIN.com. Now you are starting to look like a real online business owner. Are you excited yet?

3. Build a Shell e-commerce Store with category pages stubbed out.
After purchasing a domain and setting up a business email account its time to start building out the skeleton of your e-commerce store. I use BigCommerce.com for all of my e-commerce stores but would also suggest Shopify.com as an alternative as they are very similar.

For Bigcommerce.com when choosing an ecommerce store package I would go with the Plus package. At the time of this writing it is $79.95/month. The smallest store package is $29.95/month however I do not suggest this for the simple fact that it does not come with Abandoned Cart saver features. This is a huge factor because average cart abandonment rates are 67.91%. The abandoned cart feature automatically sends out emails to those customers that started the checkout process on your website but stopped and left your website sometime in the process. This assumes that the user has gotten past the part of entering his/her email address which is why most carts do this first. Bigcommerce allows you to customize how many followup emails are sent out, what frequency and the contents of the emails. The email will also contain a link to the cart that contains the product(s) the customer had at the time of abandonment. This abandoned cart feature will boost your bottom line and be well worth the price jump to the Plus package. Again I am not affiliated with Bigcommerce, Shopify or any other hosted e-commerce store. I am just sharing with you honestly what I have learned through trial and error.

If you do not do these first 3 steps then the manufacturer will most likely not take you seriously. They do not want an email from your personal account asking them to sell their products promising them that you will be their top seller. Even though you are doing the first 3 steps to project legitimacy you don’t want to promise more than you can really deliver. It’s best to be honest in the email outreach when initially contacting brands. You are not their first dropshipper.

4. Send an Email to the Brand / Manufacturer asking to sell their products on your website. Be sure to mention that you are looking to dropship their products. In my experience most stay where they are in life because they do not ask. You have not because you ask not. (biblical reference)
What do you ask for in the initial email? Here is the exact email I sent when starting FabFutons.com after I had completed the first 3 steps. This email was sent from customercare@fabfutons.com

Manufacturer outreach word-for-word email template I have used that gets results:

“Hi, we are launching www.FabFutons.com within the next couple of weeks and are in the process of adding new brands and products to our site to resell. We would really like to add your futon products to our website. We can give you our Tax ID and whatever else you need to allow us to dropship your product.
 
We are located in __________. We don’t have a physical store but are interested in dropshipping your products. 
 
Please send us an email or call me on my cell to let me know how we can start selling your product.
 
Thanks for your time,
 
Kent Hamilton”
___________________________________________________________________________________________________________

This is the same email template I have used for 2 previous dropshipping business’ and it has worked each time. Short and sweet, to the point.

PRO TIP *** One very important thing you need to know is that a manufacturers do not allow individuals/sole proprietors to dropship. They need a TaxID or EIN (Employer Identification Number) of an LLC or corporation in order to legally give you their products at wholesale prices in order to get the prices you need in order to dropship. You can form an LLC fairly easy before you start this step of reaching out or you can wait until after you have your first Manufacturer before forming it. I would suggest forming a generic LLC so you can use it in the future for other online ventures. So instead of using FabFutons as the LLC, I would do something like: Hamilton Enterprises, LLC. There are many articles on how to form an LLC and it varies per state so I will leave that up to you to research but I assure you it is a straightforward process. If you don’t want to figure it out yourself then you can have it done for you online by companies such as LegalZoom.com, BizFilings.com or RocketLawyer.com.

When talking with Manufacturers what you really need from them besides them allowing you to dropship their products is:
– list of all products with descriptions. Some may send this in a spreadsheet, some may give you a wholesale/dropshipper login and rarely some may say get it from our current website.
– wholesale prices you can get their products for. Some have a suggested price you sell their products for online and some have a minimum you cannot go below to maintain the integrity of their brand and prices online. You can choose your price above and beyond the minimum required price but I would suggest trying to keep your net profit at $20 per sale which is the difference in the wholesale price and the retail price you choose.

PRO TIP *** Once you have setup your shell store and reached and obtained some products to dropship it is time to start adding them to your store. At this point you will want to setup credit card online payment processing so that your store can process credit cards. Finding a company to work with to allow you to accept credit cards is a separate task than just setting up the store on Bigcommerce or Shopify. You will need to signup for a service such as PaypalPro (which is $30/month at the time of this writing). They will charge you a percentage fee per transaction as well as a small fee so keep this in mind when coming up with your retail price as this will eat into your net profit. Here is the current table of PaypalPro charges and rates:

PayPal Payments Pro
Monthly Sales Volumes Card Type Fee
$0 – $3,000 Visa, MasterCard, Discover 2.9% + $0.30 *
$3,000.01 – $10,000 2.5% + $0.30 *
$10,000+ 2.2% + $0.30 *
All sales volumes American Express 3.5% and no fixed fee

Another option for online payment processing so you can accept credit cards online is Stripe. I will not go into all the differences as it has been written about extensively online elsewhere such as here:
https://www.merchantmaverick.com/paypal-vs-stripe/

For the sake of how to start an online business from scratch you just need to know that you have to have an online payment processor to collect credit cards for your ecommerce store.

How e-commerce Dropshipping works in a nutshell:
– a customer buys a product from your website
– at the time of checkout the online payment processor (which will be integrated with your online store) processes the payment and the entire purchase amount less fees goes into your online payment processor account (such as PayPalPro or Stripe)
– the customer gets an email with and order number
– you get an order in your store that you can see the details of in your Bigcommerce store admin
– you send an email to the manufacturer with the customer invoice you print from your Bigcommerce online store
– the manufacturer places the order with your LLC or personal credit card on file to buy via the wholesale price
– the product is shipped to the customer from the manufacturer with the details from the customer invoice you emailed (I usually just export the invoice as PDF and email that to manufacturer order email. This step can possibly be done automatically if you pay for ecommerce store plugins that will handle your dropshipping
– you keep the difference of the wholesale vs retail price in your PaypalPro account to later be withdrawn
– jump for joy… you made your first sale

jimmy babby

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