An e-commerce store is a different venture than a brick-and-mortar store. When venturing online, it’s important to clearly differentiate your business since the competition is fierce. Online-store business planning helps entrepreneurs clearly outline their mission, business model, products and services, pricing strategy, marketing strategy and financial position. As a result, business owners are in a better position to seek funding from potential investors and lenders.
The Benefits of Having an E-Commerce Store
Entering the e-commerce world can seem daunting; however, there are many benefits of having an online-only store. First, you don’t have to worry about geography like you would with a physical location. Your customers can be located anywhere in the world. This provides you with a much larger potential target market.
Another benefit of having an online-only store is that the operational costs are far lower than having a retail location. Online marketing and advertising costs are more affordable than traditional print mediums. Plus, there is no rent to pay for a physical store, though many online businesses do have a warehouse location. All of these savings can be passed on to consumers in the form of discounted prices and can help to pad your profits.
Search-engine optimization is a major benefit of having an online-only location because it enables you to get your business in front of new prospects. If you optimize the content on your online store’s website, you’ll be able to attract prospects who are actively searching for the items you sell.
Why You Need an Online-Store Business Plan
A business plan is a necessary business tool that helps you outline your business strategy and operational objectives. When you’re looking for financing from investors or lenders, they will want to know how you plan to make a profit.
If you’re starting your online shop with a partner, a business plan template can help you to figure out your priorities and ensure that you and your partner have the same vision for the business. As a result, you can avoid some costly mistakes that may hurt your relationship with your partner and affect the business.
Provide an Executive Summary
The executive summary is one of the most important sections of an online-store business plan. While it comes first in the plan, it’s actually written last after all of the other sections are complete. A good summary shouldn’t exceed one page and should summarize all of the important elements of your business plan, which include:
- Your business concept, vision, goals and team
- Your products and how they are different from others on the market
- The target market to which you’re appealing
- Your marketing plan and operational details
- The current and projected financial state of your business
- The amount of investment or loan for which you’re asking
Offer Your Company Overview
Begin writing your online-store business plan by offering a brief overview of your company. The goal of this section is to let readers know who you are and what you plan to do. This section should also tell readers why you are the best person to run this business. A company overview of your online business should include:
- The name of your company
- Your business structure, such as sole proprietorship, partnership or corporation
- Your business model
- Where your e-commerce website will be hosted, such as on a platform like Shopify or as part of an online retailer like Amazon
- Background information on your business history
- Your industry and the types of products you plan on selling
- The short-term and long-term objectives of your business
- The professional bios for yourself and the people on your team
- The mission, vision and core values of your company
Keep in mind that the mission statement, vision statement and core values are some of the most important elements of a business plan. They help to provide the “why” of the business. Why are you planning on getting into this business? Investors and lenders want to know your drivers, what motivates you to succeed and what you’re hoping to achieve with your company.
Complete a Market Analysis
An online-store business plan requires in-depth research on the market. Unlike a physical store, an online business’s market can be worldwide. It’s important to understand the trends in your industry across your potential markets. This will affect the potential sales of your business.
For example, if you’re selling products that are made out of single-use plastics, you may have a hard time entering certain markets where the trend is to use sustainable and recycled materials. It’s important to understand the trajectory of your industry as well as the consumption patterns of your potential customers.
In addition to understanding the market trends, it’s imperative to scope out your competition. A competitive analysis will provide you with insight on where your business fits in the current landscape and what you need to do in order to compete with the leaders in the market. Your competitive analysis should include:
- Seven to 10 direct competitors in your industry
- The types of products they sell and the differentiating factor for each business
- How much of the market share each competitor currently owns
- The pricing strategy and business model of each competitor
- The logistics, operational model and shipping model for each competitor
- Any unique features on competitor websites, like interactive product images or search tools
- How the competitors market to customers, such as through content marketing, social media or paid ads
- What kind of customer experience each competitor offers, such as customer support and a mobile-optimized site
Pinpoint Your Target Market
Your ideal customer is the person who drives all of the business decisions you make. The foundation of your business plan — and any other key documents such as a marketing plan and business-model canvas — rests on the target market. This is the specific group of people whose problems you can solve with your products and services.
Develop a buyer persona, which is a business tool that encompasses key information about your ideal customer. You’ll need to conduct market research, look at the customers of your direct competitors and make educated guesses to arrive at the details. The buyer persona for your online store’s target market should include:
- Demographics: These include foundational elements such as age, gender, family status, marital status, occupation and income. For example, an 18-year-old male will want to purchase shoes that are entirely different from a 65-year-old female.
- Geographic elements: These include the region, climate and population density of your ideal customer. Where people live affects their needs. For example, someone living in a warm climate requires different clothes than someone living in a cold climate.
- Psychographics: This is all about the lifestyle of the customers, which includes their activities, opinions, values, ethics and interests. For example, someone who values success and money will want different products than someone who values family and community. Those who are interested in sports may have different needs than those who are interested in visual art.
- Behavioral traits: These include the ways customers behave toward products, such as customer loyalty, frequency of purchase, readiness to purchase and the product benefits required. For example, someone who is just browsing will have a different customer journey than someone who is ready to make a purchase.
Outline Your Products and Services
While your products and services will be mentioned in several areas of your online-store business plan, it’s important to have a section dedicated to them where you can provide the reader with specific details. If you have just one or a few products, then write in depth about what the products do and their benefits. If you sell several products, you can write about each category instead of each individual product.
In the products and services section, be sure to note:
- The name of the product(s)
- The pricing strategy you plan to use
- The main benefits of the product(s)
- The key differentiators of the product(s)
- Where the products are made and/or sourced
Develop a Marketing Plan
Your marketing plan is about how you will promote your products to your target market. In many cases, a marketing plan includes the four sections of the marketing mix, which are product, place, price and promotion. In an online-store business plan, it’s likely that you have covered the first three elements already, so you can focus this section of your business plan on the promotional aspect.
Be sure to specify the goals of your marketing strategy. When you’re starting, your goals may be to build brand awareness and get new customers. After you’re established, your goals may be to build customer loyalty and encourage repeat purchases. The promotional channels you use will depend on the goals you’re trying to achieve.
In every aspect of your marketing materials, it’s critical to include your business’s unique value proposition. This is the key differentiator for your business that attracts the attention of your target market. The various channels of promotions you can use include:
- Advertising: Advertising can occur in print or online in addition to on social media. You can also advertise on TV, radio and billboards. This medium is designed to reach a large market.
- Direct marketing: This channel is highly targeted to specific subsets of your audience and can be done through email, phone or post mail.
- Personal selling: This medium is designed to build relationships and connections with customers. It’s typically done one on one in person, over the phone or through email.
- Sales promotions: This channel is a great way to entice prospects who care about price. Businesses can use coupons, contests, discounts and other price incentives to attract attention.
- Public relations: This medium is great for fostering goodwill with prospects through sponsorships, donations, press conferences and press releases.
A key element of online promotion for e-commerce stores is reviews. Customers want to make sure that other people like them value your business. Have a plan to ask customers for an online review after they have made a purchase. This will not only help your SEO ranking but it will encourage prospects to make a purchase.
Plan Your Logistics and Operations
In an online-only business, logistics and operations are key. Customers expect a seamless user experience. In this section of your business plan, be sure to provide details on:
- Where your e-commerce site will be hosted, such as through an e-commerce platform like Shopify
- What special user experience you’ll offer your customers to make purchasing easy, such as abandoned-cart reminders or free shipping
- How much inventory you will carry
- What your supply chain will look like
- Where your products will be housed, such as in a warehouse
- How your products will be packaged to ensure they don’t get damaged during shipping
- How your products will be shipped. For example, will you hire a third-party logistics company or do it yourself?
- What your return policies will look like
Review Your Financial Documents
Investors and lenders will require your financial projections for the first few years of business because they want to know that you have a chance at being a profitable venture. Your online-store business plan should include:
- Income statement
- Balance sheet
- Cash flow
- Break-even analysis
- Financial projects for five years
- Shopify: Business Plans 101: How to Write a Business Plan For Any Business
- Shopify: How to Conduct a Competitive Analysis for Your Business (Plus a Free Template)
- Ecommerce CEO: How To Make An Ecommerce Business Plan For Your Startup
- OptinMonster: How to Write a Business Plan for Ecommerce Success
- PracticalEcommerce: 5 Reasons for an Ecommerce Business Plan
- NetMBA: Market Segmentation
Anam Ahmed is a Toronto-based writer and editor with over a decade of experience helping small businesses and entrepreneurs reach new heights. She has experience ghostwriting and editing business books, especially those in the "For Dummies" series, in addition to writing and editing web content for the brand. Anam works as a marketing strategist and copywriter, collaborating with everyone from Fortune 500 companies to start-ups, lifestyle bloggers to professional athletes. As a small business owner herself, she is well-versed in what it takes to run and market a small business. Anam earned an M.A. from the University of Toronto and a B.A.H. from Queen's University. Learn more at www.anamahmed.ca.