You glance at the clock and it’s only two in the afternoon. It’ll probably be another seven hours before you’re finally able to quit. Under the circumstances, another cup of coffee seems like a good idea. Telecommuting might be imperative right now, but it’s pretty relentless, and your salary feels less adequate every day.
Last night, your partner asked you a question over dinner.
“You know so much about retail. Why don’t you start your own business?”
You didn’t immediately have an answer. Sure, you’d considered it before, but you hadn’t felt ready to take on the responsibility.
“Perhaps this is the right time.”
Stirring cream into your Americano, you remember how that statement made you feel. Excited; intimidated; overwhelmed. You hadn’t known where to begin. Do people really just wake up one day and decide to start an ecommerce business?
Actually, yes, they do. There’s a catch, though: about half of all businesses fail within the first five years. Every month in the U.S., nearly 550,000 new companies take flight. Around 80% of them survive about 12 months — 70% last 24 months or more. Roughly 50% of businesses make it half a decade, and approximately a third survive ten years.
So, why do businesses crash and burn? The answer lies at the beginning of the trail. Many failed businesses don’t start with a solid strategy. Companies that succeed have one common seed — a great business plan.
This article is a practical and logical guide to business planning. By the time you hit the final paragraph, you’ll know how to draft your own business plan and how to use it to help your company succeed. Ready, skipper? Let’s set sail.
What is an Ecommerce Business Plan?
Excellent business plans help companies maintain focus on a predefined set of goals. They also help company owners present their businesses to lenders and investors. If your business is an online vehicle, your ecommerce business plan is a roadmap. First, define your business — your vehicle — and then describe where you want to take your business and how you’ll get there.
The best business plans read like travel itineraries. They include blueprints for growth, projected timelines, and financial goals. Like real-world route planners, they identify potential roadblocks and outline contingency strategies. They clarify topics like cash flow, expenses, marketing tools, and distribution channels in detail. Basically, your business plan is the framework for your enterprise.
Why Should Your Online Store Have a Business Plan?
Your ecommerce business plan is the most important strategic document you’ll ever produce for your company. Writing it helps you clarify your goals and pinpoint problems in advance. As you create your business plan, you will:
1. Gain a deeper understanding of your business.
Maybe your business concept hit you out of the blue in the shower one day; perhaps you pondered for years before taking the plunge. Either way, writing a business plan can help you get to know your baby better. You’ll probably think of things you hadn’t thought of before — and you’ll clarify the good ideas you already have.
Many entrepreneurs begin with a concise list on a small piece of paper and expand their plans from there. If you run into subjects you don’t know much about (tax questions, supply chain issues, warehousing needs, employee benefits options, and so forth), put them on a separate list and research them later.
At this stage, what you’re aiming for is a synopsis of your final business plan. As you write, try to answer the following questions:
- Do you plan to sell physical products, digital products, or services?
- Who is your customer?
- Will you need an external site, or can you work from home?
2. Identify resources needed to run your business.
You have a top-notch business idea. Now, you need to gather the resources to make it happen. Nearly all legitimate businesses require some form of monetary investment, but the list of supplies doesn’t stop there. Let’s look at three resource categories: financial, physical, and human.
Most small business owners start with relatively limited funds and build capital as they progress. If you can afford to buy equipment and inventory using your savings, that’s great. If you can’t, there are four main options open to you:
- A business loan.
- A partner of financial means.
- An angel investor.
- A Kickstarter (or similar) crowdfunding campaign.
Think about the type of tech you’ll need for your ecommerce business, like (at least) one reliable computer, a decent camera to take product photos, a printer, and shipping supplies. If you plan to manufacture your own products, you’ll need raw materials or ingredients. And don’t forget about the big items you might need, like business premises, vehicles, and machinery.
Some entrepreneurs prefer to work alone, while others form partnerships. Partnerships have several advantages over flying solo: you can pool ideas and financial or physical resources, for example.
Human resources also include employees, subcontractors you rely on to perform essential tasks (couriers, freelancers, etc), and people in your supply chain. You need talented and dedicated people on your team — and you’ll need to pay them accordingly, so they stick around.
3. Build a road map for the future.
Where do you want to be in five years? 10 years? Do you plan to build a global ecommerce empire? Do you intend to take your company public? Do you want to create jobs in your city or help people thrive in developing countries — or both?
This document is your game plan for success. In it, you’ll describe your expansion strategies, your sales goals, and your personal ambitions. You’ll come up with milestones and identify key performance indicators (KPIs).
4. Evaluate what your competitors are doing.
Many fledgling entrepreneurs spend countless hours worrying about whether or not their business ideas are unique. Wanna know a secret? It’s okay if your concept isn’t one of a kind. What matters is how well you measure up against your competition.
“In battle, if you make your opponent flinch, you have already won.” — Miyamoto Musashi
With that in mind, take some time to evaluate your competitors. What do they sell? What are their strengths and weaknesses? Can you learn from their mistakes? Can you source or create products that are just as good or better than those offered by your rivals, but without the drawbacks? If so, you’ll gain the upper hand in the ecommerce marketplace.
5. Spot opportunities.
Opportunities are everywhere — you just have to know where to look. You might be able to form marketing partnerships with companies whose products complement yours. You sell sneakers; they sell athleisure. You sell tea; they sell mugs.
Don’t discount the power of influencers. Partnerships with popular Instagram, YouTube, and Facebook personalities can yield substantial dividends. Because their followers consider them relatable, influencer product endorsements rapidly lead to revenue. Some influencers provide marketing services in exchange for free products, while others operate more like freelancers.
Who Needs an Ecommerce Business Plan?
Simply put, almost all entrepreneurs benefit from robust ecommerce business plans. Okay, so hobbyists selling hats on Etsy might not need a 10-page investment proposal, but they should at least write a list of long-term goals.
1. You’re just starting out.
Let’s imagine that you’ve only just scratched the surface of your business career. At this point, the sum total of your company is basically you sitting in your kitchen, staring at a product prototype. You want to sell 20,000 of these things by next fall, but you don’t have a supply chain or a distributor network yet. You need a business plan to help you:
- Set clear goals.
- Create a strategy for success.
2. You are seeking investors.
You’re on the up-and-up. Three months ago, you ordered a small-scale production from a manufacturer in Vietnam; the merchandise arrived yesterday, and it looks good. You’d like to place a bigger order, but you don’t have the capital to do it by yourself. You need a business plan to help you:
- Convince investors that your business is a good bet, or.
- Create an effective crowdfunding campaign.
3. You’re ready to scale your business full-time.
You have a small ecommerce store and want to upgrade to a bigger, better one. You’re ready to give up your day job and take your online business to the next level. You want to invest in a broader product range and hire additional employees. You need a business plan to help you:
- Get a major business loan from your bank.
- Determine KPIs, milestones, and partnership opportunities.
Getting Started With Your Ecommerce Business Plan
Full-scale business plans are pretty complex documents. Before you begin writing in earnest, review a few business plan templates and read a couple of sample business plans. Then, consider the following three questions and use your answers to create a strategic outline.
1. What are you selling?
Ecommerce companies sell three different types of products: goods, services, and digital products. You need to tell your readers what you intend to sell and why. It’s okay to write in general terms if you offer an extensive range of products; if you’re a single-product retailer or have a limited assortment, be more specific.
If you plan to sell digital products, be clear about what they are and how customers gain access to them. Will consumers download software, music, or educational videos from your site? Will you offer a streaming service? What about licensing requirements?
If you’re a service provider, tell your readers exactly what you do and where. Are you strictly local? Do you travel long distances? Will you partner with similar services providers in other areas? Do you plan to expand your service-based company across the country at some point?
2. Who is your target customer?
Many ecommerce businesses sell their products directly to consumers. If you’re a business-to-consumer (B2C) company, try to come up with a consumer profile and use it to create an online marketing strategy for your product. Are you trying to sell galvanized water troughs to dairy farmers or handmade French hair clips to fashionistas?
Some online retailers and service providers operate a business-to-business (B2B) model. Manufacturers who sell raw ingredients to food corporations or components to electronics companies fall into this category.
Whether you’re B2C or B2B, you need to try to figure out what makes your customer tick. What are they looking for when they visit your site? Are they practical and frugal, or do they have disposable income to spare? Do they want to buy plastic pellets in bulk, or do they want to invest in art?
3. How are you sourcing your products?
Some ecommerce companies manufacture their products in-house. Perhaps you make bespoke furniture or fishing rods; maybe you create iPhone apps or accounting software. In that case, all you have to do is buy shipping supplies or set up a downloading service, and you’re all set.
Most ecommerce retailers depend on a supply chain of some kind, though. LARQ, for example, came up with a water bottle prototype and used crowdfunding money to order its first production run. If you plan to use a third-party manufacturer, try to develop a good working relationship well in advance of your launch date.
Other product-sourcing options include:
- Dropshipping: Partner with a dropshipping service; products are made off-site and shipped out for you.
- Wholesale: Buy a large number of products at once, store them on-site, and ship them out when orders come in.
7 Parts of an Ecommerce Plan
All business plans are a little different, but most contain seven key elements. You might decide to add additional topics when you write your own plan, but if you begin with the following headings, you’ll get off to a good start.
- Executive summary.
- Company overview.
- Market analysis.
- Products and services.
- Marketing plan.
- Logistics and operations plan.
- Financial plan.
Perfect for time-limited reviewers, an executive summary refines your business idea into a clear and persuasive one-page outline. Your executive summary belongs near the beginning of your business plan — but you might want to bookmark this how-to and read it again later. Why? Because you’ll write your executive summary last. Again, why? Because as you create the rest of your business plan, you’ll develop a deeper understanding of your venture and your customer.
For the sake of this article, we’ll pretend we have a fledgling business called Candy Inc. Unlike retailer Bon Bon Bon, Candy Inc. is a B2B company, so it only sells sweet treats to other companies. Candy Inc. recently migrated from Shopify to BigCommerce. Let’s dissect an executive summary and provide examples based on Candy Inc.:
1. What does your business do?
Provide a brief summary of what your company does. Make it compelling and easy to digest. Are you a B2B business or a B2C business? Do you sell products or services? What industry is your business in?
Candy Inc. is a B2B candy wholesaler with state-of-the-art warehousing facilities in Seattle. We sell bulk quantities of high-quality American-made candy to other businesses.
2. What goals does your business want to achieve?
Write about your vision for your company. What do you want to accomplish? Why are you better than the competition?
The products we sell are made in the USA by family-run businesses with decades of traditional candy-making experience. We want to support these homespun chocolatiers and confectioners by forming partnerships with as many American and international candy stores as possible.
3. What products do you sell?
Provide a short but information-packed overview of the products you sell. If you sell a lot of products, it’s okay to speak in general terms. If you believe that your products are better than other companies’ similar products, say so.
Our product selection includes a range of naturally flavored taffy, hard candies infused with lavender, mint, and lemon verbena and chocolates made by intergenerational artisans in the Midwest. We also offer candy personalization services, including corporate packaging.
4. Who is your audience?
Write about your target audience here. If you plan to market your products to a range of different consumers, tell your readers who they are.
Our main clients are small- and medium-sized privately-owned candy stores across North America. We also sell limited-edition candy to department stores and large retail corporations, like Target, who capitalize on niche markets during the holiday season. Finally, we offer candy packaging services for large-scale corporate events.
5. Where are you going to sell your products?
If you have a physical store as well as a website, mention it here. If you’re strictly an ecommerce merchant, you might have several online sales channels — a company website, eBay, Amazon, Etsy, and so forth.
The Candy Inc. website is intuitive, modern, and well organized, and it has a highly effective embedded search function for visitors. We use SEO marketing techniques to improve search engine ranking, and we run banner ads on food service and grocery wholesaler sites to draw attention to our company.
6. What is your monetization strategy?
Offer a concise summary of your monetization strategy here. Will you work with wholesale companies? Will you form partnerships with influencers, or will you go with affiliate or email marketing? Will you produce private or white label goods?
Candy Inc. currently works with 50 small- and medium-sized candy stores in America, Mexico, and Canada. We work with other, smaller candy wholesalers and form partnerships with wholesale-centric social media influencers. Our private label candy production service has a 70% profit margin over confectionary, packaging, and printing costs.
Now you need to provide readers with a comprehensive overview of your business. By the time they’ve finished reading your company description, reviewers will know what type of business you run, what you plan to do, and what makes your venture special.
This part of your business plan is succinct but vital. Start with a concise opening paragraph, and then dive into the following topics:
1. Brand name.
List your main brand name or your business name and its associated brand names. The best brand names are both memorable and easy to associate with their parent companies’ industries. Take Burrow, for example, it’s a simple single-word moniker, and it implies that Burrow’s sofas are comfortable places to curl up on.
2. Business structure.
Write about the legal structure of your company here. Are you a sole proprietor, an LLC, an S-corporation, a C-corporation, or a partnership? Consider speaking to an accountant if you’re not sure how to explain your organization.
3. Domain name.
If you haven’t already got one, now is the time to register a memorable and relevant domain name for your business. Keep it as short as possible, and make sure it includes your brand name for SEO purposes.
Example of a great domain name:
Solo Stove’s domain name, SoloStove.com, is ideal. It’s short, it matches the brand name, and it’s easy to remember.
Your mission statement is part of your branding strategy. In one or two sentences, it has to convey why you are in business at all. What drives you? What’s your passion? Why did you come up with this business idea in the first place?
Example of a mission statement:
LARQ has a terrific mission statement: “You are what you drink. So drink brilliantly.”
Tell your readers all about your overarching business-related dreams. Where do you want to take your company? How will you get there? How can your customers travel with you?
Example of a vision statement:
Camelbak’s vision statement is both entertaining and inspirational. Here’s a snippet:
“Our vision is our BHAG-Big Hairy Audacious Goal. It’s an envisioned state of the future, and if we deliver on our vision, we will have a positive impact on the world. Together, let’s eliminate disposable plastic bottles.”
6. Background information.
Everyone loves an autobiography. This is your chance to provide one for your business. When did you first come up with your idea? How has your business grown and changed since then? If you have any kind of rags-to-riches story, write it here — but keep it short.
7. Your team and key people.
Mention all the major players in your company here. You don’t have to write down all 300 of your warehouse employees, but you do need to list your key personnel. Here are a few examples:
- Company owner — that’s probably you.
- CEO — that’s probably also you.
- Customer service manager.
- Logistics manager.
- PR and social media specialist.
- Advertising manager.
- SEO manager.
To win in the ecommerce world, you have to know your target market. As you write this section of your business plan, you’ll get to know your sector and specific industry’s long-term outlook. You’ll learn about your competitors, your company’s market potential, and your consumer demographic. By the time you finish drafting your market analysis, you’ll be an expert in your niche.
1. Market opportunities.
To create sales projections, you have to estimate a baseline level of interest for your product or service. Astronomical profits are fun to imagine, but you need solid independent data, and not fantasy, to come up with a legitimate set of KPIs. Make sure you know as much as possible about the following two factors:
- Customer behaviors: You have to know who your customers are and what they want. What are their psychographics? What are their demographics? What do they spread on toast every morning? The more you know about your consumer base, the better you can craft compelling messages.
- Industry trends and growth: Imagine you sell a product aimed at college graduates. How many people plan to get a bachelor’s or master’s degree in the next five years? What do college graduates tend to spend money on? The more data you have, the better.
Conduct a SWOT analysis of your company: To succeed, you have to tackle issues before they undermine your operation. SWOT analyses examine the strengths, weaknesses, opportunities, and threats.
- Strengths: List the best things about your company.
- Weaknesses: Be honest. Are there things you need to work on?
- Opportunities: Can you turn industry challenges into golden opportunities?
- Threats: Which external threats do you need to tackle to succeed?
2. Competitive analysis.
If you don’t understand your competitors, you can’t gain the upper hand. Conducting a competitive analysis can help you get ahead of the crowd. First, try to pinpoint the market leaders in your industry; then, identify your direct and indirect competitors. Line them up and list each company’s:
- Business model.
- Mission statement.
- Domain name.
- Monthly website traffic.
- Key product features.
- Product pricing strategy.
Pick a few real contenders and do some in-depth market research to find out what makes each one tick. Do they have the potential for improvement? Are there gaps in the market that you can fill? Can you provide better products or services than your competitors?
Once you know what your rivals have to offer, you can position your company as a better alternative. There are three main ways to do this:
- Differentiation: If you offer a totally unique product or a significantly better version of your competitor’s product, you’ll stand out.
- Consumer segmentation: Some companies concentrate on a very specific target market and build a following in that niche before expanding into the mainstream.
- Cost leadership: Put simply, you promote your company as an industry price leader — money talks, but discounts sing.
Products and Services
You gave a brief overview of your products or services in your executive summary. Now it’s time to expand on that description. If you peddle a niche product or service, go into detail about it; if you sell a range of items or provide a number of different services, highlight general features and benefits (quality, price, uniqueness, etc).
Make your products and services section easy to digest: keep paragraphs short, stick to nontechnical language, and use bullets to showcase product characteristics. Stay positive, focus on your company’s experience in the industry, and show off your own expertise. If you have testimonials from pre launch product testers, include them in this part of your business plan.
Your business idea rocks, and you’re embedded in a growing niche. Now you have to drive traffic to your ecommerce site and convince visitors to buy your products. In short, you need an effective marketing plan.
First, you need to determine your marketing campaign budget. Unless you have unlimited funds, you’ll need to find a way to put your product in front of potential customers without spending a fortune. Let’s call your customer Mrs. Jones. Where does Mrs. Jones look for inspiration? Where does she shop right now? You need to find Mrs. Jones and show her your fabulous product.
Not sure where to begin? Get with Neil Borden’s marketing mix and use the 4 Ps to write a great plan:
- Product: What makes your product or service unique? How does it fulfill consumer demand?
- Price: How much does your product or service cost to produce or provide? How much will your customers pay?
- Place: Where will potential customers look for your product? Where will your product receive the most attention?
- Promotion: Which marketing channels will you use to highlight your product?
First popularized in the 1950s, the 4 Ps concept still works in the era of ecommerce. That said, most modern marketing gurus add three more Ps to create an extended 7 Ps marketing mix:
- Packaging: Does your packaging exude quality? If you provide a service, do you look professional on-site?
- Positioning: Is your branding up to scratch? Do you maintain high customer satisfaction scores?
- People: Do you have the right people on staff? Do they work well with one another?
Exceptional marketing strategies drive positive conversion rates. The question is, which channels match your consumer demographic? Do your potential customers hang out on Instagram, or do they prefer reading WikiHow articles? Step one: figure out where your future clients are now. Step two: create attention-grabbing marketing strategies and plunk them in front of your consumer base.
1. Paid marketing channels.
Most companies use paid marketing channels to some extent because they produce measurable results relatively quickly. Examples include:
- Pay per click (PPC) advertising: You pay a publisher like Google each time someone clicks on a promoted link.
- Affiliate marketing: Websites and blogs sell your product for a percentage of the profits.
- Social media ads: You pay to advertise your product on Facebook or Twitter.
- Influencer marketing: You hire a social media influencer to promote your product.
2. Organic marketing channels.
Organic marketing channels drive traffic to your website over a longer period of time. Organic marketing tactics help build your brand name. Examples include:
- Search engine optimization (SEO): You include relevant keywords and phrases in your website content; search engines notice and your site ranking improves.
- Social media pages: You interact with followers and maintain an up-to-date presence on Facebook, Instagram, and Twitter.
- Blogger networks: External blogs drive traffic to your site via strategically placed links.
- Content marketing: Advertorials, articles, and on-site blog posts drive traffic to category and product pages.
Logistics and Operations Plan
What do you physically need to run your ecommerce company? The logistics and operations section of your business plan covers everything from tech requirements (computers, printers, cameras) to warehousing. Writing this segment of your plan will help you understand the realities of running an ecommerce company. If you need investors, this is where you list your business’s everyday capital and expense requirements.
Your logistics and operations plan should cover the following:
- Suppliers: Where do your raw materials or products come from? Do your suppliers require payment in advance? If so, how much?
- Production: Will you create your own products, or will you use a third-party manufacturing company or a dropshipping company? How long is your lead time? How will you cope with spikes in demand?
- Shipping and fulfillment: If applicable, how long is your projected wholesale shipping time? How long will it take you to pack and ship products to customers? Will you use a third-party shipper? Will you ship internationally?
- Inventory: How much inventory will you keep on hand, and where will you put it? How will you track incoming and outgoing inventory? Do you need warehouse storage space?
Nearly all businesses need a certain amount of capital to get going. Some entrepreneurs come up with their own start-up costs, while others form alliances with wealthier partners. Still, others look for angel investors, create crowdfunding campaigns, or take out business loans.
Before you begin writing your financial plan, think about your audience and goals. Will you take your plan to your bank management team? Will you show your plan to a series of potential investors? Would it be prudent to include financial projections? Maybe you just want to get a handle on cash flow or calculate return on investment (ROI) potential.
Most financial plans include the following three economic analyses:
1. Income statement.
Your income statement provides a breakdown of your revenue sources and expenses over a specific time period — a month, a quarter, or a year. If you subtract your expenses from your revenue sources, you’ll come up with your bottom line (your profit or loss). You can project these figures based on similar ventures if you haven’t started your business yet.
2. Balance sheet.
Entrepreneurs use balance sheets to calculate how much equity they have in their businesses. All your assets (machinery, stock, business premises, vehicles, etc) go in a column on the left; your liabilities (accounts and wages payable, business loan repayment, business credit card payments, taxes, etc) go in a column on the right. If you subtract your liabilities from your assets, you get your business’s shareholder equity.
3. Cash-flow statement.
Cash-flow statements are like real-time income statements. Instead of listing expenses and revenue per quarter or per annum, cash-flow statements indicate when expenses and revenue go out and come in. If you have more money coming in than going out, you have positive cash flow; if you have more money going out than coming in, you have negative cash flow. If you forecast cash flow, you may be able to adjust the way you do business to keep your company solvent.
A stellar ecommerce business plan provides a solid foundation for success. As you research and write your plan, you’ll learn about important topics, like marketing, market analysis, and financial planning. All that extra knowledge will empower you as you begin your entrepreneurial journey.
Walt Disney once said, “The way to get started is to quit talking and begin doing.”
Go ahead and pick up that pen. You can do this. Let’s go.