2022 Year End Review: How much does it cost to run an online business?
In the past few years, I have done a Year End Review to talk to you about my business growth, my accomplishments throughout the year, things that I wished I had done differently, and my goals for the next year. However, this year I wanted to do things a little bit differently.
When I first started my business, I had so many questions around finances such as how much it cost do run a business and what I should or shouldn’t spend money on. So in place of my typical review, this year I thought I would talk through my 2022 expenses how much it cost to run an online business.
Note: A lot of the links below are Affiliate Links. While I may recieve a small commision for sales, I only promote programs that I use in my own business.
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Overall a good rule of thumb is to keep expenses to 30% of your total sales. So for example, if you are projected to do $100,000 in sales this year, then you wouldn't want to spend more than $30,000 on expenses.
Here is a breakdown of all of my expenses in 2022. I've broken them down into a few categories.
Advertising (17.3%)
This includes anything to do with my Facebook Ads, Brand Photos, and other Marketing expenses.
Business Licenses and Contracts (1.8%)
It's very important that you do have client contracts, privacy policies, terms of conditions, etc for your business. These should be from a Lawyer and not free ones you find online. I use The Creative Law Shop for all of my contracts. Use REBECCAGRACE10 at checkout for 10% off.
This also includes my business license and related fees which I pay to the Canadian Government, so that would be dependent on your area.
Equipment (19.8%)
Equipment expenses were higher this year than previous years. I realized that I was missing the social side of work and was having a lot of joint pain from sitting at a computer for long periods of time. So, after examining my home office, I decided to make some upgrades. I purchased a laptop so that I can move around a bit more while I’m working either around the house or from cafes. I purchased a new webcam and microphone to improve the quality of my videos. Finally, I purchased a standing desk and a walking treadmill to make sure that I can still be active throughout the day.
Outsourcing (9.9%)
This year, I wanted to make some changes to my social media. I decided to take a step back from Instagram and focus on YouTube and Pinterest instead. To help manage my time (and because Social Media Marketing is not in my zone of genious) I decided to outsource my Pinterest as well as my SEO.
Processing Fees (10.7%)
This is an expense that a lot of people don't think about when they're starting an online business. It's definitely something I didn't know about and it's actually quite a big chunk of your expenses. Processing Dees are fees charged by a company to process payments. Honeybook has processing fees as well Stripe, PayPal, Squarespace, etc. They are usually around 3% but can get higher and can be compounded. For example, if you have your online shop on Squarespace and have people pay through Stripe than Squarespace will take 3% and so will Stripe.
Professional Development (11%)
This varies year to year depending on what is happening in my business. I always am trying to improve myself and my business, so professional development tends to be a focus for me and something that I enjoy doing. I am hoping to attend some in person conferences next year. If you have any recommendations, I would love to hear about them in the comments below!
Resources (1.2%)
This includes purchasing fonts, mock-up templates, plugins and more depending on what I'm doing in my business. If it's a purchase for a client, then they pay for it. This would be resources for myself and my business.
Accounts and Memberships (28.4%)
Squarespace (Click here and use Parter10 to get 10% off your first year)
Squarespace is the base of my business. I use this to host my Website and Membership Program.
Canva
I have a Canva Pro account which I use every day to create all my graphics, thumbnails, icons, and more. I highly recommend this program. You can start with a Free Account and move up to a Pro Account when needed.
Creative Market
I use Creative Market for fonts, graphics, and mock-up templates.
Creative Law Shop (Click here and use REBECCAGRACE10 for 10% off)
I mentioned them earlier but the Creative Law Shop is where I get all of my contracts and legal templates.
Honeybook (Click here for 50% off your first year)
I use Honeybook for all of my client management. It’s how I send all of my contracts and invoices to clients. I have a ton of videos that go over how I use Honeybook in my business. Highly recommend checking them out!
Elfsight
This is a program I use for plugins such as timers, search bars, and more. They have a ton of different widgets and I tend to use them for anything that is either going to be temporary on my site or that I don't really want to write code for.
Vimeo
I have a Vimeo Pro account for my private videos. If I'm recording videos for my coaching clients or my Encyclopedia of Code, then I will upload them to Vimeo so they can stay private and be a separate from my YouTube Account.
Zoom
I have a Zoom Account so I can meet with clients and have more than one client with no limit to how long we can meet.
PayPal
I use PayPal, which is free but it does have processing fees. I try to limit PayPal with payments and only go through Stripe for most of my payments, but the odd time I do use PayPal.
Memberspace
I use Memberspace for my Encyclopedia Membership Program. Squarespace has a membership feature but it wasn't able to do all of the things that I needed it to do when I first started out and now that I have it all set up on Memberspace I haven't really found a reason to move it over to Squarespace's Member Areas at this time.
Teachable
All of my plugin courses are hosted on Teachable. However, I am in the process of moving them to Kartra. I love Teachable. However, I wasn't able to add my Tax ID so that I could collect Tax. They do allow you to add a Tax ID, but it wasn't really working with Canada very well. I think it is something they're working on and they have added in, but I decided to move it over to Kartra anyways. I do feel like I am going to miss it and might come back to it in the future.
Kartra
This year I decided to move my plugins to Kartra because it was allowed me to get rid of quite a few of the accounts and memberships that I was using and combine them all onto one. I was using EasyWebinar for my webinars, Deadline Funnel for the timers on my sales pages, Active Campaign for my email system, and Teachable for my plugin courses. Kartra was able to combine all of those into one system.
There are pros and cons that come with that. I'm enjoying Kartra because now everything's in one space. However, if there is a program that has a little bit of everything, they're not necessarily providing Advanced Features for each one of those things. For example, Kartra has quite a few features around email marketing and funnels. However, I wouldn't say it's as good as active campaign. Kartra’s timer isn’t as advanced as Deadline Funnel. If you're looking for one thing it's generally best to go to a program that specializes in that thing.
Kartra allowed me to have it all in one place and all the features that I needed in order to run my business, so I was able to get rid of my accounts with EasyWebinar, Deadline Funnel, Active Campaign, and soon Teachable.
Quickbooks and Sush.io
New this year, I started QuickBooks and Sush.io for my accounting software. Up until now I have been using Excel, which has worked well but I want to outsource my bookkeeping and accounting so it is time to move to an accounting software.
Codepen
Codepen houses my code and files for some of my plugins.
No Longer Using
This year I stopped using EasyWebinar, Deadline Funnel, Active Campaign, and soon Teachable. I also stopped using Later. Since I decided to take a step back from Instagram, I didn’t need Later to publish posts for me.
So what should I spend money on if I am just starting out?
Keep your expenses to 30% of your income. I know this is really difficult when you're first starting out because you're not sure how much you're going to be making. As a Squarespace Website Designer there are only a few things you need to start out with and then you can build that up as you get more confident in what you're going to be bringing in.
Squarespace: You need a Squarespace account or a website yourself. So you will have expenses around keeping your own domain name and a website. Click here and use Parter10 for 10% off your first year.
Email Marketing System: You're going to want some sort of email marketing system in order to be starting to to collect and building an email list. There are free options out there. I started out on MailerLite (which is Free for the first 1000 subscribers).
Honeybook: You will want to consider having a system that allows you to send and receive contracts and invoices with your clients. I suggest honeybook for this. Click here to get 50% off your first year. I suggest starting a trial and seeing if it works for you and your business. Click here to see my blog posts on how I use Honeybook in my business.
Contracts and Invoices: You need to have contracts, a privacy policy, and terms and conditions. You want to make sure that your business is legally sound right off the bat. Again, I recommend The Creative Law Shop for these.
Overall, I suggest you start with getting the legal side of your business set up and have a way to collect and receive contracts and payments. You also need an email marketing system and your Squarespace Account. Most of the other accounts and memberships offer free versions and then you can build up to the pro versions once you feel that they are necessary.
And That’s a Wrap!
Thank you so much for your support. I hope this post has helped you sort out what is necessary and how much it costs to run an online business. I wish you all a happy holiday season and the best start to the new year.
Cheers,
Rebecca xx
