Thanks to the Internet, the opportunities for working and conducting business online have grown by 200% since the mid-1990s. Yet, 90% of small businesses fail. Why? The major reason is that most people are not prepared to take on the challenges of managing and building their own business. Read on to assess your business preparedness.

1. Do you have the aptitude: Are you a self starter? Can you communicate effectively with suppliers and customers? Are you ready to work hard? Can you stick to schedules? If your answer to any of these questions is no, you are not yet ready for entrepreneurship.

2. Are you street-smart: Wholesale and drop shipping resellers often run into scams. These include fake products, poor quality goods, and excess shipping costs. As a rule of thumb, you should not do business with suppliers who demand a fee. If you cannot find honest suppliers from the thousands of suppliers who advertise their products online, you will only get slightly burned in a business venture.

3. Can you acquire licenses and permissions: Resellers require a business tax license for ordering supplies. You have to look at considerable paperwork related to tax, shipping, and import and export of goods. If you think it would be hard to get the licenses, put your business plans on hold until you have an alternative.

4. Can you acquire finances: Some business ideas find many supporters. Others flounder and die because the required financial backing was unavailable. You need money not just to buy the first inventory, but also for hiring equipment and paying employees. And you need enough capital to support your business until you break even. Banks are the obvious choice when looking for funds, but unfortunately, few banks are willing to extend loans to small businesses, particularly home-based ones. If you plan to set up a home-based business, the Small Business Administration might be the right organization to approach for guidance and funding. There are many other loan programs run by the government, and you should do a little research to judge the feasibility of your venture from a financial point of view. If you are a female business owner, or belong to any of the special groups notified by the government, you can get substantial financial support through these organizations. However, if a few experienced people in the industry feel that your venture is not attractive enough for lenders, you will have to revisit your business plans.

5. What will you sell: Some products sell, and some do not. Computer related items are popular, as are CDs, books and toys. Niche products are in demand in select markets. Good market research is perhaps the most important part of starting a business; it allows you to spot opportunities and get ahead of competition. Sometimes, you have to push the market — persuade people to buy something (for example, if you feel people who buy a computer keyboard online may also need a mouse, make sure they are targeted appropriately). If you are bad at market research, handling your own business may not be the right choice.

6. Can you find suppliers: Finding suppliers who are honest and offer fair priced products is difficult. Another problem is finding suppliers in particular regions. For example, if you want to drop ship to Venezuela, you have to find a supplier as close to customer location as possible to save shipping costs. If your customer base is located too far away from suppliers, you have to be ready to pay more for shipping, or find warehousing facilities in a location. This involves more costs, and if you are not ready to take on the additional costs, you should look again at your business plans.

7. Can you rise to the occasion: Every business has its problems, particularly unforeseen situations that require quick thinking. Suppose a regular customer of yours orders a product and your supplier is out of stock, how do you react? Yelling at the supplier will not pacify your customer‘s need. A reseller dedicated to customer happiness will probably order the product from another supplier, or go out and buy it from a retail outlet — anything to keep the customer happy.

To ensure that your business does not join the ranks of failed entrepreneurial ventures, you must build a business with sound basics. Don’t wait for business to “take off” before you think about what direction to take, which markets to target, and how to plan finances. If you want a business “some day,” remember that the some day may never come. Start small, but do start. Here is how you can start preparing to go into business even while employed:

1. Save: Put off buying the second car or a new car if you don’t really need it. Use cheaper remodeling kits for your home. Reduce unnecessary household expenses. Save as much as you can. You will need the money when your business is still emerging. Drop shipping from home does not require a lot of capital when compared with other businesses, fortunately. But you will need to invest in eBay listings, online promotions, and website development.

2. Insure your business: Business insurance will cover things personal insurance does not, such as office supplies, equipment, and theft. Professional liability insurance is optional for drop ship resellers. Remember that health insurance premiums are high for individuals, and if you cannot afford them, stay with your current job to keep that insurance for yourself until you can afford insurance on your own.

3. Prepare A Business Plan: No business, no matter how small, succeeds without a proper business plan. Most new entrepreneurs put off this task, but a business plan is necessary to run any business. For resellers, a business plan should cover cost of inventory, supplies, supplier fee, logistics, etc. If you are not the kind of person who can sit down and draw up plans, then maybe staying at your 9 to 5 job is a better option.

4. Get Help From The Experts: Find friends in the business community. Visit online forums such as esources.co.uk and interact with resellers who are experts in the field. Esources lists profiles of trustworthy suppliers, and you should contact them and assess possible profitability of selling their products. Online marketers can advise you on how to promote your business and build customer loyalty. If you are not willing to network, starting a business might be a bad idea for you.

5. Protecting Personal Assets: While large businesses function as corporate entities, small businesses often neglect the need for protecting their non-business related assets. If you are unable to pay a business loan, the lender can seize your personal assets to clear the loan. Sole proprietorship is a bad idea if you have a large debt. Try to form a partnership with a more experienced, or financially strong business. If depending on a single partner in the business sounds risky, join a cooperative to offset the risk. Forming a corporation, while the best method for keeping personal liability under control, is not practical for small businesses because of double taxation, bookkeeping, and similar issues.

Once you have started your business, in the initial stages, you need to take care of the following issues:

1. Employee Management: Online resellers do not generally hire other employees unless they have a large business. Most people who work from home hire temporary or contract workers for managing their online store or handling phone calls. Your employees will work well only if you treat them well and they think your business is worth their time. Therefore, you have to present a professional image to employees and contractors, and make sure they understand you mean business, literally. Many startups hire people who do not take their employers seriously, and this can ruin your efforts and waste your time.

Employee management also involves tax, health insurance, work visa issues. Contact workers have to pay tax on their income, and you have to ensure that your freelance workers fall under the category of contract workers as defined by the Internal Revenue Service (IRS). An employee contract is helpful for long-term projects, but you don’t require one for shorter projects with freelance workers.

2. Insist On Written Contracts: Resellers have many complaints against unethical drop shippers like: They supply poor quality items, they steal clients from resellers, they charge too much for shipping, they do not package the products properly, and they ask for high monthly fees. The only way to protect yourself from unscrupulous suppliers is to have everything in writing. Contracts are not always mandatory by law, but they go a long way in protecting business interests. Besides suppliers, you also need to sign contracts with shipping companies, warehouses, and other service providers.

3. Customer Relationship Management: For resellers, communication is the key to success. Whether it means you provide detailed product descriptions, prompt and courteous email responses, or proper phone etiquette, it is important that you do all you can to keep customers happy. Create an ecommerce website that allows customers to create user accounts and track their shipments. Send out newsletters informing them of special schemes, discounts, sales, and other business-related matters. Poor customer feedback can impact your business badly, so go all out to keep them as customers and keep their business.

4. Working From Home Has Its Challenges: Home-based businesses should put up a professional front when needed. Consider hiring a conference room for meeting suppliers and important customers. Don’t use your street address for communicating with customers; a post-office box looks more professional and addresses privacy concerns. Install a dedicated phone line, work desk, and Internet connection for handling business matters. If you are unable to get the necessary licenses for running a business from home, you should rethink your options. Tax filing is difficult for home-based businesses because the business owner is allowed to ask for exemptions only for business expenses and not personal expenses.

If you are using your phone for personal as well as business purposes, you have to prove that the amount billed as business expenditure is accurate. Similarly, if you want property tax exemptions for business, you can get an exemption only on the office part of your home and not the entire house. The IRS scrutinizes small business expenses carefully, so make sure you save bills confirming expenses and keep them in a file for a long time. If you find too much paperwork annoying, or face difficulties in tax planning, you may not be ready to start a business.

5. Practice Discipline: You are the only person responsible for the success or failure of your business. Therefore, make it a point to stick to a schedule. Don’t let your personal life intrude on business, and this is very important considering that most online resellers drop ship from home. If you think your family may not be supportive of your business goals, or you cannot set aside a few hours daily for calling suppliers, emailing customers, handling orders, then you are not ready to start your own business.

6. Decide On Type Of Business Structure: One of the key challenges in drop shipping is hiding the source of the package sent to customers. You do not want the customer to know that the package was sent by a wholesaler and not you. A private label arrangement is the safest because it allows the reseller to label the product under their name and contact details. A second option is to send packages with no return address, but this might look a little suspicious to customers. Marketing and selling OEM products is also a good option, but that requires more inputs than traditional drop ship reselling. If your supplier refuses a private label or blind transportation arrangement, you have to find other ways to conduct business.

7. Online Or Retail: One of the best kept secrets within the drop ship community is that you do not necessarily have to operate online, though this is the easier, less costly method. There are critics of the online drop ship model, who claim that reselling online does not generate much profit. Suppliers prefer bulk order, not small orders generating less than $10 in profit, particularly if order handling involves shipping and elaborate order processing. There are companies, such as Tupperware, that prefer the older style of promoting products through affiliates who visit people’s homes and stores, and set up stalls to promote products.

If you cannot afford to work from home or stay on your computer for long hours, you can work out of a small office. This option works only if you are buying and selling in bulk or products with larger profit margins. For example, selling shipping containers via a drop shipper is lucrative, and this is one of the few businesses where word of mouth works better than online marketing, partly because the market is almost always limited to the shipping, export, or logistics industry. The drawback is that you will need to hire commercial space because you might be meeting customers frequently.