Review 7 Online Business Ideas: Read First Before You Start
Updated on August 4th, 2021
I first detail the typical path that most people follow, including myself, when thinking about money which is just having a job and trying to climb the ranks there. However, to really hit it out of the park, while you do need to have a primary income stream, you also need additional income streams coming in. Online side hustles provide that for you.
I chose a path, but not necessarily the best path, which was working for others. If I had to do it all over again would I do the same? Yes and no.
For starters, in the early 2000s, a lot of these options for making money online didn’t really exist when I was starting out. Young people of today have it made since anyone has the ability to turn a minimal investment into a real income stream with the right strategy and execution. And they can even start when they are teenagers! The online world is a great opportunity leveler.
Secondly for me, I really wanted to work in finance since I was really interested in stocks and investing and it was a personal goal to graduate from college since nobody in my family had gone that route.
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I do wish I had explored some of the website ideas that make money earlier in my life though when there was less competition than there is now. For most of the last ten years I have focused exclusively on my career and investing in my personal portfolio and not so much about secondary income streams.
I think most people have this mindset to focus solely on their career. It’s just what we’ve always been expected to do. Get educated, get a good job, save, invest and retire after thirty years.
After some time though you begin to realize that the money just doesn’t come in fast enough.
Furthermore, with the career route, you’ll have to make a lot of sacrifices, such as moving away from your established life to pursue better jobs and working late nights at the office neglecting your family. In the end, you are buying yourself golden handcuffs chained to a desk for 8+ hours a day until you wake up one day and 30 years have gone by.
Having online businesses sets you free to live and work anywhere and you’ll likely work much less than if you have a 9 to 5. The Four Hour Work Week is a great read for motivating you to break out of the traditional cycle.
And while saving and investing a portion of your salary can get you to the coveted millionaire status, like it did for me, it’s a slow way to wealth. Working on growing your income through multiple income streams and scalable business models is really the key to not only wealth but freedom of time. It’s much harder to become wealthy when you stick to only working for someone else because your pay will never match your efforts and raises are slow to come from year to year.
In a twisted way, I do think that you have more motivation to improve your lifestyle if you don’t have a good, stable job with a comfortable salary. You become laser focused on figuring out what these alternative entrepreneurial routes are and are willing to experiment with many of them to improve your situation when you’ve ruled out traditional, slow, long term paths like getting a college degree with student debt.
New Economy, Online Business Ideas
Today, we live in this new world, the online world, where amazing things are possible. The entrepreneurial spirit now has more chances for success because the start-up costs for an online business are insanely low and you can use your mind to create something that reaches millions.
For example, just learning how to code can level the playing field for millions of people, but in this article I want to focus on being an online entrepreneur and starting a successful online business that does not trade time for money, because this business model is scalable beyond the number of hours in the day that you can work; that is the real freedom.
In the online world, you don’t have to go to a bank and get a loan so that you can rent office space; everything can be done in your home with an online business. You don’t have to pass through someone else’s screens to get approved. You just have to have an idea and implement it.
And while there are few entrepreneurial businesses without any investment at all, you can become an online entrepreneur and start a successful online eCommerce business for generally under $20 for the first month with just a domain registration and a Shopify online store. I discuss this more fully below.
The perfect online business is one where you put in a smallish initial effort and it continues to pay a great return for a long time afterward, but some have more maintenance than others.
Below I discuss small online business ideas that can give you some examples of where to start and what a lot of people do. Almost every online business example has an advantage of having a low initial investment. Some of the ideas listed below are still worthwhile and some of them I don’t recommend, but all of these online business ideas provide you with the opportunity to work from home usually on a part-time basis.
I also discuss my critiques or the experiences I have had with some of the online business ideas that I have tried so that you can have a realistic expectation of whether it’s the easy money that a lot of people often claim it to be (hint: it’s probably not). Keep in mind that the best online business ideas for 2020 are the ones that nobody has written about or is something remarkably unique. Generally once someone starts making Youtube videos about getting rich with some idea, the competitors start rushing in and the profits start getting eaten up.
Product Review Affiliate Websites
The first online business in this list is the product review affiliate site, one of the original online business ideas since the advent of affiliate marketing.
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When you run over to Google and are looking to buy something specific like coffee flavored protein powder, sometimes you will end up on these. The pitch is usually pretty standard. The webmaster reviews 3-4 products of that category with pictures and pros and cons and then makes a recommendation of which one you should buy. When you click on the link and buy, the webmaster gets a commission.
In theory the idea is pretty easy. You register a domain for $10 and get some cheap hosting, and make your webpage and the sales commissions roll in.
But there is a lot more to it than that because you need web traffic and to get that traffic you need to manipulate search engine rankings or send out lots of spam.
Search engine optimization (SEO) is an online marketing field which studies how to increase your rankings on search engines through various techniques.
The catch is that usually those SEO tactics are a little sketchy. You’ve probably seen websites with a thousand keywords at the bottom of the page. But a key component to Google rankings is the number of links to your site. Nobody is going to just link to some random product affiliate website, so what are you to do? One thing that people do is buy a bunch of domains and all point them to the affiliate site. It’s known as a private blog network, but it goes against Google’s policies.
Very few site operators ever sample the product they are pushing and just find products that have high affiliate commissions. That’s a bit unethical.
These sites still exist, but it’s a game of cat and mouse with Google since they know that these sites don’t offer much value to consumers and try to squash them from showing up in the top rated listings. You have to have a serious A-game with the SEO techniques to compete in this space.
I personally never tried this type of online business because the SEO scaminess seems dishonest to me, but I had a roommate years ago who did this exclusively and never had a “real job.”
What is appealing about this form of online business is that you have very minimal overhead. You pay for the website and hosting, but own no inventory. All you have to do is buy a domain name, setup a website and load it with products priced at 2-5x cost. You can start an online clothing store, an electronics store, or basically any type of online retail business that you want.
It can be even easier than this and you can skip the web-hosting and learning webpage design by using an eCommerce shop platform like Shopify.com. It’s exceptionally easy to start your own online store this way (I’ve done it), and they offer the first 14 days as a free trial, which keeps your initial running costs to only the $10 domain registration. The best part is if it doesn’t work out, you haven’t lost much money and you can abandon ship.
However you setup your eCommerce business, when someone orders a product from your online shop, you turn around and place the order on Aliexpress.com or some of the other typical suppliers for drop-shippers and use the customer’s information for delivery. The manufacturer will send the product from China, or wherever, directly to the customer and you never touch or see the product.
Because of a shipping treaty with the USA, ePacket often makes shipping things from China cheaper than shipping from across the US, just slower; potentially much slower. In some cases it can take 4 weeks.
A few years ago I tried out the idea of opening an online boutique with drop-shipping. However, it was a net loser for me because the cost to generate sales from Google and Facebook ads was too expensive for the products I was selling and the sales didn’t cover the advertising costs. Getting eyeballs is the biggest challenge to any website.
However, the nice thing about the drop shipping eCommerce store is that you can load up a huge catalogue of products to sell. This can diversify your sales leads but you have to consider if being too broad will dampen your niche and make your target products hard to find, however.
The biggest problem for this type of online business idea is the quality control. While you can order product samples, like I did, before selling them on your site, there is no guarantee that the quality will stay that way. Quality has a tendency to get worse with a lot of Chinese manufacturers because they experiment a lot with cheaper materials and they want to maximize their profits too.
Also, returns are basically impossible and slow shipping is hard to compete in the age of Amazon Prime.
Which brings us to Amazon…
Fulfillment By Amazon (FBA) and 3rd Party Logistics
The next evolution of drop-shipping is to actually own the inventory but have a 3rd party handle all your logistics. Basically what that means is that you don’t ship a bunch of product to your house and head to the post office every other day when a customer places an order. That’s a lot of work.
Instead, you have the manufacturer ship to your logistics company and have your website connected to the logistics manager. It’s about the closest thing to a passive income online business that you can get. You occasionally have to order a wholesale batch when inventory is low and deal with any operating snags in the manufacturing or shipping, but the logistics company takes care of the rest.
In the case of Amazon FBA, you ship your product directly to the Amazon warehouse from the manufacturer, make a product listing on their website and they handle the rest. The advantage of using Amazon is that it’s a marketplace with millions of people shopping for products, and it’s hard to beat their free 2 day shipping for Prime members.
However, this online business idea has a larger upfront investment than raw drop-shipping because you have to buy a minimum number of products for inventory (often 500 units) and ship it to Amazon. This can be anywhere from $1,000 to $3,000 or more depending on your product. You take all the risk that your product will sell, and if it doesn’t you have to start paying rent for warehouse space or risk having your inventory destroyed.
Preferably you would ship at least some of the product to your home to make sure the product passes quality controls before passing the rest to Amazon, but doing this eats into profits and so a lot of unscrupulous sellers never bother to check the product quality before listing them on Amazon. Some of the reviews can be quite comical when the customer orders a product and the review photos shows that it looks nothing like the pictures.
No doubt about it, many early FBA sellers were made into millionaires from this online business venture. But like any space without barriers to entry, it quickly became saturated with copycats. It didn’t help American and Canadian importers when Amazon started marketing FBA directly to Chinese manufacturers in 2015 to cut out the middlemen resellers. It is in Amazon’s interests to find the cheapest goods for their customers, but bad for you if you are trying out the FBA online business. These days, often your main competitor is the manufacturer themselves. They all know about FBA and can make 2-4 times as much profit to cut you out.
One of the bigger problems now is that if you type any product into Amazon, you’ll find dozens of the same product with a different white labeled name brands. You have to sift through dozens of pages of products. It has also become very hard to be an honest seller and do well because of this product saturation. I describe some of the techniques used to overcome this below.
My Online Business FBA Attempt
I gave this online business idea a go a couple of years ago, but I didn’t want some off-the-shelf product that already had 500 listings of the same product. I did a lot of product research and thought of a product idea I felt needed some improvement and would sell well. I contacted some manufacturers from Alibaba who were already selling pieces of the product to get quotations for my enhancements.
It was a disaster. The samples never met the specs and sometimes it was just comical. I couldn’t believe some of the samples they sent me; it was like a 5 year old put it together as part of a school project. When I would give them a list of changes it would takes literally months for them to get me the next sample.
Furthermore, since I had done a lot of research I knew that electronic devices required FCC certification to be legally imported. If your product is inspected at customs and doesn’t have the proper certifications, your product can be seized and destroyed. Not great for profits.
I asked the manufacturer to confirm that the electronic component was certified and asked for the registration number. Mind you, the electronic component of the product was off-the-shelf, and was presumably already being sold to American importers.
It wasn’t certified and they wanted me to pay the $3,000 FCC certification fee. I had already committed to buying 500 units if they could get the product right, so that would potentially add $6 to the cost per unit. Not a huge problem, but I did find it odd that it didn’t already have the certification. I continued.
The real problem is, and everyone knows, is that once your final product is complete, the only advantage you have is being first to market. If you can brand and market properly, get sales and high product reviews before the same product shows up from other sellers, your online business will have more staying power.
The manufacturer will immediately turn around and list that product on their website to wholesale to your competitors, or they might just setup an FBA listing themselves, and probably both. It doesn’t matter if you designed it, if you don’t have a verified patent, your own product will be white labeled. Guaranteed.
I knew this, they knew this, and it is what it is and is just part of the business.
So knowing this, why exactly was a multi-million dollar manufacturer hitting me up for the $3,000 for certifications for a device they were already selling and should have already had certifications for and were going to turn around and re-market? More profit, maybe? I said I would agree to fund the certifications if I had exclusive right to sell the final product in the USA. I mean, why am I going to pay for the FCC certifications on behalf of my competitors? That makes no sense.
They only agreed to exclusivity if I would buy 100,000 units, which was clearly out of the question.
Design Process Dragged On
But we went back and forth on the design specs and this went on for the better part of a year. After the samples just weren’t to my liking time and time again, I finally gave up on the venture. I was no longer confident that this manufacturer could pull it together and I had already wasted a year with them. In the end, I lost interest in the FBA business model because of my experience and the fact that it has become so saturated with shady sellers.
The FBA Strategies
The biggest hurdle to overcome for the FBA online business idea is that there are already millions of similar products for sale on the platform. Amazon signs up 1,000,000 sellers, per year! It’s hard to even get your product noticed when you start on page 50 and 99% of buyers don’t make it past the 3rd page before making a purchase. To overcome this, there are some “strategies” to rank higher. Since almost everyone is doing it, it means you also have to do it to stand a chance.
It makes the whole Amazon selling marketplace pretty scammy. Fake positive reviews for your products, fake negative reviews for your competitors and free product giveaways is the gist of what other sellers are implementing to rank higher.
So how do people get those fake “Verified Purchase” positive reviews which rank higher in the product rating algorithm? There’s a market for it.
While it is against Amazon rules to be given product for free without mentioning it, sellers do it anyway “off the books.” There are dozens of Facebook review clubs that cater to this transaction. They will have you buy the product, review it for 5 stars and then Paypal you the refund, sometimes with extra bonus money.
I joined a few of these clubs to see how they worked and which products were being peddled, but I never participated in any review scams, mainly because I didn’t even want the junk they were offering for free! One seller was offering to give me a free “4K camera” in exchange for a positive review, but after reading the existing reviews it was clear I would have no use for this crap.
I check up on that listing once in a while and see that he is still selling a lot of those junky cameras. Once you are highly ranked you can make enough sales to continue on for a while even if your product sucks because only a small percentage of people actually write reviews and some people just don’t know the difference between a quality item and a junky item. And if you can make 200-300% return on each item sold, you can continue to offer refunds for 5 star reviews.
Also in these review groups you can be paid to leave negative reviews on competitor’s products. Or some sellers pretend to be representing a competitor and then don’t refund the money and hope that you’ll write a 1 star review out of spite.
Another strategy is listing hijacking. A seller might change a listing title and pictures from a product that had a lot of 5 star reviews to a new product he or she is peddling. When you run through the reviews you might see pictures of products that have nothing to do with the current listing.
All of these were an eye opener for me and I personally don’t buy much from Amazon anymore because of all the shady sales practices. Each time I consider buying something I first visit reviewmeta.com and fakespot.com to have a 3rd party analyze all the reviews. 90% of the highest rated products you will find are bogus. Despite its popularity, it’s not a good marketplace for quality goods.
Do You Have a Moat?
While it’s not impossible to still become a successful FBA seller, it is a lot easier if you have a patented product or a product that cannot be easily copied quickly. There is a lot of incentive for the manufacturer to just cut you out of the equation and sell their product directly on Amazon without going through you.
It takes a lot of time to come up with quality product by first finding out if there is a market for it, finding a reputable manufacturer, and then implementing a marketing plan. You can be one of those unscrupulous sellers that just imports some garbage, pays for fake reviews to convince buyers to buy crap, but that’s just not my style.
When There’s a Gold Rush, Sell Shovels
It is now more profitable to create an online business that sells courses at $500 a pop to suckers trying to get rich on the FBA action than actually selling FBA products. Just like in 1949, the millionaires being minted were people like Samuel Brannan selling shovels to the gold miners toiling out in the rivers. The internet is one giant river.
These online courses as an online business are another new innovation that didn’t exist outside of a classroom or infomercial seminar held at an airport hotel ten years ago. If you have a skill that people are willing to pay for, you can create online courses or e-books for sale online. The great thing about this online business is that you create the course once, and can sell it to millions without putting in additional work.
Unfortunately for the students, there is a lot of snake oil in this field too, so Caveat emptor still applies. You can find a course on basically anything today, but most of these people are just repackaging information they got for free online and selling it to you and aren’t adding any extra value that you couldn’t find on your own.
You’ll do better if you can prove your material is worth paying for with certifications, degrees, or an online presence that is recognized.
Bitcoin, and Bitcoin Mining
The whole ecosystem around Bitcoin is probably the most farfetched for your grandfather to comprehend. Read my complete guide to cryptocurrency that covers everything from A-Z, but in a nutshell,
“There are these digital tokens that magically come from a computer and can be used to purchase goods or can be sold for cash. Or you can just buy it outright and someone else will buy it from you at a higher price later.”
Those that bought in early became millionaires through rapid appreciation. And while the days of the 100,000% appreciation are in the past, people are still buying for as an investment and hoping for future appreciation on the order of 2-10x. Or, they buy mining equipment and mine it themselves.
Just like with the shovels, manufacturers entered the marketplace and sold specialized chip-sets to people who hope that getting rich is as easy as buying this hardware and plugging it in. Early adopters had an easier time mining when there were fewer competitors, but now there are entire warehouses that exist to just mine Bitcoin.
You’ll have to use a mining calculator to uncover if it can be profitable with your local electricity rates.
A lot of people push blogging as a great passive online business idea on their own blogs, but mainly because they are pushing their own “BlueHost” affiliate links (horrible host, btw).
As an online business, it’s not passive at all at least until you have several dozens of articles that can entertain and bring in new visitors without having to expend much additional effort. To get to that point takes a lot of time investment researching and writing articles.
And that is only half the battle. If nobody reads your work then what are your doing it for? The other part of the battle is marketing your blog and getting readers.
You either need to spend a lot of time learning SEO strategies or pay someone else to do it on your behalf. This in itself is a lot of work because you have to research long tailed keywords, write guest posts, write comments on other blogger’s posts (sometimes that is all you see is other blogger’s comments) and employ other tactics. I probably spend more time on these efforts than writing actual articles. Trust me, I would rather just write articles and have the readers roll in but that is not how it works.
This is where a lot of bloggers give up because you might put in 100 hours writing articles and only end up with 20 views. To make money off your blog, you need thousands of monthly views and it takes months to years to build up that kind of a flow depending on your blog niche and what traffic strategies you implement. Some things that appear work for others might not work for you even if you execute the same strategy.
There is no guarantee you will get eyeballs to read your content.
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Vlogging as it is known is blogging but with videos is an online business idea for people with personality.
The advantage of this online business is that it doesn’t require any startup costs aside from a decent video camera and Google does a good job promoting new vloggers. In fact you could start today since your computer likely already has a camera, and you have internet. Additionally if your vlog takes off, it’s already integrated with AdSense, so you can start making money as soon as you turn it on.
But again, you have to put in a lot of work creating and editing videos on entertaining or educational topics that are going to appeal to your niche. There’s a tremendous investment of time and it requires hundreds of thousands of subscribers and views before you can start making some real money off it.
However, if your vlog does take off, the audience can be millions and today thousands of Youtubers make six figure incomes from their online presence.
It’s Never Too Late
The thing to remember is that its never too late to start creating additional income streams or an online business. Sam Walton didn’t start his first Walmart until he was 44 and became the richest man in the world in the 80s.
There are actually a whole ton of companies that were founded later in life. For entrepreneurs in their 30s here’s a partial list of companies: Lenovo, Intel, Zara, HTC, Garmin, Public Storage, Sony, Huge Boss, Gap, Macy’s, LinkedIn, Hitachi, Salesforce, and Boeing. There’s a lot more for people who started their companies in their 40s and beyond and these were offline businesses.
The advantage of the internet is that anyone can start an online business from their home with an initial investment of less than $100 and time. If the right strategies are implemented an online business idea can turn into a real asset and income stream.
A good book to read to get your mind in the right place is the Millionaire Fastlane. It’s a real motivator for starting an online business. You just need the idea of what your online business will be and hopefully this article has given you some ideas of what type of online business to start.
Please share in the comments any online business ideas I didn’t address here.
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