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As creators, Etsy sellers, and independent consultants experience sudden overnight demand, the businesses that hold up are the ones built to handle growth before it arrives.
Businesses can now experience overnight success without warning. For those who use the internet to promote or sell their services, like digital creators or Etsy sellers, virality can dramatically change their business.
A business owner wakes up to discover that a video, product or post went viral. The shop is flooded with orders or even sold out. Client inquiries and messages fill the inbox, with new messages arriving faster than owners can respond. This sudden growth may feel exciting, but it also reveals any shortcomings in the business structure. Many small business owners launch before setting up the foundations, like compliance requirements. "Compliance is the last thing on an owner's mind in month one, and that is exactly why growth catches owners off guard," says Clay Plowman, executive vice president at InCorp Services Inc. “The businesses that come through a spike intact are the ones that put the structure in place before they needed it.” Overnight success can quickly turn into a liability if the business isn’t prepared.
Today, there are more opportunities for businesses to go viral than ever before. Each social media platform, from Instagram to TikTok, utilizes a different algorithm that impacts how your business is seen. One video can go viral overnight. A news outlet or public figure might re-share an AI consultant’s think piece on LinkedIn or mention it on X. Digital creators capitalizing on viral trends can link to an item on Etsy and suddenly that seller is flooded with orders.
Most social platforms are now shoppable, which increases the chance of virality leading to instant sales. TikTok Shop has become an influential place for younger generations to discover products. A 2024 Oxford Economics study commissioned by TikTok, which surveyed 1,050 U.S. small and mid-sized businesses that use the platform, found that 74% had sold out of a product at least once after promoting it there. A product may go viral overnight, but the trend can last for months. Businesses who use social media to market their products must be prepared for the potential to go viral. They need to respond and fulfill orders quickly, or potential customers will move on.
Volume creates exposure. A hundred orders a year means a hundred chances for something to go wrong; ten thousand means ten thousand. Add revenue worth suing over, and a business that was invisible at hobby scale becomes a target.
Owners often assume that being registered means being protected. It doesn't. Permits and DBAs satisfy tax collectors and city clerks; they say nothing about who is on the hook when something goes wrong. A sole proprietor can be current on every filing and still be personally liable for everything the business does. An Etsy seller with a permit, a DBA, and a viral batch of handmade soaps is fully compliant right up until a customer sues over an allergic reaction. Without an entity or insurance in place, a judgment can reach the owner's personal savings, home and other assets. The lawsuit isn't against the business when these protections aren’t in place. Instead, it’s against the person running the business.
Many small businesses launch as soon as they have a product or service to sell. The majority of digital creators may view their online business as a side hustle: Goldman Sachs Research estimated in 2023 that only about 4% of global creators clear $100,000 a year. If the business isn’t their primary source of income, owners may be less inclined to set up the financial logistics. Bookkeeping and tax planning are postponed, which means the business isn’t prepared for overnight success.
Filing taxes as a self-employed business owner can come with surprises. Tax deadlines and requirements vary depending on the type of business. If a small business doesn’t have a dedicated business account, proving deductions and business income can become unnecessarily complicated. Not having formal separation of personal and business finances can even impact liability protection.
When new opportunities for work arise, businesses vet clients and review contracts to ensure they can successfully deliver their services. This can be time consuming for solo-run business owners. If the business is suddenly flooded with client requests, they may not have time to thoroughly review requests and set up onboarding.
Rushing into business agreements can lead to miscommunications down the line, especially if the owner is now stretched for time due to high demand. They may make a verbal agreement instead of getting a signed contract. The client or the business may not have clarified the scope of services, payment terms or deadlines. Without a formal contract and official terms of service, the business owner could miss out on payments or lose the client. If the owner did sign a contract that they didn’t review, they may discover they mistakenly agreed to work or the terms are outside their scope and they are now forced to fulfill.
Small online sellers may not be aware of state and federal sales requirements. Out-of-state sales can create new tax obligations, especially for sellers who also sell through their own website, social shops or in-person events. Etsy collects and remits sales tax on marketplace orders in nearly every state with a sales tax, but sales outside the marketplace remain the seller's responsibility. If a seller unexpectedly goes viral and starts shipping orders throughout the country or internationally, they may not be aware of different economic nexus laws.
Most states have specific requirements for businesses based on sales. When their sales meet the state’s economic nexus threshold, they often need to register in that state and comply with state tax requirements, such as charging state sales tax. If a seller isn't prepared for out-of-state sales outside a marketplace and goes viral, they may face costly penalties long after the sales die down.
Setting up a small business is time consuming and often costly. In the Q4 2024 MetLife and U.S. Chamber of Commerce Small Business Index, 51% of small business owners said licensing, certification and permit requirements make it harder to grow, and 47% said their business spends too much time on regulatory compliance. It’s easy to postpone compliance requirements before launching. If revenue is low and a business isn’t planning for growth, registering as a formal entity or obtaining certain permits may not feel necessary.
Rapid growth switches on obligations that low volume kept dormant. Payment processors and marketplaces run enhanced verification when sales spike, asking for an EIN or formation documents before releasing funds. An owner who never formalized the business may struggle to produce them quickly, and payouts can freeze during the weeks they need cash to restock. A maker under a cottage food permit may exceed what it allows at ten times the volume. Neither of these issues announce themselves. Both surface after the spike and business owners are left to figure out how to handle them.
Businesses can’t predict sudden growth, but they can still set themselves up for success. Covering the business basics ensures that viral sales spikes won’t have costly consequences for small business owners. To have a compliant, lasting business, small businesses should:
These four foundational steps make operations easier and provide a sound structure for any business to grow.
Going viral tests how prepared a business is. Sudden growth reveals what’s missing or not working. Small business owners can use this experience as a learning opportunity. The businesses that survive are the ones that properly structure their business and adhere to compliance requirements.
As businesses increasingly operate online, there will be new opportunities for sales and growth. Compliance requirements will continue to evolve. Businesses can prioritize legal and financial preparedness to navigate this changing marketplace.
This story was produced by InCorp and reviewed and distributed by Stacker.
