Starting a profitable online business: a step-by-step guide

Freedom. Flexibility. The chance to build something of your own. These are the rewards waiting for you on the other side of starting an online business. And now’s a good time to do it. 

The e-commerce industry is booming — total global online retail sales reached a record-breaking $7.4 trillion in 2025. For budding entrepreneurs, starting an online business represents a real opportunity to turn passion into a thriving business. 

If you’re dreaming about setting up your own business but you’re not quite sure what it could be, let alone how to get started, read on. In this guide, you’ll discover profitable online business ideas, how to set up an online business (it’s easy, we promise), and the information you need to grow a business online. From company registration to business licences, we’ve got you covered. 

In this article

• What online business should I start?
• Online business ideas
• How to start an online business
• How much does it cost to start an online business?
• What business licence does an online retailer need?
• What insurance do I need to start an online business?
• Should I buy an existing online business?
• Your next steps

Well, your options here are, frankly, limitless, but let’s focus on what kind of online business makes sense for you by taking your lifestyle, experience and interests into account. 

The type of business you choose will shape everything. Your daily routine, your startup costs, even how you spend your weekends. So, it’s important to get it right. Here are some popular options: 

• E-commerce stores: This is your classic choice. If you start an e-commerce store, you sell products and services directly to customers. It could be handmade jewellery, pet accessories, or barista-style coffee. This could work for you if you love the idea of curating products

• Dropshipping: This is where you market products online, but someone else handles the storage and shipping. This means you don’t have to store physical products (like in your garage), but the downside is you generally make lower profit margins, and you have less control over the customer experience

• Print on demand: This sits somewhere in the middle of an e-commerce store and dropshipping. You create designs for accessories like t-shirts, mugs, or tote bags, and a supplier prints and ships them when orders come in. It could be perfect for you if you’re creative but don’t fancy managing inventory

• Digital products and services: This might suit you if you’re more interested in creating content like documents, templates, and online courses. If you can build an audience for your digital products, these types of businesses offer good passive income opportunities — you make money through downloads and subscriptions

• Online coaching and consulting: If you have expertise, for example, in HR, recruitment or business development, you can sell your services online. Whether you’re helping businesses with strategy, offering technical advice, or guiding leadership through changes, consulting is a great way to monetise your existing skills

• Bookkeeping: This is an evergreen service that businesses need. Every company has to keep their books in order, but most founders don’t have time to do it themselves — or the money to hire a full-time accountant. If you have bookkeeping experience and can use software like Xero or QuickBooks, this could be the business for you

• Subscription boxes: An online subscription box business delivers curated, themed (e.g. snacks, beauty, hobbies) products regularly to customers. Customers love the element of discovery, and you’ll love collecting recurring payments. Just be prepared for the logistics of sourcing, packing, and posting regularly

When deciding what kind of business is right for you, it can help to ask yourself a few honest questions:

• Do you have space to store inventory?
• Do you want to turn your existing skills into a business or try something new?
• When do you want to work — 9–5, evenings, weekends? 
• Are you excited about sourcing products? 
• Do you want to work with clients directly or would you prefer selling to customers you might never meet? 

Your answers could point you in the right direction. Don’t worry if you’re still a bit stuck. Let’s look at some of these business ideas in more depth. 

Each of the following online business ideas has genuine profit potential (when carried out well, of course)! Perhaps one of them is for you?

Business idea	Pros	Cons
Digital products and services	High profit margins, scalable, create once and sell repeatedly	Takes time to create quality products, needs marketing to reach your audience, initial sales can be slow
Online coaching and consulting	Low overheads, flexible working, leverages your existing knowledge	Income is tied to your time, requires ongoing credibility building
E-commerce store	Scalable, incredibly lucrative — nearly 40% of UK consumers shop online once a week	Complex logistics, requires inventory management and upfront inventory costs
Print on demand	Zero inventory costs, test designs without risk, automated fulfilment via a third-party supplier	Lower profit margins, less control over product quality or shipping times
Subscription box	Reliable recurring revenue, build a loyal community of customers	Complex logistics, requires constant product sourcing, risk of high cancellations

The global knowledge economy is exploding. In 2024, the market was valued at $26 billion, and it’s projected to soar to over $133 billion by 2030. In the UK, we’re seeing a massive shift toward on-demand learning — people want digital solutions they can access instantly.

For content creators, this is the ultimate low-cost, high-reward business model. You spend time upfront, perhaps three months, creating a high-quality course, ebook, or set of templates. But once it’s built, you can sell it for years with almost zero ongoing production costs.

In 2024, the UK digital coaching market generated USD $471.2 million (roughly £370 million). This includes niches like health and wellness, which are becoming increasingly popular. 

People are willing to pay for transformation, whether it’s business coaching, wellness guidance or business consulting, and you could be the one to deliver it. You’ll need to establish credibility through content, testimonials, or certifications, but the overheads are minimal — often just a laptop and a decent video setup.

The key to starting a successful e-commerce business is finding your niche — what can you offer that isn’t already well catered for? 

Perhaps sustainable homeware, speciality ingredients, or accessories for a specific hobby. You’ll need to think about sourcing reliable suppliers, setting up payment systems, and creating a top-notch website that converts visitors into buyers.

If you want a creative outlet, but you’re not keen on managing your own physical inventory, print-on-demand is an easy business to start. Especially if your designs are ready to roll. 

Services like Printful or Printify handle the production side while you focus on marketing and design. Note that the profit margins for print on demand are slimmer than traditional e-commerce, but you can launch without risking your money on inventory that might not sell.

Subscription boxes tap into people’s love of surprises and discovery — who doesn’t love a surprise? You could box up everything from craft beer and vegan snacks to stationery and beauty products. What’s important is the community you’re building around shared interests. 

This is a recurring revenue model, which means cash flow is more predictable. But be realistic about the work involved — sourcing products each month, managing subscriptions, and keeping customers excited enough to stick around takes dedication.

Right, we hope you’ve landed on an idea that gets you excited. Next comes the practical bit — turning that idea into a real business. And turning you into a business owner!

It’s time to get specific. What problem are you solving? Who are your customers? What makes your offering different from the 47 other businesses doing something kind of similar?

It’s a good time to research: you could start by checking out competitor websites, browsing Amazon reviews to see what customers love and hate, and joining Facebook groups where your potential customers might hang out. The more you understand your niche, the better positioned you’ll be.

When you think you’ve landed on your niche, get even more specific. For example, if you want to set up an e-commerce website for yoga and wellness products, take it further — can you specialise in eco-friendly yoga and wellness products? Think about how to tailor your niche to your specific audience. 

Your business plan is incredibly important because it provides a description and overview of your company’s future. It clarifies your services and your vision and helps you make informed decisions. 

It also serves as a communication tool for investors, partners and employees if you want to scale your business down the line. 

If you’ve not created a business plan before, don’t worry, it doesn’t have to be perfect. Start with a solid outline you can refine as you learn. The point is to have something that forces you to think through the details before you’re knee-deep in problems you didn’t anticipate.

To help, here’s what your business plan should include: 

• Executive summary: A high-level snapshot of your entire vision. Think of this as the highlight reel that summarises your most important goals and findings 
• Personal description: This is your chance to share your story. Highlight the specific experiences, passions, and professional skills that make you uniquely qualified to lead this new online venture 
• Company description:  Cover the basics, like your business name and legal structure (e.g. limited company), alongside the core purpose of your business
• Products and services: Give a clear explanation of what you are selling and how your products provide a solution to a specific problem your customers are facing
• The market: Show your research. Build a profile of your ideal buyer and demonstrate that you have an understanding of the current trends shaping your niche in the UK
• Competitor analysis: Take an honest look at your rivals. Acknowledge what other businesses do well, then clearly define what makes your business the better choice
• Marketing strategy: Identify which platforms and tactics you will use (Instagram, TikTok, etc) to make sure your customers know about your business
• Operations and logistics:  Map out your daily workflows, from the software you’ll rely on to how you’ll manage orders, and the external partners needed to keep things running smoothly
• Costs and pricing: List every expense and match it against your price list to ensure your business is actually built to be profitable
• Financial forecast: Work out (or estimate) your profit and expenses for the first 12 months to pinpoint when your business will turn a profit
• Backup plan: Think through how you would adapt your strategy or use your skills differently if your initial idea needs to pivot to stay successful

A brand is more than a logo. It’s how people feel when they interact with your business. 

So, how should you build yours? You can start by choosing a business name that’s memorable, easy to spell, available to register on Companies House, and available as a domain name.  

Use a free company name availability checker to make sure you’re not stepping on anyone else’s toes.

Then, it’s worth investing in your visual brand identity —  logo, colours, fonts, imagery, and patterns. Together, these represent your brand and reflect what your business is about. While your brand should reflect your personality and values, tailor it to your products and audience. For example, if you’re selling luxury products, your branding should feel premium. But if you’re selling playful kids’ toys, make it bright and friendly.

You could consider trademarking your business name and logo if you’re building something you plan to scale. 

Online trademark registration costs start at £170 for one class (a class is a product category, like clothing, advertising or education), with £50 for each extra class. While there is a cost, trademarking protects you if your business takes off and someone else copies your brand.

Most first-time founders in the UK choose between two business structures: sole trader or limited company. Both come with pros and cons for online businesses:

Feature	Sole trader	Limited company
Liability	Unlimited: You and the business are the same legal entity. If the business has debts, your personal assets (like your house and car) are at risk	Limited: Your business is a separate legal entity. Your personal finances are protected if the company fails.
Setup and admin	Easy: You just register for self-assessment with HMRC and file one tax return per year	More involved: Requires registration with Companies House (£50 fee), plus you need to file annual accounts and confirmation statements  Tip: Countingup’s company registration service costs just £12 and we handle the Companies House application for you
Tax	Less flexible: You pay income tax and national insurance on all profits you make	Tax efficient: You pay corporation tax and can pay yourself via a mix of salary and dividends
Privacy	Private: Your business details and earnings are not public knowledge	Public: Your company address, director details, and annual accounts are published on Companies House
Credibility	Lower: Larger clients or big brands may prefer not to work with sole traders	Higher: Having Ltd after your business name often looks more professional to big clients and customers
Cost to run	Cheap: You can often do your own taxes for free or pay a small fee for an accountant	Some costs: Unless you can do it yourself, expect to pay £800–£1,500+ a year for an accountant to handle your finances and legal filings  Tip: Open a dedicated business current account to automate tax and sort your invoices for you

There’s no single right answer. It depends on your circumstances, ambitions and how much risk you’re willing to take on. 

It’s time to make things official!

Many first-time online business founders choose to set up a limited company because your personal assets are protected by limited liability. A limited company is also perceived as a more established business, which helps to build trust with your customers and partners. 

Here is how the company registration process works:

• Choose your path: You have two main ways to register with Companies House. You can do it yourself on the Companies House website (£50 fee), or you can use a company registration service like Countingup. We handle the paperwork for you for just £12, ensuring everything is filed correctly
• Gather your info: You’ll need to have a few things ready, like your company name, registered office address, description of your business service, and some personal details like your name, address, nationality and proof of ID 
• Get registered: Standard registration usually takes 24 to 48 hours, but with Countingup, we can get you up and running within a single working day

Congratulations, you’re now a business owner. 

Before you launch, you need all your systems in place. This means choosing your e-commerce platform or website — Shopify, WooCommerce, and Squarespace are popular options.  You’ll also need to set up payment processing (Stripe or PayPal are popular choices as they’re easy to integrate into most platforms). 

If applicable to your business, you’ll also need to sort out shipping options and work out your fulfilment process.

It’s a good idea at this stage to open a business current account to keep your personal and business finances separate. If you’ve set up a limited company, this is a legal requirement anyway. 

Finally, start to build relationships with reliable suppliers if you’re selling physical products. Have backup options. And test your website thoroughly — you need your checkout to work hard for you. 

Now that you’ve launched, here are a few things to keep in mind as you start running your business:

• Make sure you’re ready to process your first sales. Have all your platforms been set up correctly?
• Keep an eye on your numbers. What’s your conversion rate? Which marketing channels are bringing in customers? Where are people dropping off in your checkout process?
• Be prepared to adjust. It’s OK to change things up — you’re new to this, after all. Maybe your pricing needs tweaking. Perhaps your product descriptions aren’t clear enough. Possibly your social media strategy isn’t landing.

The businesses that succeed are the ones that stay flexible and keep learning. Stay curious and pivot when you need to. 

Honestly, the costs vary depending on what you’re selling, how you’re selling it, and your other activities, like marketing. 

We’ll break it down into ballpark costs so you know what to expect.

Typical startup costs — for most online businesses:

• Company formation: £12–£50 (depending on the service you use)
• Website/platform: £15–£30 per month (for a Shopify or Wix subscription)
• Domain name: £10–£20 per year
  (Tip: look out for any website/platform deals that include a free or discounted domain name)
• Inventory: £500–£5,000 (unless you are dropshipping or selling digital products and services)
• Branding and design: £200-£1000 if you hire brand professionals like a copywriter, designer and web developer. There are free brand tools out there, like Canva and Looka, if you want to keep costs down though  
• Marketing: £100–£500 per month (to get those initial eyes on your site)

But every business is different. So, let’s go beyond these typical startup costs and look at two types of online businesses a little deeper.

Digital service businesses 
If you’re a coach, consultant or content creator, you could start for well under £500. The real cost here is your time. Most of your expenses, beyond company registration and your website, will be centred around growth and protecting your business.

• Software: Between Zoom for meetings, Calendly for bookings, and video editing software for your content creation, expect to spend about £40–£70 each month
• Protection: Professional indemnity insurance is vital for these online services — it covers you if a client claims your advice caused them a loss — and usually starts around £6–£12 per month for consultants in 2025
• Marketing: In the early days, you can often land clients for free through networking or LinkedIn — but setting aside £100–£200 for targeted ads can help you grow quickly

Online stores selling physical products
Starting an online business that sells physical goods is a different beast. It does require more initial investment. 

You have to think about unit economics — ensuring that after you pay for the product, the box, the shipping, and the marketing, there’s still a profit left for you. 

• E-commerce platform: The difference here is that you need to make sure your website has all the recommended e-commerce features and functionality. So while you could start on Shopify’s Basic plan (£19 per month), the real cost comes from paid apps for specific functions like SEO, customer reviews, premium themes, payment transaction fees and developer costs for website customisation and maintenance. You should realistically budget £100–£500 per month for a great e-commerce store 
• Packaging and shipping: You should budget around £0.50–£1.00 per order for packaging, plus roughly £3.85 for a Royal Mail Tracked 24 service
• Insurance: You’ll need product liability insurance to protect yourself if a customer has an issue with an item you’ve sold — this typically costs between £20 and £40 per month

Technically yes, but not really. There are ways to keep your costs down, though. Here’s how people do it:

Start with services rather than products. If you’re a consultant, coach, or even a virtual assistant, your skills are your inventory.  Use free website builders, leverage social media for marketing, and use your first earnings to invest in better tools. 

If you want to sell products, try dropshipping or affiliate marketing, where you don’t buy inventory upfront. Or start with print on demand, creating designs and only paying when someone orders.

In summary: work with what you have. And be resourceful. Use your smartphone for product photography. Write your own website copy. Design your logo using Canva’s free plan. The scrappier you can be at the start, the less cash you’ll initially need.

It’s best to just be realistic — having some money to invest will make everything easier and faster. Even £500 can make a meaningful difference to how professional your business looks and operates.

Profitability often comes down to your margins — the difference between what it costs you to make/buy something and what you sell it for. But some business models consistently perform better than others.

• Digital products and services usually have the highest profit margins because you’re not buying physical inventory or paying for shipping
• E-commerce with private label products (creating your own branded versions of products) offers solid returns. Profit margins of around 50% are possible if you source well and build a strong brand
• Software-as-a-service businesses can make a lot of money once they’re established, but they require technical skills and take longer to become profitable 
• Print on demand sits at the lower end with margins around 20–30%, but the trade-off is the almost zero inventory costs

Most online businesses in the UK don’t need special licences to operate. But there are exceptions you should know about.

• If you’re selling food or drink, you need to register with your local authority at least 28 days before trading. It’s free and ensures you’re following food safety regulations
• Alcohol sales require a premises licence and a personal licence. These come with a fee (about £37 + training + DBS check) and take time to arrange (4–6 weeks) — so make sure you factor this in if you’re planning an online wine shop
• Selling certain products like cosmetics, medicines, or items with age restrictions comes with specific regulations. Cosmetics need to meet safety standards and be registered on the EU Cosmetics Portal if you’re selling to Europe
• Data protection matters too. If you’re collecting customer information (which you will be), you need to comply with UK GDPR. For most small online retailers, this means having a clear privacy policy and handling customer data responsibly. You might need to register with the ICO depending on your data processing activities

Insurance isn’t the most exciting part of starting a business, but if a customer claims your product caused them harm, or if a hacker steals your client data, having the right protections in place could save your business. There are a few essential types of insurance you should consider:

• Public liability insurance covers you if someone’s injured or their property is damaged because of your business activities. Even if you’re working from home, this is worth having. Costs start around £50 per year
• Professional indemnity insurance matters for consultants and advisors. It covers claims if your advice or services cause a client financial loss. Expect to pay from £53 per year upwards
• Product liability insurance is essential if you’re selling physical products. If something you sell causes injury or damage, this policy protects you 

Beyond the essentials, a few other types of insurance are recommended:

• Employers’ liability insurance becomes legally required the moment you hire your first employee. It protects you if an employee is injured or becomes ill because of their work
• Cyber insurance is increasingly important for online businesses. If you’re handling customer data and experience a breach, this helps cover costs, legal fees, and potential compensation claims
• Contents insurance for your equipment, like laptops and cameras, makes sense too, especially if you’re working from home and your standard home insurance doesn’t cover business equipment

If you don’t love the idea of starting from scratch, you might look into buying an existing online business for sale in the UK.

Buying an existing business (sometimes called acquisition) gives you a massive head start because the branding, systems, and customers are already there. But, of course, it comes with its own pros and cons. Let’s look at them now to help you decide if it’s for you. 

Pros and cons of buying vs starting from scratch:

The pros
You’re buying existing revenue, established customer lists, and proven systems. There’s less guessing involved. You can see what’s working, what needs fixing, and what the realistic profit potential is. The business might already rank on Google, have email subscribers, or have loyal social media followers, for example

The cons
You’ll be paying a premium for that existing success — usually, if a business makes £50,000 profit a year, you might pay £75,000–£100,000 to buy it. Larger, more established businesses can cost even more, sometimes three or four times what they make in profit annually. So, you need to properly verify everything: Is the revenue real? Are customers happy? Why is the owner really selling? Sometimes businesses are for sale because the market’s drying up or there’s a problem the owner hasn’t mentioned.

So, should you buy?
Buying is a great option if you have capital to invest and want to skip the trial-and-error phase. Just be sure to conduct thorough checks yourself — this means checking the accounts, debts, and customer reviews — so you don’t inherit someone else’s debt. 

Also, make sure you’re not buying a business that’s only successful because of the current owner’s personal brand or relationships you can’t replicate.

Or, should you build?
If you’re still in the inspiration phase and looking for online business ideas, building from scratch allows you to experiment with different niches without the big financial commitment. It’s the ultimate way to learn every moving part of an online business. Plus, there’s nothing quite like the feeling of making that first sale from something you built with your own hands.

In summary: For first-time entrepreneurs, buying might be harder than starting fresh. This is because you need more money upfront and enough business acumen to evaluate what you’re buying. Consider starting your own business first. Learn the ropes, understand what makes online businesses tick, then perhaps buy a competitor or complementary business to grow faster.

Starting your own online business is a journey of a thousand miles but you’ve already taken the first few steps today. 

Don’t let the fear of admin stop you from building your dream online business. Focus on your idea, check your name, and get your structure sorted. Everything else will follow.

Shall we make it official?

1. Check if your dream name is free with our company name availability checker
2. Get your company registration sorted in just 24 hours for £12 
3. Apply for your business current account to keep your finances on track 

Remember, the businesses that succeed are the ones that start, learn quickly, adjust, and keep going. Your online business doesn’t need to be revolutionary, it just needs to solve a problem for people willing to pay for that solution.

You’ve got this. Now go build something.

Yes, it’s highly recommended. Product liability insurance protects you if a customer is injured by something you sold — even if you didn’t manufacture it yourself — while public liability covers incidents involving third parties at your premises or home office.

In the UK, you can earn up to £1,000 per year tax-free under the trading allowance. Once you earn more than that, you must register as either a sole trader or a limited company to stay on the right side of HMRC.

Absolutely. Most UK e-commerce founders start from home to help keep costs low. Just remember to check if you need to inform your mortgage provider or landlord, and see if your home insurance needs a small tweak to cover physical inventory.

Service-based businesses (like virtual assisting or consulting) or print on demand models are the cheapest to start. These businesses require almost zero upfront investment in inventory or equipment — you just need your skills and a basic website.

Yes — even if you don’t have a physical shopfront. You can set up a Service Area Business profile which allows you to show up in local search results without revealing your home address to the entire world.

Focus on your skills. You can use free social media platforms to market yourself and free invoice templates to bill clients — allowing you to reach your first £1,000 in profit before you ever have to spend any money on tech platforms, marketing or other professional tools.