10 Steps to Starting an Online Business in the Philippines
By: Venus Zoleta
Published on: January 21, 2020 . Last updated: October 19, 2020 Category: Personal Finance
This article was published on November 13, 2018 and was updated on January 21, 2020.
Planning to make money at home by starting an online business? That’s a bold move you’re making.
Guts alone will only take you so far. Many other things make a new business work. They’re so plenty, they can easily overwhelm first-time entrepreneurs.
It doesn’t help that 30% of startups fail (1) in their first two years. While the statistics sounds discouraging, it can also motivate aspiring small business owners to be careful and strategic in their every decision and action.
The key to the success of your online business is starting it right. Make the process less overwhelming and more systematic. Here’s a guide on how to start an online business in the Philippines.
Table of Contents
- How to Start an Online Business: 10 Steps for New Entrepreneurs
- Step 1: Define and Understand Your Target Market
- Step 2: Identify Your Product
- Step 3: Determine Your Business Idea’s Profitability
- Step 4: Write a Business Plan
- Step 5: Register Your Online Business
- Step 6: Set Up Your Finances
- Step 7: Look For Suppliers
- Step 8: Establish Your Delivery Methods
- Step 9: Build Your Business Website
- Step 10: Create Your Social Media Accounts
- Final Thoughts
How to Start an Online Business: 10 Steps for New Entrepreneurs
Step 1: Define and Understand Your Target Market
So, you have a great business idea. What to do next?
Start with knowing your market. Avoid making the common mistake of would-be entrepreneurs: sourcing their products without doing market research first. Ask the following questions to help you out.
- Who are your target customers?
- What are their needs and biggest pain points?
- How will your online business solve their problem?
You can easily find the answers to these questions on the internet. Check online communities such as Facebook groups, Quora, and Reddit to find out the usual questions people ask related to the product or service you’re planning to offer. Conducting online or face-to-face surveys is also a good way to get to know your target market better.
Know also how other online businesses in the same field are trying to attract customers. Check the websites of your potential competitors and see what they’re doing to address their customers’ needs.
When done right, market research enables you to craft a product for the right market that’s better than the competition.
Step 2: Identify Your Product
Once you have a deep understanding of the market you want to serve, it’s time to find a product—a potentially profitable one—to sell. Ideally, there’s a good demand for your product without too many competitors.
This step entails a lot of keyword research to know how your target market perceives your business idea. A good online tool for small business owners is the Google Keyword Planner. Just enter a keyword (your business idea) and check those with highest monthly searches and low to medium competition.
For example, you want to make money online with a catering business at your home in Pasig. Using the Keyword Planner (see screenshot above), you’ll discover that a good number of people in your location are looking for catering services, specifically for corporate functions, weddings, and parties.
Consider also your interest, experience, and knowledge of your business idea. It would be difficult to sustain a business you’re hardly knowledgeable and interested in.
Step 3: Determine Your Business Idea’s Profitability
Will your online business idea work? Before asking how to start an online business, you have to put it to the test by conducting a feasibility study. This activity looks at various factors to evaluate if your business idea is profitable and how much the risk of failure is. Such factors include the following:
- Your financial situation and qualities as an entrepreneur
- Whether your target market is able to and willing to pay for your product
- Your competitors, their scope in the market, and your competitive advantage (what sets you apart from the rest)
- Materials, equipment, services, and manpower needed to run your online business
- Startup costs
- Source of funding, including any required business loan
- How profitable and sustainable your online business will be
- What is the Best Type of Loan for My Business?
- 8 Businesses You Can Start with P50,000 or Less
- Online Business Ideas You Can Start Even with Small Capital
Step 4: Write a Business Plan
If your feasibility study findings show that your online business has a great potential for earning profits, then you can start creating a business plan. Don’t skip this step, no matter how small your business is.
A business plan is a written assessment, in an outline format, of your business’ viability. Lenders such as banks and government agencies require this document when you apply for a business loan.
Check the Department of Trade and Industry (DTI) website (2) for the business plan format and steps to create one.
Step 5: Register Your Online Business
Is it necessary to register an online home-based business? Of course! In the Philippines, same business registration rules apply to online businesses as traditional businesses.
Before you start an online business, make sure it is legal to operate and has the required permits and licenses. The only way is to register with these government offices:
- DTI – Sole proprietors need to register their business name at any DTI office.
- Securities and Exchange Commission or SEC – Partnerships and corporations should register at the SEC Building in EDSA Greenhills.
- Local government – You also need to get a mayor’s permit or municipal license from the city hall or municipal hall in your location.
- Bureau of Internal Revenue (BIR) – Even if all your business transactions will be done online, you’re still required to register with the BIR. Once you do, you’ll be issued a business tax identification number (TIN) and the authority to print official receipt and invoices.
- Pag-IBIG, PhilHealth, and SSS – If you’re hiring workers for your online business, you also need to register as an employer with these government agencies.
Step 6: Set Up Your Finances
This crucial step on how to start an online business involves not just sourcing funds from lenders and investors. It also requires preparing the money-related aspects of running your enterprise.
Here are the financial must-haves for your business:
- Corporate bank account – For managing your business expenses and employee payroll, as well as accepting payments from customers via bank deposit
- Business credit card – Also a great financial management tool for online business owners
- Online payment methods – Although most startups settle for cash on delivery (COD), it’s also good to offer your customers more convenient ways to pay for their purchases online using debit, prepaid, and credit cards. Consider opening an account with payment gateways (PayPal, DragonPay, etc.) and mobile wallets (GCash, PayMaya, etc.).
Step 7: Look For Suppliers
At this point, you’ve decided on the right product to sell and secured the money to cover your startup costs, including your initial products. Now, it’s time to source your physical products, materials, equipment, and other things you need to get your online business running.
Identify and find legitimate suppliers and wholesale distributors that sell high-quality items at reasonable prices, so you can offer competitive prices to your customers while still earning a profit.
How to find good suppliers for your online business? Ask for recommendations from people you know, check the internet (particularly buy-and-sell websites), and attend bazaars and trade events in your industry.
Step 8: Establish Your Delivery Methods
All too often, logistics is just an after-thought for people who are starting an online business. After all, you can do meet-ups with customers to deliver goods as you’re starting out.
But how to start an online business if you can determine your delivery methods? Get a competitive edge against other online businesses in your niche. Customers will love buying again from your business if you can deliver their orders fast.
Your delivery options include couriers or shipping companies (LBC, Air21, 2GO Express, etc.) and delivery apps (Lalamove, GrabExpress, Mober, Transportify, etc.) that offer on-demand, same-day delivery services for small businesses in the Philippines.
Step 9: Build Your Business Website
You’re almost there! Now is the time to build your store on the internet. While many online businesses start (and even thrive) on having a Facebook page alone, investing in your own website makes your business look more legit in the eyes of your target customers. You can either hire a professional web designer to build a website for you or do it on your own.
Create an online presence for your business in three ways: setting up an e-commerce site, using online shopping marketplaces, or creating a portfolio website. Let’s explore each one of them.
1. E-Commerce Site
Ideal for: Online businesses that sell physical goods such as clothes, shoes, and other items. An e-commerce site allows you to sell your products directly to customers without a go-between. You also have full control over the look and feel of your online store.
Not only big companies can afford to set up an e-commerce site. Small businesses can also open their own online store at minimal fees for as low as USD 13 (around PHP 700) per month.
Some of the popular e-commerce platforms for small businesses in the Philippines are Shopify, Shopline, and OpenCart. They make it easy for entrepreneurs to set up their online store and for customers to shop online.
2. Online Shopping Marketplaces
Ideal for: Online businesses that sell products or services the simpler way. If you want to easily build a business online, using third-party ecommerce marketplaces is the way to go.
You can be an online seller on Lazada, Shopee, OLX, or Sulit.PH. If you want to make money online using your apartment or condo, you can be a host on Airbnb.
These third-party platforms provide more convenience for online sellers because of their huge customer base and readily available payment platforms and delivery services.
3. Portfolio Website
Ideal for: Online businesses that provide freelance services such as photography, web design, writing, etc.
If you’re selling a service, it makes more sense to set up a professional website that features your best works.
For example, if you have a photography business, a website that carries your portfolio (like photos you took of your clients’ events and projects) will give potential customers an idea of your photography style, packages, rates, and other information.
Here’s what you need to build your business website:
- Domain name – Your unique address on the internet, usually the same as your business or product name. You can register for one at a low cost (around PHP 400 for .com domain or PHP 1,500 for .ph domain) through a domain name registrar in the Philippines such as dotPH, Pangalan.com, and Namecheap. Web hosting companies also offer domain name registration as part of their services.
- Web host – A web hosting service allows you to upload your web pages, images, and other digital assets. Some of the popular web hosting companies in the Philippines are GoDaddy, Web.com.ph, and iManila.
- Website builder – Website builders allow you to choose from their website templates and customize your site to your preference. WordPress, Wix.com, Squarespace, and Weebly are among the top website builders you can use for free.
Step 10: Create Your Social Media Accounts
Get your online business closer to your target customers by opening accounts on the right social media sites, depending on the nature of your business. If you’re selling food or home decor items, for instance, the best channels to use are Instagram and Pinterest.
Of course, regardless of your online business type, you should create your Facebook Business page (3). Around 82% of Filipinos use this social network (4), so use it extensively to promote your business.
After setting up your accounts, make sure to post regularly on your business’ social media channels to increase your followers and engage with them, as well as grow and sustain their interest in your business.
Still thinking of how to start an online business? Don’t be afraid. Starting an online business is no different from that of a brick-and-mortar enterprise. You’ll go through the usual birth pains, ups and downs, trials and errors. But once you make it through, you’ll realize that every effort, time, and money spent is worth it. Good luck in starting your online entrepreneurial journey!