If you’re starting an online eCommerce business, it’s tempting to dive right in and set up your digital shop. After all, eCommerce businesses are often less expensive to start than physical businesses and the risk may seem lower. Unfortunately, that’s not the case. There’s still risk involved and money you may lose if you don’t start your business the right way.
So if you want your business to be successful you’ll want to start with a business plan first. Not having a business plan is one of the primary reasons businesses fail and it’s an easy first step that you can start for free.
Businesses that do take the time to plan are actually proven to be significantly more successful than those that don’t.
If you’re looking for funding from investors for your eCommerce business, you’ll definitely need a business plan. But, business plans aren’t just for entrepreneurs who are looking to raise money for their business. There are many other reasons why you should consider writing a plan.
A business plan can help you develop your strategy, test your idea, figure out how much money you’ll need to get up and running and identify potential roadblocks. It’s a critical step that will ensure that you don’t waste time or money as you get your business off the ground.
Every business plan follows a fairly standard format, but for eCommerce you will need some extra detail in the marketing and fulfillment sections. Here’s an outline of what you should include.
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Every business plan needs an executive summary. Usually, you write the summary last, after you’ve fleshed out all the details of your plan. The executive summary isn’t a repeat of the full plan—it’s really just a brief outline that should be 1-2 pages at the most.
When you’re getting introductions to investors, you’ll probably just share your executive summary to start, and then share the full plan if an investor is interested.
Your executive summary should summarize your vision for your online business, the products you’ll be selling, a short description of your target market, and highlights of your management team and financials. If you did a market analysis, don’t get into tons of detail, but cover enough that a casual reader will understand what you’re trying to accomplish.
The first chapter of your eCommerce business plan describes your opportunity. That’s a description of the business you are building and the problem you are solving for customers.
Every business needs to solve a problem for customers. For your business to stand out and be successful, you’ll ideally fill a gap that other companies haven’t filled yet.
Even if you’re selling the same types of products as other companies, your eCommerce business could offer a better shopping experience, lower prices, or better customer service. The problem you are solving then is that customers can’t get good customer service or low prices from other companies in your industry. They will come to you, instead, because you do offer those things.
You can also solve problems for customers by offering a product they’ve never seen before. Perhaps you’ve developed a new line of kitchen utensils that are designed for older hands and wrists. Or maybe you’ve invented a new line of soap that is more sustainable than traditional hand soap.
Arguably, the target market section of your eCommerce business plan is one of the most important components. Your target market describes the types of customers you hope to attract. Trying to please everyone is bound to be a failure—instead, focus on a specific group of people or type of person and build from there.
For example, maybe you’re trying to sell to young professionals who value good design. Or, maybe you’re targeting new families who are looking for sustainably made, affordable kids toys.
When you’re writing the target market section of your business you’ll describe exactly who your ideal customer is, what their demographics are, and how large your target market is.
There are a lot of details that you can include in your target market section of your eCommerce business plan, and we’ve got a great article that covers everything you might want to include.
For an eCommerce business, getting the word out about your business is critical. Unlike a physical storefront that potential customers might walk or drive by, an online store needs to figure out how to get customers to its virtual doors.
In the marketing and advertising chapter of your business plan, you’ll want to detail your marketing plan for your business – how are you going to get customers’ attention? How will they know you exist?
Here are a few tactics you may want to consider:
Successful eCommerce businesses are all about ensuring that their operations are running smoothly and efficiently. Use your business plan as your chance to figure out what your operations plans are ahead of time before you jump in and get started. This is where many businesses can get tripped up, so taking the time to get your operations set up properly is worth the up-front investment of time.
Areas you’ll want to cover include:
This chapter of your eCommerce business plan describes the structure of your business and who is running it. If you’re going into business with other people, you should establish a partnership agreement. Your plan will need to explain how your business is structured and who owns what portions of the business.
You’ll also want to include a company description that includes details on the management team and the highlights from their resumes. Potential investors will be looking for experienced owners and managers to get an eCommerce business up and running, so this section of the plan should explain why your team is qualified to build the business into a success.
If you aren’t looking for outside investment, this section of your eCommerce business plan is still important. You should think about the different positions you’ll need to fill and who is going to do each job in the business. Even if you don’t plan on hiring employees right away, having a plan for who you’re going to hire and when will be enormously helpful when the time comes.
Finally, your eCommerce business plan will need to include a financial plan. Investors will want to see a sales forecast, income statement (also called profit and loss statement), cash flow statement, and a balance sheet. If you use a tool like LivePlan, you’ll be able to build out your financial forecasts relatively quickly, even if you don’t have experience with business numbers.
Even if you’re not working with investors or getting a bank loan, you should run your numbers. This is arguably the most important part of your business plan. You need to know if the numbers work for your business based on your forecasted sales and planned expenses.
It’s much better to find out if you need to make changes to your business model while it’s all just an idea on paper rather than a business that you’ve already invested money in.
If you want to see how other eCommerce businesses have created their plans, check out our free library of eCommerce business plans. You can download all of them in Word format so you can jump-start your own business plan.
