Estimating The Startup Cost For e-Commerce, 20 Best Tips To Know

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Having an e-commerce startup plan at your plate comes with significant responsibilities. An e-commerce startup is a business that offers its products and services through a digital platform. It provides a virtual shopping space to the users in the form of a website or web-application. It is always good to work in phases while working on a plan to start a business.

Ideally, executing a business plan should work in 3 phases. The pre, during, and post. Woking this way helps to rule out upcoming challenges and plan for future outcomes better.

After working on the idea of an e-commerce startup, the question that arises next is the cost of website development for the same. Finding a suitable answer to this question can be very tricky, as some websites require a smaller development budget while others require a handsome development amount.

The cost depends on various attributes like the User Interface, Payment Gateways, development software, etc. Costing counts to be an essential part of the pre-planning phase as here, the business owner can estimate the future expenditure and define the structure accordingly.

In our blog, we will discuss the 20 best tips for estimating the startup cost for an e-commerce project. 

Predictive Analysis

Estimating and evaluating the cost of a new e-commerce business can be done through predictive analysis. It is good to calculate the necessary expenditure before your business goes on floors. For doing so, you can consider the below-mentioned factors,

  • Resources, materials, and equipment required.
  • Outsourcing a software development firm or hiring developers.
  • Availing licenses, certificates, and permits for the startup.
  • Opting for an integrated payment gateway or online transaction.
  • Advertising and marketing strategies.
  • Maintenance of assets.
  • Insurance
  • Market Research and Development

Working Space

For a business, be it online or offline, it needs a dedicated working space. Hence, it is essential to chunk out the cost for rent and storage. This will include calculating the cost of electricity, store management, rent agreement, loading, unloading charges, etc.

Website Production

Another home to an e-commerce startup is its website. As the base and strength of an e-commerce business are a website or web-application. It becomes essential to keep aside a significant amount for its development. Startups can hire the services of a web app development agency

This will help them in getting a robust, dynamic, and attractive web-application developed. The costing for creating a website can be calculated considering the following, a total number of pages, design and style, copywriting, database integration, responsive design, CMS, and e-commerce functionalities.

IT Budget 

Businesses today are majorly dependent on technology. Hence, it requires essential IT infrastructure that, in turn, will help manage the business properly. It includes separating a budget for computers, laptops, printers, mobile devices, routers, and maintenance costs.

Employee Salaries

Figuring out salaries and benefits for employees is an essential part of an e-commerce startup’s plan. To exact numbers can be decided to keep the following in mind, the current budget, competitive wage market for a particular position, valuation of the business, and investors on board.

Packaging and Shipping Partners

After a website, a credible shipping partner is the breath and soul of an e-commerce business. So it becomes necessary to calculate an entire budget for a suitable shipping partner that facilitates the delivery without any damage and within the stipulated time. Some good examples of shipping companies can be Safexpress, Ekart, and FedEx.

Insurance and Securities

While establishing a business, it’s always good to be insured. To enhance the safety of goods, place of storage, and office employees, one must consider investing in a good insurance scheme.

Marketing and Advertising

For an e-commerce business, marketing and advertising become essential. In this era of digital advancement, competition for new startups is very high. To sustain it and establish a place within consumers’ hearts, one needs to apply the right marketing and advertising strategies. 

Here, one should estimate PPC campaigns and digital marketing activities. Also, a separate budget should be allocated to print and television advertising, if needed. Some important facts that can be helpful while allocating the marketing budget,

  • Marketing goals for the next quarter
  • Budget for SEO and PPC campaigns
  • Budget for TV and Print Advertising
  • Region Specification

Miscellaneous Charges

While counting the expenses, don’t forget to mark a budget for miscellaneous charges such as repair cost, essential utilities (which are forgotten every time), emergency funds, etc.

Legal Formalities and Taxation

Opening a startup requires you to have some required documentation; for the same, one may need to hire a CA and legal adviser’s services to function in a credible and stipulated manner. It also includes estimating a cost for certifications like MSME and GST. Certain factors like city, state, country, and products sold count to be critical while calculating such costs.

Cost for Internet Connection and Software Applications 

The cost of an internet connection depends upon the type of connections one opts for, like DSL, fiber, or cable. It will also include estimating a cost for the software subscriptions used by the hired web development agency. 

Startup Loan and Interest Accumulation

The government today provides various startup loans for starting a new business. They can be under the MSME category or various other schemes. While estimating the budget, it is also essential to include the cost of the interest incurred on such loans if one opts for such loans.

Recurring Cost and One Time Cost

It’s good to separate the recurring cost and one time cost. It helps in establishing the budget after the launch of a startup. The recurring cost includes numerous things like domain, business email, SSL certificate, and estimated number of products.

While one-time cost will include customization, designing, adding products, and data. These costs can vary for a startup, retail enterprise, and small business.

Website Maintenance Service

An e-commerce business will need a website maintenance service. Such costs should be interpreted and added to the list of expenditures. However, the maintenance cost depends on the type of business, but as we talk about the e-commerce business, timed and regular website maintenance is required. Hence, this should be counted as necessary for the proper and error-free functioning of your website.  

It is also good to keep on customizing the design and selected features of your website in reference to the likes and dislikes of your customers. It will, in turn, increase the user interactivity on your digital business platform. 

Expenditure on Packaging, Promotional Kits, and other Stationery

Though we are residing in a digital era, we still need to invest in traditional forms of promotion. It includes getting designed business cards, note pads, pamphlets, leaflets, etc. Stationery can help you increase good networks and can act as a good PR investment. It enhances professionalism and fetches itself a column in your budgeting list. 

It becomes essential for an e-commerce business to invest in getting a good and environment-friendly packaging designed. Going eco-friendly leaves a good impact on consumers (in terms of marketing) and also protects our environment from clogging and degrading.

Raw Material and Their Transportation Charges

For a product-based e-commerce business, it needs to procure raw material to deliver the final designed goods. One needs to add the cost of raw materials and their transportation in the budget estimation list. 

For example, suppose an e-commerce company deals in cotton clothes. In that case, it needs to calculate the cost of procured cotton and its transportation, which may be interstate or intrastate. 

The Expense of Payment Gateway

If you opt for a credit card for your business, keep maintaining an account of the incurs’ fee. It might prove to be expensive. 

The majority of users don’t prefer doing online transactions due to security concerns. Hence, it is good to use a renowned and secured payment gateway on your e-commerce website. 

Recruitment Costs

One must consider this important and should not forget to add this into the list of expenditures. Recruitment cost is a primary concern for employees. Before calculating the recruitment costs, go through the following steps, 

  • Estimate the expenditure on job advertisements, referrals, consultants, consulting agencies, or promotions.
  • Cost evaluation for logistic support during relocation and hiring.
  • Assessment of the cost for the recruiting panel.

A company might be a startup, but it should always think of investing in its employees as it is the employees who have a major chunk of contribution in making a business successful. 

Surety Bonds

Companies often forget to take care of surety bonds until their significance is realized midway through the licensing process. Make sure to fill the surety bonds and add their fees.

Importance of Evaluating The Startup Cost (Conclusion)

Starting a new business is a big challenge. But with some prior planning and sound research, one can launch it successfully. For any business to survive the competition today, it requires an exhaustive digital marketing strategy at place. In the case of an eCommerce startup, it needs to plan its expenditures and function accordingly. Above mentioned tips are very helpful in calculating the costs for an eCommerce startup. Do apply them and make your project a big success. 

Anusha is a Technical Content Writer at Hestabit. She is an analytical thinker who loves to write content-rich information. Being an avid learner and reader, she loves to stay ahead in learning the latest technological trends. Her writing style is expressive and reflects an analytical stake in things.