In this article, I’m going to give you a definitive, to-the-penny answer to that question. Something I don’t think you’ve gotten elsewhere.
I find the rule for start-up money to be the same for an Internet business as it is for many home-based businesses. It’s a “time or money” equation. (Michael Masterson has written about it many times.)
The “time or money” rule dictates that you need either time or money to succeed.
If you have little money, you must put a lot of your time into the start-up. That’s what’s known as “sweat equity.”
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If you have little time but plenty of cash, you can pay others to do a lot of the work.
Time or money. Either one will do.
It is extremely difficult to start a home business if you have no money and no spare time.
However, with an Internet business, we have a big advantage.
You can’t run an Internet business with zero dollars. You need to buy domain names, pay for hosting, have Web pages designed, and so on. But it is much easier — and far less expensive — than an offline business.
It’s also far less risky.
As Gary Scott said at an American Writers & Artists Bootcamp, “The Internet is very forgiving of mistakes.”
For instance, if an e-mail marketing campaign to your subscribers bombs, you don’t make much money that day. But sending an e-mail promotion, even to thousands of subscribers, is so inexpensive, you don’t lose much either.
On the other hand, running a business offline … especially one selling a physical product … can cost a small fortune. And all of it is risk capital.
Take, for example, the business magazine — Portfolio. It was launched by Conde Nast in April 2007. Two years later, it was gone. According to the New York Post, the total loss for the publication’s two years of operation was $120 million.
In my little Internet information marketing business, I never spend much more than $1,000 to develop and test a product. Usually, I spend considerably less. My first product, an e-book, cost me a total of $263.
Since most of us have grand plans, ambitious dreams, and big ideas, but not much money, I suggest you start your Internet business with your own labor rather than begged or borrowed capital.
Especially at the beginning, you’ll have to put in a lot of time. But that will give you an edge over your competitors. Most of them simply will not make the effort.
“If you work more hours than somebody else, during those hours you learn more about your craft,” writes Randy Pausch in his book The Last Lecture. “That can make you more efficient, more able, even happier. Hard work is like compounded interest in the bank. The rewards build faster.”
It takes a lot of hard work to start and build a profitable online business … much more than many “get rich quick on the Internet” promoters would lead you to believe. But once you get going, Internet marketing can generate a steady stream of passive income. That’s the “compound interest” part of it. You create a product once, and then sell it again and again.
That’s not the case with a service business, such as freelance copywriting, coaching, consulting, or speaking.
In a service business, the start-up is simpler. You just start advertising. But service businesses generate mostly active income. You have to keep working, with a high level of activity, to make a high level of income.
A business that generates passive income pays bigger dividends down the line. And, as I said, you can start an Internet information marketing business with very little money. But not zero.
Exactly how much do you need, then?
If you do most of the work yourself at the beginning, you can get started with less than $1,000.
Take a look at my budget for my first product on the Internet, an e-book titled “Write and Grow Rich”:
- Writing the e-book — zero (I assembled it from previously published articles.)
- Hiring a designer to put my Word file into a PDF format — $75
- Registering my domain name — $9
- Creating the landing page copy — zero (I wrote it myself.)
- Paying a company to design the landing page — $175 (I outsourced to an overseas firm.)
- Monthly shopping cart software subscription fee — $4 (The company I use — automateyouronlinebusinessnow.com — charges $49 to $99 a month, depending on the software you select. But they offered a one month trial for only four bucks. I started with that.)
- E-mail distribution — zero (I was already paying a flat monthly fee to have the e-zine I send to my copywriting clients distributed, and I never came close to the maximum number of e-mails I can send for that.)
- Total out-of-pocket, excluding my own labor: $263
- Total revenues: $2,958 (for 102 copies of the e-book, sold at $29 each)
As you can see, even with a budget of only a few hundred bucks, you should have enough to cover the initial start-up costs. That includes hosting … domain name registration … design of your landing page … creation of your first information product … setting up a merchant account … and shopping cart software.
The bottom line: If you have ambition, vision, and desire … and are willing to work hard, at least in the beginning … you can start a successful Internet marketing business for under $500.
To launch a business for under $500, however, you need to spend your money wisely — finding quality service providers that charge reasonable fees.
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By patronizing the bargain suppliers and avoiding the rip-off artists, you can get started on a shoestring. And get hosting … website design … shopping cart software … and everything else you need … for pennies on the dollar.
By the way, figuring out how much time or money you are going to spend to start your Internet business is just the first step. To get it off the ground — and start making sales every day — you need to know the secrets to selling online. That is the main factor in determining your success.
My small Internet marketing business generates more than $25,000 a month in revenue. And I can show you exactly how I do it.