How to start a penny auction website

rocketIf you’re thinking about starting your own penny auction website as a way to make money online, then follow along with this helpful guide with information on how to do it.

Create a business plan

The first thing you’ll need to do is understand exactly what business you’re getting into and create a business plan (including evaluating startup costs and timeframes, establishing viability of the project, assessing your competitors, coming up with goals, and defining your products, services, customers). You’ll of course need to learn about penny auctions and understand them, and you’ll also need to plan out how you’ll reach customers (some online marketing expertise will come in handy here), and what other information and documents you’ll need to get started with your online penny auction site.

If you don’t have any start up money of your own, consider asking friends, family or investors to get involved. Showing them a well-researched and viable business plan will go along way in this respect.

In terms of legal considerations, luckily for you, although penny auctions may seem like a form a gambling, the law actually states they are not and therefore, you do not need a gambling license.

Acquire software

Now that you’ve got a business plan and hopefully, some start up money, it’s time to select software. Choosing the right one is essential because the wrong software could be too slow, something that penny auction customers won’t tolerate. So, invest in fast and reliable software that can handle a high volume of traffic and many simultaneous bidders. Research options and read reviews, and try to select software that has already been on a market for a few years so you know what to expect.


Your customers will be bidding on products, so you’ll need to have a plan outlining how you’re going to acquire the merchandise these customers win, and how to get it to them. Customers will expect to find information on your website about shipping times and costs, so make sure you research in advance how this will be structured so that you can follow through and provide good customer service. It is not necessary that you buy the merchandise in advance and have it in your home ready to ship to the winner; most penny auction sites purchase the item online after it has been won and ships it directly to the winner.

Also you may want to think about what kind of merchandise you want to offer on your penny auction site. Maybe you want to specialize in something (electronics, or jewelry, for example). Before you decide, make sure you know what your competitors’ niches are so that you don’t just repeat another penny auction site that already exists. The best way to break into an already established market like this one is to do something no one else is doing yet. So think about what might be new and interesting in terms of what products or services you offer.

Rules, policies, terms and conditions

Every penny auction site has information on the rules of their auctions and their policies, so you’ll need to write out yours and post them on your site. Your customers will want to know that they are offered fair competition so make sure you have some rules that cover this; many sites limit the number of wins per customer during a specific period of time, for example.

Legally, you should have the terms and conditions of using your site (check out these pages of other similar websites to guide you) explained and easy to access on your site.


If you have some marketing expertise, you’re in luck. If not, you’ll need to find some help, and probably invest a bit in this side of the business, especially at first. Today, marketing is mainly online through search engine optimization, social media, blogs, ads and more. You’ll definitely want at least a Facebook or twitter account, possibly a blog, and some SEO to ensure your site shows up on internet searches done by potential customers. You can pay to show up on Google searches through Google Adwords, a great way to reach customers as soon as your website is up and running. You can also try television and radio publicity as well (your competitors are using it!). Again, hire someone to help you if you don’t know anything about web marketing. It would be a waste to invest time and energy into a website that no one is going to find!

Through marketing you’ll be trying to build your customer base as much as you can because without customers, you won’t be making much of a profit. So do marketing and publicity online, tell friends and family, participate in forums, post articles related to penny auctions, and more; whatever you can do to get people to the site and telling others about the site.

Customer Service

Right from the beginning, providing good customer service is key to any successful business, and a penny auction site is no different. You could provide a live chat service, or provide an email address on the website where customers can contact you (respond within 24 hours, always). If possible, provide a telephone number as well. Many penny auction websites that have provided poor customer service haven’t survived; so don’t make the same mistake. It is also helpful and useful fo customers if you have a frequently asked questions page on your website. In fact, this will save you time later on when they don’t need to contact you because their question has already been answered here.

Starting a penny auction website is one of the many ways to make money online these days, but just like with any business, you’ll need to do research, plan, deal with customers and have startup money. As long as you are organized, prepared and start a business with integrity and good customer service, you should be just fine. Oh right, and don’t forget the importance of good, fast software and online marketing.