What to Do After You Made Money Online

You decided you wanted to dive into e-commerce, and now you are making a steady profit through online sales. Now what?

Managing the money you make online is like organizing finances for any other business ? with a few key differences. If this is your first experience making money from your own business, you will benefit from this crash course in money management.

Figure Out Your Taxes

When you work as an employee, your annual income taxes are mercifully straightforward. However, now that you own and operate an online business, you know what it truly means to dread April 15.

The IRS expects citizens to pay taxes on any and all income they generate, which includes money made online. Yet, business owners potentially have the added complexity of filing business taxes come tax season. How you file depends entirely on how you registered your online business: as a sole-proprietorship or as a corporation. You may also need to consider sales tax, employment taxes, and more, reliant on the size, scope, and location of your business.

Attempting to hide your online income from the IRS will eventually land you in serious trouble, so it is better to go through the hassle of reporting your Internet earnings than putting off your tax-related headache.

Set Up Business Accounts

To make all financial reporting easier ? especially taxes ? you definitely want to give your business its own checking and savings accounts. Often, business bank accounts provide a number of features perfect for small businesses, including the ability to process high transaction volume and benefits like direct payments and merchant services. Additionally, you should consider applying for a business credit card, which can provide a number of rewards useful as you work to build and expand your online venture. It’ll also make keeping track of purchases much easier.

Understand Your Gross Margin

Even high school economics classes teach the most basic calculation for gross margin: income from sales minus cost of goods. This is the easiest way to discern the profitability of your business ? but if you are like most e-commerce entrepreneurs, you don’t understand this number’s full potential. However, by keeping a close eye on your gross margins, you can increase the money you make online to a dramatic degree.

While most online sellers operate with between 25 to 50 percent gross margins, others tend to decrease the profits they make from individual sales while focusing on improving the volume of sales they make. Your target gross margin depends on your industry and your goals for your online company.

You can adjust your gross margins to suit your goals by experimenting with your products, pricing, sourcing, sales channels, and promotional schemes. For example, you may have started selling products your customers want at a low- to mid-range price; however, offering higher-end products with larger price tags might decrease the volume of your sales, but it will dramatically cut back on your competition. Additionally, advertising the outstanding features of your products as opposed to their competitive prices might draw more customers your way, increasing profits.

Increasing your gross margin could easily be detrimental to your long-term profits. Instead, you should strive to optimize your gross margins, which might cut back on the profit you make from each individual sale while increasing the number of sales overall.

Expand Your Business

After you have a secure grasp on your gross margins, you will be better equipped to expand your business and thereby expand the money you make online. While you might be tempted to keep all the profits of your online venture, putting the majority of your income back into the business will help line your pockets in the future.

How you choose to expand your business again depends on what, where, and how you sell, but in general, experts provide these smart expansion tips:

• Invest in systems. This is especially useful for e-commerce, which needs tech tools to function. Consider a trustworthy CRM, improved e-commerce platform, social analytics suite, and more.
• Invest in people. It is a big step to bring on your first employee, but the right people can take your vision and make it run. Keep your people happy, and they will return the favor.
• Plan, and then plan more. A successful expansion requires an understanding of your business, inside and out, and that understanding should naturally create a strategic plan. Never take any step unless you know where it leads.
• Remember scalability. A quick, cheap solution may work today and tomorrow, but a few years from now, when your online business has 200 employees and 10,000 customers, you will probably need something better. Plan for the future, always.

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