Advertiser Disclosure
Advertiser Disclosure: The credit card and banking offers that appear on this site are from credit card companies and banks from which receives compensation. This compensation may impact how and where products appear on this site, including, for example, the order in which they appear on category pages. does not include all banks, credit card companies or all available credit card offers, although best efforts are made to include a comprehensive list of offers regardless of compensation. Advertiser partners include American Express, Chase, U.S. Bank, and Barclaycard, among others.

How to Start an Online Business & Make Money in a Down Economy


Disorder, Inflation, and Gold...

Discover how experts are combatting inflation with Gold (TAX FREE) with this free report.

Inside Your Report:

  • Top Strategies to Hedge Inflation
  • Benefits of diversifying with gold and precious metal
  • 2022 IRS Loopholes
  • Why experts are turning to Gold

Download an actionable plan to help protect your assets with gold & silver in a severe economic downturn.

It’s never been cheaper or easier to start a business.

Once upon a time, you needed a business loan, venture capital funding, or deep pockets to finance a new business. Today you can buy a domain name for $5, build your own website for free through a company like Bluehost, and open shop.

That means even in a down economy, you can launch an online business with little financial risk.

Of course, the less money you spend, the more time you need to invest. But given the low barrier to entry, there’s little to stop you from launching a virtual business as a side hustle, regardless of this month’s GDP or stock market numbers.

Motley Fool Stock Advisor recommendations have an average return of 397%. For $79 (or just $1.52 per week), join more than 1 million members and don't miss their upcoming stock picks. 30 day money-back guarantee. Sign Up Now

Why an Online Business?

Online businesses come with an inherent advantage for scrappy entrepreneurs with little startup capital: You can operate them from your home without having to sign a commercial lease. That saves you money up front, and it also keeps your ongoing overhead low — a boon in any economy, but especially during downturns.

Beyond rent, you also save by not having to outfit a physical space. You don’t need to decorate a restaurant or coffee shop, don’t need to buy computer equipment or cubicle stalls. Nor do you need to pay for a new set of utility bills on a rented space.

Hiring help can also prove easier for online businesses. You can hire workers from anywhere in the world, broadening your labor pool and enabling you to take advantage of the lower cost of living in other states and countries.

After years of paying top dollar for U.S.-based web developers, for example, my partner and I decided to experiment with an India-based development firm. We’re happier with the quality of the work and we only pay a fraction of the hourly rate.

Many employees and freelancers prefer to work from home as well, making it even easier to hire and retain good workers at a reasonable rate. That’s doubly true in the wake of the COVID-19 pandemic when many workers got a taste for telecommuting for the first time and found they liked it.

For first-time entrepreneurs, starting an e-commerce or other virtual business is a low-cost, high-upside first foray into entrepreneurship.

Choose Your Niche

As a teenager, my mother told me “Do what you love and the money will follow.” I didn’t believe her, as I looked askance at her teacher’s salary.

But as so often happens, I gradually came to realize my parents knew a thing or two I didn’t. And nowhere is her lesson clearer than the world of entrepreneurship.

If entrepreneurs don’t feel a consuming passion for their business, they won’t make it past the 10th, 50th, or 100th roadblock they hit. Starting and growing a small business involves an endless series of seemingly insurmountable obstacles, and the job of an entrepreneur is to find a creative path forward even when it looks impossible.

As I always tell aspiring entrepreneurs, starting a business isn’t the easiest way to make money. It’s the hardest — climbing the corporate ladder is a simple and straight line by comparison.

For business ideas, look for the intersection between your passions, your talents and skills, and what the world needs. Start by looking at what you do for fun even though no one pays you. No one says you can’t turn your hobby into a business or start by freelancing part time before launching a full-fledged business.

Always err on the side of niching deeper in your business model, rather than trying to be everything to everyone. You want to stand out as the best option for a small, specific group of people, not just one more anonymous face amid a sea of better funded, more established competitors. Saturated markets rank among the reasons why business startups fail.

Planning Your Success Before You Start

The more detailed your plan is before you start, the better your odds of success.

Remember, a detailed plan doesn’t lock you in or prevent flexibility. Quite the opposite. By planning your business in detail, you can create contingency plans and better brainstorm new innovations and ideas to experiment with in the future.

1. Start with a Mentor

You’ve heard the cliche ad nauseum: Don’t reinvent the wheel. But many new entrepreneurs still try to forge ahead alone.

Find a mentor with experience in your field or niche, because they’ve already made many of the mistakes you’re likely to make. They’ll ask you probing questions about your business plan, your marketing strategies, and your daily routine. Then they’ll point out the pitfalls that could sink your business and recommend alternatives to generate more revenue with less risk.

Mentors can also share their existing networks. That alone can boost your business opportunities significantly.

Mentors don’t have to cost money, either. Check out as a free resource to find mentors in your space. It’s the best investment of time you can possibly make and can save your business in a literal sense.

As a new business in a down economy, you need every competitive advantage you can get. Experienced mentors can help add to yours.

2. Form a Business Plan

It may feel like a waste of time, or overly formal or bureaucratic, to write out a detailed business plan. It’s not.

Like so much else in life, the value lies in the process, not in the end result. Business plans force you to walk step by step through every dimension of your prospective business, to answer uncomfortable questions, and to think through details that probably didn’t occur to you in your initial excitement.

For example, a thorough market analysis forces you to explore all of your competitors in great detail. You may discover that they’re not as vulnerable as you thought — that they do in fact offer many of the features or services you imagined would distinguish your business.

A deep niche provides one type of competitive advantage. But you want as many “unfair advantages” as possible; look for at least 10 ways to beat the competition. Can you offer free shipping when your competitors charge for it? Can you deliver your products or services faster? Can you customize your products or services while others offer only generic options?

As you go through the process of building your business plan, look for your audience’s pain points. Then find ways to ease them that your competitors have missed.

3. Form a Marketing Plan

Sales and marketing form the core of any business’s success. If you aren’t prepared either to become a master marketer or to hire one, your business won’t go anywhere.

Just because you build it doesn’t mean they will come. How do you plan to reach prospective customers? What will your marketing cost, and what kind of return can you expect on that investment? What will set your marketing apart from your competition?

If you plan to use pay-per-click advertising to market your online business, for example, you need to understand the going rates for keywords in your niche, the click-through rates you can expect, and the conversion rates. And you then need to prepare for the bid costs to go up when a new player — you — starts bidding on those keywords.

All marketing costs money or time, and all marketing should generate more money in revenue than it costs. One of your core jobs as an entrepreneur is to understand that relationship and build a marketing plan that is both profitable and scalable.

4. Form a Financial Plan

If you run out of money before your business turns a profit, you face the black Game Over screen. And reaching profitability almost always costs several times what you think it will, and takes several times as long.

Your financial plan for getting from zero to profitable needs to include several layers of contingency plans. Some entrepreneurs self-fund with savings. Others take out a small-business loan through OnDeck or Bluevine, while others bring on venture capital funding, often in exchange for a stake in future profits.

But credit markets and venture capitalists alike tend to tighten up during downturns, making it all the harder to raise outside capital when the economy flounders.

In my own online business, my partner and I self-funded with savings. Then our web development company took half of our money as a deposit and never completed our online software, leaving us without the seed money we needed. In the years that followed, we pushed forward regardless, but with so much less money at our disposal, we had a steeper uphill climb.

We did, in fact, run out of money before reaching profitability, and it forced us to turn to a fourth option: “extending our runway” with income from side hustles.

And it worked. We bridged the gap and reached profitability, and while we both still do some side gig work, we do it because we’ve come to enjoy our side hustles as a fun change of pace.

Consider keeping your full-time job while you start an online business on the side to extend your own business’s runway. Or, if you’ve already left your full-time job, consider taking up a side gig to help cover your expenses while you lift your business off the ground. Diverse income streams are a useful safety net in any economy and prove even more crucial during recessions.

5. Plan for Relationship & Health Management

Running out of money isn’t the only reason businesses fold. Many businesses fail for nonfinancial reasons, most often divorce, health changes, or partner disagreements.

That means your business plan must include strategies for maintaining strong relationships with your business partner, life partner, and your own health. Starting a business is stressful — it takes its toll on you personally and on your relationships.

Add the financial risk into the mix, and you have a perfect storm for divorce or conflict. My own marriage nearly didn’t survive my starting a business, and we went into it with strong finances and a strong relationship.

In a down economy, the stressors and risks often prove even higher. Take the time from the beginning to plan how you can care for your relationships and health first, despite the endless hours and stress inherent in starting a business.

6. Incorporate & Open a Business Bank Account

New business owners tend to jump to these steps first because they’re the easiest and most straightforward. Instead, you should only undertake these formalities once you’ve completed the much harder steps outlined above.

When in doubt over choosing a legal entity structure, just start with a limited liability company (LLC). It remains a simple legal entity to create and maintain through ZenBusiness, and it’s ideally suited for online startups. And no, you don’t need to pay an attorney a pretty penny to custom draft one for you.

Most states give you their articles of organization form for free on their website, and filling it won’t exactly tax your gray matter. The fields you have to complete include such brain busters as your name, address, and the type of business you plan to operate.

Once registered with your state, you also need an employer identification number (EIN). Consider it a rare example of government efficiency. You can apply and get your EIN instantly from the IRS. The easier to tax you with, my dear.

Likewise, opening a business bank account is easier than ever before, particularly given the rise of free online banks like Lili that have disrupted the old guard of stiff, expensive banks. Find a free business bank account to begin with; you can always “upgrade” to a premium account later if you feel the need.

Build a Website

Although every business needs a website, the website is the business for online companies.

Some online stores simply operate through other platforms, such as Amazon, eBay, or Etsy. While you may not technically need a website in these cases, it can still help you establish credibility and trust as you build a customer base.

Fortunately, even founders with no technical background can easily create a website nowadays. And whatever you can’t or don’t want to do yourself, you can hire someone else to do for you affordably. I can’t write a single line of code, yet I founded a software company.

It all starts, however, with buying the rights to the web address you want.

Building Website Hand Drawing Images Online

1. Choose and Buy a Domain Name

As you brainstorm ideas for business names, bear in mind that you’re going to want a website address to match it. This means you need to make sure no one else has already taken it.

Use GoDaddy as a quick and easy way to search available domain names. You can typically buy available domain names for $5 or $10, so you don’t need to budget a fortune for this.

Some web domains are already owned but not in use, and the owner offers them for sale for a steep price. In a down economy, consider just finding another name that’s available for $5. You’ll have plenty of other expenses — many of them unexpected — so don’t blow your budget on a vanity name.

Once purchased, you can point your domain to where your actual website files are stored, so it opens as a working website when users visit it. Which means it’s time to build your website.

2. Create Your Website

From Bluehost to Wix, you have plenty of free or low-cost options to build a website yourself with no technical expertise. I personally like the Divi builder for WordPress. It’s intuitive and easy to use and not expensive.

Alternatively, consider hiring someone to build a basic website for you. Go on Fiverr or Upwork and find someone affordable, experienced, and well-reviewed to create your site.

Unless your website requires unique or custom functionality, it need not cost much. The designer will, in all likelihood, give you the choice of a few themes and layouts appropriate for your niche. They’ll then install your selection with the click of a mouse and tweak it with your brand colors, fonts, logo, images, and so forth.

You can just as easily do it yourself, or pay a few hundred bucks to delegate the work if you prefer. Either way, don’t be intimidated, and don’t buy into sales pitches about how complex your needs are unless you truly need something custom built from scratch.

Which, in all likelihood, you don’t.

3. Integrate a Payment Processor

To accept payments for your products or services, you need to register as a merchant with a payment processor.

The process doesn’t take long; many merchant service providers can onboard you on the same day. But be prepared to provide them with documentation such as your business’s articles of organization, your EIN, proof of identity such as a driver’s license, your business bank account details, and so forth.

For easy and convenient — if more corporate — options, try Stripe or Square. If you prefer more flexibility for unique business needs, try PaySafe or Bambora.

Once approved with a payment processor, you can hook it into your website to accept debit and credit payments and possibly PayPal.

Pro tip: If you choose Novo for your business banking, you’ll receive $20,000 in fee-free processing through Stripe.

Launch Your Online Business

When you first push your website live, don’t immediately start flooding the web with expensive ads. Instead, start small with paid advertising, and build less expensive marketing funnels through social media, content marketing (such as blogging or launching a podcast), email list building, and search engine optimization (SEO).

Because in order to run profitable ad campaigns, you first need an understanding of your conversion rates. Without that data, coupled with accurate website analytics, you can’t know how much to spend on ads or how those ads perform.

Collect feedback from your audience — both your converted customers and, even more importantly, those who checked you out but didn’t buy. Understand what they like about your business and website, what they don’t like, and what drove their decision to buy or not buy.

By conducting usability tests on your website and using dynamic customer behavior analysis tools like those from Lucky Orange, you can collect this feedback and tweak your business accordingly. In doing so, you’ll improve your conversion rate, which will boost sales and let you spend more on advertising.

Continue to Adapt, Grow, and Learn

Small-business owners and solopreneurs are successful in direct proportion to their own ability to adapt and improve. As they say, entrepreneurship makes the ultimate personal development crash course.

In the beginning, you need to understand every facet of your business inside and out. Later, as your business starts to gain traction and profit, you can then outsource tasks to virtual assistants or contracted workers. Delegating low-skill, repetitive tasks helps you streamline operations and frees up more time for you to focus on sales, marketing, and growing your business.

Remember, your business doesn’t exist in a vacuum. Your customers’ needs and wants change over time, and your products and services need to evolve to keep meeting them. Your competitors don’t stand still either — they too constantly improve, and you need to keep running if you want to keep pace. Or, better yet, to stay ahead of them.

Never is change and disruption faster than during economic downturns. Old competitors go under, while new and more agile competitors arise. In times of economic turmoil, your customers’ spending habits also change rapidly.

You need the flexibility to cut spending when needed and double down on investment when you spot an opportunity, and the vision to spot trends before they become common knowledge.

Starting a business represents a commitment to constant growth and change, on both personal and business levels. If that doesn’t interest you, consider going back to punching the 9-to-5 clock.

Final Word

Even during down economies, there are always opportunities to launch a successful business — perhaps especially during economic downturns, because so many bloated, outdated competitors end up folding.

Online businesses offer low real estate and startup costs, making them an easier path to becoming your own boss, particularly during recessions. In the beginning, stay lean and agile, with low overhead costs and an unrelenting commitment to keep improving.

That, combined with either a strong cash cushion or ongoing income to extend your runway, will give you the best odds of success that any entrepreneur could ask for.

G. Brian Davis is a real estate investor, personal finance writer, and travel addict mildly obsessed with FIRE. He spends nine months of the year in Abu Dhabi, and splits the rest of the year between his hometown of Baltimore and traveling the world.