How much to invest in a new ecommerce business?

Hi all. Do any of you have a rule-of-thumb when it comes to the amount one should be investing in an ecommerce startup (retail) in relation to what to expect in return? I’m having this discussion with a prospect who wants to make some money before they invest more in their site, but I don’t think they’re going to get any sales (they have none to date) unless they improve their site. In other words they are putting the cart before the horse.

I realise this is a loaded question, but looking for an average.

Example: Store owner wants to be turning $10,000 per month. For that kind of return, what should they realistically expect to spend to get started?

Any opinions or links on the topic most appreciated.

There is no way to answer your question I am afraid. You can just as well ask “How long is a piece of string?”.

There is too many unknowns, if someone already have a successful brick and mortar store, adding a online store can increase sales without that much advertisement, compared to if you start from scratch. In addition, the market and what products you sell will also play a huge role in how hard it is to get it rolling (i.e. who is your competing stores).

Personally, if we are thinking starting from scratch, selling products that are in demand. I would expect to spend between $100,000 and $200,000 to get a recurring income of $10,000 per month. Where the majority of the money would be spent on advertisement to drive traffic to the store. (The important thing to remember here, is that is you try to sell in a market that is already saturated you need to spend even more money to bring in the traffic/sales).

Thanks @TheRedDevil, you actually answered the question perfectly in the third paragraph. I did mention “startup”, but perhaps should have specified that it is in fact a “from scratch” business. Just semantics I suppose.

Another piece of advice I received that you and others may be interested to know, and perhaps give your opinion about is that (if being really brutal) you can work it back to how much would you invest in a fixed deposit account to get $120k interest per year risk free. Not a rule, but a yardstick. A site should outperform interest, but is higher risk.

Thanks again. Not often I get what I ask for from the first response. Well done :slight_smile:

Personally I feel this advice is more true to normal business (not internet based), as the risk factor is much higher when starting an online business, compared to opening a non internet based business (of course there is exceptions but overall).

It also depends on the interest offered. In Europe the interest on deposit is close to 0% now in most countries. Which means according to the advice, you can almost invest unlimited if you take it literally.

But again, this all depends on the business, and their business model. If the potential gain in the future look promising, it can be worth taking a higher risk. Though as with everything, you should not invest unless you believe in the business, and only when you can afford to lose the money.

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