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5 Types of Online Businesses

With the advancement in technology and the internet, starting an online business is more practical than ever. You can run an online business part-time or full-time, but before you start any company, one of the first steps is deciding what kind of online business to run. To do so, you will need to research about the advantages and disadvantages of the different types of online business. Keep in mind of your skills, expertise and knowledge, and your vision as a business owner.

There are so many different types of online businesses, but only 5 major categories of online businesses will be covered here.

1. Information Products

The first type is selling of information products which is anything where the core of what is being sold is information. This can be in the form of courses, books, memberships, conferences, and more. You need to follow the trends, find out what the most profitable niche markets online are, and what information format would work best. A great place to start is with your own interests. Information creators everywhere are translating their passion into revenue-driving information products. Essentially, they use their knowledge to create content that changes the lives of their customers.


  • High Margin Business

High profits due to lowest start-up costs and low expenses. You can create digital information products for free. Your risk and financial exposure will also reduce because there is no need to create or store physical products. You just need ideas. Basically, your products can be about anything.

  • Convenient

There is true location independence for this type of online business. You can do it wherever.

  • Good Passive Income

You can get paid forever for work done once. For example, an author who publishes a book. It takes years of hard work, but when it sells very well, it could keep selling over the next ten or twenty years. The author does not have to continue writing just to earn more money.

  • Rewarding

If it is successful over the long term, getting to see your information products impact and help thousands of students achieve their dreams is an amazing feeling. Being able to do what you love and get paid for it brings so much satisfaction and meaning in life.


  • A Lot of Time and Effort is Needed

Creating a quality product takes effort and time. You must do lots of research, sift through so many different sources and extract the relevant information. Then comes the compilation of data and presenting the concise information to your target audience. This information must be easy to consume and valuable to your audience.

  • You Need an Audience

Without an audience, you will struggle. You need to build an audience before selling your products. You do not need a big unwanted audience group, just a small following is enough to slowly grow your business. You must have an email list of subscribers and engage with them despite the low response rate. To supplement selling information products, blogs are usually used to get discovered.

  • Fierce Competition

The market for information products is very saturated thus finding a niche is really important to set your business apart from just another company.

  • Low Buyer Intent

It is very difficult to sell information products because it is not something tangible and physical. A lot of the success and convincing customers to buy it is heavily dependent on getting results for your students. If they do not get the results you promise, the bad reviews deter potential customers from signing up. You end up losing reputation and this will affect your business very badly.

2. Software Business

Software products can be targeted towards businesses or individual users. Software products are also developed to target a certain market segment or issue. For example, programs that help users take care of all their office paperwork such as preparing charts, invoices and more. Because of the speed and convenience that software does for people, software products are one of the easiest things to sell. This business type is more profitable and can scale fast than most other type of businesses which is why there are so many tech billionaires. However, if you do not have the qualifications or a co-founder with the technical qualifications, do not consider this type of business.


  • Easy to Sell

Software is one of the easiest items to sell because the main purpose of software is to do the work for people. It’s a technology doing the work for you at a usually insanely cheap price. By creating a software that handles tasks which you do not want to do or doing your work at a faster speed, it will sell well.

  • Very Profitable

If you have created a good software, it can earn a lot of money. By having a good product, you can ask how much someone would pay to have this solution implemented in their business. You allow the market to confirm the value and importance of your product which can help in its pricing.

  • High Market Demand and Transferable Skills

As the world is becoming more digital and technology dependent, the demand for software is drastically increasing. Reliance on mobile technology is surging at a fast pace. You can create different types of software in the field you wish to help such as finance, green energy, healthcare, and more.

  • Satisfaction

You get a sense of pride and craftsmanship in your work. Moreover, you will gain experience and understand the needs of people or their problems faced better in order to create software.

  • No Inventory Costs


  • You Need Qualifications or a Technical Co-founder

You must have the technical qualifications yourself, or at least a technical co-founder and then a team of good and competent employees who can create that quality product. The team must complete a project successfully to build a good brand image which can then bring in more projects. Without the expertise and competence, your software business will not work.

  • Good Software Developers are Expensive

To create a very good software, you may need a team. However, by being a small company, there might be insufficient funds to pay your employees properly.

  • Technical Skills are Not the Only Important Part

Marketing must always make a conscious effort to retain the customers and get them to engage with your service. If someone has a bad experience, address it immediately. Monitor how customers talk about your service in public forums. And always be on the lookout for users of competing services.

  • Innovation

You will need to create a product that is unique and desirable by your target market.

  • Fierce Competition

If a competitor offers the same functionality at a cheaper price, your customers may leave. If they offer more functionality at the same price (or at a slightly higher price as compared to yours), you will lose customers and business opportunities.

3. E-commerce Stores

E-commerce has reshaped the way of modern shopping. E-commerce eliminates the need for physical stores while allowing businesses to grow their customer base. Thus, making this business choice a very popular one. It provides shoppers (in less accessible areas) with the opportunity to purchase goods. A lot of big companies such as Amazon and Ebay stores are examples of successful E-commerce stores.


  • Physical Products are Easier to Sell

Physical products are real and tangible. The value of the products is easier to demonstrate, and their purposes are usually clear and easily comprehensible. Thus, with a good product, it can create more repeat buyers or capture the attention of potential buyers through positive word-of-mouth marketing. If it is good and a consumable such as supplements, more people will buy it month after month. This leads to higher revenues.

  • Minimal Follow Up After Shipping

Physical products can be shipped with instructions and require minimal follow up on how to use the product.

  • Growing Customer Base

By using online E-commerce, it removes the possibility of long queues unlike at physical stores. Moreover, it allows for those staying in areas with less physical stores to purchase a whole variety of goods without having to travel. Thus, increasing the number of shoppers.

  • Easy Email Marketing

E-commerce merchants capture contact information in the form of email. This makes sending out both automated and customized emails simple. Notifying customers about a sale or promoting a new product then takes minimal effort.


  • Inventory, Shipping and Handling Fees

Physical products require physical delivery. This means packaging cost, postage costs and handling fees. If you are not doing online drop shipping, you must carry large inventories. This will cost money to store and manage the products while having to pay another provider to oversee the warehouse.

  • You Have to Deal with Faults or Negative Feedback

If you do drop shipping, you can be blamed for any faults unlike E-commerce stores that do not dropship. Dealing with the negative feedback from the shoppers can be tiring as well.

  • Product Development Requires Time and Effort

An idea can still fail when tested even if the company invested a lot of time and effort into its product development process. There will always be a risk with product development because the costs of a failed idea must be absorbed by the business.

  • Consumers Need to be Assured

With the increase in online scams and risk of identity fraud, your site must be able to convince shoppers that the check-out process and their details are kept secured and safe. If not, they could be too afraid to purchase your products.

4. Coaching and Consulting

Numbers 4 and 5 on this list are perhaps the most accessible for beginners as compared to the aforementioned business types. If you are an expert in the field, especially anything relating to businesses, you can get wealthy fast. This is because you do not have to create a product since your product is your expertise. You just need to start selling and work your way up as a beginner in the coaching and consulting business. When starting out, consider getting coaching training; this is not required, but it can help you be a better coach, provide you with helpful tools, which can increase your credibility and marketability.


  • Convenient and Low Startup Costs

If you are running your consulting business at home, your startup costs should be relatively low.

  • Coaching Profession is not Highly Regulated yet

Anyone with people skills and the ability to help can become a coach. It is highly recommended you take courses and get certifications; however, the coaching profession is not highly regulated yet. This means that anyone can be a coach when equipped with the right knowledge and ability to help others.

  • Different Clients

Coaches and consultants will often be juggling a variety of projects with different businesses or individuals. This keeps work from being too monotonous.

  • Different Fields of Coaching

Although business and life coaching are very popular, there are many more choices. You can be a health coach, relationship coach, sales coach, or more.

  • Rewarding

You do what you love and get paid for specialising and guiding others.


  • It can Take a Long Time to be Successful

As a beginner in this business, you need to do a lot of networking and market your skills to the public. This self-promotion can take up significantly more time and effort than the actual consulting work. It can take a while to build a solid, stable business.

  • Certification and Qualifications

Before starting this career, you should study the market for consultants in similar fields as you. If you do not have the professional certification that can rival your competitors, it will be very difficult finding work.

  • A Lot of Patience

You will need a lot of patience. Although people come to you for advice or help, it does not necessarily equate to them doing whatever you suggest. Many people are resistant to change especially when they do not share the same view or have different priorities. Thus, you will need to be able to support and encourage them while challenging them at times to improve on themselves.

  • You Have to Spend Time on the Phone

You will spend a lot of time on the phone or video conferencing to answer questions. If you do not mind having many appointments or calls a day, this will not be too big of an issue.

5. Service Business

This is the best type of online business for beginners. If you already have a skillset, selling those skills is the fastest way to being wealthy and the easiest if you are literally starting at 0. You can build your skillset by studying or going for intense courses then start selling them.


  • Beginner Friendly

You can start selling your services if you have a skillset. Even if you do not, you can always learn from working in that field first or take courses before starting your business.

  • Easier to Scale your Income

If you developed your service based on a skill you have, you become an expert in your field. You can increase the size of your business by improving that skill.

  • Easier to Get Clients

You do not have a product to sell and you take the task off people’s hands, so it is easier to sell than coaching. People who can afford your services, will generally have less objections to have you handle the work for them.

  • No Inventory

Since there is no need for inventory, you can focus on sales and marketing your services.

  • Customisable

Services are flexible. They can be customised instantly to accommodate the needs of the clients unlike physical products. Service businesses can be creative in its offering and create several ways in which it differentiates itself from the competition. For example, 10 writing companies can all offer the same basic services, but each can also offer specialized services.

  • You are Your Own Boss

You are in control of your time, resources, and future. No more being answerable to higher authorities or having to adhere to rules and regulations laid out by someone else in your business.

  • Endless Choices of Business Ideas

A major plus point of the service business is that there is no end to the kinds of business ideas to choose from

  • Work with Different Clients

You get to work with different clientele. Thus, making it very suitable for those who tend to bore easily and want to change it up occasionally.

  • Linear Progression

A lot of people start from the service business and slowly progress on to selling their knowledge via information products or through coaching and consulting. This builds more revenue with less effort of self-promoting yourself to the market.


  • Hard to Get Clients Initially

You must establish a track record of your sales, some reliable sales projections, and your expertise to convince people of the value of your company.

  • You Need a Good Business Plan and Marketing

You may be skilled at your job or service, but without the backing of a good business plan and marketing strategies, the chances of your business succeeding are almost zero.

  • No Guarantees of a Steady Source of Income

Your income will be dependent of the work available.

  • Limited Creativity

Your creativity is somehow limited to your customer’s requirements. Although you can always advise them and come up with suggestions, you are essentially working on someone else’s specifications. Even if your client’s decisions go against your proficient opinion, the customer is always right.

  • Multiple Bosses (Clients)

It requires a lot of time and effort. Most of your clients are reasonable and this can be frustrating to deal with.

  • You are Selling Your Time

You are trading your time to do services for others. Also, managing phone calls, emails, and other forms of communication with customers can cost you a lot of time. These things cause low productivity and taking valuable time away from other important tasks.

Regardless of which type of online business you get into, the business formula is the same and I teach it all in #MomBossGoal Mentorship Program (registration is still open if you read this before 31 March 2020!). Get to know your customers really well, better than they know themselves, build a loyal following, provide value for their money (this doesn’t mean being cheap) and offer the service/product your customers want and give them what they need.

So which type of online business are you gravitating towards? Tell me why in the comments below.


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