ABC's Shark Tank is currently one of the most popular shows on television.

Its premise is simple. Hopeful entrepreneurs go on the program and present their business idea to a panel of self-made millionaire investors (Sharks) in the hopes of getting an investment in exchange for a stake in their company.

Typically that interest comes in the form of an equity stake or royalty scenario, or sometimes both.

The demand to get on the show has never been higher due to the dramatic impact it can have on sales - a phenomenon that's become known as 'The Shark Tank Effect'.

It's not unusual for products featured on the show to experience up to a 700% increase in sales.

For example BuggyBeds went from being in 60 stores to being in 600 hundred stores with sales going from $150,000 to over $1,200,000 in the two months following their appearance on the show.

In other words, simply getting in front of over seven million weekly viewers can be all your business needs to reach its tipping point.

But getting on the show and getting a deal isn't easy. In addition to having a product that's interesting from an investment and entertainment standpoint, you need to get past the auditions and meticulously prepare for yor appearance if you're accepted on the show.

This involves research, a hard look at your numbers and a strategy for when you're in the tank.

To help you out, lets look at six companies that have successfully struck deals with the Sharks and examine what they did right.

We'll also look at some common questions that come up from the Sharks and how to get your business ready for an appearance on the show.

How to Get on Shark Tank

If you want to get on the next season of Shark Tank, now's the time to apply. ABC is currently looking for new businesses to feature on the show.

You can either attend one of the live casting calls or submit your application electronically.

To submit your application electronically, follow the steps below:

• Email SharkTankCasting@yahoo.com
• Include your name, age, contact info, a recent photo, and a brief, NON-CONFIDENTIAL description of your business/idea/product.

You should also make sure you read their Terms of Use agreement so you know what you're getting into.

Remember, when applying, the story behind you, your business and your product is just as important as your product itself. Shark Tank is just as much about entertainment as it is about investments.

Preparing for Shark Tank

If you want to get on Shark Tank and find success, the first thing you'll want to do is get to know the Sharks:

• Daymond John
• Mark Cuban
• Kevin O'Leary
• Robert Herjavec
• Lori Greiner

Each Shark has their own way of operating in the Tank. Getting to know which products and niches each investor is typically attracted to can help you aim your pitch accordingly. It's also important to remember that the Sharks aren't just investing in your product, they're investing in you and want to know you'll be someone they can work with. Therefore it's important to present yourself with confidence, defending yourself when necessary while also being respectful.

There are plenty of examples of people not getting deals simply because they were annoying and obnoxious during their pitch.

The next thing you should do is watch every episode of Shark Tank possible and pay attention to what kind of pitches are getting deals and which ones aren't. You'll start to notice common questions that the Sharks ask which should help inform your preparation strategy. Here are some of the most common themes that come up.

Lessons on Valuation & How Much to Ask For

In every episode of Shark Tank, the first thing each Shark does when a pitch begins is write down what the presenter is asking for.

This is partly so they can remember the amount of cash that's being requested during the pitch but also so they can do some quick math in order to determine what you think your company is currently worth (also known as your valuation). For example, when you ask for a $100,000 investment in exchange for 10 per cent ownership in your business, you're saying the entire company is worth a million dollars.

When coming up with your valuation for the show, try and strike a balance between selling the dream of what your company could be worth, while being careful not to shoot for the moon to the point that you simply end up annoying the Sharks. You also need to be able to defend your valuation in the negotiations that follow as there will typically be some disparity between what you think your company is worth and what the Sharks think it's worth.

In order to do that effectively, you need to know your numbers, understand your market and be persuasive with your pitch. Here are some key things the Sharks usually ask about and some tips for wooing them into giving you a deal.

Terms & Numbers You Need to Know

Sales: The Sharks almost always ask what your sales are. Having healthy sales shows that there is real, tangible demand and a market for your product. It also allows the Sharks to do some projections and determine what future growth could look like.

Margins: What does your product cost you to make and how much are you selling it for? The Sharks love high margins because they mean higher profits.

Patents: Demonstrating that you own patents and intellectual property rights to your product makes you business significantly more appealing from an investment perspective and it's something the Sharks always ask about. Having patents means you are somewhat protected from competitors moving into your market and copying what you do.

Retailers and Distributers: While distribution is something the Sharks are often able to help with, they also like to see that you have made an effort to get your product into stores yourself. Having some distribution in place before entering the Tank shows the Sharks that you have some hustle.

What do you need the money for? This is a common question the Sharks ask presenters. They want to see that you have a game plan and understand your market. Depending on what you need the money for can also determine which Shark is best suited as an investor.

How much debt do you have? While the Sharks understand that you need to spend money to make money, they are also very weary of debt. If you have debt, be prepared to offer a good explanation about why taking it on was a necessary investment.

Know Your Competition: Make sure you're knowledgable about your competition because chances are the Sharks will ask. They are trying to see how well you know your market and how attractive that market is.

Demos and Free Samples: Sometimes the most effective pitch can be when you let your product do the talking. The Sharks love getting their hands on stuff and trying it for themselves - especially if your product is food.

Logistical Considerations

If you're lucky enough to make it on to the show, there are steps you will need to take to get your business ready for your appearance.

There's a safe bet that you're going to get a flood of both orders and traffic coming to your website. That means you may need to have extra staff on hand to handle fulfillment and take steps to make sure your website stays up under the server melting traffic load.

Shark Tank is notorious for crashing websites and the last thing you want is your site to be unresponsive during the most important moment ever for your business.

Nearly a dozen Shopify powered businesses have gone on Shark Tank and never once has a site of ours gone down. Just sayin' :)

Let's take a look at some of those businesses now and see what they did right and what advice they have for aspiring Shark Tankers.

Six Shark Tank Case Studies

1. GobieH20

Ask: $300k for 15% Equity
Deal: $300k for 40% Equity
Website: http://www.gobieh2o.com/

What advice would you give entrepreneurs who are looking to get on the show? Are there any tips for executing a successful audition?

Start off by being prepared. Know who you are selling to and what you are selling.  Remember, this is not a normal pitch to investors, this is a pitch to American television viewers.  If you can make your story compelling and relatable, dramatic or even quirky, go for it, remember, you need to make your pitch note worthy, it is all about the entertainment value here.  Before you send in an application video, watch as many Shark Tank episodes as you can, study the common grounds they all share, then look at how you can apply those common themes to your business.  Think, 25% product pitch, 75% entertainment value.

How did you prepare for your appearance on the show? What are some critical things everyone should have in place and know before going on?

It cannot be said enough, KNOW YOUR NUMBERS!!! Even though the show is intended for entertainment, the Sharks are 100% real business investors who are experts at picking companies apart and seeing where the true value lies.  In our case, we put together a panel of local serial entrepreneurs, all with very high net worth, professionals that are accustom to evaluating start ups, and asked them to be mock Sharks on a practice pitch.  Investors like to help start-ups so don't be scared to reach out to local business leaders that can help you prepare.

We then told them not to pull any punches and really go at us, as if they were going to invest in us themselves.  That proved to be invaluable as it  highlighted our weaknesses that fundamentally needed to be worked on.  We went back to the drawing boards, re-crafted, then did it all over again. Listen, nobody on earth relies on talent alone, it takes tons of practice, a little good luck, and then tons more practice.  If you want to be successful, now is the time to get your hands dirty.  The preparation will pay off immensely as both the Sharks and America will see how serious you are.

What advice do you have for the actual pitch itself when you are live and in front of the sharks?

Stay calm, breath, and remember, at the end of the day you made it this far.  Rely on your practice as we know you have done. Stay true to what you know and don't start making things up, the Sharks will smell a skunk like flies on !@#$.   Make sure to listen to what the Sharks are asking and don't be to quick to assume that you know what that is.  Stay present, don't think about everything else, eg: what will happen if you screw up, what will happen if you don't get a deal, what will happen if you do, are you going to look stupid, does my breath stink, STAY PRESENT.  Thinking about anything other than what is happening exactly at that moment will only pull you away from your training and ultimately disconnect you with the Sharks and America. Remember, stay calm, breath, and know at the end of the day, you made it this far!  Good luck...

Ari Hoffman
Chief Operating Officer, GobieH20

2. LollaCup

Ask: $100K for 15% Equity
Deal: $100K for 40% Equity
Website: http://lollaland.com/

What advice would you give entrepreneurs who are looking to get on the show? Are there any tips for executing a successful audition?

The best tip I can give is to make sure that you tell a story. Your business/item/service is equally crucial to how you got to where you are and why you are dedicating your blood, sweat, and tears to it. Hanna and I made sure to balance our pitch between our product and how we started dating in Jr. High + how we came up with the lollacup.

How did you prepare for your appearance on the show? What are some critical things everyone should have in place and know before going on?

First, we practiced our pitch hundreds of times in front of our friends, family, and a camera. Second, we wrote down EVERY question from EVERY episode and typed out our answers and practiced those over and over. The most important thing to do is know your numbers. Your sales, costs, margins, anything you can think of that you would want to know if someone were asking you for your hard earned money. Be prepared to not only go over your mistakes up-to-date (who doesn't make mistakes) but most importantly, be able to clearly describe why or how you came to those mistakes and what you are doing to avoid them again.

What advice do you have for the actual pitch itself when you are live and in front of the sharks?

Stay calm and do not get defensive. The core of the pitch is a business transaction, but don't forget that they will throw you curveballs not only to gain leverage on you but because it has to be somewhat entertaining. If you start getting defensive, emotional, or angry, you might lose out on a chance of a lifetime. I think this is the best time to try to be as humble as possible, no matter how preposterous their offer is or if they are being ridiculously offensive. Lastly, if a deal doesn't happen, don't take it personally. You may just have a better opportunity someplace else.

Mark Lim
LollaCup

3. Hoodie Pillow

Ask: $90K for 15% Equity
Deal: $90K for 20% Equity
Website: http://www.hoodiepillow.com/

What advice would you give entrepreneurs who are looking to get on the show? Are there any tips for executing a successful audition?

Play the part - those that are auditioning for Season 5 have the benefit of being able to see over 100 Shark Tank Alumni on previous episodes of the show. It is a safe guess that the producers are looking for personalities similar to those who have already been on the show so do your homework and bring your A-game to the auditions.

How did you prepare for your appearance on the show? What are some critical things everyone should have in place and know before going on?

Practice, Practice, Practice! - If you have been chosen to film Shark Tank it is your duty to watch every single previous episode of the show. You should be able to answer every question the Shark's have ever asked on the show in 2 seconds or less. Also, do your homework on the Sharks - know their businesses, their previous investments on the show, how they negotiate etc. If you are not prepared to answer every question that has been asked on the show then you have no one to blame but yourself when you stumble on your words.

What advice do you have for the actual pitch itself when you are live and in front of the sharks?

Again - Practice! You should be able to do this pitch while standing in a torrential downpour in front of 5,000 people while smiling and not nervous. Practice until you can.

Rebecca Rescate
Co-Founder, HoodiePillow.com

4. Surf Set Fitness

Ask: $150K for 10% Equity
Deal: $300K for 30% Equity
Website: http://www.surfsetfitness.com/

What advice would you give entrepreneurs who are looking to get on the show? Are there any tips for executing a successful audition?

Be yourself! Shark Tank is a true reality show & they want to showcase entrepreneurs who are real and extremely passionate about their companies. Show them how much you've invested into your idea and how much you truly care about it. And before you do your audition make sure to prepare, pretend you are actually going on the show and be ready to answer the hard questions.

How did you prepare for your appearance on the show? What are some critical things everyone should have in place and know before going on?

Like most entrepreneurs, we lived & breathed our company even before going on the show. We were prepared to answer every question because we were constantly working on SURFSET and trying to improve our operation everyday. So if you have employees already or don't run every aspect of your business, make sure you study every little detail. Also, one of the most critical points to the Sharks, or any investor for that matter, is how you're going to make back their money plus a great return. The idea might be amazing, but make sure there is a solid business model to back it up and a strategy mapped out to get you there.

What advice do you have for the actual pitch itself when you are live and in front of the sharks?

Treat it just like you would any business meeting, but make sure to bring your passion & energy with you, and let it show. The Sharks are all self-made entrepreneurs, which means they can identify someone who is determined to achieve their goals and build an awesome company. The best thing you can do is make them see your vision and trust in you to make it happen.

Sarah Ponn
Fitness Director & Brand Manager, SURFSET Fitness, Inc.

5. Teddy Needs a Bath

Ask: $50K for 15% Equity
Deal: $100K for 30% Equity + 10% Royalty
Amended Deal: $25k Loan for 10% Royalty
Website: http://www.teddyneedsabath.com/

What advice would you give entrepreneurs who are looking to get on the show? Are there any tips for executing a successful audition?

Unlike many presenters, I didn't wait in line at a casting call. One night I decided what the hell and filled out their online application as well as sent an email to some general address from their site.

9 months later, I got the call. I was to film an at home video answering a long list of questions about myself. After that, I went through an intense background check to verify everything i had said was true. My advice is to be straight up and honest about EVERYTHING.

How did you prepare for your appearance on the show? What are some critical things everyone should have in place and know before going on?

I studied for three months. This included memorizing every detail about my company including all numbers like sales data and money spent. I watched every episode that aired in seasons past... probably 10 times each. I wrote pages of questions that the sharks liked to ask and practiced answers for each (and they still threw me!)  Also, did my research on each shark and their history. I was literally sleepless preparing. Stressed out maniac would be a good way to describe me then. Oh! And I rehearsed my pitch on camera for my hubby dozens of times. The last thing you want to do is forget/blow your pitch. You get three minutes and you can't take anything back or try again.

Also, it's the first time the sharks have ever seen you. So the first impression is everything. Don't be arrogant or act like you know it all. They hate that.

What advice do you have for the actual pitch itself when you are live and in front of the sharks?

Like I said, be honest, humble, know your shit. Don't be arrogant or pompous. DON'T ASK FOR TOO MUCH MONEY! Look at it like this- ask for a lot, most of your segment will be spent discussing why you are worth this much money and they will try and make you look bad. Ask for less and they will move onto talking about you and your brand- which is why you went on the show in the first place, right? I looked at it like this: you can't buy 15 minutes of prime time TV on a Friday night. So ask for less and it's like you spent some money on advertising.

Nicole Townend
President, Teddy Needs a Bath!

6. Fishing Ammo

Ask: $80K for 20% Equity
Deal: $80K for 33% Equity
Website: http://fishingammo.com/

What advice would you give entrepreneurs who are looking to get on the show? How did you do it? Are there any tips for executing a successful audition?

Go to the casting call and be prepared to wait! I thought I was going to get there early to be first in line, but boy was I wrong. I think people spent the night outside of the hotel! You will see hundreds of inventions. Don't get intimidated by inventions you think are better than your own. Even if you have a fishing bobber made from a shotgun shell, you gotta think your invention is the best hands down!

In regards to the audition you should treat it as if you were in front of the sharks and America. Every step during the process should be treated like the main event.

How did you prepare for your appearance on the show? What are some critical things everyone should have in place and know before going on?

I watched a ton of shows that were recorded previously and wrote down how much they were asking for, what the product was, the starting and ending equity if they got a deal and who they got a deal with. If you've seen the show, you know the important questions. Know your sales. Know your market. Know your competition. Basically memorize a well written business plan. As a matter of fact, you should have a well written business plan. Be prepared and practice!

What advice do you have for the actual pitch itself when you are live and in front of the sharks?

PRAY you don't become PREY :)

Jeff Stafford
Fishing Ammo

Are you a Shark Tank fan? What strategies have you noticed that seem to work when asking for a deal? What do you think is the most common mistake entrepreneurs make during their pitch?

Dropshipping is a popular method of selling online, but it's often associated with scams, ripoffs and get rich quick schemes. To shed some light on dropshipping, we wrote a free beginners guide to dropshipping as a part of our new Ecommerce University. It's the most indepth ebook to dropshipping you'll find anywhere, and it tells you exactly how to create and run a successful dropshipping business.

This week, we took some of the best parts from the guide and put together an infographic. Check out all of our findings in the infographic below. Please click on the image to enlarge. 

Do you need a trademark for your ecommerce business? Protecting your online reputation is an important part of building your business and earning your customers' trust. In the U.S. it's easy to start using a trademark (for products) or servicemark (for services). In fact, you can do it in just three steps or less.

The trademarking process starts with (1) determining whether or not your brand or logo is eligible, (2) deciding what level of protection makes sense for your business, and (3) possibly registering the trademark with the U.S. Patent and Trademark Office (USPTO). First, lets go over the basics of trademarking in the United States:

What is a Trademark?

According to the U.S. patent and trademark department: “A trademark includes any word, name, symbol, or design, or any combination used, or intended to be used, in commerce to identify and distinguish the goods of one manufacturer or seller from goods manufactured or sold by others, and to indicate the source of the goods.”

Similarly, the site defines a service mark as “any word, name, symbol, design, or any combination, used, or intended to be used, in commerce, to identify and distinguish the services of one provider from the services provided by others, and to indicate the source of the services.”

Ecommerce merchants may think of trademarks — especially registered trademarks — as a way of protecting brand names, taglines, slogans, or logos. 

Unregistered Vs. Registered Trademarks

There are essentially two categories or types of trademarks honored in the United States — registered and unregistered.

Unregistered Trademark: Can be used by any business, assuming it is eligible to be a trademark. To identify an unregistered trademark, simply place the trademark symbol (™) after or on the brand name, advertising slogan, or graphic design. Seriously, that's all you have to do. 

Displaying the unregistered trademark with the associated symbol on a website, in emails, on invoices, and on packing slips constitutes use. That is all that is required for unregistered trademarks in the U.S.

In the event of a dispute over a trademark, the company that first used the trademark will win in most circumstances. 

Registered Trademark: Is recognized on the U.S. Principal Register and can have a few advantages over an unregistered mark. For example, a registered trademark provides a legal presumption of ownership, which can be a huge help in the event of a trademark dispute. The registered mark makes it easier to file suite against copycats. And registering a mark in the U.S. can help if you want to extend the trademark to other nations. Registered U.S. trademarks use the registered symbol (®).

Do You Need a Trademark?

Most small businesses should at least treat the company name, website name, and any key marketing slogans as unregistered trademarks, adding the trademark symbol (™) next to them and naming them as trademarks in the site footer or about page.

The real question is do you need a registered trademark. For most small ecommerce merchants the answer is probably not. Adding the trademark symbol (™) as described above should provide adequate protection.

There are several very good reasons, however, for registering a trademark:

·    You have a niche business that might be copied.

·    Your business is growing rapidly and may need more trademark protection.

·    You are seeking investors.

·    You are applying for a business loan.

·    You want to sell your business.

·    You are working with an advertising agency to produce promotions.

In all of these cases, having a registered trademark could help. Take as an example the case of seeking investors: a registered trademark is generally considered to have a monetary value, while an unregistered one might not.

How to get a Trademark

The process of trademarking your business name or logo, should take about ten minutes or less for an unregistered trademark or about an hour for a registered trademark. Both types of marks share the first two steps in common.

Step 1: Be Sure You Can Use the Trademark

Before using a brand name or slogan, it's important to learn whether or not that name is eligible for trademarking in United States. The United States Patent and Trademark Office (USPTO) doesn't allow trademarks that are descriptive, generic, or likely to cause confusion.

As an example, the USPTO might reject an attempt to use “Appl” or “App-L” as a trademark for a company selling electronics because the name could be confused with Apple. 

Similarly, the USPTO might reject a brand name like “Online Store” or “Hat Store” since these are the generic names for the category or type of business.

Visit the USPTO Trademark Electronic Search System (TESS) to help identify whether or not you can trademark your property. Also, it's a good idea to use Google, Bing, or another search engine to look for other unregistered trademarks similar to yours.

Step 2: Adding an Unregistered Trademark

If your trademark is eligible and there are no similar trademarks already in use in your industry, you can start using it. In fact, the first step in protecting a trademark in the United States is actively using it.

Start adding the trademark symbol (™) immediately on your ecommerce store and website. This is often done in the footer and on documents that you send or email to customers. Notice at the bottom of this blog we have a trademark on one of our slogans: "A shop in minutes, a business for life."

If you believe that you need the additional protection that registering a trademark can provide you'll want to move on to step three. Otherwise, you're done. You've successfully begun protecting your brand, slogan, or logo in the United States. 

Step 3: Adding a Registered Trademark

You can register your trademark via the online application called the Trademark Electronic Application System (TEAS).

TEAS includes several forms, beginning with the initial application. You'll need to know what “class” your business or trademark is, based on the more than 1,400 USPTO accepted classes. As an example, many online retail businesses are class 035. The USPTO has a class description search tool to help.

You'll also need to know basic information about your business, including its legal structure, and your trademark. And in the case of logos or designs, you will need examples that can be uploaded.

TEAS provides a PDF preview of its online form. This form cannot be used to actually submit the registration application, but it is very helpful for preparing before you start the electronic application process.

The TEAS processing fee ranges from $275 to $325. You should also note that it can take the USPTO six months or longer to complete the registration process, so be patient.

If you would like to learn more about Trademarks in other countries, please let me know which country in the comments. 

2. What's Your Competition?

What does the competitive landscape look like for your product? Are there no competitors, a few competitors or many?

If there are a lot of players in your niche, it can be a signal that the market has been validated. In order to break thought though, you will have to do something different to attract customer attention and build market share.

Example: Shopify store Luxy Hair wasn’t the first company to sell hair extensions online, the market was filled with competitors when they began two years ago. Right from the start they knew they had to do something different. Luxy entered the game with a different marketing strategy by offering value for free in the form of video tutorials on YouTube.

9. What is Your Product Size & Weight?

Product size and weight can have a big impact on your sales and bottom line. More and more customers expect free shipping these days. If your product is oversized and/or heavy, costly shipping can deter potential buyers. Did you know that shipping costs are the #1 reason for shopping cart abandonment?

Additionally, there will be added costs for shipping the products to you if you are working with an overseas manufacturer and it will increase warehouse costs if you choose to use a fulfillment warehouse.

Example: There is a popular oversized yoga mat company which sells giant workout mats. The product itself is a reasonable $99. Shipping to the USA is $25, Canada is $40 and the rest of the world is $100. For some, it would be hard for them to justify spending 40-100% more for shipping. 

Same goes for any large or heavy item. You may be very keen on selling iron weight sets, and perhaps you found a great supplier that will give you an excellent price - well, you need to take into account the increased shipping cost. There's only so much in shipping costs that a customer is willing to pay. 

10. Is Your Product Durable?

How fragile is your potential product? Fragile products can be an invitation for trouble. Breakable products will cost you more in shipping/packing costs and you are bound to have more customer returns and exchanges. Always keep in mind that even if it’s the shippers fault, it’s still the customers experience with your brand. You are ultimately responsible for that entire experience.

When you get to the stage of ordering samples, test them and push them to the limits. Leave them in a hot/cold environment, apply pressure, twist it, pull it, drop it, kick it. Don’t worry about breaking a few hundred dollars in samples. It’s more important you know exactly the quality of your potential product.

Example: Play Lashes lost over $2,000 worth of product due to a damaged shipment to themselves when the shipping company tried to fit the shipment into a P.O. Box that was too small. The hard plastic cases that were protecting the delicate product shattered on most of the units. Going forward they decided to have their fulfillment warehouse bubble wrap all orders. 

11. Is Your Product Seasonal?

Businesses with seasonal products can suffer from inconsistent cash flow. Ideally, you want to find a product that will show even demand year round. At the very least, you just want to be aware of seasonal demand fluctuations to plan accordingly.

Example: Christmas items like the Omega Tree Stand are best sold leading up to the the holidays. Take a look at the Google Trends report below.

Tools: Look for seasonal trends by looking at Google Trends for your product/niche keywords.

12. Does Your Product Serve a Passion or Pain? 

Products that sell best serve a passion, relieve a pain, or solve a problem. Customer acquisition (marketing) costs tend to be lower as well since customers are actively seeking out a solution as oppose to discovering it.

Example: Pro Teeth Guard sells custom mouth guards to prevent teeth grinding. People with this problem are likely to seek out a solution and find Pro Teeth Guard rather than needing costly advertising to draw them in. As JP, owner of Pro Teeth Guard pointed out in a Skype call, “It’s a much easier sale when someone is in pain and your product helps alleviate that pain.”

13: What Will Your Turnover Be?

It’s risky to have products that constantly need to be changed. You run the risk of not being able to sell your product before time of turnover. For example, clothing with seasonal colors or accessory products for the ever-changing smartphone and tablet market. Now of course there are plenty of successful businesses who cater to these markets, like iPhone and iPod cases, but it's important to realize how fast your product turnover may have to be. There are costs associated with entering a market like this.

Example: I got a chance to talk to the owner of Sutra Designs who is the designer/owner of a line of leather smartphone/tablet cases. He has been having difficulties building awareness of his brand and selling his product since launch.

Sutra Designs' biggest challenge is creating enough traffic to sell his inventory before the cases become obsolete due to new models of hardware. If he choses to design new products for new hardware models, he will be faced with additional costs for developing new designs and minimum order quantities by manufacturers. This will be perpetual and ongoing because of the niche he chose. 

14. Is it Consumable or Disposable?

As we already discussed, it’s easier to sell to existing customers than to new ones. Having consumable or disposable products makes this easier by essentially putting a time limit on the products life.

Example: Manpacks sells products that generally have a lifespan like razors, condoms, socks and underwear.

15. Do You Need to Consider Perishability?

Perishable products are risky for a physical storefront, never mind for ecommerce. Since some perishable items require speedy delivery, shipping can cost quite a bit. 

For example, baked goods, meat, frozen foods, and anything else that needs to be kept cold or has a short expiration date all require special care when shipping to a customer. If you choose to sell perishable goods, you need to be prepared for the extra process and shipping costs associated with your product.

Example: The Yummy Tummy Soup Company makes delicious homemade soups and desserts that they sell and ship to customers through their ecommerce website. This model works well for them and they're doing very well, but it's not right for every ecommerce merchant. They need to prepare fresh soup every day and be very conscious of shipping times. 

16. Will There Be Restrictions & Regulations?

Before you dive into a niche or choose a product, make sure there are no regulations or restrictions, or make sure they are at least manageable. Certain chemical products, food products, and cosmetics can carry restrictions by not only the country you are importing your goods into but also the countries you are shipping your product into.

Some places to make a few phone calls are customs of the country you will be importing your product into, your warehouse if you plan on using one, and the food and drug administration if it’s a food/supplement product.

Example: Silky Polish, a non-toxic, cruelty-free nail polish, was excited about their product and niche, but ran into problems when they learned it was considered 'hazardous materials' because of flammable chemicals in it. 

These regulations prevented them from having the product transported by air when they were importing it and when selling it to customers, preventing oversea sales. 

17. Is Your Product Scalable?

Many people don’t think about scalability when they first start out. It’s difficult to think about the future when you are still in the launching process but scalability should be thought of and built into the business model right from the start.

If your product is hand made or contains difficult to find materials, think about how to scale it if your business takes off. Will you be able to outsource manufacturing? Will your number of employees have to increase with the number of orders or will you be able to maintain a small team?

Conclusion

The product and niche you choose is at the very core of your business and one of the most important decision you will have to make. 

Although the perfect product may or may not exist, there are definitely ways to minimize risk by choosing a product and niche that have more going for it, than against it.

Using the above criteria as a guideline can help you better understand the product you are considering and increase your overall chances of success.

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By Richard Lazazzera. Richard is an ecommerce junkie, online marketer and blogger over at A Better Lemonade Stand. If you liked this article, download part 2 and 3 in his recently launched ebook on how to start an ecommerce business.

This article will help you understand how to incorporate a business in Canada. I will tell you the benefits and disadvantages associated with incorporation, give you the step-by-step process of how to incorporate, and go over your other business structure options, like sole proprietorship, partnership and cooperative. 

Learn about incorporating in the United States. 

What is Business Incorporation?

Tips on Manufacturing a Product

1. Think Outside of Google

2. Submit Lots of Proposals

3. Hunt Down the Scams and Fraudsters

4. Don't Judge a Book by the Cover

Tips on Prototyping a Product

1. Define What Type of Prototype you Need

2. Don't Spend Too Much Money

3. Hire a Firm, Use 3D Printing

4. Manufacture in Small Batches

Many new online business owners aren't sure if they should incorporate, what their business structure options are, what incorporation might mean for the business, or even what they need to do to form a company.

This guide is a 'company formation 101' and will explain the benefits and disadvantages of incorporating, lay out the various options you have to officially form a business in the United States, and give you a few easy first steps. 

What is Business Incorporation?

In the United States, corporations must pay a fee between $25 and $1,000 depending on which state, and choose an operating name. A 'corporate name' must have a legal ending, like “Inc.,” “Corp.,” or "Ltd." which stand for “incorporated,” “corporation,” and "limited" respectively. The process of registering your company as one of the business structures that we're going to outline below is different in each state.

Benefits of Incorporation

1. Protection of personal assets
2. Transferable ownership
3. Pay less taxes
4. Increased durability
5. Separate credit rating regardless of an owners personal score
6. Easier to create retirement plans 

Disadvantages of Incorporation

6 Possible Business Structures

What is Sole Proprietorship?

This is by far the most common and popular form of business in the United States - mostly because it's easy to start and manage. Simply put, a sole proprietorship is an unincorporated business where there is no legal distinction between the company and the individual who owns it and runs it. This is the business model most ecommerce merchants are using.

This business type is especially good for new ecommerce companies that have a low risk of liability. The company does not need to file taxes, startup costs are very low, and the owner has complete control over the business. Get a business license your local state or county, perhaps register a name, and the business is up and running. The sole proprietorship can evolve into another business type later, but is the fastest and easiest way to start. 

Note though, that taxes do need to be filed under the individual owning the sole proprietorship. The risk here is that because there is no difference between the individual and the company, the individual is personally liable for everything the company does. Thus, the individual's personal assets are on the line. Also, once the business grows to more than one person, it can no longer be a sole proprietorship.

What is LLC? (Limited Liability Company)

A lot of people don't know what an LLC is, or how to get an LLC. Now it's important to note that LLCs can differ from one state to another, but generally speaking they are a hybrid business structure, combining the ease of a partnership with the liability protection found in corporations. Owners, frequently called members, pay taxes on the LLCs profits directly and the LLC itself does not file taxes as a separate legal entity. 

LLCs require a lot less record keeping than corporations do, provide some protection for the member’s personal property, and are burdened with fewer profit sharing requirements than corporations. Conversely, LLC members will have to file additional forms for both federal and state taxes depending on the number of members, local laws, or even the LLC’s articles of organization. Often the members of an LLC pay payroll tax too.

Depending on the state, LLCs may also have a limited lifetime. In some jurisdictions when a member leaves the LLC, that LLC is dissolved. Starting an LLC requires significantly more effort than forming a partnership and a business will probably want to employ a lawyer or at least consult a certified public accountant.

What is a Partnership?

Partnerships are single businesses that have two or more owners. Each of these owners or partners contributes to the business either with funding, property, labor, skill, or similar. 

A general partnership assumes that the business is evenly divided or that specific percentages of ownership are documented if there is a partnership agreement. A limited partnership can limit both control and liability for specified partners.

Partnerships will require registration, but are still relatively easy to set up. Partners share responsibility and profits. Each state will have slightly different requirements for forming a partnership, but in many, if not most cases, it is a matter of filling out a form and paying a small fee. 

What is a Cooperative?

It would be somewhat unusual to find an ecommerce store merchant organized as a cooperative, but it's not impossible. Cooperatives are businesses created to service and benefit the owners. Put another way, its customers are its owners. 

One possible example would be a labor union that operated an online uniform store, so that the union members could purchase work clothing at or near wholesale.

What is a Corporation?

The corporation is a legal entity separate from any “natural” person, meaning that its owners are generally free from personal liability - which can save your butt if things go awry.

Each state has particular rules for corporations, but in general you'll need to register a company to be considered a corporation. Once you're registered, corporations will need to pay local, state, and federal taxes that are filed separately from its shareholders. It will need to acquire a particular tax ID number, and abide by all applicable rules, regulations, and laws for its industry.

The primary benefit of forming a corporation is that regarding the corporation’s assets or debts, a shareholder’s personal property is protected. 

Example: If a customer sued a retail corporation, and won, the corporation could be forced to pay, but if the corporation ran out of money, the shareholders would not have to make up the difference.

Corporations are also more easily transferred compared to other business structures, may sell shares to raise capital, and may be more attractive to employees, who can be compensated — in part — with shares in the corporation.

Corporations are relatively more difficult to form and maintain than the other options. If the corporation’s records are not properly maintained, it is possible to lose the limited liability. When attorneys sue corporations and demonstrate that the corporate records were not maintained and that the corporation was not, in fact, acting like a separate legal entity, they have “pierced the corporate veil”, and the protection for personal property is lost. 

Corporations may or may not pay lower taxes than individuals. This differs state by state, so it is a good idea to compare individual tax rates, which would apply for sole proprietorships, partnerships, or LLCs, with corporate tax rates. In many cases, the corporation will pay less.

In some cases, shareholders of small companies may get taxed twice. Specifically, the corporation will pay taxes on its profits, and then the shareholders will pay taxes on their share of the profits in the form of personal income.

What is an S Corporation?

An S corporation is formed through a special U.S. Internal Revenue Service (IRS) tax election and is specifically built to avoid the double tax problem mentioned above. The owners of an S Corporation still have limited liability, although not to the same extent as with a regular corporation, but pay taxes just once.

The S corporation has the same or similar record keeping and regulatory restrictions of a corporation, which can be a burden for some small retailers.

Which Business Structure is Best for me?

Unfortunately, there isn't an easy answer or formula that every new business can follow when selecting a business structure. Most online retailers start as sole proprietorships or partnerships, and only go on to incorporate when the company’s potential liability makes protecting personal assets attractive or when being able to sell shares of the business would help it grow. 

Right now, over 70% of US businesses are owned by sole proprietors and operate successfully without incorporating. Knowing that, it's safe to say that most ecommerce merchants won't need to go through the hassles of incorporation. But if you're more than a couple people strong, and you're growing in size, then you should start weighing your options now - and contacting an attorney will be the safest way to decide which business structure is best for you and your company.

How do I Incorporate my Business?

Each state has a different process to get your business incorporated. Search and apply for your state license here.

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If you're not in the US, we'll be publishing a similar guide for other countries in the coming weeks. Let me know in the comments if you have anything specific you want me to address.

Getting a merchant account should be easy. After all, they're going to make money every time you process a transaction. They should be happy to have your business, right? If only that was the case.

The payments business is highly competitive, and processors obviously want your business - but they still need to do their due diligence before approving your application. In this article we're going to tell you exactly how to ensure your merchant account application is approved, and what to do if you're declined. 

Since the payment industry and the jargon used is fairly complicated, we're also going to define some commonly used terms, like merchant account, payment gateway, and payment processor. If you already know the basics, feel free to skip the definitions. 

What is a Merchant Account?

What is a Payment Gateway?

What is a Payment Processor? 

What is the Difference Between a Payment Gateway and Processor? 

Why do I Need to Apply to get a Merchant Account?

Broken down to it’s most basic core, the reason you must apply and be approved in order to get a merchant account is because they have the potential to lose money every time they process a credit card transaction on behalf of your business. 

Visa and MasterCard have a very clear policy that is enforced when a cardholder pays for a good or a service: 

The cardholder is entitled to receive the promised good or service. If such good or service is not delivered then the cardholder is entitled to getting their money back. 

This is one of the basic consumer protection principles that apply to credit card transactions. 

In order to mitigate this risk the credit card processor has a screening / application process. Note that most processors charge an application fee, and only some will refund the application fee in case of a decline. If you're concerned about being declined, ask if your setup fee is refundable. It’s not an unreasonable request and if your chosen processor won’t agree you can find another that will.

Watch Out for Unrealistic Promises  

When you speak to your prospective processor ask what type of documentation will be required and how long it will take to get approval. There should be concrete answers to this question. In particular, if they are making blanket promises or statements that seem unbelievable like “we approve any type of account”, (especially if you know your product or service is higher risk), you should be highly skeptical.  

This is also a point at which you should make sure you get a copy of your merchant agreement before signing the contract. If it’s seeming entirely too rosy, with no explanation of the process and little mention of supporting paperwork then consider yourself fairly warned: you may not receive what was promised.

How to Get Approved for a Merchant Account

1. Gather Your Financial Statements

Financial statements are the single best tool you can bring to the table in order to leverage the best terms of approval possible. 

From time to time I work with clients that do not want to provide financial statements. It’s usually because they are a mid-sized company that is privately owned and they value that privacy. Company financials are sensitive business information. However, from a payment processing perspective this is a significant mistake. More than anything else, most underwriters will want to see financial stability demonstrated so that they know the company will continue successfully operating well into the future. 

On the flip side of this coin I work with startups that don’t have solid a financial history. Being a startup is tough and being in that situation (especially if you have a risky product) makes it hard to get approval. The underwriter knows that if a pile of chargebacks come in the merchant may have difficulty returning the funds to the cardholders. Merchants in a startup position would give anything to have a strong balance sheet because it would make a huge difference in their approval. If a business has worked hard to earn success, it's a poor decision not to leverage this successful history to get the best possible terms of approval. Use your financial statements or be prepared to put up a security reserve. You will want to provide the most recent balance sheet, profit and loss statement, and any notes from the accountant. 

A note on startups:  if you have not yet completed a year end don't fret. If trading volumes are smaller, then approval should be relatively easy to achieve (less money trading through the account means less potential risk). If you operate a startup business that is likely to do strong trading volume out of the gate you will have to leverage the other tips found below to achieve approval. It may also be helpful to work with a processor or agent that specializes in consulting with startups to help through the approval process. Some processors are more startup friendly than others.

2. Consider Your Processing History

Having a strong processing history is another extremely important tool to leverage your application. The more money you trade, and the fewer chargebacks, the stronger case you build. The logic is simple: if you've processed credit cards previously and been successful then why would that change? It wouldn’t. Always supply at least 3 months processing statements whenever available. 6 months is going the extra distance. If you trade high volumes or have a high risk product or service dig up an entire years worth of statements. It may be a bit of extra work but it will be well worth the effort if it reduces or eliminates the need for a security reserve. 

Processing statements should always show the following broken down by month:

• Number of transactions
• Total transaction volume
• Number of refunds
• Total refund volume
• Number of chargebacks
• Total chargeback volume

A Secret Weapon to Ensure Approval

There is no magic phrase or secret handshake that will get you through the door of any processor. However, the most obvious strategy is also the one that is most often overlooked: Explain what you're doing in plain English with an old fashioned cover letter.

Write the cover letter almost as if you were applying for a job, except it’s being written on behalf of a company. Your goal is to address the hot button points that the underwriter will consider when reviewing your application. It’s certainly true that the underwriter’s job is to protect the processor’s best interests. They will not approve applications fraught with chargeback risk. However, for the most part they want to help businesses succeed. 

Some processors are more lenient than others in this department. For example, some processor encourage underwriters to reach out to merchants by phone to discuss any concerns, where other processors do not. You may not ever get the chance to speak to the underwriter and make your case, so your cover letter should work to proactively address any concerns that may come up as they review the file. For this reason, the cover letter is perhaps the ultimate weapon in your arsenal.

6 Tips on Writing a Merchant Account Cover Letter 

Writing a good cover letter is a question of balance. First, seek guidance in this department from your sales representative. This is important because each bank or payment processor has a different risk appetite for different industries. They may have valuable insight or advice. 

Also remember that underwriters are people, and can be swayed and reassured like anyone else. Get your best foot forward. If you have a high risk or complicated service it’s critical that you prepare a brief, carefully worded, and extremely clear cover letter that hammers home your points. Attempt to address any concerns that might come up, and answer any questions before they even have the chance to be raised. If you do this these questions can’t foster doubts and will never grow into concerns. It’s the classic “head it off at the pass” approach. 

For suggestions, here are common criteria that should always be addressed on the cover letter.

1. Consider the Product Risk Specific to your Industry.

Guns and ammunition. Enriched uranium. Ivory tusks from endangered elephants. If you are selling any of the above your cover letter had better be written with magic ink. On the plus side some processors would refund your setup fee after being declined, which you could then put towards bail after you were arrested! In reality these would be on the prohibited list which is maintained by Visa and MasterCard. You simply won’t get approval for some type of products. Let’s focus on the sale of products and services that won’t get you arrested. 

The highest risk accounts usually require a specialist processor. In the high risk category, discount rates are extremely high and security reserves are large. It’s best to summarize that in this sector you will need to find a specialist processor. Two examples of high risk accounts in the eyes of obtaining a merchant account are: 

• Pornography / Adult material 
• Online gambling 

A step down the risk ladder takes us to businesses that are traditionally considered high risk, but approval is most often achievable with the proper effort. These businesses should leverage every one of the tips in this article to get approval.  

Some examples of moderate risk businesses:

• Travel packages, airfare, and accommodations
• Telephone services (especially long distance telephone and calling cards)
• Multi level marketing
• Group buying websites
• Penny auction websites
• Discount memberships
• Gym memberships

Another rung down the risk ladder takes us to low risk applications that where you will find most B2B and B2C products and services. I would think that most Shopify ecommerce store owners would fit into the low risk category.   

Talk to your sales agent at your prospective payment processor and ask if the type of product or service you provide is usually supported. Knowing what to expect ahead of time will give you a heads up in case you really need to give your cover letter polish. 

2. Highlight What is Good

Sing your praises and don’t be shy to provide relevant information that is factual. Remember to stick to the facts though, and don’t get carried away. You wouldn’t want to tell the underwriter that you have an IQ of 160, can cook a pretty mean omelet, and can bench press 300 pounds. You have a short window of opportunity. Keep it brief because if it’s long winded the underwriter may not read the whole thing, and if it’s too fanciful it will lose credibility. Stay on target by talking about the directors, principals or people involved in the project that lend credibility. For example, if you were selling a book that you’ve written and your editor also works on books by Stephen King it would be very relevant. Industry relevance or insight that you have earned, gained or acquired should be highlighted.

If you know your product is affiliated with a higher risk industry then you should ask yourself if there is anything that separates your business from the crowd.  Do you have proactive policies towards monitoring fraud? Do you offer a groundbreaking product that makes yours superior to that of your competitors? If there is anything of note put it in, while staying factual and concise.

3. How to Address High Trading Volumes

Trading volumes directly impact the potential risk to the processor because more money is moving through the account. If you are going to be trading strong volumes you should highlight to the underwriter that you have a strong processing history. If you are a startup and don’t have a strong processing history then tell the underwriter what is unique about your business that will cause strong volumes to happen out of the gate. You should be validating the application by providing logical reasons why your business is going to perform the way that it is, and make sure that you demonstrate an ability to keep up with orders to smoothly operate the business. 

4. How to Address Long Fulfillment Duration Timelines

There is something in the industry called “fulfillment duration” which refers to the amount of time that passes between when a payment is collected and when the product or service is delivered. For example, if you sold baseball mitts online the fulfillment duration would likely be about a week because if you ship the glove immediately the customer would receive the product within a week. If you sell vacation packages the fulfillment duration would be much longer (about 60-90 days) because most people book their vacation 2 to 3 months ahead of time.  What you want to keep in mind is that the more time that passes between the date of the sale, and the date the order is complete, the higher the risk score goes. 

Subscriptions are always impacted directly by fulfillment duration. Anytime you buy something with a future expiry date (like subscription access to a website) the risk score tends to be higher. You would ideally build your business in a way that controls or limits the risk from fulfillment duration. In some cases you will have no control over this point because external factors will dictate how this must operate.  

This leads to a very important consideration: In some cases you may find that your business is higher risk and a decline is a very real possibility (especially if it’s a young business without financials). If you find yourself in this situation it’s sometimes best to tweak your business model to reduce the fulfillment duration or subscription timeframe because it will cause the risk score to go down. Addressing this in the cover letter can make a significant difference. It could be the difference between a flat decline and the underwriter reaching out to you to open a discussion about approval.

5. Are you Open to a Security Reserve?

Some people think it’s crazy to tell the underwriter that you are willing to put up a security reserve. This is flawed logic because it’s not like the underwriter isn’t going to go down that road anyways if the risk score is getting too high. It’s best to be as proactive as possible. 
  

When in doubt say: “I realize that our industry may historically be considered a bit higher risk. We realize this and are sincerely interested in working with you. If security is required we are willing to look at this if necessary.” It conveys a sense of seriousness about the application. You aren’t going to waste anyone’s time and will work with the processor to find mutually agreeable terms of approval.

6. Dealing with Bad Credit

If you’ve had problems with chargebacks previously, or have bad credit you should be forthright about it. It conveys to the underwriter that you are an honest person and demonstrates that you are willing to step up to the plate and address any issues that may otherwise be a cause for concern for the underwriter.

What if My Merchant Account is Declined?

What should you do if you’ve done everything you can and you have still been declined? First of all, remember that some processors are more lenient and willing to listen than others. Declines can be overturned. If you’ve received a decline you should consider responding back with something like:

“Thank you for taking the time to look at our application. I have some knowledge of how merchant industry risk works and why our application may not be able to be supported. For the sake of being thorough I’d like to reiterate that we are sincerely interested in using your service and this is a serious project for us. If there is anything we can provide, including cash collateral or security we are happy to do explore this. We are committed to this business and are willing to provide significant security or anything else that may be required in order to achieve approval. If there is anything that we might be able to provide to help achieve approval please let me know, we do want to work with your organization.”

Obviously, the above is a rough template and should be edited to be specific to your situation. What you are trying to do is convey a sense that you want to work with them. I’ve found that the more overtly willing a merchant is to come to the table and have a candid discussion around security, the less security ends up being needed. I expect this is because it demonstrates to the underwriter that you are serious about your business and are willing to “put your money where your mouth is”, so to speak.

I’ve Tried Everything But Was Still Declined!

Keep in mind that different banks and processors have different appetites for risk. For example, travel is historically considered a higher risk industry but some processors specialize in travel accounts and can provide them relatively easily. It might be the case that the processor you selected just wasn’t the right fit for your business. 

Another example: Right now, group deal (Groupon type) websites are very popular, but there aren't many banks that will underwrite these accounts. You may have to pound the pavement and research to find the right processor. It also sometimes helps if you can work with an Agent that represents a few banks, because they may be able to save you some effort and know which processor will have an appetite for your type of business. 

What Happens if all Else Fails? 

In almost every situation “declined” really means “declined right now, but talk to me later once you have more history.”

Some processors specialize in very high risk accounts. I encourage cautiousness when using this type of processor. Thoroughly do your due diligence before going down this road. High risk processors, which are often located offshore, will charge significantly higher fees than low risk processors. In some situations you may not have an alternative though. If you do use a high risk processor try to make sure you are not locked into a contract. After 6 months to a year of successful processing history you may be able to re-submit a stronger application into some of the processors that declined you previously. 

I realize it’s a catch 22 that you can’t get a processing history if you can’t get approved. Some businesses have to start with a high risk processor, with a long term goal of building a solid processing history and moving to a lower risk processor. 

A last note regarding this strategy:  Be fanatical about preventing chargebacks if you are going to go this route. You want to make sure your processing history is sterling when you try to revisit that application a year later. 

Conclusion

Your merchant account sales representative is the best tool you have access to ahead of submitting your application. Ask questions about approval and listen to the responses. If it’s all roses be skeptical. Be honest with your expectations and if you have concerns highlight them upfront. The processor you are working with should want to help you get approval, which should ultimately lead to a mutually beneficial long term partnership. 

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This article was written by David Goodale  who is the CEO at MerchantAccounts.ca. David has over 10 years of industry expertise in the international and multi-currency ecommerce payments sector.

By Andrew Youderian, ecommerce store owner, eCommercefuel.com

Many people shy away from starting an online store because of the startup costs and fulfillment hassles. But imagine if someone offered to pay your up-front inventory costs on thousands of items and manage your fulfillment operations. It'd be much easier to get started, and you could run your business from anywhere in the world. Sound too good to be true? It's not, if you know about drop shipping. 

In this article, I'm going to teach you all about drop shipping. I'll go over a simple definition, list the benefits, show you how to find drop shipping wholesalers, and give solutions to some common problems associated with drop shipping. 

What Is Drop Shipping? 

Drop shipping is a retail method in which you don't keep products in stock. Instead, you partner with a wholesale supplier that stocks its own inventory - you transfer customer orders and shipment details to them, and they ship the goods directly to the customer. The biggest benefit of drop shipping is you don't have to worry about fulfillment or inventory issues. 

Also, most customers don't know you're drop shipping, since "private label shipping" lets you ship from the wholesaler with a return address and invoice customized to your ecommerce store.

The Benefits of Drop Shipping 

There are a number of reasons you should consider drop shipping:

1. You Don't Need Buckets of Money: Drop shipping makes it amazingly easy to get started selling online. You don't need to invest heavily in inventory, yet you can still offer thousands of items to your customers. 

2. Convenience & Efficiency: Successfully launching and growing an ecommerce business takes a lot of work, especially if you have limited resources. Not having to worry about fulfillment is incredibly convenient and frees up your time to concentrate on marketing, customer service, and operations 

3. Mobility: With all the physical fulfillment issues handled, you're free to operate your business anywhere you can get an internet connection.

4. It's a Trusted Model: You might be thinking that this sounds like some sketchy, fly-by-night model – but it's not. Plenty of Shopify online stores, even major retailers like Sears, use drop shipping to offer a wider selection of products to their customers without having to deal with increased inventory hassles.

How Do I Find Drop Shipping Wholesalers? 

Before contacting suppliers, you'll want to make sure your legal ducks are in a row. In the United States, most suppliers will ask for your business EIN number and a copy of your state sales tax and/or resale certificate. Once you're properly established, you can start contacting drop shipping suppliers. 

There are various ways to find drop shipping wholesalers, and the video below outlines your options:

If you already know what products you'd like to drop ship, contacting the original manufacturer is the easiest way to find qualified distributors. Not all distributors will be willing to drop ship, but it will give you a list to follow up with. Unfortunately, the market is littered with scams and low-quality information. If you do decide to invest in a directory, I can recommend the paid directory World Wide Brands as a reputable source of drop shipping wholesalers - but it's still very important to exercise caution.

Google can also be an effective tool for finding drop shippers, but you need to keep a few things in mind. 

3 Ways to Use Google to Find Wholesalers 

1. Search Extensively: Wholesalers and drop shippers are notoriously bad at SEO and marketing, and usually aren't going to pop up on the first page of Google for a term like “handbag wholesaler.” Instead, you'll need to dig deep into the search results, often going through 10 or 20 pages of listings.

2. Don't Judge by the Cover: Suppliers also tend to have outdated, late ‘90s-era websites. So don't be scared away by abysmal design and layout. While a sleek, modern site could signal a great supplier, a low-quality one doesn't necessarily indicate a bad one.

3. Use Lots of Modifiers: As you hunt for suppliers, don’t stop with a search for “wholesale” - make sure to use other modifier terms, including “distributor” , “reseller” , “bulk” , “warehouse” and “supplier.”

4 Common Problems With Drop Shipping 

Despite my glowing recommendation, drop shipping isn't ecommerce nirvana. Like all models, it has its weaknesses and downsides. With some planning and awareness, these issues can be managed and need not prevent you from running a successful drop shipping business.

1. There will be loads of competition and awful margins.

Solution: It's true. Products that can be drop shipped will spawn a lot of competition. Usually this will lead to cutthroat pricing and diminishing profit margins, making it hard to build a viable business. 

To be successful, you typically can't compete on price. Instead, you'll need to offer value in a different way, usually through top-notch product education, service or selection. For more information on how to pick a profitable niche and add value, see these posts on finding a product to sell andthe anatomy of a profitable niche. 

2. Syncing inventory is difficult & leads to out-of-stock items.

Solution: The best way to mitigate this problem is to work with multiple suppliers with overlapping product lines. It's inherently dangerous to rely on a single supplier. Having two suppliers doubles the likelihood that an item will be in stock and available for shipment.

Many sophisticated suppliers offer a real-time product feed, and you can use a service like eCommHub to easily sync your Shopify website with the warehouse.

Eventually, you’ll sell a customer an out-of-stock item. Instead of canceling the order, give the customer an upgraded product for free! You might not make much – if any – money on the order, but you'll likely build a loyal brand advocate.

3. It's hard to sell products that you never see.

Solution: In today's world, it's possible to become an expert in just about everything through information online. Selling products from manufacturers with detailed websites will allow you to become intimately familiar with a product line without ever having touched a physical item. And when you do need to answer specific question about a product, a quick call to your supplier or manufacturer will give you the answer you need. 

You can also buy your most popular items to get acquainted with them, and then resell them as “used” or “refurbished,” often recouping most of your investment.

4. Involving a third party will result in more fulfillment errors, mistakes, and logistical problems.  

Solution: Even the best drop shippers make occasional mistakes, and mediocre ones make a lot of them. Suppliers are fairly good about paying to remedy problems, but when they're not, you need to be willing to spend what's necessary to resolve the issue for your customer. 

If you try to blame your supplier for a fulfillment problem, you're going to come off as amateurish and unprofessional. Similarly, if you're unwilling to ship out a cheap replacement part to a customer because your supplier won't cover the cost, your reputation is going to suffer.

One of the costs of drop shipping convenience is the expense of remedying logistical problems. If you accept it as cost of doing business – and always make sure to put your customer first – it shouldn't be a long-term issue.

The Final Word on Drop Shipping 

Is drop shipping the path to overnight ecommerce success? Of course not. As with any successful online store, you'll need to invest over time in a quality website, marketing, and customer service.

But drop shipping does provide an easy way to get started and the ability to leverage other people's capital without having to invest thousands of your own. When managed correctly, it can form the foundation of your own successful online store.

Further Learning

Looking to learn more about drop shipping? Check out our "Ultimate Guide to Dropshipping" - a free comprehensive guide that covers everything you need to know about building and running a successful dropshipping business. 

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By Andrew Youderian, an ecommerce entrepreneur and the owner of numerous online stores. You can learn how to create a profitable online store with his free 55-page eBook or find out more about drop shipping on his blog, eCommercefuel.com.