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How to Start an Online Business

How to Start an Online Business

Discover how to start an online business, including figuring out your "why," identifying your target market, and building a brand and website!

Pat Flynn
How to Start an Online Business

How to start an online business: It’s a giant question, one that’s loaded with lots of ins and outs. And it’s one that I (with a little help from someone on my team) will attempt to answer for you in this post!

I’m first going to share what I consider the crucial first three steps you must go through (plus a couple more key tips) before building an amazing online business. Then I’ll hand it over to SPI’s “integrator”—Matt Gartland. He’ll introduce some of the things we’ll be talking about on the blog in the near future about the less sexy but still super important parts of creating a business that will stand out and stand the test of time.

Step 1: Ask the Most Important Question—“Why?”

Today, we have this thing called the internet that allows us to build a platform, create a business, grow an audience, generate an income, and do it all in a way that supports the lifestyle we want.

In my opinion, starting an online business is something that everybody should attempt to do. Why? Because it can provide new freedoms in your life. Freedom financially, freedom with time, freedom to be creative, so that you can live a happier and more fulfilled life.

These are big-picture whys. But you also need your own, personal why. That’s why before getting into the how of starting an online business, you need to understand exactly why you’d want to start one.

You Need to Have a Destination

Why do you want to create an online business? The answer should not be because you want to make more money and gain more fame. Those are potential byproducts, but they shouldn’t be the main goal.

Instead ask yourself how you want an online business to support your life. What kind of life do you want? Whenever anybody asks me, “Pat, how do I actually start an online business?” I always ask the question, How can an online business support you?

I want you to think about that really quickly now. You need to be able to answer the question, how do you want your life to be?

A lot of people start businesses because it’s fun and exciting. Being an entrepreneur is really cool now. But many of them jump into it without knowing the direction they want to go. And just like driving a car or a plane, you might have freedom to go whichever way you choose.

But if you don’t have a destination in mind—an address in your GPS, or an airport where you’ll land—then all you’re doing is burning gas. You’re potentially moving yourself further away from where you actually want to be, and it’s very dangerous. It’s especially dangerous because, yes, while you can make more money, you can’t get time back.

I repeat: you can’t get time back. And that’s why this is really important.

In a way, building on online business can actually help you get time back in your life. It can help you generate more income so that you can have more time to do the things that are more meaningful to you.

But you first have to understand why you want to do this. That’s why in my book Will It Fly?, the first few chapters contain thought experiments to help you understand more about where you want to go and what you want to do.

So I recommend checking out Will It Fly? as a first step if you haven’t already. This book will also help you with the next step, which is identifying the right niche and target market for your business.

Step 2: Identify Your Target Market

After you figure out why you want to create an online business, you need to figure what that business is going to do. Another way to think of it is, who do you want to serve? What is the target market you want to help?

It can be a target market you already know how to help, one you perhaps already have experience with. Or it can be one you have a lot of care and passion for but don’t have experience with yet.

As I often say, the riches are in the niches. In episode 337 of the SPI Podcast, I talk about the advantage of niching down, and why actually being small to start is a great way to go about your new online business.

I was interviewed once on a podcast called Mixergy by Andrew Warner, where he asked me about a lot of the smaller businesses I’ve built, like my LEED exam study site, GreenExamAcademy.com, and my security guard training site, SecurityGuardTrainingHQ.com. These businesses were a lot smaller than the businesses Andrew typically featured on his podcast, and he asked me why I would dabble with those things when there are much bigger problems in the world. Why not create the next Excel, something every person in the world could use?

My answer was this: there are people out there with specific problems who I can help much more quickly. These are people who I can help because either I care about them a lot or I already know how to help them (or can at least figure out how to help them). Although I can’t create something that changes the entire world, I can create something that changes their world.

And that’s what I recommend to people who are thinking of starting a business. Don’t think about creating the next fidget spinner or the next Uber. Think about creating a version of that, meaning a very specific solution for a very specific group of people’s problems.

Create Your Market Map

In Will It Fly?, I share some exercises that can help you validate your idea and determine if it’s a good one to pursue.

In the book, I talk about creating something called your “market map.” This is where, after you select an idea or a passion, you go into that market and do some research. You don’t quite yet know what your specific product or solution is yet because there’s no way to know it without doing some legwork. You have to first know what people’s problems are.

The idea of the market map is to find the lay of the land so you can figure out what your position is. How can you start helping people in that space?

Let’s say, for example, you’re targeting people who play tennis. You like tennis, you know how to play tennis, and you think you have the ability to help others who also like tennis or want to learn to play.

Now should you immediately go into coaching people online about how to play tennis? No. Because you don’t know if that’s actually A) what you want to do, and B) if there’s a need there.

Unmet Needs Are Your Opportunity to Serve

Instead, what you want to do is find where there’s a pain, and thus a need. So you might do some research using the market map exercise where you dive into the people and the products that exist in that space to find those people’s unmet needs.

You might find that there’s a pain for people who have tennis ecommerce stores whose biggest problem is they’re getting completely derailed by Amazon. So, for example, you could go in and consult with tennis store owners on how they can use their tennis knowledge in different ways on a more local level.

Or you might find that there are people over the age of fifty who love to play tennis but are now dealing with arthritis. So you could focus your business on helping tennis players over fifty who are dealing with arthritis.

These sets of people have very different pains: one is a business pain, while the other is a very real physical pain. And each pain requires a very different solution.

You have to go in there and see what already exists to see where people may need help. And again, you don’t need to invent something completely new. You can create a better version of something that already exists, both online and/or offline.

Building Community Is Often a Great Solution

Sometimes people doing their research determine that one of the biggest pains is that people are just lonely. So the solution is creating a community, whether through an online forum or events. They decide the best product or service is creating a space for people, facilitating conversations so that they can all connect with each other.

Human connection is hugely important. And if there’s a need or a lack of human connection in a particular niche, it’s something that a lot of people will pay for. Just think about how many people go to LEGO conventions or Adult Fans Of LEGO (AFOL) meetups. That’s a big niche, and one I talk about in my new book, Superfans.

Starting Small Means Less Competition and More Authority

Starting small is totally okay—and even recommended!—because it makes it easier to stand out from the competition, and it makes it easier for you to understand what the specific problems are.

When there’s less competition, it’s easier for you to become an authority. And when you’re focused on a narrow target market, it’s easier to understand the language those people use.

Let’s say you wanted to start a fitness business—that’s a huge industry. If you wanted to create a successful fitness website today, how could you possibly do that? Yes, it may have been possible before, but today you’d need a lot of money and a lot of time to break into that industry.

However, if you wanted to help new moms with their fitness, they have a very specific need and a very specific set of circumstances that are different from men who want to compete in CrossFit competitions. And each audience would require a completely different set of solutions. So if you were to create a website that helped both those people, it would actually help neither of them.

Instead, you need to pick one audience and focus on it. Niche down.

Step 3: Experiment and Iterate

Before we talk about the third step, let’s backtrack a little. You’ve identified the why behind what you want to do and how you want this business to fit into your life. If you just wanted to create a business that will sustain your current lifestyle, think about how much money you’re making and then how you might create a business that could replace that income.

What I don’t want you to do is what a lot of people do, which is to say, “My goal is to make seven figures a year because I hear everybody else is doing it.”

But do you actually need that? First, you need to be very clear with your goals and destination. Second, you need to pick a target market and a niche, and you can use the processes in my book Will It Fly? to do that.

This post has been all about how to start an online business. But have I said anything yet about building a website or starting a social media campaign or creating Facebook ads?

No, because you haven’t yet learned the most important things you need to know before you start building your business. First, you need to know why want to do this and what your business might look like. How big might it be, and how might it be structured? Next, you need to figure out who you’re serving and what their needs are.

With all that out of the way, we’re onto the third step, which is all about experimentation, conversation, and iteration. You need to experiment with creating different solutions for the group of people you’ve identified and start having conversations about those potential solutions with them. Through this process, you’ll start seeing what works and what doesn’t. You’ll also start to understand that failure is a part of the process.

You need to let them guide you toward that potential solution. Then once you figure that out and you start to gain a little bit of interest, you can either pre-sell a product like I teach in Will It Fly?, or you can create a website to start building an audience and bringing people together around that particular topic and group.

It’s only then after all that should you actually start to create a brand and an identity for your business. It’s very simple to start a website. It’s very simple to create a business card. But those aren’t your business. The business is all the stuff that happens beforehand.

You Need a Reason to Take Bold Action

When you build your business in a way that fits into your lifestyle, that’s when it becomes sustainable and something you’ll fight for. And that speaks to my next point, which is that you need a reason to do this—a deep, burning reason, one that will get you off the couch and taking action.

When I got laid off in June 2008, I had a reason to start my own business—and that reason was essentially survival.

If you speak to other entrepreneurs, you’ll find that there’s often some piece of their origin story that involves a ton of pressure that got them to take bold actions they weren’t taking before.

If you assume that just starting a website and trickling into a space is going to get you results, you’re wrong. Yes, it can happen. It’s happened before. And because these are the stories we hear about in the media, we think it’s the way to go for everyone, but it’s not.

Businesses start because of bold actions, and bold actions only happen when there’s a reason to get outside your comfort zone. For me, I had been laid off. For you, it might be something similar, or maybe things have just gotten unbearable at your current job.

Here’s a thought experiment: If your family needed you to start a business to survive, would you do whatever it takes, 100 percent? So if you’re at that point in your life where you are in desperation, but you’ve been fiddling with things without taking bold actions, then you might as well look for another job.

You have to have the courage to step out of your comfort zone and make things happen. You need to dig deep to find the courage to take bold action.

The Next Stage: Building a Brand and Website

Now there’s obviously a lot more to starting an online business, and in a moment I’m going to hand it over to Matt to share some of the less sexy parts of business building.

But before I do that, I want to take a moment to talk about creating your brand and building a website. I know it may seem like I’ve downplayed this part of building a business, but it’s still really important to get it right, as long as you’ve done the legwork and gone through all the steps we’ve talked about so far in this post.

When you get to that phase, my free online course Build Your Own Brand (BYOB) will help you build a brand and website that matches your business and helps you stand out. Over 25,000 people have already taken this course, one that will help you walk through every step along the way to creating your brand and building an awesome website for it.

The Unsexy Side of Starting a Business

There’s a lot more to starting a business that a lot of people don’t like to talk about—things like finances, taxes, incorporation and business formation, among many other things.

It’s with that in mind that I’d love to introduce the person I call my “integrator,” Matt Gartland.

Matt is a crucial asset to Smart Passive Income, because he works to ensure that the business runs smartly and smoothly. As the chief operating officer (COO) and chief financial officer (CFO) at Smart Passive Income, Matt deals with a lot of the “unsexy” side of running the  business, from legal and financial to business formation and insurance, among many other important things.

The reason I call him the “integrator” is he takes the vision I have for the business and integrates it into something that can work on the ground. There’s a great book I highly recommend by Gino Wickman called Rocket Fuel (Amazon link), which talks about this kind of relationship, one that exists in a lot of successful businesses: a visionary plus an integrator.

Although Matt and I have worked together in various capacities for a long time, I didn’t have him onboard as my integrator at the start—and you definitely don’t need to have an integrator in the beginning. But I definitely recommend bringing one on eventually, especially if you see yourself as more of a visionary type who may need help with more of the nuts-and-bolts, ground-level (i.e., boring) parts of running a business.

Over the next few months on the blog, we’re going to be talking more about our business goals and some of the other things in our business that are not sexy things very necessary. We’ll link back to those things here as they’re published.

With that in mind, I want to introduce Matt now to share a bit about the super important guidance he’s going to be sharing on the blog over the next few weeks relating to the less glamorous side of building an incredible business.

So Matt, thank you so much. You’re amazing. Here’s Matt.

Why Great Ideas Don’t Make a Business (with Matt Gartland)

Matt: Thanks, Pat.

Partnering with Pat on the future development, growth, and evolution of the SPI business is such a remarkable and humbling opportunity: because our collective work helps entrepreneurs like you overcome obstacles, discover breakthrough opportunities, and develop the wisdom and skills needed to successfully start, sustain, and grow your very own startup company.

I use the word “company” with great intention here. As Pat teed up, distilling your vision into a specific addressable market (your niche) is far from enough. Identifying a product or service concept to solve that market’s principal pain point is also not enough. Even developing relationships with folks in your industry that may be able to help you is not enough. Why?

Because those ideas—however great, refined, and unique they are—do not constitute the necessary elements to actually begin operating as a business. Furthermore, even if you have a phenomenal network in your industry, if you don’t have an operational business, then the business development potential of that network will never be harnessed into real, tangible results.

What Are You Building? A Real Company

That’s why the term “company” is instructive and powerful in this context. When you make the mindset shift to thinking about your idea not just as a “side hustle” or “project” or even “startup” but rather as a “company,” then you immediately begin to take yourself more seriously. Others will also begin to see you and your efforts through a more professional lens. That’s a positive perspective and energy shift, and it’s the very shift all entrepreneurs need to successfully avoid the “talk is cheap” trap and actually start taking action as a serious businessperson.

When you begin thinking about your ideas as the beginning of a real company, you’ll begin to see the value in topics such as:

  • Business formation documentation
  • Business development skills and resources
  • Negotiation and contracts
  • Fundraising
  • Product (or service) research and development methods
  • Data and derived business intelligence
  • Performance metrics
  • Cash flow management
  • Communication standards
  • Workflow methodologies
  • Talent recruitment and retention
  • Culture building
  • Legal strategies and tactics
  • Compliance safeguards
  • Insurance programs
  • System automations

For someone like me with a long leadership career chiefly building and running high-performing teams and companies, these subjects are quintessentially sexy because, when developed well, they sculpt your company into a smart, strong, and lean specimen that others will admire, be attracted to, and wish to learn from. What’s sexier than that?!

That said, I admit that this stuff can be dry at times. I also admit that, relatively speaking, marketing work is almost always perceived to be more glamorous. That’s okay with me because I’m motivated by, and grateful to have, these unsexy subjects as special, secret weapons that can help us stand out from the crowd and succeed in a way that takes others by surprise.

Coming Soon: A Deep Dive into the Unsexy Side of Business

I’m excited to pull back the curtain on these subjects and discuss them with you and the rest of the SPI community. If you’re already tingling with anticipation for this stuff, woohoo! If not, I simply ask that you deactivate any preconceived notions you may have about these subjects and approach them with an open mind.

While not all skills are suitable to all people, developing a healthy respect and knowledge about these subjects is fundamental to successfully leading a company—even if it’s a company of one. And if you have a business partner who’s more the “integrator” type, all the better because that person can lead on this work consistent with his or her hardwiring for it.

And if you’re a visionary type like Pat, you must still learn to appreciate and respect this stuff.

This Friday, you’ll see an article from me titled, “How to Set Up and Incorporate a Business.” I’m pumped to publish that article for you. It’s an epic read that will be a true foundational asset as you think about establishing, operating, and growing your company.

To prepare for that article, and the future arc of these subjects, I’d also like to invite you to read my article “10 Timeless Business Lessons I Learned During My 7-Year Agency Career (And Why I Sold Mine).” It provides a useful big-picture context to key themes and insights as an entrepreneur and business leader that shape how we need to think about these subjects.

This is fun stuff—although probably more nerdy fun than party fun. Get ready for it!

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