How to start an online business in Australia | Xero
Learn how to start an online business in Australia, from picking your idea to getting your first sales.
Written by Jotika Teli—Certified Public Accountant with 24 years of experience. Read Jotika's full bio
Published Wednesday 22 April 2026
Table of contents
Key takeaways
- Register your business correctly before you start trading by getting an Australian Business Number (ABN), choosing a business structure, and registering for GST once your turnover reaches $75,000.
- Define your target customers before you launch, as understanding exactly who will buy from you shapes your product, pricing, and marketing more effectively than any other early decision.
- Budget carefully for hidden digital costs such as pay-per-click advertising, payment processing fees of 2–5% per sale, and software subscriptions, as these expenses catch most new online business owners off guard.
- Keep your business plan short and flexible, since online startups rarely need lengthy documents and a one-page plan you update regularly will serve you better than a detailed plan that quickly becomes outdated.
What goes into starting an online business?
Starting an online business requires an idea, a plan, a budget, and a few extra considerations unique to digital operations. While the fundamentals mirror traditional businesses, the online approach lets you move faster with less upfront investment.
A survey of 171 experts who work with online businesses revealed the following:
- Ideas can be more niche: The internet connects you to customers everywhere, so unusual concepts can find an audience
- Plans can be shorter: You'll learn by doing, so lengthy documents aren't always necessary
- Budgets can be smaller: Lower overheads mean you can start with less capital
This guide combines their insights with quotes from online business owners and ecommerce consultants so you can see how to start an online business.
How to start an online business
Understanding the advantages and drawbacks of online business helps you prepare for what's ahead. Here's what research reveals about how digital businesses compare to traditional operations.
Pros and cons of online business
Xero surveyed small business advisors to see how ecommerce stacks up against traditional brick-and-mortar businesses.
Key findings
Online businesses outperform brick-and-mortar operations across several key metrics, according to accountants and bookkeepers who prepare financial statements for 2,200 Australian small businesses.
- Higher profitability: 48% say online businesses have higher net profit margins, compared to 24% for brick-and-mortar
- Greater resilience: 68% say online businesses are less likely to fail, and 64% say owners lose less if they do
- More innovation: 56% say online businesses are more likely to be based on a novel idea
- Better lifestyle flexibility: Online business owners are twice as likely to hold down a day job
- Lower stress: Just 8% say online owners are more stressed, compared to 52% for brick-and-mortar owners
- Reduced costs: Most say online businesses face lower operating costs (see full report for retail/services breakdown)
- Faster break even: Most say online businesses reach profitability sooner (see full report for retail/services breakdown)
Online businesses have clear advantages, but they come with specific challenges you'll need to plan for.
Common pitfalls
- Digital marketing costs: 38% say marketing expenses catch beginners off guard, especially pay-per-click advertising
- Transaction fees: 32% say payment processing fees of up to 5% per sale can erode margins
- Revenue forecasting: 31% say predicting income is difficult in the early months
- Website quality: 29% say creating a genuinely effective website takes more effort than expected
- Lack of human contact: 27% say owners miss face-to-face customer interaction
The online and brick-and-mortar businesses in this study had comparable revenue so these differences were not likely due to scale. 59 Australian accountants and bookkeepers participated in the study, with an average of 37 clients each (equating to a collective clientele of 2,200 businesses).
Once you understand the landscape, you'll need to choose how you want to sell online. Different selling models suit different products and audiences.
Ways to sell online in Australia
There are many different ways to sell your products or services online. Choosing the right model depends on what you sell and who your customers are.
Selling through online marketplaces
Marketplaces give you instant access to a large audience. They handle the website infrastructure, making it easy to list your products and start selling quickly.
Building your own ecommerce website
Creating your own website gives you complete control over your brand and customer experience. You can use ecommerce platforms to build a professional store without needing to code.
Selling through social media platforms
Social media platforms allow you to sell directly to your followers. This is a great way to build a community and turn engaged fans into loyal customers.
Offering services online
If you provide a service, you can consult, teach, or freelance entirely online. You just need a website to showcase your skills and a way for clients to book your time.
After choosing your selling model, you'll need to develop a specific business idea that resonates with your target market. Here are the main categories to consider.
Online business ideas
Online businesses typically fall into four categories:
- Retail: Selling physical products, including handmade goods
- Services: Offering professional skills remotely
- Apps: Building software products
- Content: Creating media, courses, or digital products
For detailed ideas in each category, see our guide to online business ideas.
Before you commit to an idea, take time to research the market and understand demand. This groundwork saves effort later.
Researching what's in demand
Online businesses require the same energy and effort as physical ones, even if startup costs are lower. Spending time on research upfront helps you refine your idea before you invest that effort.
Finding your profitable niche
A niche is a specific segment of a market that you can serve better than anyone else. The more focused your niche, the easier it is to stand out and attract the right customers.
Understanding your target customers
Define your target market before you launch. This was the most common advice from business experts surveyed for this guide.
Work out exactly who will buy from you. They might be local parents, fitness enthusiasts, restaurants, schools, or another specific group. The clearer your picture of this audience, the better you can tailor your product and marketing.
Once you know your target customers, build everything around them:
- Talk to potential customers directly: Ask what they think of your idea, packaging, and pricing
- Research their current options: Find out who they buy from now and why
- Learn from competitors: Identify what others do well and where they fall short
Evaluating your competitors
Look at who else is selling what you want to sell. What are they doing well? Where are they falling short? Understanding your competition helps you position your business and find ways to stand out.
With your research complete, you're ready to document your strategy in a business plan. This plan will guide your decisions as you launch and grow.
How to write a business plan for your online business
An ecommerce business plan can be shorter and more flexible than traditional plans. You may not have all the information upfront, and that's normal for online startups.
What to include in your business plan
Your business plan should cover the basics: what you're selling, who you're selling to, how you'll reach them, and how you'll make money. Include your startup costs, pricing strategy, and a rough timeline for when you expect to break even.
Why you can keep it simple
Traditional 20-page business plans exist mainly to impress investors and lenders. Since online startups cost less to launch and rarely attract institutional funding, you can write a plan that works for you. It might be detailed or brief, depending on your needs.
Almost 60% of new online business owners struggle to forecast revenue in their first few months, according to Xero's Global eCommerce report.
This happens because digital marketing results are unpredictable early on. You'll test different tactics across multiple platforms before finding what works. Only then can you forecast sales with any confidence.
This uncertainty is why online startups favour shorter, flexible plans. A one-page plan you update regularly often works better than a detailed document that becomes outdated.
Setting goals and measuring success
Planning still matters. Working through each element of a business plan forces you to examine your startup from multiple angles. That process strengthens your idea before you invest time and money.
Set clear goals for your first few months. How many customers do you want to reach? What revenue target feels realistic? Track your progress so you can adjust your approach as you learn what works.
Once your plan is ready, you'll need to register your business legally before you start trading. This step protects you and keeps you compliant with Australian regulations.
How to register your online business in Australia
Before you start trading, you need to make sure your online business is legally registered. This protects you and ensures you meet your tax obligations.
Choosing your business structure
You need to decide how your business will be structured. Most small online businesses start as a sole trader. You can also choose a partnership or company structure depending on your needs. These are the most common structures in Australia, alongside a company and trust.
Registering for an Australian Business Number (ABN)
An ABN is a unique 11-digit number that identifies your business to the government and community. You need an ABN to operate a business in Australia and to register for other taxes.
Registering your business name
If you trade under a name other than your own, you must add it to the business names register. This helps customers find you and ensures no one else can trade under the exact same name.
Understanding GST registration requirements
You must register for Goods and Services Tax (GST) if your business has a turnover of $75,000 or more. Track your income so you know when to register, as you must do so within 21 days of reaching the threshold.
After registration, you'll need to create a detailed budget to understand your costs and plan for profitability. Financial planning is essential for any new business.
Creating a budget for a digital business
A startup budget helps you understand what your business will cost and when it might become profitable. While online businesses generally cost less to run than physical ones, beginners often overlook several significant expenses.
Common ecommerce budgeting mistakes
- Website costs (32% cite this): Off-the-shelf templates are affordable, but creating a great user experience often requires custom design, professional photography, and ongoing maintenance
- Digital marketing costs (38% cite this): Pay-per-click advertising, social media promotion, and search engine optimisation can quickly add up
- Payment processing fees (32% cite this): Transaction fees of 2-5% per sale reduce your profit margins
- Shipping and fulfilment (28% cite this): Postage, packaging materials, and returns handling cost more than expected
- Software subscriptions (24% cite this): Email marketing tools, accounting software, inventory management systems, and customer service platforms create ongoing monthly costs
Budget for these expenses upfront so you're not caught off guard as you launch and grow your online business.
FAQs on starting an online business in Australia
Here are answers to common questions about starting and running an online business in Australia.
Do I need an ABN to start an online business in Australia?
Yes, you need an Australian Business Number (ABN) to operate a business in Australia. You can apply for an ABN through the Australian Business Register once you've determined your business structure.
How much does it cost to start an online business in Australia?
Costs vary widely depending on your business model. You might spend as little as a few hundred dollars for a basic website and marketing, or several thousand for custom development and professional branding. Most online businesses have lower startup costs than traditional brick-and-mortar operations.
Do I need to register for GST straight away?
You must register for GST if your business turnover reaches $75,000 or more. You can choose to register earlier if it benefits your business, but it's not required until you reach the threshold.
What's the best business structure for an online business?
Most small online businesses start as sole traders because it's simple and inexpensive. As your business grows, you might consider a company structure for liability protection or tax benefits. Speak with an accountant to determine the best structure for your situation.
How long does it take for an online business to become profitable?
Most online businesses reach profitability faster than brick-and-mortar operations, according to research from accountants who work with small businesses. However, the timeline varies based on your business model, marketing effectiveness, and startup costs. Many online businesses break even within the first 6-12 months.
Disclaimer
Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.
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