Learning how to start a dropshipping business, like any type of business, is not easy. Still, it’s a great first step into the world of entrepreneurship. You can sell to customers without holding inventory. You do not have to pay for the products in advance. And if you take your new business seriously, you can build a sustainable revenue stream for yourself over the long term.
If you are considering dropshipping, consider the following business and financial steps in this complete dropshipping tutorial.
Reading: How to create a dropshipping website from scratch
Some are mandatory from the start, while others are just one are a good idea. But taking care of it in advance will save you time and headaches later.
How does the dropshipping business model work?
Dropshipping is an order fulfillment method that allows store owners to sell directly to the Consumers without storage. When a customer buys a product from a dropshipping store, a third party ship it directly to them. The customer pays the retail price you set, you pay the supplier’s wholesale price, and the rest is profit. You never have to handle products or invest in inventory.
To sell products, you just need to register an account with a supplier.
Three common ways to find a supplier for your dropshipping shop are:
- Through a supplier database like Alibaba or AliExpress.
- With an integrated supplier directory in the backend of your shop, like DSers.
- Through a print-on-demand service like Printify.
The easiest dropshipping process for Shopify store owners is through DSers. You can source millions of products from DSers marketplace through AliExpress and import them directly to your store with one click.
When a customer buys something from your store, DSers will fulfill the order automatically. All you have to do is verify that the order details are correct and click the “Order” button. The product is then shipped from the AliExpress dropshipping supplier to the customer, no matter where they are in the world.
With the dropshipping business model, you are responsible for building your website and your own brand, as well as selecting and marketing the products you wish to sell. Your company is also responsible for shipping costs and setting prices that result in a good profit margin.
Is dropshipping really profitable?
Yes, dropshipping can be a profitable business model for merchants as you are not responsible for shipping or manufacturing. It’s a low-risk business model that doesn’t incur huge costs like a wholesaler would normally have, and you can make a good profit margin with the right suppliers.
How much can you earn as a dropshipper?
There are many dropshippers who make up to $100,000 a year from a successful dropshipping shop. If your idea of being a successful dropshipper is to make $100,000 a year, you need to choose the right suppliers and build a brand.
How hard is it to start a dropshipping business?
Starting a dropshipping business can be very competitive. Since you can start a dropshipping business for free, you may come across many companies selling a specific product at similar prices.
How to Start a Dropshipping Business: 9 Steps to a Profitable Dropshipping Business Plan
- Commit to Starting a Dropshipping Business
- Choose a dropshipping business idea
- Do competitive research
- Choose a dropshipping provider
- Build your ecommerce store
- Decide on a business structure
- Get your finances in order
- Marketing your dropshipping shop
- Analyze and improve your offer
1. Commit to starting a dropshipping business
Like any other business, dropshipping requires significant commitment and a long-term perspective. Anyone hoping for a six-figure income from six weeks of part-time work will be bitterly disappointed. By approaching your business with realistic expectations about the investments required and your profit potential, you will be much less discouraged and quit.
Starting a dropshipping business as a beginner requires investing heavily by use one of two currencies: time or money.
Investing time in your dropshipping business
Bootstrapping and investing Sweat Equity to build your business is especially our recommended one Approach for first-time dropshipping entrepreneurs. We prefer this approach to investing a large sum of money for several reasons:
- You will learn how the business works inside and out, which will be critical to managing others as your business grows and grows .
- You know your customers and your market well, so you can make better decisions.
- You are less likely to spend large sums of money on vanity projects that are not mission critical.
- You will develop several new skills that will make you a better entrepreneur.
Realistically, most people wouldn’t be able to quit their job to spend six months launching their new online store. It might be a bit more difficult, but it’s definitely possible to start dropshipping even if you’re still working 9am to 5am, provided you set reasonable expectations in terms of customer service and fulfillment times for your customers. As you begin to grow, you can work full-time on your business as cash flow and profitability allow.
All businesses and entrepreneurs are unique, but it’s possible to earn anywhere from $1,000 to $2,000 a month Stream within 12 months and work about 10-15 hours a week to build your business.
If you have the opportunity to work on your business full-time, this is it the best choice to improve your profit potential and chances of dropshipping success. It’s especially helpful to focus all of your efforts on marketing when building momentum is critical in the beginning. In our experience, it typically takes a dropshipping company at least 12 months of full-time work with a heavy emphasis on marketing to replace an average full-time income of $50,000.
That might seem like a lot of effort for a relatively small payout, but think of these two things:
- Once your dropshipping business is up and running, maintenance will likely take significantly less than a 40-hour-week job. Much of your investment pays off in terms of the efficiency and scalability that the dropshipping model offers.
- When you start a business, you create more than just a source of income – you also build a fortune on you can sell in the future. Make sure you consider the equity value you are accumulating as well as the cash flow generated when looking at your actual return.
Invest in your dropshipping business
< It is possible to start and grow a dropshipping business by investing a lot of money, but we do not recommend it. We've tried both approaches to building a business (bootstrapping our own or outsourcing the process) and had the most success when we were in the trenches doing most of the work.
In the early stages , is It’s critical to have someone deeply invested in the success of the business you’re building from the ground up. Without understanding how your business works at all levels, you are at the mercy of expensive programmers, developers, and marketers who will quickly eat away at your profits. You don’t have to do absolutely everything yourself, but we strongly recommend being the primary driving force early on in your business.
You will, however, need a small cash cushion in the $1,000 range to get your business off the ground and operational. You will need these for minor operational expenses (e.g. web hosting and dropshipping providers) and to pay for incorporation fees, which we will discuss below.
2. Choose a Dropshipping Business Idea
The second step in learning how to start a dropshipping business is to do the necessary market research. Just like opening a retail store and looking at the different locations, competitors and trends, you want to research a niche that interests you and make decisions based on how profitable it can be. But the truth is, it’s difficult to come up with validated product ideas to sell.
To inspire you with your next dropshipping business idea, Shopify creates a list of trending products based on the top-selling product categories on the platform. By focusing on more niche and trending products, you can help capture buyers’ attention and gain traction without competing with larger, more established companies.
Niche products often have a more passionate customer base, which can make selling to specific audiences easier by increasing awareness of your products. Fitness, fashion, beauty products, electronics, phone accessories, and yoga-related items can be a good entry point to start dropshipping with no money.
Some examples of a niche dropshipping shop could be:
- Dog bow ties for dog lovers
- iPhone cases for iPhone owners
- Camping gear for campers
- Exercise gear for fitness people
You can also use the following tools to test your dropshipping business ideas:
See also: Designing & Publishing a Site with KompoZer
Google Trends. Google Trends can help you determine if a product is trending up or down, and which seasons it tends to be trending. Note that Google Trends does not show search volume.So if you use it, make sure you match your data with a keyword tool like Keywords Everywhere to determine the product’s popularity in search.
Keywords everywhere. This keyword research tool shows you the monthly search volume for your product and how competitive it is. You can use this information to measure the popularity of your dropshipping business idea and to inspire new product ideas for the future.
DSer order volume . In DSers you can search for products based on order volume to determine the potential of your business idea.
While the growth in e-commerce is a huge benefit for those looking to start a dropshipping business, it also creates a lot of competition. This means that when putting together your dropshipping business plan, you should conduct competitor research to be successful in selling your products.
3. Conduct competitor research
Now that you know what you’re going to sell in your store, you want to look at who your competitors are and understand how they work. Your competitors can be a good indicator of success and can help you create a stronger marketing plan for your dropshipping business.
If your market has a lot of competitors (which is a good thing in dropshipping), narrow yours Research about five other dropshipping companies, including one or two big players like Walmart, eBay, or Amazon. It helps you stay focused and plan your next steps.
Some ways you can do your competitor research are:
- Do a Google search. Search engines are an obvious place to start. Use Google to create a list of your top five competitors. Start with key search terms in a simple search, like “earbuds.” The top 10 results show you who your top competitors are and how they are promoting their products. If you want to focus on a specific country, you can use a third-party tool like Ahrefs or SEMRush to find keyword data in those areas.
- Use competitor spy tools like Similarweb and Alexa . Online tools like these are great for finding (and tracking) what your competitors are doing online. They give you a list of competitor website information such as: B. their social media profiles, top traffic sources, number of visitors and who their competitors are.
- Social networks search media. Search for Facebook ads in your niche and check out the top brands out there. See how the company communicates with their customers, how their feed is designed, how much engagement they get – you can even follow their feed to make sure you don’t miss a thing. Use this information to find ways to differentiate your business and improve your social media marketing strategy.
- Subscribe to competitor email lists. Want to get competitor updates straight to your inbox? Sign up for their email list and get a glimpse of their marketing strategy. You can also learn more about the promotions and offers they use to encourage customers to make purchases.
Learn all about your top competitors: their website, prices, marketing methods, product descriptions, reputation, etc. Organize your research in a spreadsheet so you can always refer back to your business decisions meet. For example, if you want to use email marketing to promote your business, you can use your spreadsheet to see if competitors are already doing so and what tactics they are using, all in one place.
4 . Choose a Dropshipping Supplier
Choosing a dropshipping supplier is a crucial step in building a successful dropshipping business. Without suppliers, a dropshipping business would have no products to ship to customers and would therefore cease to exist.
At this point you have checked what dropshipping products you want to sell and know that they can be profitable. Now you want to make sure you find a dropshipping supplier that can give you the quality service you need to grow. Ecommerce platforms like Shopify offer a plug-and-play style option to find potential suppliers by connecting DSlers to your online store.
DSers is a marketplace that makes it easy to find products to sell online. Be it electronics, fashion, toys or other trending items, you can find products with good profit potential from dropshippers around the world and add them to your store in one click.The app manages the routing of customer orders to your dropshipping supplier, so you never have to worry about packing, shipping or inventory management. Getting started costs nothing.
The DSers app uses AliExpress to help you find and add products to your store. If you want to know more about product quality, delivery times or want to check a supplier more closely, you can do so on the DSers product page.
Clicking on a vendor’s link takes you to their AliExpress page, where you can find reviews, top selling products, and more.
One thing to keep in mind: Strive to sell quality products from DSers that offer ePacket shipping if your supplier is from China. ePacket is an economical and fast option for shipping items from China to countries like the US, UK, and Canada. Instead of waiting months for a package from China, your customers only have to wait up to two weeks, and at a cost of just a few dollars.
5. Build Your Ecommerce Store
The next thing you need to start a dropshipping business is an ecommerce platform like Shopify. From here you send traffic, sell products and process payments.
Shopify makes it easy to build and launch your ecommerce site, from finding a domain name to adding marketing and sales plugins. It’s a complete trading platform that allows you to sell in multiple places (including online), sell in multiple currencies, and easily manage products and accept payments.
You don’t have to be a designer or developer to use Shopify either. And you can easily change the look and feel of your store with the store builder and Shopify themes.
Need help building your online store? Sign up for a free Shopify trial and read How to start a Shopify store: a step-by-step guide.
6. Decide on a business structure
If you are serious about your venture, you should set up a legitimate business entity. We are not lawyers and cannot offer legal advice, but we can give you an overview of three commonly used company forms:
Sole Proprietorship
This is the easiest company form to implement, but it also does not offer a personal one liability protection. So if your company is sued, your personal assets could also be at risk. Filing requirements are minimal and you simply report your company’s earnings to your personal taxes. No other state or federal business registrations are required.
Limited Liability Company (LLC)
An LLC provides increased protection of your personal assets by incorporating your business as a separate legal entity. While liability coverage isn’t foolproof, it offers more protection than a sole proprietorship. You may have to meet additional filing requirements and pay both incorporation and ongoing fees.
C-Corporation
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Most larger corporations are incorporated as C-Corporations, which is what when you’re done are correct, offer the greatest liability protection. They are likely to be more expensive to set up and subject to double taxation as income is not passed directly to shareholders.
So which structure to choose? Again, we are not lawyers and would advise you to consult with one before making any incorporation decisions. Most small business owners choose either a sole proprietorship or an LLC. We have personally used an LLC for all of our dropshipping businesses because we feel it offers the best compromise in terms of liability protection, independence from personal finances and costs.
Note: The business structure information and EIN (Employer Identification Number) discussed below apply to entrepreneurs in the United States and do not apply to other countries. For information on incorporating a US based corporation from outside the United States, see the instructions at the end of this article.
Request an EIN Number for your corporation
The IRS requires it all businesses must have an Employer Identification Number, which serves as your social security number for your business. You’ll need this number to file your taxes, apply for wholesale dropshipping accounts, open a bank account, and pretty much anything related to your business.
Thankfully, it’s easy and free to create one get EIN number. You can apply for an EIN number online.
7. Get your finances in order
A common mistake entrepreneurs make when starting a business is to mix up their personal and business finances.This creates confusion, complicates bookkeeping, can lead to personal assumption of business liabilities, and is a big red flag for the IRS if you are ever audited.
You want to keep your business and personal finances as much as possible separate. The best way to do this is to open new accounts in your company’s name. You should open:
Business Checking Account
You should manage all of your business finances through a primary checking account. All business income should be deposited there and all expenses deducted from it. This makes accounting much easier and cleaner.
Credit Card
You should have a business credit card that is only used for business expenses and dropshipping inventory purchases. Since you’ll be buying a lot of goods from suppliers, you can rack up some serious bounty with the right bounty travel cards. We have found that Capital One has the best travel rewards program and that Fidelity Visa/American Express offers the best cash back program.
Collect sales tax
You only need to collect sales tax if both of the following conditions are true:
- The state in which you operate collects it Sales Tax
- An order placed by someone who lives in your state
For all orders placed by residents of other states, even if those states own theirs collect your own sales tax, you don’t need to collect any tax. There’s a good chance we’ll see changes to these laws in the years to come, but for now, tax laws are very beneficial for small online retailers.
If your state has a sales tax, be prepared Collect it for the limited number of orders from customers in your home state. Contact your state’s Department of Commerce to register as an online retailer and find out how often to file the tax you charge.
Learn more about sales tax liability by checking out direct shipping and sales read Tax: A Simple Guide by Bench.
Local Business Licenses
Most cities and counties require businesses to obtain a business license, which must be renewed periodically. However, this requirement may differ for dropshipping businesses, many of which are likely to be operated from home offices. You should check your local laws and regulations to see what may be required.
Incorporation outside of the United States
It can be complex, but it is possible for international traders, set up a business in the United States, giving them access to US-based dropshippers and customers. The merchant must come to the US to complete the necessary formalities, have a trusted US business partner who can act on their behalf, or hire an agency to set it all up.
The following resources can do this do help you understand this process, but we strongly recommend consulting with a legal professional before making any decisions:
- Doing Business in the USA: A “Bullet Point” Guide for Foreign Business People, by New York attorney Aaron Wise
- Non-resident Delaware LLC and Corporation for Foreigners, by Delaware Corporate Headquarters
8. Market Your Dropshipping Shop
Now that you know how to start a dropshipping business, it’s time to talk about marketing your new shop. In order to stand out in your market, you may want to put extra effort into your marketing and promotional efforts when creating your dropshipping business plan.
Because so many things are automated with dropshipping, here are some ways you can focus on marketing and promoting your business:
1. Paid ads (Facebook and Google). The average cost of a Facebook ad is around 97 ¢ per click, which is not bad if you are new to advertising on the social media platform. Facebook ads are scalable, products can work well on them, and they inspire people to make impulse purchases. You can run Google Shopping ads and target long-tail keywords where shoppers are more likely to buy. Google ads tend to have more price competition, but it may be worth trying.
2. Influencer Marketing. As a new dropshipper, you may have a limited budget to market your business. Influencer marketing is an affordable way to reach your target audience as people tend to trust influencers more than traditional advertising. If you go this route, you are negotiating an affiliate fee with the influencer instead of a flat rate. It’s a win-win situation as they make money on every sale and the cost to you is less.
3. Content Marketing. If you want to build a long-term traffic stream for your business, include content marketing in your dropshipping business plan. Start a blog all about your dropshipping niche and create content that entertains and informs your target audience.You can also start a YouTube channel, create infographics, or start a podcast to spread the word about your brand.
4. Communities. Get involved with groups of people who are passionate about your niche. You can start conversations with potential clients on Reddit, Facebook groups, or online forums. Remember not to be too salesy when dealing with a community. Try to help potential customers and build relationships with them so they trust your brand and want to buy from it.
5. Mobile Marketing. Mobile marketing is a broad term that refers to a business that engages with customers through their mobile phones. For example, you can create a VIP text club and encourage site visitors to sign up for exclusive offers and promotions. Or offer customer support in a live chat conversation with buyers on Messenger. With a mobile marketing platform like ManyChat, you can create automated lead generation, customer retention, and cart abandonment campaigns to increase sales and revenue for your dropshipping business.
As with any successful online business, keep an eye on which channels are working and which aren’t—especially if you’re investing in them through paid ads. As you continue to grow and improve your business, you can always adjust your marketing strategy to reduce costs and maximize revenue.
9. Analyze and improve your offer
After you’ve marketed and managed your dropshipping business for some time, you can see the results of your hard work. Shopify Analytics can help you answer some important questions about your online store, such as:
- Sales. What are my top performing channels? Where should I invest more advertising money? What are my top selling products? Who are my best customers?
- Buyer behavior. Are people buying more on desktop or mobile? What is the conversion rate for each device?
- Profit margins. Which products and SKU variants are the most profitable? What are my sales and gross profits like month by month?
You can also use tools like Google Analytics and Search Console to measure search traffic over time and improve your search engine optimization (SEO) efforts. Additionally, if you’re using a third-party app for your social media or messenger marketing, review the reports monthly to ensure your overall strategy is working for your business.
When you create a dropshipping ecommerce store, you want to create a data-driven analytics system. Stay consistent with what you analyze over time and measure your store’s performance against clear KPIs. This will help you make smarter business decisions and, over time, take your small business to the next level.
Start your dropshipping startup today
Whatever Whether you’re a new entrepreneur or a seasoned business owner, a dropshipping business is a great, low-risk, and cost-effective way to start selling online. With the rise of third-party apps and marketing automation tools, running your business online is no longer a problem. Hopefully this dropshipping guide inspires you to find a path to success and financial freedom so you can live the life you’ve always dreamed of like so many other ecommerce entrepreneurs.
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