How to start an ecommerce business: Your Small business guide

Published Friday 5 December 2025

Table of contents

• What is an ecommerce business?
• Why start an ecommerce business?
• How much do you need to start an ecommerce business?
• How long does it take to start an ecommerce business?
• Starting an ecommerce business: a step-by-step checklist
• Managing your ecommerce business finances
• FAQs on starting an ecommerce business

Key takeaways

• Conduct thorough market research using customer surveys, competitor analysis, and tools like Google Trends to validate your business idea and identify market gaps before committing resources.

• Create a comprehensive business plan that includes financial projections, target market analysis, and marketing strategy to guide decision-making and secure potential funding.

• Choose an ecommerce platform that integrates with accounting software to automate transaction tracking and simplify financial management as your business scales.

• Develop a focused marketing strategy targeting 1-2 platforms where your audience is most active, rather than spreading efforts across multiple channels before mastering your core approach.

What is an ecommerce business?

An ecommerce business is a company that buys and sells goods or services over the internet. Instead of a physical shop, your storefront is a website where customers can browse products, make purchases, and arrange delivery. This model allows you to reach customers anywhere, at any time, without the costs of a traditional retail space.

Why start an ecommerce business?

Ecommerce businesses offer significant advantages over traditional retail stores. The market grows 12% annually, creating ongoing opportunities for new businesses.

Key benefits include:

• Lower startup costs: No rent, utilities, or retail staff expenses
• Faster launch time: Build and launch within weeks, not months
• Global reach: Sell to customers worldwide from day one
• Scalable operations: Grow without physical space limitations

If you have internet access, you can already use many tools and resources to succeed in online selling.

How much do you need to start an ecommerce business?

Starting an ecommerce business typically costs £500 to £5,000, depending on your business model and product complexity. Essential startup costs include:

• Platform subscription: £20-£300 monthly for ecommerce software
• Stock and manufacturing: Variable based on product type
• Marketing and advertising: £200-£1,000 monthly budget
• Order fulfilment and shipping: Per-order costs plus storage
• Staff costs: Only needed as you scale

Start by writing down all of the essential costs for starting your business. Total them up, to figure out how much you'll need to kick things off.

Separate the one-off costs from the ongoing costs (e.g. one-off costs like designing a logo, ongoing costs like an ecommerce platform subscription), and use the ongoing costs to develop a monthly budget. If you know how much you need to cover your expenses every month, you can work out how much you need to earn to stay on track.

How long does it take to start an ecommerce business?

Building an ecommerce business takes 2-12 months from idea to sustainable income. Here's the typical timeline:

• Website launch: 2-4 weeks using modern ecommerce platforms that require no coding skills.
• First sales: 1-3 months with active marketing and customer acquisition.
• Sustainable income: 6-12 months to build consistent revenue and refine your strategy.

In terms of building sustainable income, your ecommerce business can take a little longer to generate revenue. This is because customers need to know who you are and what you're selling before parting with their hard-earned cash. Marketing and advertising is an essential part of running an ecommerce business, and it usually takes at least a few months before you see a return on investment.

Many ecommerce businesses build up over time. Be prepared to spend a year honing your marketing strategy, refining your product line, and optimising your site before you enjoy the big wins. To make the financial side easier, use software that connects your ecommerce platform to your accounting software.

For example, if you're using Xero, A2X can be integrated seamlessly to automatically code transactions and speed up reconciliation.

Starting an ecommerce business: a step-by-step checklist

What do you need to start an ecommerce business? This checklist walks you through a simple approach to starting an ecommerce business, and setting up an ecommerce website.

Step 1: Market research and idea generation

Market research validates your business idea by analyzing customer needs, competitor strategies, and market opportunities. This reduces risk and improves your chances of success.

Effective research methods include:

• Customer surveys: Test demand and pricing with your target audience
• Competitor analysis: Study successful businesses in your niche
• Market reports: Use existing data to identify trends and gaps
• Google Trends: Track search volume for your product ideas

There are many different ways you can carry out market research. For example:

• Setting up focus groups with your target market, and asking them questions about their needs and wants
• Running an online search of your competitors, analysing their marketing campaigns, and digging into the research and resources they share online
• Reading through market reports to spot trends, identify patterns, and explore gaps in the market

If you don't have the budget to conduct your own studies, look out for existing market research, trends data, and reports. Check out Shopify's ecommerce trends reports or head to Google Trends to see what internet users are searching for right now.

Stay open to changing direction if your original idea does not work out. The best way to approach ecommerce is to come up with lots of different ideas, and test them out before committing. Bounce ideas around with trusted friends, your local coffee shop barista, or your work colleagues. Watch how they respond, and use their reactions to determine the strength of your idea.

Step 2: Choose your products and niche

Once you've done your research, it's time to narrow down what you'll actually sell. Focus on products that solve a real problem for your target customers or fill a gap in the market you've identified.

Consider factors like profit margins, shipping costs, and storage requirements. Digital products like courses or software often have higher margins, while physical products may need more upfront investment but can build stronger customer relationships.

Your niche should be specific enough to stand out but broad enough to sustain growth. Think about your own interests and expertise too – you'll be more motivated to succeed in an area you're passionate about.

Step 3: Write an ecommerce business plan

An ecommerce business plan outlines your strategy, financial projections, and operational approach. It helps secure funding, guide decision-making, and track progress toward your goals.

Essential components include:

• Executive summary: Overview of your business concept and goals
• Market analysis: Target customers and competitive landscape
• Product strategy: What you'll sell and why it's unique
• Financial projections: Revenue forecasts and startup costs
• Marketing plan: How you'll attract and retain customers

Whether you send it to potential investors, or use it to navigate entrepreneurship alone, your ecommerce business plan is an essential resource.

Here are some things you could include in your business plan:

• Executive summary: This will be the first section of your business plan, and the last thing you write. An executive summary gives an overview of your business idea, the market, and what you're trying to achieve.
• Opportunity: Here, you explain the challenge or situation, and how your business provides an answer or solution.
• Business name, vision, mission, and values: These are the core details of your brand. They explain why you're developing an ecommerce business and how you'll go about it.
• Overall business model: This explains how your business will make a profit. It's an overview of how and what you'll sell.
• Products: Here, you'll introduce your unique products or line of products, how they're made, and what makes them stand out in the market.
• Target market: This is where you define who your customers are. Explore their demographic, highlight their likes and dislikes, and the brands they shop with.
• Market analysis: Here, you need to provide an overview of the current market. What's it worth, who the key players are, and the latest trends.
• Competitor analysis: This is similar to a market analysis. You need to provide an overview of your competitor research – exploring their business models, revenue, what they do well and what they don't do well.
• Sales and marketing channels: Explain how you'll get the word out about your brand. Will you opt for social media marketing, email marketing, or an SEO content strategy? Perhaps something else entirely?
• Operations: This section explores how your business will operate day-to-day. Detail your equipment, assets, processes, premises, and people.
• Financial plan: Your financial plan should explore how much money you expect your business to make, including projected cash flow, profit and loss, and revenue.
• Milestones and timeline: This is the exciting part. Detail specific goals and targets you expect to reach, and when you expect to reach them. As you build your ecommerce business, you can map your progress against these original milestones.

Research ecommerce business plans for your specific sector or market to check whether there is anything you have missed.

Step 4: Branding

Branding creates your business identity and influences customer perception. Complete these essential steps:

• Choose your business name: Select something memorable and relevant to your products
• Register your business: Complete registration at gov.uk for legal compliance
• Design your logo: Create a visual symbol that represents your brand values
• Develop brand guidelines: Establish colours, fonts, and tone of voice for consistency

Step 5: Set up your website

An ecommerce platform is software that powers your online store, handling everything from product listings to payment processing. Choose based on these criteria:

• Ease of use: Platforms like Shopify require no coding experience
• Integration capability: Connect with accounting software for automated bookkeeping
• Scalability: Support growth from startup to established business
• Payment options: Accept multiple payment methods securely

Xero integration benefit:Shopify automatically syncs transactions and inventory with Xero, eliminating manual data entry and simplifying cash flow management.

Next, secure your domain name. Select a domain name that's the same as, or as close as possible to, your brand name. Focus on making your ecommerce website as user-friendly as possible. Break up blocks of text so they're easier to digest, use high-quality images of your products, and pick fonts that are easy to read.

If you're not confident in bringing together an ecommerce website on your own, there are plenty of consultants online who specialise in optimising ecommerce stores.

Step 6: Set up payment processing and security

Payment gateways securely process customer payments without exposing card details to your website. They encrypt transactions and handle compliance requirements automatically.

Payment gateways use encryption and other security measures to protect customer payments. In the UK, regulations require strong customer authentication for many online transactions, making it vital to choose a compliant provider.

Security essentials:

• SSL certificate: Enables encryption and displays security padlock
• PCI compliance: Choose gateways that handle security requirements
• Multiple options: Offer 3-4 payment methods to reduce cart abandonment

Beyond choosing a secure payment gateway, you can make your ecommerce site more secure by investing in an SSL (secure sockets layer) certificate. SSL certification makes encryption possible, and can help to boost your search engine ranking.

These certificates give you the padlock icon in the address bar that reassures customers they are visiting a secure site. Make sure you research the different SSL certificates, so you can select the right one for your business.

Step 7: Establish order fulfilment and shipping strategies

Order fulfilment is the process of receiving, processing, and delivering customer orders. You have two main options:

Internal fulfilment:

• Pros: Complete control over quality and customer experience
• Cons: Requires staff, storage space, and shipping logistics
• Best for: Small volumes, high-value products, custom packaging

Outsourced fulfilment:

• Pros: No storage costs, professional logistics, scalable operations
• Cons: Less control, per-order fees, potential quality issues
• Best for: High volumes, standard products, rapid scaling

Packing, shipping, and delivering your orders to customers will require extra staff and resources. But you'll be able to deliver bespoke customer service, and manage the quality of your fulfilment and shopping process.

Outsourcing your order fulfilment and shipping means you won't need to hire a fleet of vehicles, or the staff to deliver goods. But you'll also lose oversight of the delivery process, and have less control over the quality of shipping and handling.

If you ship internationally, you might need a separate company that can handle your overseas deliveries. Research outsourcing options to see if they fit your fulfilment requirements before making a decision.

Step 8: Market your business

Customers can't buy your products if they don't know about them – that's where marketing comes in. Building an effective marketing strategy for ecommerce is all about focusing on your target customer.

The more you understand their behaviours, needs, and wants, the more targeted your ecommerce marketing strategy can be.

Today, there are all kinds of digital platforms you can use to attract customers.

Writing SEO-friendly blogs can attract customers searching for specific answers or information. Posting on Instagram and TikTok can show customers a behind-the-scenes view of your brand, and help them build a relationship with you.

Partnering with social media influencers can help you build credibility, as their followers trust in the opinions of their favourite online creator. Engaging with your customers online can help to build brand awareness, and make them think of you next time they're in the market for products like yours.

Set up a TikTok shop to market your business and generate sales.

Focus on one or two platforms that are popular with your target audience instead of trying to be on every platform. Focus on one or two that are popular with your target audience. And make sure you've mastered those platforms before adding more to your strategy. Check out our free advertising ideas for small businesses for more inspiration.

Your marketing strategy should include the following points:

• Your target audience
• Competitor analysis
• Budget
• Channels you'll use – such as SEO content, social media marketing, and influencer partnerships
• Content pillars or themes
• Publishing frequency and engagement strategy
• Goals and KPIs
• What you'll measure (ecommerce metrics and KPIs)

Read our guide on how to do digital marketing for small businesses for more insights.

Managing your ecommerce business finances with Xero

Once your business is up and running, keeping your finances in order is key to long-term success. Staying on top of your numbers helps you understand your profitability, manage cash flow, and make confident decisions.

Using accounting software simplifies this process. You can connect your ecommerce platform and bank accounts to automatically track sales, fees, and expenses in one place. This saves you time on manual data entry and gives you a real-time view of your financial health.

With clear reports, you can spot trends, plan for growth, and make tax time less stressful, especially as many UK business owners now need to follow the government’s Making Tax Digital rules.

Explore how Xero's accounting software can help you run your business, not just your books.

FAQs on starting an ecommerce business

Here are answers to some common questions about starting an ecommerce business.

What are the main types of ecommerce business models?

There are four main models: Business-to-Consumer (B2C), where you sell directly to individual customers; Business-to-Business (B2B), where you sell to other companies; Consumer-to-Consumer (C2C), where consumers trade with each other on platforms like eBay; and Consumer-to-Business (C2B), where individuals sell services or products to businesses.

How profitable is ecommerce for small businesses?

Profitability varies by industry and niche, but many ecommerce businesses achieve healthy margins. A typical gross profit margin is between 30% and 50%, with a net profit margin of 10% to 15% being a good target for sustainable growth. Digital products and niche markets often see higher profitability due to lower overheads.

Do I need business experience to start an ecommerce business?

No, you don't need formal business experience to get started. Many successful entrepreneurs learn as they go. What's important is having a solid idea, a willingness to research your market, and the discipline to manage your time and finances. Using intuitive tools and seeking advice from mentors can help fill any knowledge gaps.

What's the difference between ecommerce and dropshipping?

Ecommerce is the general term for selling products online. Dropshipping is a specific type of ecommerce where you don't hold any inventory yourself. Instead, when a customer places an order, you purchase the item from a third party who then ships it directly to the customer. It's a popular model for its low startup costs.