Disclaimer: This guide is for general informational purposes only and does not constitute legal, tax, or financial advice. Requirements vary by state, industry, and business structure. Consult a qualified professional for advice specific to your situation.
Selling Online (E-commerce)
Selling online means reaching customers directly through a website, marketplace, or both – without a physical storefront.
Direct-to-consumer (DTC): You sell through your own website (Shopify, WooCommerce, Squarespace) and keep the full margin. You control the brand experience but are responsible for driving all your own traffic.
Marketplace selling: You list on Amazon, Etsy, eBay, or similar platforms. You get access to their existing customer base but pay fees (typically 8–15% of each sale) and have less control over pricing and presentation.
Legal and tax considerations: Online sellers must collect sales tax from customers in states where they have “nexus”, either a physical presence or, since the 2018 Supreme Court ruling in South Dakota v. Wayfair, economic nexus (typically $100,000 in sales or 200 transactions in a state). This applies even if you’re based in a different state.
Retail (Physical Storefront)
A physical retail location gives customers a tangible experience with your product and builds local brand recognition. It also comes with significant fixed costs: rent, utilities, staffing, inventory that exist whether or not you’re making sales.
Key considerations: Location is critical and expensive. Foot traffic, parking, neighboring businesses, and lease terms all affect your success. Most retail leases are 3–5 years with personal guarantee requirements.
Licensing: Physical retail businesses typically need a local business license, Certificate of Occupancy, and potentially additional permits depending on what you sell (food, alcohol, firearms). Check our Municipal Law section for local requirements.
Inventory management: Retail businesses tie up significant capital in inventory. Understand your turnover rate, how quickly products sell relative to how long they sit, before committing to stock levels.
Wholesale
Wholesale means selling your products in bulk to retailers, distributors, or other businesses, who then resell to end consumers. You sell at a lower per-unit price but in much larger quantities.
Typical margin structure: Wholesale prices are generally 50% of the suggested retail price. If your product retails for $40, you’d wholesale it for around $20 and need to manufacture it for under $10 to maintain a viable margin.
How to get started: Trade shows, cold outreach to buyers, brokers, and distributor relationships are the primary channels. Independent sales reps who work on commission (typically 10–15%) can help you reach retailers without a full sales team.
Legal considerations: Wholesale agreements should specify minimum order quantities, payment terms (net-30 is standard), return policies, and exclusivity arrangements.
Service Business
Service businesses sell time, expertise, or labor rather than physical products. This includes consulting, trades, healthcare, creative services, legal services, and countless others.
Pricing models: Hourly, project-based (flat fee), retainer (recurring monthly fee), or value-based (priced on outcomes rather than time). Retainer models provide predictable revenue and are worth pursuing once you have trusted client relationships.
Contracts matter: Every service engagement should have a written agreement covering scope, deliverables, payment terms, intellectual property ownership, and what happens if either party wants to end the relationship.
Licensing: Many service professions require state licenses – contractors, healthcare providers, financial advisors, real estate agents, attorneys, and many others. Operating without a required license can result in fines, inability to collect payment, and personal liability.
Subscription
Subscription models charge customers a recurring fee (usually monthly or annually) in exchange for ongoing access to a product or service. Software, media, meal kits, and professional services all use this model.
Key metrics to track: Monthly Recurring Revenue (MRR), churn rate (percentage of subscribers who cancel each month), and Customer Lifetime Value (LTV). A business with 5% monthly churn loses over half its customers every year. Reducing churn is usually more valuable than acquiring new customers.
Legal considerations: The FTC has strengthened rules around subscription cancellation. Customers must be able to cancel as easily as they signed up. Clearly disclose billing terms at the point of purchase.
Dropshipping
Dropshipping means selling products you don’t physically stock. When a customer orders, you forward the order to a supplier who ships directly to the customer. You keep the margin between the retail and wholesale price.
Pros: Low startup capital, no inventory risk, easy to test products.
Cons: Low margins (typically 10–30%), no control over product quality or shipping speed, high competition on price. You’re also responsible to the customer for problems caused by your supplier.
Choosing the Right Model
Most successful businesses eventually use multiple channels. Start with the one that matches your product type, capital available, and target customer:
- Physical product, limited capital: Start online DTC or marketplace, add wholesale as you scale
- Physical product, local community focus: Retail or farmers market/pop-up to test before signing a lease
- Expertise or skills: Service business with project-based pricing, evolve toward retainers
- Software or digital content: Subscription model from day one
Common Mistakes
- Starting with too many channels. Master one before adding another. Spreading too thin early leads to mediocre execution everywhere.
- Ignoring unit economics. Know your cost per acquisition, margin per sale, and break-even point before scaling any channel.
- Verbal agreements. Whether you’re selling wholesale, services, or subscriptions – get it in writing.
- Missing sales tax obligations. E-commerce sellers especially underestimate multi-state sales tax complexity.
Where to Go Next
Whatever model you choose, you’ll need to understand basic bookkeeping to track revenue and expenses, and licenses and permits to operate legally. The Federal Law section covers FTC advertising rules, the CAN-SPAM Act for email marketing, and consumer protection requirements.