Start a Business Without Breaking the Bank

When Jennifer Teschendorf had her son, she wanted to work from her Darien, Ga., home. After some research, she decided to launch eBabyConsignment.com, which specializes in reselling baby products, in part because it required only a few thousand dollars to start and could be managed around her family time.

For many like Jennifer, e-retailing is an attractive business option. But just like a brick and mortar store, it can become a money pit.

Here's how to get started without losing your shirt:

Looks Are Important

Secure a domain name that best captures your business plan but make it short and memorable, recommends Joel Elad, author of several books on Internet businesses, including Do-It-Yourself Web Stores For Dummies (Wiley). Once that's done, you can set up the Web site in a couple of different ways: hire a Web-development company or turn to a store-front provider like Yahoo! Small Business(YHOO) or eBay's(EBAY) ProStores. A Web designer will customize your site and make it stand out from the competition, but can cost about $5,000. And, as Teschendorf discovered, you should have a clear idea of how you want your site to function or the bill can be as high as $10,000, since these companies charge by the function.

Yahoo! Small Business, meanwhile, will get you up and running for as little as $39.95 a month, but your Web site may be cookie-cutter. Zachary Smith, president of Web hosting company Voxel.net, recommends starting out with a storefront provider and then keeping a Web designing company on retainer (about $100 a month) for some customization and updating. Just don't load up on a lot of Flash bells and whistles. A site that takes too long to open up or navigate will be a major turn off.

Customer Satisfaction Is Key

To maintain customer loyalty, make it easy for them to pay for, track and return items. While a credit card merchant account can run you several hundred dollars a month after fees, PayPal does not charge for set-up or registration. However, it takes about 2.9% plus 30 cents for each transaction.

When it comes to fulfillment, you can do it yourself or turn to a company like Amazon.com. If you want to keep control, then factor in storage costs if your home cannot hold your inventory. As for shipping and return expenses, build them into the price of the product.

Elad, who has experience running an eBay shop, has found that a good return policy allowed him to bump his prices up about 1%-2%. And he keeps shipping costs down by ordering his boxes and supplies from shop.usps.com, which ships them free to his door. He also recommends scouring friends, families and local businesses for boxes destined for the dump.

If you can't be bothered with fulfillment, partner with businesses like Amazon. Send them your inventory and they will handle ordering, packing, shipping and tracking for a fee.

If you don't want to deal with inventory at all, then partner with a drop-ship company like Doba.com, which connects you to 75 wholesalers, manufacturers and craftspeople in order to resell their products to your customers. The fee: $49.95 a month.