Startup cost
$5k–$100k
TRUiC Business Ideas
How to Start a Marketplace Website Business
Decision Snapshot
Marketplace Website
Idea Score
61
Profit margin
21%
Break-even
4 mo–12 mo
Time to launch
12 wk–36 wk
Demand trend
Stable
5-yr failure rate
—
Capital intensity
High
Time commitment
Flexible
Part 1 - How to start a Marketplace Website business - Background
More and more people are looking for gig-style work online, which is giving rise to a new type of website. Marketplace websites connect vendors and customers looking to conduct business together, and the websites collect a commission for doing so. One-quarter of Americans participated in this type of work in 2015, and that number is only trending upwards. Thus, there’s plenty of opportunity for new marketplace websites.
These websites may be service- or product-based. What differentiates marketplace websites from ecommerce sites isn’t what is being sold, but who is doing the selling. Whereas ecommerce sites sell directly to customers, marketplaces connect vendors, who are selling goods or services, with customers.
You may also be interested in additional online business ideas.
Our guide is in 3 parts:
- Part 1 - How to start a Marketplace Website business - Background
- Part 2 - Our planner tool to see if this idea is the right fit for you
- Part 3 - Action plan to get started
What are the costs involved in opening a marketplace website business?
The costs involved in opening a marketplace website vary dramatically depending on how the site is built.
Coding a full-featured website from scratch can cost $100,000 and up, although it may be possible to keep total costs slightly lower by outsourcing work to countries where labor is cheaper and skipping certain features.
A more affordable option is to build a site using a template that’s provided by a marketplace platform service. These services charge a monthly subscription fee in exchange for providing a pre-built template that a site can be designed on.
Near-Me, Sharetribe and Arcadier are three such services. They charge between $34 and $2,000 per month, depending on how many users a site has and what features it needs. Most rates are several hundred dollars a month.
What are the ongoing expenses for a marketplace website business?
If a marketplace website is coded from scratch, the ongoing expenses include labor costs associated with running and maintaining the site, and hosting fees.
When a site is set up through a platform service, the ongoing expenses consist of the monthly subscription fee.
Who is the target market?
The target market for a marketplace website consists of both vendors and customers who are interested in the site’s niche. Some vendors will sell only a little, while others will sell full-time.
How does a marketplace website business make money?
Marketplace websites primarily make money by earning a commission on each transaction that takes place on the site. Some sites also make money from subscriptions (for frequent users) or upselling extra perks (e.g. rush delivery).
How much can you charge customers?
The amount charged by marketplace websites ranges. For example, Etsy charges a nominal listing fee and 3.5 percent of the sale price when items sell. WriterAccess takes about 30 percent, which is common for writing-focused marketplace platforms.
How much profit can a marketplace website business make?
A marketplace website’s profit potential depends on how much money exchanges hands over the site. The most successful sites, such as EBay, bring in billions of dollars annually (if not quarterly). A site doesn’t need to be this large to earn a significant profit, though. Flippa, a marketplace site for domains and websites, has monthly revenues in the millions.
How can you make your business more profitable?
Some marketplace websites increase their revenues by offering personal assistance to customers who have high-volume orders. Customers receive help navigating the site and finding vendors, in exchange for making large deposits or paying a fee. WriterAccess employs such a tactic for additional revenue.
Day-to-Day and Growth
What happens during a typical day at a marketplace website business?
Most of the work done at a marketplace website is online. On any given day, site owners may:
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investigate and fix bugs in the site
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monitor site activity and implement updates
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respond to vendor and customer inquiries
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review and adjust marketing campaigns
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send vendors payments
In general, business owners need to make sure their site is running smoothly and all users know how to access the features they want. Any issues in the user experience may cause vendors or customers to leave the platform.
What are some skills and experiences that will help you build a successful marketplace website business?
Running a successful marketplace website doesn’t require any coding knowledge (see below), but having a basic grasp of HTML and CSS is helpful. Knowing how to perform basic edits to a site’s HTML and CSS lets site owners customize their sites beyond what drag-and-drop templates allow.
Site owners who have no HTML or CSS knowledge will find a plethora of online courses, ebooks and other resources. Codecademy and W3Schools offer good, free courses. Two helpful books are HTML and CSS, and Learning Web Design.
Additionally, site owners must be familiar with the products and/or services that will be sold on their marketplace platform. Even though site owners don’t actively sell, knowing what vendors and customers want will help owners design a more useful platform. To learn more about the particular niche their site will serve, owners can read books on the niche, join local clubs, and network with other enthusiasts.
What is the growth potential for a marketplace website business?
A marketplace website may be a small site that caters to a narrow niche, or it can grow to be a large platform. Old Town (kayaks and canoes) and Chairish are two examples of smaller sites. Some larger, well-known platforms are Airbnb, Uber and Lyft. Amazon, eBay, and Craigslist are some of the largest platforms.
What are some insider tips for jump starting a marketplace website business?
Even site owners who have coding knowledge may want to start with a platform service. Not only do these services cost much less than building a site from scratch, they also take care of all coding issues. The service addresses bugs and provides updates as needed, so site owners can focus on growing their site rather than technical issues.
Using a platform service does, however, make a site dependent on the service. The site’s features will be determined by what the service offers, and the site will be updated as the service rolls out updates. For this reason, it’s important to sign on with a service that has a strong track record of quickly rolling out updates and responding to client’s requests for features.
How and when to build a team
Many marketplace websites start out with only the site owner running the site. Owners typically bring on employees as the workload requires and revenue allows.
Part 2 - Is a Marketplace Website business the right fit for you?
Business Evaluation & Strategy Tool
We'll walk you through the four pillars every business needs: Points of Leverage, Marketing Strategy, Financial Model, and Personal Compatibility. At the end you'll see a personalized report and your action plan below will be tailored to your answers.
Step 1 of 4 — Points of Leverage
Every viable business has natural advantages. Below are common leverage points across four categories. Pick the ones that apply to your Marketplace Website business. We've pre-suggested a few based on your idea — review and adjust.
Step 2 of 4 — Marketing Strategy
Without a way to connect with customers, even great businesses fail. Pick the channels you plan to use to reach your customers.
Step 3 of 4 — Financial Model
Enter your monthly baseline costs — the minimum overhead to keep the business running. Then we'll calculate how many sales per month you need to break even.
Step 4 of 4 — Personal Compatibility
A business that doesn't fit your life will fail no matter how good the numbers look. Tell us how this business fits you.
Your Marketplace Website Evaluation Report
Complete the four pillars and your personalized summary will appear here.
Points of Leverage
Marketing Strategy
Financial Model
Personal Compatibility
Part 3 - Action plan to launch your Marketplace Website business in 90 days
Nine concrete steps to take you from idea to open business, grouped into 30-day phases. Complete the planner above and we'll highlight what's most important for your situation.
First 30 days — Foundation
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Form your legal entity
An LLC keeps your personal assets separate from business debts and lawsuits — the most common reason small business owners choose this structure. Sole proprietorships and partnerships do not provide this protection.
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Get an EIN and register for taxes
Apply for your free Employer Identification Number through the IRS, then register for any state or local taxes that apply to your business (sales tax, franchise tax).
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Open a business bank account and credit card
A dedicated business account is required to maintain personal asset protection. Mixing personal and business finances ('piercing the corporate veil') can void your LLC's liability shield.
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Set up business accounting
Recording expenses and income from day one makes tax filing easier and lets you see when the business is actually profitable. Use software (QuickBooks, Wave) or a part-time bookkeeper.
Days 30–60 — Compliance & Risk
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Get permits and licenses
State and local requirements vary widely. Brick-and-mortar businesses typically need a Certificate of Occupancy; service businesses may need specific professional licensing; food businesses need health permits.
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Get business insurance
General Liability Insurance is the most common starting point. If you'll have employees, most states require Workers' Compensation. Specific industries need additional coverage (product liability, professional liability, etc.).
Days 60–90 — Launch
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Define your brand
Your brand is how customers perceive and remember you. A clear name, logo, and visual identity make every later marketing decision easier and protect you legally as you grow.
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Create your business website
Every legitimate business needs a website. Social media pages are not a substitute — you don't own the platform. Modern website builders mean you can launch a clean site in a weekend without a developer.
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Set up your business phone system
A dedicated business number keeps your personal life private, makes the business look legitimate, and lets you route calls professionally. Cloud phone services start under $20/month.