What Online Businesses Are Most Profitable?
The Internet has made starting a business much easier, especially for young entrepreneurs. You can work from home and the initial investment can be very low, so the barrier to entry is minimal. But the reality is that more than half of the companies that open today (before the COVID-19 crisis, only 43 % survived according to Daario 5 Dias) do not reach 5 years of life. Because? Well, for the same reason that companies closed in the past, because they are not profitable or because it is not worth it for the owner to continue moving forward under current conditions.
This is because creating your own business, whether it is a digital or analog business, and for the benefits to be stable, requires a lot of time and effort. For this reason, those who think that living off the Internet is suck, quickly become discouraged when things do not go as well as they expected and give up after a few months.
Maybe right now you are excited about your business idea, which seems great and 100% viable to you. You are convinced that it will work wonders and that it will not take long to generate profits. But you should think with a cool head and ask yourself certain questions before taking the leap.
Nowadays there are many people who launch themselves into the world of entrepreneurship (some in a crazy way, I must say...). I am often contacted by people who already have their project online and want to know the cost of on page seo services to assess whether it is worth investing to position their business. First, ask yourself what your purpose is, what need you are going to cover, and who your ideal client is. From there you can start a path, which is not a bed of roses by any means.
Which online business is most profitable?
To know if a business is profitable, you have to ask yourself a series of questions.
What will be your fixed expenses?
Fixed expenses are those incurred by your business whether you sell your products or not. Being an online business, it is likely that you will not have to pay rent for a premises (at least at the beginning), but a website also has its expenses, such as domain and hosting.
Another fixed expense would be, for example, the electricity that you are going to consume. You may work from home and this expense may go unnoticed, but if you have a computer on for between 8 and 12 hours, the lights in your office on, etc., all this counts as an expense.
And of course, among your fixed expenses, do not forget that you have to pay social security when you register (what we call the payment of the self-employed fee) and the possible civil liability insurance that you may have to pay depending on the type of business.
Are you going to do the accounting for your business? Are you going to be in charge of keeping the accounts, and paying the VAT, for personal income tax...? Otherwise, start writing down payments for consulting among your fixed expenses.
Something as simple as using an expense sheet will help you evaluate the different scenarios before launching. Here you have a basic but effective office template.
How much do you need to earn to pay your fixed expenses?
Once you know what your fixed expenses are, you know how much you must earn as a minimum to cover expenses (profitability threshold). And the interesting thing, once you have that information, is that you do other calculations to know if your business is going to be profitable.
How much do you have to earn per day to reach that figure?
Whether your business is an online store if you are dedicated to selling services or if you are dedicated to the world of info products, you have to think about how much you need to invoice to reach the profit you are looking for in this project.
If you sell services, you must learn to set rates. To do this, a resource that I love is Laura Lopez’s freelance calculator.
How many products must you sell to earn that amount?
If, for example, you sell a book through Amazon for €2.99, your gross profit will be approximately €1.3 (after the margin that the store takes and removing VAT). If your fixed expenses are €500, you will have to sell almost 385 books per month to cover the expenses. About 13 books a day.
Do you see it as acceptable? Also think that sales must be stable over time. If you sell 500 books the month of launch, but in the following months you do not even reach 100 sales, your business is not viable as a fixed source of income.
The same thing happens with an online store, although from the price of the product you sell, you must subtract how much it costs you to purchase that item. If you sell t-shirts for €20 and you buy them for €10, you make a €10 margin on each item of clothing. You should sell 50 a month to cover expenses. 1.5 t-shirts every day, 365 days a year.
Do you already have a clientele? Are you known in the sector?
If you have worked in the sector before and already have your own clients, starting your own online business will be much easier, as it will begin to cover expenses and make profits much sooner than if you have to start from scratch.
Going back to the idea that you are a writer, do you think you will be able to sell 500 books if you are an unknown author? It is very likely not. But if you have already published a book with a publisher and now want to embark on self-publishing, it will surely be easier for you since you will have some fans/clients.
With this, we do not mean that if you are unknown in the sector it is impossible to successfully start your business, but you should keep in mind that you will have to focus all your initial efforts on gaining clientele and “being seen.” Whether on social networks, search engines, through paid advertising, or affiliation.
Salary and variable expenses
Until now, we have focused on covering fixed expenses, but we have left aside one of the main fixed expenses of the company. The salary of your workers, in this case you. Salaries in a company are usually considered fixed expenses since employees must be paid month by month.
In this case, we have left it out (until now) because when starting a business, you are surely willing to sacrifice certain things, and during the first months of covering expenses you can be content.
However, you should not forget that in the end, it is about earning an income month after month. That is why it is vital that you establish a decent salary for yourself. A company will not make a profit until it covers all its expenses, including salaries (yours is one of them), and leaves room to re-invest and grow.
We still need to talk about variable expenses. They are those that are generated when selling your product. In an online store, for example, if you plan to add free shipping costs to differentiate yourself from your competition, you will have to deduct these costs from your profit margin. The same happens with payments by debit or credit card since the bank usually keeps a percentage of the money transferred.
Also, don't forget that if you have an online store and you need to have stock, you will have to invest in material before you can sell it and that capital will be tied up until you sell it.
Scalability
But what really makes an online business the most profitable? Scalability is an almost magical word in the world of online business. It is one of the ones I like the most, if not the most.
Do you know what it is? The ability of a business to grow and generate more money without having to increase its fixed costs.
A clear example of scalability is the sale of info products: you dedicate time and effort to generating an online course, a book, a guide, etc., and then you can sell it countless times from your website without having to constantly create new products.
You will have to find a larger audience and strengthen your online presence, but you will be able to keep fixed costs stable while your sales grow. Of course, do not forget that the digital world is very changing and it is likely that you will have to continually update your info product so that it does not become obsolete.
Maybe your desire has gone away. That wasn't my intention. The idea is that, before launching your business, you have your feet on the ground and value a series of fundamental aspects. If you run the numbers and everything fits, you are ready to create your business.
Do you want to see some ideas for profitable online jobs?
The 7 profitable online businesses with hardly any investment
1. Affiliate Marketing
Affiliate programs are one of the most widespread and profitable online business models there is, as they do not require prior investment and do not entail logistics, after-sales, or production expenses. Customer service is also eliminated.
The affiliate marketing system consists of selling third-party products and earning a commission for them. It is necessary to have a website, a blog, or an online store with a good volume of visits to be profitable. An approach that usually works very well in this type of business is product recommendations and reviews.
One of the most famous affiliate programs is the Amazon affiliate program.
2. Sale of online services
If you are a professional or a company, selling services online can be a good option both to create a business from scratch and to expand the clientele of an existing business. Something that many service companies have done during the COVID-19 crisis.
Logically, you will need to have a website on which to offer the services and it may also be interesting to have a blog with related content of interest to your target audience and thus attract new clients.
The main problem with this business model is that it is not very scalable, since the time and costs it takes to offer the service do not vary and each client must be satisfied individually.
If you want to grow you need to have a team, either within your company or through collaborations with other professionals. In addition, the company brand or personal brand is vital to get clients.
3. Copywriter
A copywriter is a writer who writes content for websites, blogs, virtual stores, other online businesses, etc. Companies need to strengthen their presence in the digital landscape and this involves creating text content that becomes blog posts, product descriptions, article reviews, the information that appears in the sections of a website, etc.
It is easy to start working as a copywriter and start earning money online since the only requirement is to know how to write well (it is also advisable to know SEO, although it is not essential). There are platforms that connect clients and authors, such as great content that connects clients with writers, making it easier for you to start with an acceptable volume of work.
You can work directly with clients, making job offers or creating an editor page so clients can find you. The most important thing is that you have a portfolio of texts prepared for when they ask you for examples of the quality of your work.
4. Infoproducts
Info products are a very interesting variation on the sale of online services. Unlike the latter, the sale of info products is scalable and can be one of the most profitable businesses on the Internet. Well, it is a digital product that can be sold repeatedly and automatically through a website or blog, achieving great profitability for the same product.
Online courses, video courses, eBooks, PDF guides, etc. are info products. Basically, it is training in which the author teaches the student his knowledge in a certain field.
Info products can be created on almost any topic, as long as there is an audience interested in the topic: cooking courses, software development, marketing, design, etc. To make it profitable, it is necessary to create a quality product and this requires work and effort.
Very important! To create an info product, you have to be really good at what you do and be an authority in the sector in which you operate. It's no use saying: "I like writing (although I don't have any experience as a writer), I'm going to sell a Copywriting course."
In addition, you need to have a base audience, that is, a large mass of users (potential clients) that allows you to achieve a good initial sales volume and that lifelong word-of-mouth also works (testimonials and what is said). of you on social networks, they are essential).
5. Virtual Assistant
With new technologies, this type of work has become popular, connecting companies or entrepreneurs virtually with people willing to lend a hand with the most difficult or repetitive tasks in exchange for money.
A virtual assistant can perform different tasks, such as answering emails, helping with accounting, updating content, organizing in-person events, preparing documents, editing videos, taking care of their client's agenda, etc.
The price of the service is usually set at a price per hour and does not require an initial investment, although it is not possible to automate or scale it. To work in this sector, you can directly contact companies, entrepreneurs, YouTubers, etc., to offer your services, or register on pages such as Freelancer or Upwork.
6. Monetize your blog
If you have a blog with a good volume of monthly visits, you can monetize it to get economic returns. The most common method to do this is to insert third-party advertising and receive a commission for each click made.
Incorporating advertising into blogs is very simple. The usual thing is to register on a platform that acts as an intermediary between advertisers and advertising spaces. Such as Google AdSense or The Monetize.
The platform provides us with some lines of HTML code that must be incorporated into the blog and the advertising banners change automatically. In many cases, ads are related to the interests of the user visiting the blog.
Additionally, a blog can be monetized through affiliation or the sale of info products.
7. Marketplaces for creatives
Signing up for a Marketplace can be a great opportunity to do business online. This model is very common among creative people who like photography, and music or are very good freelance programmers.
There are marketplaces where you can upload your creations and receive a percentage of the sale in exchange every time a client purchases a user license.
This system works well with photographs, drawings, musical jingles, songs, and web templates, although it usually does not generate large income unless you have a very popular product. It can be interesting as extra income. Some Marketplace pages are Fostoria, Shutter stock, Encore, Air bit, and Themeforest.
Digital marketing strategies
All these businesses need a visibility strategy to attract customers. What options do you have?
You have many alternatives today, but I am going to leave you my favorites:
1. SEO
Search Engine Optimization or Search Engine Optimization is clearly my favorite because it is a long-term strategy and entrepreneurship is a long-distance race. It is about optimizing your website for search engines and giving those search engines the content that your ideal customer is looking for, in the different phases of the purchasing process.
2. SEM or PPC
Search Engine Marketing or Pay Per Click, refers to online advertising strategies. For this, the most used platform is Google Ads, which has paid advertising options in its search engine and applications, as well as in a network of associated media through Google AdSense. I recently published an entry on how to launch your first campaign in Google Ads quickly and easily.
3. Email Marketing
For many, an outdated option, but for others, one of the channels that generate the best conversion among their audience. If you have a list of followers of your brand and you give them content that interests them on a regular basis, you can get a lot of sales by sending emails.
If you haven't heard of the "daily email" technique used by digital marketing leaders such as Isa Bravo or Arturo Garcia, take note because they are making a lot of noise.
Do you want more? Check out the other techniques they recommend in this Marketing and Web article.
And if you like podcasts, I recommend the podcast that I launched a little over a month ago. In it I interview both digital marketing professionals and online business directors who tell what they apply and how it goes. You can listen to it on Spotify:
And also on Ivo Ox or on Apple Podcasts. And of course, on my website, you will find all the episodes, linked from the main menu.
Conclusions
As you have seen, there are opportunities to do business online with very little investment, for very different professional profiles: writers, photographers, programmers, salespeople, experts in a specific topic...
And many more that I'm sure I've left out. What this article aims to do is for you to have all the information before jumping into the pool and seeing the different alternatives that exist.
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