Congratulations! You’ve made it to the last step in our guide to starting an online business. In this last article, we will discuss several important topics about money as it relates to your new business.
We’ll cover ways to supplement your primary business income by exploring other channels of revenue, such as showing ads, doing affiliate marketing, creating a membership program, and offering merchandise.
Then, we’ll dive into human resources topics, such as paying employees and contractors and providing employee benefits.
Finally, we’ll tackle the dreaded topic of business taxes! 😱
So, buckle your office chair belt, and let’s begin!
This is Step 8 of the 8 steps in the complete beginner’s guide to starting an online business.
- ✅ STEP 1: The Basics
- ✅ STEP 2: Define Your Business
- ✅ STEP 3: Set Up Your Infrastructure
- ✅ STEP 4: Set Up Your Products
- ✅ STEP 5: Set Up Your Backend
- ✅ STEP 6: Set Up Your Frontend
- ✅ STEP 7: Marketing
- ✅ STEP 8: Money Matters
Supplemental Income
Did you know it’s possible to make even more money from your online business beyond your core products and services?! 💰
Yep! Consider supplementing your business income with these auxiliary sources of income, which we’ll discuss in detail below:
Earn Money from Ads, Sponsors, and AdSense
Once you have a website up and running that is bringing in regular traffic, you might want to consider showing ads on your site in order to monetize that traffic.
These types of ads are not marketing ads that help drive traffic to your own products and services (which you can of course do as well). Rather, the purpose of these ads is to send your visitors to 3rd-party products and services.
🙋♀️ Why would you advertise 3rd-party products on your site? Well, frankly, it’s because you can get paid to do so!
PRO TIP: Because you are indeed sending off your beloved visitors to another site, you need to be very strategic about where and when you’re showing the ads and where you’re sending your visitors to.
Ideally, you want to show ads that complement your products or services, while also maintaining a high level of quality so that you don’t lose your visitors’ trust.
Here are the three common ways to earn money through ads:
You can work with a 3rd-party sponsor directly for specific products and services or use an ad network that will allow you to show a wide variety of 3rd-party products and services.
Sometimes other companies will want to become a sponsor and pay you to either advertise their brand or simply use their products or services. This can be a very powerful way of earning supplemental income.
Once your online business has gained some traction, you might naturally attract the attention of potential sponsors. Otherwise, you’ll likely need to do some work to seek out and contact potential sponsors.
Often, rather than pay by CPC, CPM, or PPA, sponsors will pay you a lump sum to advertise and promote their company for a given amount of time, or perhaps to create a blog article that features their company or their product.
The other very popular approach to showing ads on your site is to use an ad network.
Google AdSense is a very popular ad network that is used by over 2 million people. AdSense allows you to earn money from your site by automatically showing a variety of ads that are relevant and optimized for your site.
The amount of money you can earn from showing ads on your site depends on several factors, including your region, niche category, monthly page views, advertiser demand, user location, ad type, and much more.
For example, if your site is in North America and your site contains content about finance, Google says you might be able to earn $19k per year if you get 50,000 monthly page views:
You can place ads pretty much anywhere on your site, but here are some popular ad placement locations you should consider:
Earn Money from Affiliate Marketing
In the last article, we discussed how you can create your own affiliate program to drive traffic to your site. Well, now, on the flip side, you can use affiliate marketing to help produce more income from your site by promoting other products and services.
In other words, you can become an affiliate marketer and strategically place links to 3rd-party products and services that complement your business throughout your site.
Similar to regular ads, you can show banners and images that use your affiliate links. However, the more common approach is to place your affiliate links within the context of your product page or blog article.
In case you missed the last article, affiliate marketing is where you promote a 3rd-party product or service to your visitors in exchange for a fee or percentage of any sales the advertiser makes when your visitor uses your link and makes a purchase on their site.
With affiliate marketing, advertisers usually track your visitors via your affiliate ID that you include in the URL link that they click on your site. Then, when your visitors make a purchase on the advertiser’s site, the advertiser knows who should get the referral fee.
PRO TIP: A super important point about affiliate marketing is that there is no charge or extra fee to your visitors. In fact, visitors often can get a discount by using your affiliate links, saving them money.
It’s a win-win-win scenario: you earn extra money, your visitors discover helpful products and services, and the advertiser gains a new customer. 😁
To become an affiliate to promote products and services from other companies, you first need to check to see if the company offers an affiliate program (there’s usually a link to the affiliate program in the footer on their website).
Then, depending on how they set up their affiliate program, you need to either join their affiliate program directly from their site or sign up for their affiliate program through an affiliate marketing network that they use.
When reviewing affiliate programs and networks, your business is considered a publisher of content. So, be on the lookout to create a publisher or affiliate account.
If you’re interested in adding affiliate marketing links to your business website or blog, check out these popular affiliate marketing networks that provide access to a large collection of advertisers in one spot:
Affiliate Marketing Networks
PRO TIP: If you apply to become an affiliate directly with a company, but are declined, you might want to check to see if you can join your desired program via FlexOffers. It is often the case that you can still get approved when going through FlexOffers since they already have an arrangement with the company and sort of act like a buffer.
For what it’s worth, I’ve personally used this technique successfully for several affiliate programs.
Also, to help soften the blow of the lower rates you’ll get as a sub-affiliate, FlexOffers has a second-tier program that allows you to earn even more money by attracting new affiliates to their network… like I’m trying to do here! 😉
And if you’re looking for specific affiliate programs to join, here are a variety of programs across various categories that you might want to consider joining. There are thousands of them out there! 🤪
Affiliate Programs
Earn Money from Memberships & Subscriptions
Another way you can earn some extra money from your existing online business is to create a paid membership program or subscription service.
With a membership program or subscription service, you ask your customers to pay you a small fee on a regular schedule, usually in exchange for access to special features or otherwise private content.
A membership program can act like a paywall that can help generate more money for your business, supplementing your income from your primary business.
Here are some ideas for setting up your membership or subscription program:
Here are some tools that can help you set up a membership program on your site:
Membership Program Tools
Earn Money from Brand Merchandising
Another popular way to generate some extra cash for your business is to offer branded merchandise.
This includes things like t-shirts, sweaters, mugs, and stationery with your company logo on them.
Not only is branded merchandise a great way to earn some extra income it is also a great way to market and promote your online business.
Nowadays, with print-on-demand (POD) services it is super simple, affordable, and low-risk to provide branded merchandise to your customers.
POD services allow you to upload your custom design, such as your business logo, and then place them on a slew of merchandise, on anything from clothing to bathroom curtains, from housewares to mobile phone cases, and from candy wrappers to actual chocolate bars molded into your design! 😍
The best part is that your custom products are not manufactured until a customer creates an order. Then, the POD service creates the product and can even ship the product directly to the customer without you having to do a thing except receive your royalty share for the sale.
We discussed on-demand printing in lots of detail in Step 4, but that was in the context of using POD as your main business product. However, the process is very similar if you just want to use POD to sell some branded merchandise.
You can either integrate your brand merchandise store directly into your existing online business website, or you can simply link to a stand-alone merchandise store that you create separately.
Here’s a quick review of some merch-on-demand services (but I’d recommend checking out that other article, too!):
Print-On-Demand Services for Brand Merchandise
Other Money-Making Ideas
Also, make sure to check out our related article that explains dozens of creative and proven ways to make more money with your blog!
Human Resources (HR)
If your online business is more than a sole proprietorship or requires you to outsource some work, this section about HR is for you!
In particular, we’ll focus on just a few money-related aspects of your HR department:
Employees
Hiring employees for your business is a major step that has lots of ramifications, including significant financial ones. With respect to the money side of hiring employees, here are some things you should consider.
The cost of having employees is more than just their salaries or hourly rates. For example, look at the following common costs and benefits you might provide (or have to provide) depending on the size of your company and other factors:
All of the benefits and costs above should be included when considering and calculating an employee’s Total Compensation package.
You should also not forget that there is a cost (both time and monetary) to finding, interviewing, hiring, onboarding, training, managing, and firing employees! 😲
Outsourcing & Using Independent Contractors
Instead of hiring new employees, or perhaps in addition to hiring employees, it might make sense to outsource your work to a 3rd-party company or hire independent contractors or self-employed freelancers for specific projects.
You can contract out tiny, one-off projects like designing a logo for your business… or go big and even outsource entire departments, like Operations, IT, Manufacturing, or Engineering!
Here are some outsourcing and contracting tips and tricks that could save you time and money.
Here are some marketplaces and services you might want to check out if you’re planning on outsourcing work or hiring an independent contractor or freelancer.
Freelance Marketplaces & Outsourcing Services
Payroll
Payroll is a term that refers to the compensation process for your employees over a given time period.
Payroll can also include the management of other employee compensation-related items, such as employee benefits and taxes.
When you hire employees, you will be required to pay them an agreed-upon amount at regular intervals. This tracking and processing of payments can quickly eat up a lot of your time and be prone to error if done manually, especially when you take into account the multitude of tax calculations and reporting that will be required.
Therefore, it’s vital you set up some sort of payroll software system to help you with the process and automate most of the steps.
There are a ton of payroll services and tools out there, but here are just a few popular ones to get you started.
Payroll Tools and Services
PRO TIP: In addition to reviewing the services above, make sure to check your existing accounting, bookkeeping, and payment services to see if they offer an integrated payroll component you can use, potentially even as a free add-on!
Taxes
Finally, no checklist or guide for starting an online business would be complete without talking about taxes.
Hardly anyone likes dealing with taxes. Sure, this is a required step, but there are tips and tricks that can actually help save you money!
In this last section, we’ll cover the basics of business taxes, as well as help you make the most of your write-offs and tax breaks. We’ll cover:
Although we already covered business accounting software back in Step 3, make sure to go back and review that step if you haven’t yet chosen or set up your accounting system.
Tax Tracking
It might be obvious to most, but it is extremely important as a business owner to keep detailed and accurate records of your business expenses for tax purposes.
Not only will you need those records to calculate your total annual expenses, but you also might need to show proof of those expenses, in case you get audited by the IRS.
Here are some important steps to take for tax tracking purposes:
Expenses & Write-Offs
Spending money as a business actually has its perks. In particular, most businesses can write off qualifying business expenses when reporting their taxes. This means that your business can reduce your taxable income by that amount, thus lowering your overall tax liability and putting more money into your pocket.
Write-offs are a type of legal tax deduction allowed by the IRS and your local government. NOTE: Each state and industry may have specific rules about what you can and cannot write off for your taxes… so do your research and consult a certified public accountant (CPA), enrolled agent (EA), or professional tax preparer!
Writing off business expenses can therefore be a very powerful tool for saving you money and increasing your overall business profits!
Therefore, it’s important to research exactly which business expenses you can write off. Many expenses qualify, but not all… and the IRS might limit the amount of particular expenses that you can write off, possibly only giving you a portion of savings.
PRO TIP: A tax credit is an even more powerful benefit for small businesses. Tax credits apply directly to the total amount of taxes owed. So, rather than reducing your total taxable income, tax credits reduce your final tax payment, dollar-for-dollar!
Also, be on the lookout for industry-related and geographic-related tax credits that might apply to your specific business.
Here are some common tax deductions and credits available to many small businesses that can help save you money:
As you can see above, there are lots of ways to save money… so it is definitely worthwhile to consult a tax expert so that they can give you personal advice for your specific situation!
Tax Reporting
Small businesses are usually required to report their taxes annually to the IRS and to the states they operate in, either based on the calendar year or the business’s fiscal year.
However, businesses must still pay quarterly estimated taxes throughout the year. If you fail to pay estimated taxes, you may be charged an underpayment penalty.
Your exact tax reporting procedure will depend on the type of business you set up.
Generally, sole proprietorships and other pass-thru tax entities such as LLCs and S Corporations will require you to report business income on your own tax returns. Businesses with other structures, such as a C Corporation, usually have to file separate tax returns.
PRO TIP: If your business wasn’t in existence for your entire first tax year, it is called a short tax year. You’ll usually still need to pay taxes as normal, but some limits and requirements may be prorated or different than a full tax year.
As a business, you’re responsible for paying the following types of taxes:
Make sure to check your accounting and payroll software to see if they have features to automatically calculate and/or pay the various taxes above.
I highly recommend using a robust online tax service, such as the ones below:
Tax Software & Services
1099 Reporting
The last business money matters topic we’re going to cover is about 1099 reporting, which is a very common tax form required by the IRS for reporting payments to non-employees.
Specifically, your business should fill out and send a 1099-NEC form to each freelancer, independent contractor, and independent service provider to which you paid $600 or more in the tax year. You should also file each filled-out form with the IRS.
A 1099-NEC tax form is sort of like an employee W-2 form, but for non-employees. In fact, NEC stands for non-employee compensation. 😉
PRO TIP: The reporting of non-employee compensation used to be included in the 1099-MISC form, but has since been separated out by the IRS onto its own form: the 1099-NEC.
Usually, your business will be able to write off the value you report on your 1099-NEC forms. However, the freelancer or contractor you paid will need to report your payments as income on their own tax reports.
The 1099-NEC form also helps prevent under-the-table and cash-only dealings where the freelancer or independent contractor might otherwise try to hide their earnings from the government.
You must file all 1099-NEC forms by January 31 each year.
In order to ensure that you file the 1099-NEC using the contractor’s valid tax ID, you should require that the independent contractor fill out and send you a W-9 form, which states their legal name, entity type, address, and tax ID (TIN) such as an SSN for individuals or EIN for businesses.
TIN matching is the process of verifying a contractor’s tax ID with the IRS before you file the 1099 form. This helps ensure that everything goes smoothly and that you’re reporting payments to the correct entity.
Your tax software might include a 1099-NEC reporting feature. Otherwise, many online services exist that can help you generate, track, send, and report 1099 forms. For example:
1099 Reporting Tools
Conclusion
And just like that… we’re done! 😁
Congratulations on making it all the way through the 8 steps in this guide to starting a new online business!
I wish you all the best and lots of success with your new venture!
If you found these articles helpful for your business, please share them with your family and friends, and on social media. Thank you!
