Define Your Business: How To Start an Online Business

Define Your Business: How to Start an Online Business

Learn how to set business goals, find a profitable niche, define your business model, create a brand, and plan your business!

24 minutesEstimated read time


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DISCLOSURE: Some of the links in this article may be affiliate links, which may provide compensation to us from the service providers at no cost to you if you decide to use their services.

In this article, we’re going to take a closer look at how to clearly define your business, so that you start your business off on the right foot.

Out of all of the steps for starting a new online business, this is probably the most important step. The effort you put in here will pay off in spades down the road.

We’re going to cover defining your business goals, finding your niche, market research, competitor analysis, your business model, branding, and setting up your business, financial, and marketing plans!

So, buckle in and let’s get to work! 😊

How to Start an Online Business: Complete Checklist for Beginners
How to Start an Online Business: Complete Checklist for Beginners
A must-have beginner’s guide for starting and launching your online business! Easily track your progress and make sure you don’t miss anything!

You’re on Step 2 of 8 steps in the checklist for How to Start an Online Business.

What are business goals?

Creating a business goal has to do with setting out to do something and then measuring the outcome.

Therefore, if you want to start an online business, there are two vital questions you need to ask yourself first:

🙋‍♀️ 1. Why do you want to start an online business?

🙋‍♂️ 2. How will you know if you’re successful?

In order to answer the second question, you’ll need a clear answer to the first question.

If your answer to why you want to start a business is something like “I want to make a lot of money 💰,” then your answer to the second question better include something having to do with the amount of profit you can make within a given time period.

Likewise, if your answer to the first question is that you think you have an awesome product or service that will astonish your customers 😲, then your answer to how you’ll know if you’re successful better have something to do with measuring customer satisfaction.

What if the reason you want to start an online business is to make money from sharing your knowledge? Well, then, in order to measure whether or not you’re successful, you’ll need to be able to measure your profit and whether or not your customers are actually learning what you’re trying to teach them.

And here’s a bonus question…

🙋‍♀️ 3. What is your exit strategy?

Although it may seem like a strange way to start a business, it can be helpful to figure out your exit strategy before you get started. An exit strategy is how you plan to leave your own business.

For example, is your plan to build up a profitable business and then sell it as soon as possible? If so, you should design your business so that all of the assets and services can easily be transferred, and so that your valuation is as high as possible.

Or do you plan to work on this new online business until the day you pass away? If this is the case, do you plan to pass the business on to your children or to a friend or colleague? Or do you plan to shut down your business once you are gone?

Or, perhaps the goal for your business is for a specific timeframe, season, or event, and you plan to close down shop once it’s over or no longer relevant?

However you answer, you should consider structuring and building your business in a way that aligns with your exit strategy.

What are SMART business goals?

A common recommendation is to create S.M.A.R.T. business goals, which means that your goals should be:


The Business Archery Analogy

It might help to think of yourself as an archer. In these first few steps about setting up your online business, we’re working on your mindset, stance, form, making sure you have the proper equipment, and pointing your arrow in the right direction!

If you are the archer, then your arrow is your business, and your business goals define the target you want to aim at.

Your job is to hit your target… but not just anywhere in your target. You want to hit directly in the center of your target… a bullseye!

If the target represents your business goals, then the bullseye represents your niche.

Archery Analogy infographic

How do you find your niche?

Finding your niche is a very important part of defining your business. Without a niche, you’re bound to flail around and waste your time, energy, and money while half-heartedly competing in areas that you probably have little chance of breaking into.

If you immediately set out to create another Amazon, Microsoft, or Apple, you’re very likely going to fail because those huge enterprises have enormous amounts of traffic and funding, and they compete with each other at so many levels.

Instead, you need to do a reality check 👀 and really focus in on what exactly sets your business apart from every other business.

Finding your niche is all about finding an opportunity in a market where you can use your passion, expertise, and skills to create something that your audience is willing to pay for.

Finding Your Niche infographic

Look for profitable business opportunities where:

You can provide a considerably superior product or service in a competitive environment.
You can provide any type of competitive product or service in a desirable market with very few competitors.
You can create new markets by combining two or more ideas of existing successful markets. Be creative! For example, perhaps you can combine a mobile pet care service with a grocery delivery service! 😉

Usually, to find a niche, you want to start with a general business idea and then start narrowing it down until you find a niche that has low competition and a reasonable audience size.

PRO TIP EXAMPLE: If you want to create an online business to sell clothing, you might want to first narrow it down to focus on customers only from the United States. Next, you might want to consider only selling t-shirts, instead of all types of clothing. Finally, you might want to narrow down your t-shirt designs to only those having to do with holidays.

In this example, we took a general online clothing business and turned it into an online business focused on selling holiday t-shirts to customers in the US.

Of course, this doesn’t mean that you can’t expand your market or target audience in the future. But finding a niche will help you focus on the core part of your business that will help stand out from your competition and help make you profitable as soon as possible.

Try asking yourself these questions:

  • 🙋‍♀️ How does your expertise set apart your business from other businesses?
  • 🙋‍♂️ Where does your business have special leverage, technology, or insight that most other businesses don’t have?
  • 🙋‍♀️ Which aspects of your business or industry are you most passionate about?
  • 🙋‍♂️ Are there particular locations, countries, states, counties, or cities where your goods or services would most likely succeed?
  • 🙋‍♀️ What is your target audience? Be specific. If you say “everyone,” then answer this question instead: what are the demographics of your customers that will likely produce the lion’s share of profit?
  • 🙋‍♂️ Are you likely to make a profit selling your products or services at a competitive or reasonable premium rate? If not, how can you change your focus, target audience, products, or services so that you will likely make a profit?
  • 🙋‍♀️ What will it cost to break into your desired market? For example, if your plan is to focus on driving traffic through advertising, do you have the budget to compete for high-value keywords?
  • 🙋‍♂️ How many people are actually looking for the products or services that you want to sell?

In order to fully answer these questions, we need to go deeper and talk about market research and competitor analysis.

What is market research and competitor analysis?

Market research involves exploring target markets and understanding how they work. In this process, you want to answer questions such as:

What is the audience size of your target market? How much qualified traffic can you expect to get?
What other markets are closely related to your target market, where partnerships could be mutually beneficial, or you could eventually expand into?
Is your target market seasonal or highly influenced by world events or fads?
What is the trajectory of your market? Is demand increasing or decreasing?
Who are your customers? Can you create customer persona profiles and describe their demographics?

Competitor analysis is a highly-related topic to market research that involves:

Identifying your competitors, including their strengths and weaknesses. How do your strengths and weaknesses compare?
Identifying existing products and services in your target market. How do your products or services compare to theirs?
Estimating the amount of traffic you can potentially funnel away from competitors and to your online business. Will that amount of traffic be able to support your business goals?
Identifying opportunities that your competitors are currently missing.
Recognizing areas where competitors might threaten your profitability. Are larger competitors able to offer much cheaper prices or much higher quality? Are competitors throwing gobs of money at advertising in your target market? Can you compete at the same level?
Understanding what types of marketing, tools, website content, keywords, social media, backlinks, and advertisements your competitors use to drive traffic to their sites.

Luckily, even beginners have access to sophisticated SEO tools that can help them with market research and competitor analysis. 😎 These super-powerful tools below will go a long way to helping you find answers to all of those questions:

SEO Tools

Highly technical, tons of features, premium cost.
Lots of features, reasonable cost.
Simple interface, helpful features, better for those on a budget.

After doing market research and sizing up your competitors, you should have a much better idea of the niche you should focus on for your own online business. You want to choose a niche that aligns with your business goals and where you have a high chance of succeeding.

Why should you use surveys and focus groups?

Sometimes you might not know how customers will react to your products or services, or if your products or services are a good fit for your customers. In these cases, you should consider running some surveys and/or doing focus groups.

If you happen to already have your own audience and a way to easily contact them, you should consider sending them a survey to get feedback about what you plan to offer via your new online business.

Don’t worry, though, if you don’t yet have your own contact list, or if you want to query a much larger set of potential customers with specific demographics. Many survey companies exist that allow you to target thousands of potential customers and a pre-screened audience to get their feedback.

Survey tools allow you to create questionnaires, webpage forms, chat surveys, and offline surveys that will allow you to better understand your target audience. And of course, you can continue to use surveys beyond doing your initial market research. 😉

Here are some survey tools you might consider checking out:

Survey Tools

Free 14-day trial without a credit card. They also offer survey services to target audiences in over a hundred countries.
Simple pricing for fast market research.
Quickly get survey responses from around the world.
Use templates to create surveys.
High-quality responses from around the globe.

Focus groups are another tool you can use for market research. With focus groups, you bring together a small number of people and ask them for their feedback on your product or service.

Although focus groups are very similar to general surveys, they differ in a few distinct ways. Focus groups involve:

Several people sharing their feedback and opinions in a face-to-face group setting.
A trained moderator who leads discussions for the group and digs into responses by asking follow-up questions.
The ability to measure actual non-verbal reactions to questions.

What is your business model?

By this point, you should have a good understanding of your business goals, your niche, and the current state of the market and your competitors. But before you go further, you should clarify your business model.

What do B2B, B2C, C2C, and C2B mean?

One way to understand your business model is to consider who your business caters to. There are a few acronyms that you should be familiar with that can help you with this: B2B, B2C, C2C, and C2B.

What is B2B?

B2B stands for business-to-business and it is a model where your company sells services or products to other businesses.

In this model, your online business might sell goods wholesale, which other companies can then resell to consumers at a full retail price. Or perhaps your online business will offer products and services that only make sense for businesses, such as advertising agencies or accounting software.

What is B2C?

B2C stands for business-to-consumer. This model is used to describe a business that sells products and services to consumers.

This is the obvious model that most people think of when talking about e-commerce or online businesses. Heard of Amazon or Alibaba?! 😉

When an online business bypasses traditional suppliers and physical marketplaces and sells its goods directly to consumers, this type of B2C is called D2C, or direct-to-consumer.

What is C2C?

C2C stands for consumer-to-consumer. In this model, your business allows consumers to sell products or services to other consumers.

Some examples of this type of business model include classified ads, auction sites, and craft stores, such as Craigslist, eBay, and Etsy.

What is C2B?

C2B stands for consumer-to-business and it refers to businesses that allow consumers to sell services or goods to other businesses.

It’s similar to C2C, but where consumers provide value to businesses instead of to other consumers. Some examples of this business model include showing ads on your site for other businesses, doing affiliate marketing, and survey sites where consumers get paid for answering survey questions.

How will your business make money? 💰

Another way to understand your business model is to consider how it is your business will operate and earn revenue.

Which of the following business models best describes your new online business?

Ecommerce model

Customers pay you for products or services that they find on your website.
You make revenue on each sale, which means you need to continue driving new and existing customers to your site in order to continue making money. This will likely be your primary focus.

Subscription model

Customers agree to pay you on a regular basis (e.g. monthly or annually) in order to use your service.
New customers will increase your total annual revenue and help fight attrition. Otherwise, you’ll continue to make money year after year with the same customer base you acquire early on. With this model, your focus will likely be on improving your service, adding more features, and supporting existing clients.

Freemium model

Customers get to use your product or service for free (or for a very small amount of money) for a limited amount of time or with a limited set of features. Customers then have to pay you in order to unlock more time or more features.
You make revenue when your customers upgrade from the free tier to a premium tier. This means your focus will be on creating a very alluring free product, as well as optimizing the paywall experience in order to convert those users into paying customers. You will likely have less problem attracting new users compared to other business models, but more of an issue monetizing those users.

Support model

Similar to the freemium model, customers use your service or product for free, or for a small fee. However, customers must pay to get help or support.
You make money when your users need your help. Thus, you’ll likely focus on either:
  1. Creating a feature-rich product or service that has so many bells and whistles that customers will likely want help to make the most of it. In this case, your focus will be on feature development.
  2. Or, creating a relatively simple product or service that can solve a complex problem that is inherently difficult to understand. In this case, customers probably won’t need help on how to use your product or service. Rather, they will likely need your advice on how to most effectively apply your product or service to their specific situation.
In either case, you will likely spend a lot of time and effort optimizing your support system.

Advertising model

Customers don’t pay you anything to use your products or services. Instead, you are paid by advertisers that advertise on your website, in your products, or through your services.
You make revenue either per impression or per click. Either way, your focus will be on driving as much traffic as possible to your website. You’ll likely focus on content creation, SEO, and finding the highest-paying quality advertisers.

Affiliate marketing model

Similar to the advertising model, your customers don’t pay you anything. Instead, you get paid from companies you affiliate with and promote on your website through links.
When a visitor clicks on an affiliate link on your website and then goes on to buy a product or sign up for a service on that affiliate site, you get a small commission from that affiliate site for referring your visitor, at no extra charge to the customer. It’s a win-win-win: the customer finds a product that meets his needs, the business gets a new customer, and you get a commission for leading the customer to the business.
You make money when you connect your visitors with a service or product on another website. Therefore, your focus will be on driving qualified traffic through SEO, advertising, and creating highly-optimized content that will also encourage visitors to use your affiliate links.

Peer-to-peer (P2P) model

Very similar to the C2C business model, customers pay you a small fee or percentage in order to facilitate a transaction directly with another customer.
You make money when your customers make transactions with other customers. Thus, your focus will likely be on creating a marketplace where customers can quickly and easily find each other. You’ll need a robust transaction system and a way to attract new customers to list items on your marketplace.
Customer Personas

What are customer personas?

Figuring out your business model and doing market research can also help you create customer personas, which are useful for marketing and to help you better understand your target market.

A customer persona is basically just a fictional profile that represents a general type of buyer or customer segment of your business.

The idea is to analyze your target market and try to figure out the distinct types of customers you’ll encounter. You can have fun with it and give each persona you create a fake picture and a name that best represents them.

Your goal is to create a variety of distinct personas that accurately describe your potential visitors and customers. Then, you can focus your efforts on building your business with those personas in mind.

Once you create your primary buyer personas, you can think about how your business can and should cater to each persona.

  • 🙋‍♂️ How do the demographics for each customer persona affect your products, services, and website design?
  • 🙋‍♀️ Are your fictional customers logical or emotional? Do they make quick purchases, or do they take their time and come back to your website many times before purchasing? How will this affect your marketing or budgeting?
  • 🙋‍♂️ How would each customer persona interact with your website or use your services? What would they look for? What would they struggle with?
  • 🙋‍♀️ Would you need to drastically modify your products or services depending on the persona? If so, perhaps you should focus on a more narrow niche to begin with.

What is business branding?

Great job! If you’ve made it this far, you’re well on your way to starting your business on a solid foundation. Now that you know what your business is going to be and who you are selling to, you can finally work on your business brand!

Your brand helps potential customers easily identify and understand your business and services. Your brand makes your first impression on visitors and will guide their thinking on how to use and interact with your business.

What better way to describe the purpose of a brand than with a ton of corny metaphors?! 😁

Your brand is a face. Are you smiling, frowning, laughing, or scowling? Are you wearing dark sunglasses with a smug look? Do you look crazy and fun?

Your brand is an animal. Are you a wild wolf, a prissy cat, a strong workhorse, a roaring lion, a tiny mouse, or a fun-loving dog?

Your brand is a song. Is your song upbeat, relaxing, moody, or inspiring? Is it Pop, Rock, Hip-Hop, Ambient, or Classical?

Your brand is an outfit. Are you wearing a t-shirt, shorts, and sandals? Are you in a business suit? Are you wearing the latest fashion or are you wearing a comfortable sweater? Are you in a sports uniform?

I think you get the idea. 😉

Your business branding includes things like your business name, domain name, logo, font, colors, theme, slogan, and even things like your writing tone and website design.

Make sure to choose a brand that is consistent with your business goals, niche, and target market!

And also make sure that your brand is consistent with itself. For example, if your business name is fun and whimsical, make sure to choose a matching logo that is equally as fun… and make sure that your writing style is comical and upbeat, not bland and boring.

How do you choose a business name?

The first thing you’ll want to do is choose a business name. Make sure that your business name is unique and that the corresponding domain name is not yet taken.

If you think branding on social media will be especially important for your business, then also make sure that your desired business name is available on social media platforms like Instagram, Twitter, and Facebook.

PRO TIP: Don’t choose a name that is easily confused with another business or trademark. And definitely don’t use misspelled variations of existing businesses, like “Gooogle” or “Googel”… unless you really like lawsuits! 😲

You should try to choose a name that:

Is memorable.
Is short.
Conveys the idea of your business.
Is easy to spell and say.
Is unlikely to be confused with another business.
Doesn’t have an alternate meaning that might confuse visitors.
Still makes sense if you end up growing your business into other related markets.
Doesn’t accidentally form unintended words when combined as a domain name.

Actual Bad Example: There used to be an extremely popular online programming forum called “Experts Exchange.” Well, let’s just say that visitors would sometimes confuse them for a completely different industry when they saw their domain name: 😉

How to Come Up with Creative Business Name Ideas for Your Company

Once you settle on a name, the very next thing you should do is acquire the domain name.

You can purchase and register your domain name through a domain registrar. Domains usually cost around $10 / year, with many sites offering a discount for the first year.

Check out these tools to help you find and register a domain name:

Domain Tools

Lots of features to help find a brandable name. They also provide a service to create logos (see the logo section below).
Automatically checks combinations of words to see which domains are available.
They offer a free domain when you sign up for a hosting package.
In addition to offering domain names, they also provide a free domain for the first year when you sign up for any web hosting plan (we’ll talk about that in much more detail in a later step).

How do you choose colors and a logo design?

Once you have a business name and you’ve secured your domain name, you’ll want to figure out which color scheme to use for both your logo and your website. Alternatively, you can first create a logo and then choose a color palette that complements your logo.

If you’re unfamiliar with color theory, or you just want some fresh ideas for a color scheme, you can use a color tool such as:

Color Tools

Lots of user-rated color palettes.

Unless you’re a graphic designer, you probably want to have someone create a logo for you. Creating a logo can be surprisingly tricky, and there are lots of little details you need to pay attention to.

It’s probably best to outsource the creation of your logo or use a tool that is specifically designed to help you create a logo on your own. Here are some sites you can use to create a logo:

Logo Tools

Professionally designed, AI-assisted, affordable, fast, and simple.
Combines your preferences with AI tools to help you quickly create a
Free logo designer. They make money if you decide to use any of their other brand-related tools.

How do you create a Marketing Plan, Financial Plan, and Business Plan?

The last part of defining your business involves planning the major aspects of your business. You should spend some time creating a marketing plan, financial plan, and business plan.

You don’t have to create huge, hundred-page works of art. But you should at least think through the basic outline for each plan.

Sound daunting? 😱 Then just keep it simple! And don’t worry… you can always adjust your plans as you go along.

Your marketing plan should describe how you plan to drive traffic to your online business and your strategy for making money. This should take your business model into account, and what you discovered when doing market research and competitor analysis. Your marketing plan should simply explain how it is you plan to market to each customer persona that you created earlier.
Your financial plan should take into account your marketing strategy, as well as your expected infrastructure expenses and costs of doing business. It should describe your budgeting strategy. Your financial plan will also help you figure out what type of capital, funding, or business loans you might need. Use this plan to figure out your overall financial strategy, so that your income will ultimately exceed your expenses! 😎
Your business plan should simply distill down everything you’ve already figured out earlier in this article. It should describe your business, your mission statement, your niche, your goals, and how you plan to achieve those goals. Your business plan should cover your entire business and include a summary of your financial and marketing plans.

Keep Moving Forward

Good job! Defining your business is a major step towards making your online business dream a reality.

At this point, you should have a solid understanding of your business, your target audience, and how your business can add something special to the market.

You should have a good handle on your brand, have selected your business name, secured your domain name, and created your logo.

Next up, head on over to the article about setting up your company infrastructure.

Set Up Your Infrastructure: How to Start an Online Business
Set Up Your Infrastructure: How To Start an Online Business
Learn how to form a legal entity, acquire licenses, set up your insurance, choose your accounting software, and fund your business! Set up your infrastructure!