MindValley Labs Internet Marketing Blog

Nila, a real-estate broker from North Carolina asked the following questions:

After I bought your book, how much a month should I spend to make this work? If I only have a budget of $250.00/mo, is this system going to work for me?

One for the beauties of starting an ecommerce business is that it doesn’t take much to run.

Fixed costs such as setting up the site and hiring a web designer are usually a few hundred dollars. The variable costs such as advertising are what you need to be concerned about.
Let me answer your questions with a personal example.

My first foray into ecommerce started on a shoe-string budget. Through a friend, I found an interesting product. I spent a few weekends preparing some rough pieces of copy to describe the product and it’s benefits.

Now I incurred the fixed costs of setting up the site:

First, I got on elance.com and posted an ad looking for a web-developer. I found one in Asia who had a fine reputation and could get my site up in 2 weeks for a mere $500. (now, prices have dropped further and $200 is possible).

So I had my site and my copy written. The next costs incurred were webhosting ($30/month) and purchasing licensed images to use on the site ($1 each from iStockPhoto.com). Next I opened a Paypal account so I could collect payment (Paypal is free and claims just a small percentage of each transaction as a fee).

That really was it. I had my site running for under $600 in initial fixed costs. But of course, just having a site is not enough. You need traffic. So my next expense was opening a Google Adwords account and buying PPC ads. I budgeted $500/month for my first few ads.

The Variable Costs

In my first month, I spent $568 on Google ads. My income was $195 and I had made a lost of $373. Darn!

But this first month also thought me a lot about what made my site work. I adjusted the copy, improved the landing pages and by Month 2, I made my first profit of $83. Okay, not much. But this grew - rapidly.

In month 3, I earned enough to cover by initial fixed costs and my first month’s losses. By month 4 - everything come in was pure profit.

The chart below shows you my advertising cost and my monthly income from the site. As you can see, a mere 2 years after starting the site, I was making $18,000 a month.

So to answer Nila’s questions. Yes, expect to spend around $500 to setup up your site. Budget well for PPC, you can get started for $50, or if you’re a little braver you can start at $500. That’s up to you. Just make sure you watch and constantly optimize your conversion rates.

Recent posts by Mike

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About the Author

Prior to MindValley Media, Mike was the Head of New Ventures Strategy at eBay where he conceived of the strategies that led to the investment in Craigslist, the launch of Kijiji.com and the acquisition of Skype. Mike has an MBA from Stanford and previously worked for the Boston Consulting Group. He is also a certified Google AdWords Professional.

Check out other posts by Mike

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