If you’ve read my story then you will know that I’m not just copying information from the internet and re-wording it for the sake of an article to create more content, but I have actually ran a dropshipping business on a large scale and still do run a small dropshipping business on the side of my current gardening and landscaping company. All of the advice and information I give on this website and especially for my dropshipping series is all from experience. If you’re still new to the world of dropshipping then before you continue reading this article, why don’t you my previous post titled ‘what is dropshipping?‘.
Starting a dropshipping business, for the most part, is fairly easy. Especially compared to most other business models. From the actual setting up of your business to getting your suppliers and making your sales, I’m hoping to cover all of it right here! If however I do miss any information or you have any questions then please do comment at the bottom of this article as I am always keen to help.
The first thing you need to do is find some dropship suppliers!
The reason I’ve put finding suppliers before thinking of a business name is because if you are thinking of a business name based on a specific product category but can’t find a dropshipping supplier with the products you are hoping to sell then you will need to go back to square one.
I’ll be writing some reviews soon on tried and tested dropship suppliers but even a quick Google search should point you in the right direction. Personally, I wouldn’t opt for the suppliers that are heavily advertising due to there being more dropshippers on their books to compete with, but regardless of your chosen supplier, once you have your list of items available to sell then you can always see how many sellers there are with the same products on popular selling sites like eBay and Amazon.
It isn’t all about the number of competitors though, but how savy the sellers are. Let’s say for example that you’ve signed up to a giftware supplier with an item for sale titled “unicorn mug”, if this is all they are listed as on popular selling sites then your in luck. You need to add as many keywords as possible to your title to get more views than your competitors – In this case I would title the item as ‘Unicorn cup mug childrens gift present souvenir”.
Also, be wary of dropship suppliers asking for a sign up fee. In theory, good suppliers don’t need to take sign up fee payments. But, and it’s a big ‘but’, I have worked with excellent suppliers that do ask for a one-off sign up fee. Just make sure to do your research first and check for reviews etc..
Another thing worth noting is to make sure they you get a live stock feed which will allow you to consistently update your listed items with ease. It’s not a total deal breaker if your chosen dropship supplier doesn’t offer this service but it does mean that you will spend alot of time cross referencing and checking each item listed for sale against their website. Imagine having to do this with 5000 products when you could just check a live product feed.
The next thing you need to do is think of a business name for your dropshipping business
Whether you sell on your website, eBay, Amazon or anywhere else for that matter you are going to want a matching business name across all selling platforms. Have you thought about what you will be selling? If you plan to stick and specialise on one product line then make sure that there is a dropship supplier that you are happy to work with before deciding on the name. If not, it will be a good idea to find an alternative dropship supplier and base your business name around that.
My first dropshipping business’s name was based on catering since I sold kitchen equipment and as I grew and kept finding more great suppliers, I created new business names for new websites, all specialising in their own fields. Now however, I have one generic name for my smaller scale dropship business which allows me to sell anything and everything under one name. For example, it could be ‘ABC Wholesale’. Ultimately, how you want to be seen by your potential customers is entirely up to you.
My biggest advice? Do a Google search of your business name ideas to make sure that your not stepping on another company’s toes! Also check to see if the domain (website) name has been taken.
Now it’s time to set up your business
Just like any other business, dropshipping is no different when it comes to paying tax. In fact my first dropshipping company turned over so much money that I had to go VAT registered, but you don’t need to worry about this just yet! Besides you need to turnover £85,000 in a 12 month period before worrying about VAT! For now, let’s stick to the basics! There are 2 main types of business to set up when starting up as a dropshipper (or any other business start up for that matter) which I will go over the very basics below.
Setting up a dropshipping business as a sole trader
Being a sole trader, also known as being self employed is the easiest way of setting up a business. You can either contact any local accountant to set up your new business or register as self employed by following this link.
The tax year for all sole traders typically runs from the 6th April and ends on the 5th April although the accounts don’t need to be filed and paid for until 9 months later – The following January 31st. The good news is that depending on your other work commitments, you don’t need to pay tax on the first £12,500 that you earn.
Setting up a dropshipping business as a private limited company
The biggest difference between being a director of a limited company and a sole trader is that technically speaking, you are employed by the company and are therefore not self employed. There are many benefits of running a limited company such as having a higher ‘take home pay’ as well as having more protection since the company debts are not your debts (unless you take out lines of credit with a director’s guarantee).
On the downside, the accounts are more complicated which means higher accountancy fees. For example, you must file your first accounts 21 months after incorporating your private limited company, file annual accounts 9 months after your financial year ends, pay corporation tax 9 months and 1 day after your accounting period ends and file a company tax return 12 months after your accounting period ends. You can find out more here.
My advice on initially setting up a dropshipping business
If the thought of setting up a legitimate business scares you then don’t worry about it for the time being! You don’t have to register as a business until you turn over £1000 in any 12 month period. Not only this, but if are planning to go self employed as a sole trader then you don’t actually need to register your business until the 5th October after the end of the tax year. As an example, the current tax year for sole traders runs from 6th April 2021 to 5th April 2022. This means that if you start making sales within this time frame then you won’t need to register as a sole trader until October 2022 with payment for tax (if any) not due until 31st January 2023.
Personally, I wouldn’t bother setting up a private limited company for the time being. In my experience, being a self employed sole trader is the easiest route and if ever your dropshipping business really takes off then your accountant will advise you when it’s best to set up a private limited company. And seriously, don’t worry about being self employed, an accountant takes care of everything and it’s so easy!
Every dropshipping business should start with a website
It’s not absolutely essential to have a website but even if you only plan on selling on existing selling platforms it’s still a good idea to have a website. First of all, although many suppliers offer a quick and easy instant sign up process, some of the best dropship suppliers will ask for your website as part of their application and verification process and especially if you want to go direct to the manufacturers instead of the wholesalers.
Not only this, but it’s cheaper to sell items on your own website compared to other selling platforms as there are no seller fees to pay. My websites have always been able to offer a lower price compared to the same listed items offered elsewhere.
Another good reason to have a website for your dropshipping business is to own the domain name. The last thing you are going to want is to have the perfect business name for the perfect products that you’ve spent days to find the best dropship supplier for, and then someone comes and takes the domain name to your business. In fact, checking the availability of domain names should be part of your business name checking process.
When signing up to a website provider, make sure you get the online shop package – Or a package that allows you to list items. I use WordPress for this website with a package specifically aimed at blogs, but there are shop packages available too. I’ve used WordPress, Prestashop and Ionos (previously known as 1&1) and although the most expensive, Ionos is by far my favourite. For me atleast, it’s the easiest to list items, have them instantly connect to eBay if needed, design etc.. I will write an article comparing them all soon so I will include a link on this post when done.
Finally, it’s time to sell your products
Speaking from experience, unless you have money to invest on marketing then your website isn’t going to make many sales. For now I would use your website as a place to direct customers to cheaper priced items as well as used it as a way to gain trust – That you are a legitimate business.
For most sales, in the first instance, I would recommend listing your items straight to eBay or Amazon. To save confusion, list all of the items from your dropship supplier to eBay and once finished, list them all on Amazon (or vice versa). Just don’t forget to add as many keywords as you can! A ‘Unicorn mug’ needs to be listed as a ‘Unicorn cup mug childrens gift present souvenir’. The more keywords you have means the more chance you have of directing potential customers to your items.
eBay and Amazon will likely be asking for MPN and EAN numbers to identify your items. Your dropship supplier should have these on the product page so they are nice and easy to copy and paste to other marketplaces. Using an Excel spreadsheet to keep a list of the product name, MPN and EAN numbers is a great way to keep track of stock. When something is out of stock, mark it on the spreadsheet – When it comes back into stock then find the item on the spreadsheet and update it. There are more savy ways to get more sales when playing with these numbers but I’ll save this for my next article titled ‘how to get more sales dropshipping’. I’ll include a link here as soon as I’ve written it.
Make sure you check the eBay and Amazon seller fees when working out your sale price. You don’t want to sell your items too cheap that as soon as the seller fees are taken, you are at a loss. These fees are marketplace and category specific and there are online calculators available to help.
Finally, be careful of cashflow! Seriously, I’ve been caught out before with bad cashflow by growing a dropshipling business too quickly. Think of it this way. You have £1000 in the bank. You grow so fast that you sell £1500 worth of items in a single day which has cost you your entire bank of £1000 to purchase. You’re owed £1500 which is great, right? Only eBay and Amazon take 3-5 working days to pay you. So what happens when you make more sales the next day? You have no money to pay the dropship suppliers which means you can’t process the sale. There are things in place to help with this such as pausing your online shop and when you receive payment to set it to live again. Just grow your dropshipping business at the same rate as your capital/cashflow and you will be fine.
My thoughts on starting your own dropshipping business
I know I’ve got carried away and written a full blown essay which has taken me a few hours to write but it really isn’t complicated at all. Dropshipping is one of the easiest businesses to set up and get going but be patient as you need to list alot of items to start seeing a good income. My average profit is just 15%. This means that I would need to sell £10,000 worth of items just to make £1500. The hard work isn’t the setting up of the business, it’s the listing of the items, keeping on top of stock levels and sticking to it! A purchased out of stock item means a cancelled purchase and the possibility of bad feedback! Below is a quick list of the steps needed to start your own dropshipping business but otherwise, if I’ve missed anything or you need any help or advice then please do comment below!
- Find dropship suppliers
- Think of a business name
- Register your business
- Build a website
- List your items for sale across various marketplaces
- Start selling and start earning!