So, you’ve finally found yourself in a position where you’re ready to quit the 9-5 life and start your very own ecommerce business. You have your idea sorted, the best product to sell, and the passion to succeed.
Starting an ecommerce business poses a lot of small and big decisions. What should you sell? How do you sell it? Can you do the product photography yourself or do you need someone to do it? However, before you start setting up your version of Amazon, you need to slow down and organize your thoughts. Or, in other words, it’s time to write your ecommerce business plan!
If you’re truly serious about establishing your online business, a business plan will come in handy. A business plan doesn’t just provide a skeleton that organizes your thoughts coherently, but it also gives you the opportunity about every aspect that can impact your business. You may realize that, in the process, there’s a need to rethink a few strategies. Or, that you have everything figured out and are good to go!
Now that you know why a business plan is the first stepping stone in setting up your own ecommerce business, here’s everything you should cover:
The Value Proposition
Creating a concise and clear value proposition is a great way to determine how well-thought-out your idea is. Cover this part in a way that’ll help you explain your business in under a minute to a potential customer or investor. Keep refining it and practicing to yourself until you feel confident enough to say it in a crowd. Once you’re done writing it and are happy with the output, you can use it as the description for your company.
The Business Model
Before you start investing money here and there, it’s a good idea to do some mind mapping for your business model. Once you list down the different sections of your plan and conduct some research accordingly, you’ll want to make a few changes to your business model.
So, what exactly does your business model entail? Depending on what you’re planning on selling, it’s crucial to think your business model through:
- Do you plan on selling physical products (clothes, electronic goods, shoes), digital products (software), or services (consulting)?
- Do you want to sell to businesses (B2B), customers (B2C), or act as a marketplace that connects businesses to customers?
- Will you manufacture your product yourself, outsource it to a third party, collaborate with a drop ship manufacturer, operate as a wholesaler?
Here’s something that’s always going to be true: there will never be a successful entrepreneur that isn’t aware of the ins and outs of his or her target market. The marketing analytics section is one of the most crucial parts and gives you insight into your industry, your competition, and your target audience.
Here’s how you can research your target market:
- Industry reports: Google has many reports available that tell you your industry’s growth rate, the customer segments, and any potential threats and opportunities.
- Competition: A detailed competitor database can help highlight gaps in the marketing which will give you an idea of how you can make your brand attractive to your audience.
- Shopping: Getting out in the field and talking to a sales representative of a product similar to yours will help you understand what’s popular, what isn’t, customers’ price point, repeat purchases, and insight on last-minute purchases.
- Google Analytics: Through Google’s keyword planner, you can take a look at trending topics and get an idea of your product’s demand.
- Trade shows: Trade shows help you build connections with people in your industry and offer the chance for you to interact with competitors and gain knowledge on the future of the industry.
The Products & Services
To succeed as an ecommerce business, you need to sell a product that’s trending and has a growing niche. You should have a list of existing products, with their specifications, and future products that can help you grow your business.
The financials section of your business plan covers your forecasted sales, expenses, and potential net income. You should also consider creating a monthly schedule that highlights the following:
- Projected revenue: This can simply be calculated by estimating your expected number of units sold multiplied by the average price of your product.
- Variable expenses: These expenses change directly with how much you sell and often include costs, such as the cost of sales and payment processing fees.
- Fixed expenses: You have to pay these expenses regardless of how much you produce or sell. They commonly include rent, salaries, electricity, etc.
An overview of your future financials will help give you an idea of how to achieve your profit goals. Although such projections are always an estimation, they’ll give you measurable goals to work towards.
Here are a few questions you should aim to tackle in this section:
- How many products are you required to sell to meet your income goals for the year?
- How much margin are you planning on keeping on every product?
- Does your business require any significant capital expenditures early on?
- Can your gross margins be improved through bulk orders?
With technology evolving rapidly and affecting every aspect of a business, it’s vital to understand how everything in an ecommerce business can be integrated. There are various elements that you’ll need to master in your ecommerce business, including accounting, payment processing, shopping carts, social media, and even customer relationship management.
Luckily for you, there are thousands of services available that ease you through the process. For instance, you can choose Shopify for your shopping cart needs, an easy to use CRM software for small businesses, or even a knowledge base software that you didn’t realize you needed.
Due to the tech-savvy nature of the world today, you should also factor in the costs of getting a mobile app for your ecommerce business. You can either choose to get one made from scratch or convert your website to a mobile app. The possibilities are endless.
List down the products and services that you’ll need to run your ecommerce business efficiently, as well as the monthly subscription of each software. These costs will matter when you’re calculating the margins on your products.
Ecommerce is a broad term that covers different kinds of online businesses. Although many online stores have established themselves to sell physical products, many have branched out to sell services and digital products, too.
There a variety of online stores that sell online courses, ebooks, or other digital products. Similarly, many ecommerce businesses offer services, such as custom printing, to earn their income. On the other hand, some ecommerce businesses choose to do everything themselves while others outsource the majority of the tasks.
The point is, there isn’t one strict route to establishing your ecommerce business. There are so many different ways you can be successful, and a business plan helps you get these. Of course, your business plan can be adapted easily according to your goals and, whatever route you choose to take, a business plan gives you a solid foundation to start with.
Have you ever made a business plan for your ecommerce business? How’d that work out for you? Do you have any specific tips that worked for you? Sound off in the comments below!