How to Create an E-Commerce Business Plan
- November 18, 2020
If you ever plan on finding investors, partners, or employees for your e-commerce startup, you’ll need to know how to create a business plan. A lot of people make this process out to be more complicated than it needs to be. When you do it right, creating a business plan doesn’t have to be so difficult.
In this guide, I’m breaking down step-by-step everything you need to know about creating a powerful e-commerce business plan.
What is an E-Commerce Business Plan?
Have you ever thought about something you wanted to accomplish in your business? You’d likely jot down a few lines discussing strategies, costs, and methods behind the steps you would take to achieve those goals.
If you’ve ever done that, you’ve created a basic business plan, and there isn’t too much more to it than that. An e-commerce business plan is a strategy for how your business will work, how you’ll fund it, who your audience will be, and how you plan to succeed.
Understanding how to create a business plan is key. It requires research, understanding your audience, budgeting, and more.
The overall key to writing a business plan is to create something comprehensive enough, so you never have to wonder what step is coming next. As you navigate the sometimes challenging process of starting an e-commerce business, don’t leave anything to chance.
When you’re struggling or having a hard time envisioning the next step, you don’t have to worry because your business plan thoroughly outlines everything you’re going to do, when you’ll do it, and how much it’ll cost.
Another aspect of business plan writing is looking for investors or partners. You need to pitch your e-commerce business in a way that is easy to understand. Investors aren’t going to jump aboard something that lacks vision or appears unorganized.
Having a thorough business plan that gets straight to the point will show investors that you know what you’re doing and you have a concrete strategy for success.
How is an E-Commerce Business Plan Different From Other Kinds?
The way e-commerce businesses reach their customers is much different. At a brick and mortar store, for example, foot or vehicle traffic will contribute to a lot of free advertising for the business.
E-commerce stores, on the other hand, can very easily get buried in the SERPs, never to be seen by anyone if you don’t know how to get the word out. You need to keep these types of things in mind when putting together your business plan.
As for research and development of your business plan, standard businesses need to factor in local licenses, ordinances, building codes, and other factors that may influence where and how they can conduct business.
Luckily, e-commerce doesn’t have to worry as much about that, but it doesn’t mean you can ignore it either. It’s your responsibility to understand any restrictions or requirements that may prevent you from sourcing and selling your products.
Why E-Commerce Business Plans Are Important
Understanding how to create a business plan means nothing if you can’t see the importance behind it. While I believe there are more important aspects of starting a successful business, every e-commerce venture should have a stable foundation, beginning with a business plan.
Business Plan = GPS
You’re the driver of this business, but you’ll end up going in circles, wasting time and money, if you don’t know where you’re going. Having a solid business plan guides you through the steps of starting and growing a business. Think of the plan as the GPS of your business. If you ever get lost, you can fall back on your original plan.
It Helps You Generate Ideas
This process is much easier than it seems. It might seem like this looming dark cloud of horror, but once you dive in, the juices will start flowing, and you’ll find out that you probably have a lot of great ideas. This may be the first project of your new venture, so business plan templates and how-to guides can help.
It Can Help You Understand the Market
Getting your audience right is the most important aspect of an e-commerce business. If you’re trying to reach everyone, you’ll reach no one. A big part of your business plan needs to be the development of a customer avatar. This avatar is your perfect customer. They’re the ones that buy everything you sell because they love you and your brand.
It Helps with Funding
Whether you’re looking for funding or business partners, you’ll need a business plan. Having a strong strategy shows investors that you’re confident in what you’re doing, you understand the business, and investing with you is a smart choice for them.
It’s a Great Way to Keep Track of Accomplishments
What better way to look back and see everything you’ve dreamed of come to life? You can map out the next few years in a business plan and look back as everything comes together, and keep track of everything you’ve accomplished. A business plan acts as a “to-do” list for your new venture.
What Does an E-Commerce Business Plan Look Like?
If you’re wondering what a business plan should include, it might look a little different than you originally thought. The days of massive 15-page business plans are over; you don’t need a super complicated plan to find investors and sell your products.
Lean business plans are growing in popularity. This e-commerce business plan involves a one-page “pitch” of your business. You’ll document the problem you’re solving, your unique solution, your market, the competition, your team, and a little information about your company culture.
Part 1: Executive Summary
Think of an Executive Summary as an overview of your company’s goals and objectives. If you had to hand someone a piece of paper explaining as much about your business in 250 words or less, what would you say?
It should include information such as:
- A description of your products and what you sell
- Your goals as an e-commerce provider
- Identifying your target audience
- Explanation of your competition and how you stack up
- Overall growth potential
- Funding requirements
While you’re not going in-depth in any one area here, this is the most important aspect of the business plan because it’s your overview. When people think of your e-commerce brand, this is what they’ll think.
Part 2: Description of the Company
Who are you, what is your experience, and why should you have the right to sell products to other people?
The company’s description is a lot less about what you want it to “be like” and more of what “you’re like.” You’re pitching yourself, your experience, and your ability here.
A great business example here might be:
In this description, we covered what we’re selling and provide the credentials of the owner, which will create confidence in potential investors and partners.
Step 3: Market and Industry Research
If you don’t understand your audience or the industry you’re working in, you’re doomed. Researching the market is critical, and there’s a big difference between standard business and e-commerce here.
When you’re researching the market for a retail store, you’re very limited in who your audience is, so it’s a bit more cut and dry.
As for e-commerce, the world is your audience, but you need to narrow it down to a specific demographic to cater to your products and marketing to those people.
Ask questions like:
- What problems do my customers have?
- How can I solve these problems?
- What products solve those problems?
- When do people shop for these products?
- How often do they purchase them?
Step 4: Operations Plans
Forget learning how to create a business plan; we all go into business to profit, right? Having an operations plan helps ensure you remain profitable by keeping all your costs in line. This section of the business plan discusses managing, staffing, preparing products, fulfilling orders, inventory management, customer service, and more.
This part is where you get to start outlining what a typical day will look like in your business. How will it run, how will people convert, and how will you fulfill those orders?
Start thinking about things such as:
- What equipment and supplies do I need?
- What is the chain of command; who is in charge?
- Do I need to develop products, or am I reselling others?
- What are my staffing needs?
- Will my operations change or remain the same as I grow?
Make sure you keep your industry, market, and target audience in mind as you prepare your operations plan. You don’t want to venture off in the wrong direction as you dive deeper into it.
Step 5: Marketing Plans
It’s a no-brainer that you’ll have to market your business if you want to have success, but you need a plan. In e-commerce, you have a few different options, and the choices you make will determine a lot.
You need to highlight the methods you plan on using so partners and investors can see that you have a clear path to success. Some of your choices may be:
- PPC (Pay-Per-Click)
- SEO/Content Marketing
- Guest Posting
- Social Media
I recommend using a combination of all of these because they each have upsides and downsides. For example, SEO is a relatively low cost to get started, but it takes time, and if you don’t possess the knowledge yourself, you’ll have to hire an agency to do it for you.
PPC can be costly if you don’t know what you’re doing, but the results can come quickly because you’re leapfrogging over a lot of the competition.
Regardless of what marketing methods you choose for your e-commerce business plan, you need to highlight them and explain how you plan to use them.
Step 6: Costs and Revenue Predictions
Now you need to wrap up your business plan and put a nice bow on top. Based on everything you’ve included so far in your business plan, what are your costs versus your revenue? Keep in mind that first-year revenues aren’t always extravagant, but you need the potential to gain more revenue in the future.
As long as investors and partners see that you have the growth potential, they won’t worry too much about first-year losses. The goal should be to keep your costs as low as possible and your revenue as high as possible (makes sense, right?).
Predict the total cost of operation in your business in the first year or two and include that in the plan. Then, anticipate the revenue prediction as well and include that.
If you’ve followed everything in this guide, there should be a clear path that brings you to those numbers. You should know how much everything will cost to get started and operate the business for a year.
Based on your market and what your competition is doing, that’s where you get your first-year revenue predictions.
Make it transparent and keep it simple.
What Do I Do With an E-Commerce Business Plan?
Now that you know how to create a business plan, what are your next steps? What do you plan to do with the business plan? Most people will use their business plan to find investors, partners, and employees when they’re getting started.
If you’re thinking about pitching to investors, you’ll want to choose carefully because not all investors are the right choice for you. Even if someone is willing to give you what you ask, they might not be the right fit, and taking their money will lead you down the wrong path.
First, you want to look at an investor’s expertise. When they have experience in a certain area, it makes it easier for them to understand your potential, and they can offer guidance to help you succeed.
Second, in what stage is your business? Different investors specialize in different stages. Some invest in pre-seed, while others won’t even hear your pitch until you have revenue.
Third, how much do you think you need? What you think you need and what you need are two different things.
Lastly, how do you plan on involving your investors? Some investors will back you financially and offer nothing more, while others will demand consistent financial updates and reports while offering guidance and assistance. You need to determine how involved you want your investor to be in your operations.
Now that you know how to create a business plan, the rest is up to you. Remember that gathering information and understanding something is important, but it’s nothing if you don’t implement what you learn. Take the steps outlined in this guide and put them to work.
If this seems a little daunting, we have plenty of resources to help you. Your business plan doesn’t need to be this elaborate essay; you can complete it in a day with the right strategy.
What do you think is the most important part of creating a solid business plan?
The post How to Create an E-Commerce Business Plan appeared first on Neil Patel.
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