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How to Write A Good Ecommerce Business Plan

By May 20, 2016Business, Ecommerce

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When it comes to setting up your eCommerce store, writing a business plan is probably not the first thing on your agenda.

Most eCommerce store owners are fixated on writing tantalising product descriptions, uploading pretty pictures and ensuring that their checkout page is optimised.

While these are all excellent and important things to do, having an eCommerce business plan is truly one of the most effective ways to ensure that your online store will- function smoothly in the long run, help you to achieve your goals and deliver a positive return on investment.

Taking the time to write a thorough business plan may seem like a lot of work, however it can truly save you a lot of time and money moving forward.

How?

Having an eCommerce business plan ensures that you are building your online store on a solid foundation and that you have a plan of action. It can also help you to see the bigger picture and be in a better position to chart your growth and sales.

Down the road when you reach a plateau or issues arise, your eCommerce business plan will also act as a guiding force and will hold you in good stead no matter what the problem or pitfall.

To keep it simple, here are:

8 reasons why having an eCommerce business plan is a positively awesome idea

  1. Having a business plan helps you to focus on the bigger picture and your larger goals
  2. Having a business plan helps you to chart a strategy for future growth and development
  3. Having a business plan can help you to effectively manage a plateau or stunt in growth
  4. Having a business plan can help you to know your customer, your industry and how you can compete
  5. Having a business plan can help you to launch marketing campaigns and drive sales
  6. Having a business plan can help you to manage your budget and any potential funding needs
  7. Having a business plan can give you strength when issues arise and help you to avoid pitfalls
  8. Having a business plan can help you to more effectively manage your business overall so it is more profitable and easier to run

Now that you are convinced writing an eCommerce business plan is as step in the right direction for you and your company, here is your guide on how to put it all together:

How to Write a Good eCommerce Business Plan

If you are dealing with investors your eCommerce plan may need to include certain criteria, however if this is a plan for your own records we have a few suggestions of where to start.

(This plan is excellent for all established businesses, startups and emerging eCommerce stores.)

Part 1: The Executive Summary or Value Proposition

The executive summary or value proposition highlights the entire business plan in just a few short sentences. While the executive summary is written last, it should appear at the top of your report and should be as clear and concise as possible.

To help you be succinct as possible, perhaps write down a bullet list of all the main points and then construct your sentences around them. A good executive summary or value proposition should really only be a few sentences at most.

Here are a few bullet points to help you get started:

  • What product or service do you plan to sell?
  • How do your products or services differ and why?
  • How does your product offer something of value to your target audience?
  • What are your financial projections?
  • Who makes up your team and what are their top skills?
  • What funding do you need?

If you are planning on writing your eCommerce business plan for an investor, be sure that your executive summary is the best part of your plan, as that is what you will most likely be judged on.

Part 2: A Description of Your Company

Having a company description is next on the agenda, and this acts as an overview as to what your company does and what products and services your company offers.

In this section, you will also add the types of consumers you attract, as well as what gives your company a competitive advantage. To help you write this section, think of it as a pitch of your company. You want to generate excitement and interest into your business, but you also want to clearly highlight what you do and what makes you special.

Here is an example of a company description from a hiking clothing company called Atlas Hiking Co.-

“Atlas Hiking Co.is a lifestyle hiking company that produces high performance hiking shirts for outdoor lovers. Our proprietary SPF40 fabric is one the lightest fabrics on the market, providing mountain lovers with maximum comfort, both from a breathability and sun protection standpoint. Our product is made in the USA and a portion of our profits are donated to preserve national parks around the country.”

This is an excellent company description because it clearly highlights what the company does, what makes it unique and what their philosophies are when it comes to business. It also uses many adjectives and sensory words so you not only know the facts of the company but also the feel of the company.

Part 3: Market Analysis 

In the market analysis section you need to include research about your target audience and your industry. In this section, it is very important that you highlight and define your target customer including their gender, age range, location, interests, needs, wants, socioeconomic status etc. In this section you should also highlight who you are selling to, for example-

  • Business to Business (B2B): organisations, corporations and non-profits
  • Business to Consumer (B2C): individual customers
  • Marketplace: middleman between big businesses and B2B’s or B2C’s

Understanding your audience is one of the most important things for any business, so you may want to flesh this section out to help create more effective marketing strategies in the long run. There are a few ways you can do this such as-

  • Creating an industry report: look for growth in your industry, the largest customer segments etc.
  • Shopping around: visit brands that sell similar products and services and see what they are doing for ideas and suggestions. You may even be able to get them to share with you what their best or worst selling products are, or what common pitfalls they experience in your particular industry.
  • Competition: create a spreadsheet of all your competitors and include, what your competition is missing, what gap your company closes and where you can add further value.
  • Google Analytics: you can get a good sense of how in demand your product and service is by looking at Google’s keyword planner or trends page. Remember, Google is a great way to get ideas, but just because something has a high search volume doesn’t mean that it is a solid win either.
  • Trade shows: this is a great way to build connections and understand what other people in your industry are doing. Trade shows are also a great opportunity to meet manufacturers, competitors and see where things are heading in your industry.

By the end of this research you should be able to clearly define how big your overall industry is and if there is room for your company to operate.

Here is a checklist of questions that you may want to ask yourself after you have completed this section:

  1. What does my overall industry look like and where will my company fit in or stand out?
  2. How crowded is my industry with competitors and what are the main issues when it comes to competition?
  3. What can I offer that my competitors can’t?
  4. Who is my target customer and what are their spending or purchasing habits?
  5. Is there a sub-group of my target audience that I can more effectively market to?

Part 4: The Operational Plan

The operational section basically highlights all of the vital processes that your business needs to run. This includes the day to day operations that your business is going to complete, such as your hours, your location, your inventory and accounting practices. You can create subheadings for each of these in order to make your plan more readable and efficient.

In this section you may also want to include the technology that you plan to use. For an eCommerce store you may need to look into using-

  • Shopping cart software or plugins (eg. Shopify)
  • A payment processor (eg. Paypal)
  • Fulfillment centre (eg. Amazon)
  • Social Media Planning or Scheduling tools (eg. Buffer or Hootsuite)
  • Accounting software (eg. Quickbooks)
  • Email services (eg. MailChimp, Aweber etc)
  • Customer Loyalty Programs
  • Webhosting/Servers/Domains

In the operational section of your plan, it may also be beneficial to include possible things that could go wrong and the steps your company will take to fix it, for example you could have flow chart of what to do if your site goes down or gets hacked.

If you are pitching your plan to an investor, keep what could go wrong simple and to the point, try not to give every possible scenario as this may unnecessarily cause fear and doubt.

Part 5: Management and Employees

In this section you are going to include all the main players and managers in your business and what their roles are. This will help you to define what each member of your team is responsible for and how they are helping to contribute to the success of your business.

For most eCommerce stores you will want to have-

  • Chief Executive Officer
  • Operational Managers
  • Financal Managers or Accountants
  • Marketing and Business Development experts
  • Content Writer/ Blogger
  • Technology experts
  • Logistics or Shipping companies for tangible products
  • Customer Service representatives (for handling returns, questions etc.)
  • Social Media Manager / Photographer

This section is also a great thing you can offer to your employees, as it gives them a clear understanding of everyone’s responsibilities as well as their own. Some businesses also prefer to include salaries in this section, but you can also include this in the financial plan section as well.

If you are just starting out, you may also want to include positions that you hope to create in the future or people that you wish to employ once you reach a certain point of growth.

If you are pitching your business plan to an investor, you may also want to include a brief sentence or two about your employees skills and how they are going to help your business thrive.

Part 6: Products and/ or Services

In this section you need to clearly describe the products and/or services that your company offers and their selling price. It is best to describe your products and services from your customers perspective as this will help you to draft more effective marketing strategies in the long run.

You may also want to include visuals of your products or examples of your services if you have them, as well as any key features that your products or services have.

It is also important to include here where you are sourcing your product from, for example-

  • Manufacturing in-house: you are making your product in-house
  • Third party manufacturing: you are outsourcing your product to be made elsewhere
  • Dropship: you are working with a company who will make your product and ship it for you
  • Wholesale: you are buying goods in bulk and then reselling them

In your products and services section, you may also want to include potential products that you plan to sell in the future. For example, you may start off with launching a red and blue version of your product only, but in time, you may want to launch a gold or silver, depending on sales and how your customers respond.

Be sure to also include a timeline of when you plan to release more products and consider setting up tracking so you can monitor the best types of products to introduce further down the track.

Part 7: Marketing and Sales

This is one of the most important sections of your eCommerce business plan and should include how you are aiming to reach your target audience and sell your products and /or services to them.

When creating this section, also think about any marketing strategies or creative campaign ideas that you want to test out. You can highlight them in this section but also remember to leave room for brainstorming and expanding on your ideas.

Marketing and Sales strategies can get very detailed, so you may want to highlight your ideas on your business plan and have more detailed strategies written elsewhere.

For eCommerce stores, you may also want to include a website development plan which includes all the requirements for your website and perhaps even templates for your sales pages and funnels.

To help you workshop what to include in this category, think about all the channels that you have available to reach your customers such as-

  • Paid Marketing: pay per click campaigns, affiliate sales
  • Organic Marketing: social media, search engine optimisation (SEO), content marketing
  • Other: trade shows, live events, community outreach, festivals etc.

Using a mix of all three of these is a great place to start and will help you to also know which channel your target audience prefers the most.

Part 8: Financial Projections

Financial projects are typically done to cover a 5 year period, but you can use whatever time period works well for your particular business.

In this section, you need to include historical data and your predictions based on that. If you don’t have any historical data, you should include any research that you have found in regards to how much you should be making and why you came to your estimations.

This section can really help you to highlight the profitability and scalability of your business. It can also help you to stay motivated in regards to reaching your goals.

Part 9: Funding Requests and Financial Plan

In this part of your eCommerce business plan you need to define and outline your funding and budgetary needs. You also need to include where you are going to collect those funds from and how you are going to pay them back. Even if you are investing your own money into your business, you should have some idea of how long its going to take to break even on your investment.

This section can really help you to focus your spending as well and ensure that you are properly allocating funds where they need to go.

Most business owners struggle the most when it comes to determining the funding and financial plan, but here are some steps to help you break it down and what you should include in this section-

  • Projected revenue: this can be a reasonable estimation or based on historical events
  • Fixed Expenses: the expenses that will always be incurred by your business
  • Variable Expenses: expenses that will change such as processing fees, shipping fees or taxes

By including these three categories here, you business will have a better understanding of what sales need to be achieved in order to be profitable.

Keep in mind too that in time, you can always update your financial projections and expenses as you get a more accurate picture.

After you have completed both your financial projections and your financial plan, you should be able to answer the following questions-

  1. What is the minimum amount I can sell my products or services for in order to make a profit?
  2. How much product do I need to sell in order to meet my income goals?
  3. What are the margins for my product after factoring in all expenses including marketing, supplier expenses, employee salaries etc.?
  4. What is the lifetime value of my customer or what is the projected lifetime value of my customer?
  5. How much can I afford to spend in order to acquire my customers?
  6. Do I have any big expenses that may require funding from outside investors or can I afford to self-fund everything?
  7. Can I improve my gross margins in any way possible such as buying in bulk, choosing a different manufacturer etc.?

Part 10: Exit Plan

Even though it may not be on your agenda to exit from your business anytime soon, it is important to plan for the day. The reason for this is that it helps you to build up your business in a way that is sellable and interesting to another party.

Options for your exit plan could include a strategy for selling the business, merging the business with another or using the business as a gateway to another venture.

In this section, include your most desired exit plan and goal for your eCommerce store and a possible timeline for when it could occur.

When it comes to creating your business plan remember that you can always change and edit things as you go along. Having a structural foundation however, will help you to run a more efficient business and will help you to make more effective adjustments along the way.

If you have constructed a good eCommerce business plan you should have a pretty good understanding of what your business is all about and how it is going to work.

Your business plan should essentially help you to –

  • Get a better sense of what you know and don’t know in regards to your business
  • Understand where possible gaps or issues may occur in your business or what the “problem areas” may be
  • Have an insight into what resources you will need to make your business successful- for example, funding, employees, sales strategies, marketing plans, technology, manufacturers etc.
  • Create a road map for your business from start to finish which helps to highlight the pathway for achieving all of your goals and projections
  • Know whether your business is viable or not in terms of profits, opportunity, necessity etc.

Even though it may seem like a tedious chore, when you go through the process of writing your own eCommerce business plan it will help you to get a better understanding of your business and your target audience.

It will also put you in an excellent position in terms of being able to take advantage of lucrative opportunties and reducing any potential threats or pitfalls.

There are so many benefits to having an eCommerce business plan, so even if you already have an eCommerce site up and running, perhaps take the time to flesh out a plan and see if it an help you to create a more successful business.

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