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Ecommerce Business Plan: The Step-by-Step Guide For Retail Companies

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Guides & Advice
Ecommerce Business Plan: The Step-by-Step Guide For Retail Companies

Do you want to boost the chances of success for your ecommerce business? Having a detailed ecommerce business plan outlines where you expect your business to get and how you can achieve that.

We’ve been in the ecommerce business for 10+ years, and we’ve seen dozens of ecommerce websites appear and disappear. One of the biggest mistakes merchants make is neglecting to write a business plan before they get started.

A business plan for ecommerce business can help you clarify your tactics, identify business opportunities, figure out potential obstacles, assess what resources you’ll need, and evaluate the viability of your growth plans before you move to a new step. 

So, how to develop an ecommerce business plan? In this post, we’ll discuss the various components that constitute an effective business plan. 

Why should you create a business plan?

To get funding for your business venture, investors require you to send a detailed plan, so they can evaluate if your ecommerce business can make profits year after year and mitigate any upcoming risks. There are also a few other benefits of having a business plan, even if you don’t require funding:

  • You get a clear picture of all the business matters.
  • With a business plan, it’s much simpler to communicate your business vision to your employees to build confidence in the venture.
  • It helps to define the resources necessary to make your business thrive.
  • The business plan can be used to identify your business’s weak and strong points.
  • It can help you establish a course of action and develop accurate projections.

How to write an effective business plan: a step-by-step guide

Writing a business plan for your company can help you reduce unnecessary expenditures and stay concentrated on your long-term goals. Look at these components you should add to your ecommerce business plan.

Executive summary

The first part of your plan is the executive summary. In this section, you should set out briefly your whole business plan to encourage potential investors to give their funding support. 

Although this is the first part of your business plan, it’s better it write it after you’ve finalized the rest of your business plan. It’s actually much simpler as you can take the best parts from the sections you’ve already written and include them in the executive summary.

In the executive summary, you need to mention: 

  • business concept and objectives
  • target market
  • what tells you apart from your business rivals
  • a little bit about the goods you’re going to sell online
  • working staff
  • current financial state
  • projections about the funding

The executive summary is aimed to give a high-level overview of your business. It has to be clear, well-organized, short, relevant, and shouldn’t exceed one page. 

Company description

The company description shares all the essential details about your ecommerce company. Typically, this is what you should include in company description:  

  • Company name and location.
  • Legal structure ( partnership, sole proprietor, limited liability company, corporation, etc.)
  • Types of ecommerce business (B2B, B2C, C2C or C2B)
  • Licenses and permits
  • Founders and roles in the company (CEO, COO, CIO, CTO, etc.)
  • The number of employees ( their skills and responsibilities)
  • The resources that a company operates
  • The main competitors on the market
  • Short-term and long-term business goals (potential challenges and solutions)
  • Company values, vision, and  mission statement

Keep your information brief and sequential to minimize confusion and lend credibility to your business. 

Products and services

Products and services part will feature in almost all sections of your business plan, however, it’s crucial to provide a separate section that provides more detailed information on each product. This part aims to give readers a clearer idea of the product or service you provide, its features, characteristics, prices, etc. 

Feel free to make this section as detailed as you want, but, there are some key elements you should include:

  • A detailed description of your product and its features
  • A unique value proposition of your product or service
  • The price of your goods in comparison to your top competitors
  • The expected profit margin
  • The production and delivery details ( manufacturing, wholesaling,  drop shipping, etc)

Once you specify which business revenue models you will apply, you will need to explain why it works for your ecommerce company. You could also add details about overhead costs, exclusive deals with suppliers, how you get the high-demand products, personalized customer service, and more.

Market analysis 

Market analysis is aimed to obtain an in-depth knowledge of the market you’re operating in, get a clear picture of the size of the market for your goods, analyze your business’s position, target customer demographics, and the existing competition.

Opt for the market with a large number of customers, that need your goods. If you select the wrong market, or the relevant market at bad timing, you may face problems to drive sales. It’s crucial to show your potential investors that the market is large enough to get profit within the specific framework.

To complete the market analysis of your business plan you should:

  • Study recent market reports.
  • Visit closest stores that sell similar items and talk to the customers to gain valuable insights.
  • Check out IBISWorld to get industry and market research reports for the U.S., UK, and more countries. 
  • Statista also provides free and paid insights, infographics, and statistics across 600 industries and 50+ countries.
  • Another way to research your market is with the help of Google Trends. Google Trends is a free tool that provides keyword-related data across different regions. The tool uses graphs to compare the search volume of different products over time. 
  • Social media tools such as Facebook Audience Insights can help to get customer insights on the largest social network.

There are also two analytic tools we recommend you to use in this section to learn further about the market:

  • PESTEL analysis (political, economic, social, technological, environmental, legal factors that may have an influence on your business operations)
PESTEL
  • SWOT analysis (strengths, weaknesses, opportunities, and threats of starting your business)
SWOT analysis
SWOT analysis. Image credit: WordStream

By using these PESTEL and SWOT tools, you will be able to make a systematic and thorough evaluation of your business. 

Marketing plan

A marketing plan allows you to plan and monitor your marketing tactics aimed at your target audience over a given time span, for instance: 

  • SEM (search engine marketing), 
  • SMM (social media marketing: Instagram, Facebook, etc)
  • SEO (search engine optimization)
  • content marketing
  • email marketing

Define the KPI (key performance indicator) you’ll apply to evaluate the progress of each marketing strategy and try three or four at once to find out the most effective ones that give you the best ROI (return on investment).

For example, let’s say you want to use Instagram as one of your marketing strategies. You can invest in ads on Instagram, post pictures of your products, create interesting content, and more. Your KPI could be Instagram subscriptions, likes, and comments. 

Most marketing plans include information on four key topics:

  • Marketing solutions
  • The total marketing budget (per day, month, year)
  • Deadlines when you expect to execute your marketing strategies
  • Any relevant services where you want to promote your products

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Business operations 

The operational plan for ecommerce relates to everyday business operations and should answer the question of how you are going to create and distribute your products or services, so everything goes smoothly.

In this section, you should dwell upon the administrative side of your business processes, including:

  • Facilities (offices, physical retail space)
  • Staff members (duties and working time)
  • The tools and technologies (computers, office desks, landline phones) 
  • Suppliers
  • Fulfillment and shipping (in-house, third-party partners)
  • Inventory management (storage, tracking)
  • Customer support (requests, complaints, and refunds)
  • Production ( manufacture, wholesale, or dropship )

Certainly, you can always return to this section and add or delete some information. As soon as you have your supply chain and production process defined, you’re ready to proceed with your business finances.

Financial plan

Everyone’s favorite topic. Money matter. In this section, you write a report of your financial transactions and calculate all the expenses. You need to project how your ecommerce company will operate and evaluate the overall financial health of your business.

Financial plan. Image credit: Slidesharecdn.

The following aspects should be taken into account:

  • The sales forecast (per month, next 1 – 5 years )
  • The expenditure budget ( how much money you’re planning to spend monthly)
  • The cash-flow statement (how much cash you have at your disposal for a certain period )
  • The ecommerce sales projections
  • The expenses on materials and operational machines
  • Prior income and future projection
  • The funds for marketing

You’ll need a financial plan for an ecommerce business to show that the revenue you’re foreseeing will lead to an ROI. Having a financial plan section will also be beneficial if you are looking for fundings from private equity investors or angel investors. Moreover, if you want to take credit from the bank, they will also require a financial plan to be sure that you can repay the loan. 

Appendix

The appendix is the final section of your business plan where supplemental documents required for ecommerce business goes. When readers need to verify any information from the earlier sections, they can refer to the corresponding documents. Examples of supporting documents included in the appendix section are : 

  • Personal resumes
  • Credit history (personal & business)
  • Letters of reference
  • Business contracts
  • Legal documents
  • Business tax regulations
  • Product pictures
  • Licenses, permits, and patents
  • Detailed information on market studies (graphs, tables)
  • Copies of lease agreements

Your ecommerce business plan is completed—now what?

Strategic planning for your ecommerce company is a great way to form a complete business concept, verify your business idea, organize your strategies, and identify your business’s strengths and weaknesses. 

A well-written business plan navigates you through each stage of developing your business and might come in handy when you are searching for investors who should understand your business objectives.

Writing a business plan is only one step to create an ecommerce business. Read: how to start an ecommerce business:

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