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Why Writing an Ecommerce Business Plan Is So Important

Are you launching an online store?

Do you wonder if there is any planning you should do beforehand?

These days, it doesn’t take much to have your own ecommerce store. You don’t need to invest much money in any stock and could start a drop shipping business.

You also don’t need to know much about technology, there are plenty of hosted systems out there that allow to open a store quickly.

You don’t even need much experience, you can find all the knowledge you may need online.

Yet, there is a danger in all this. The ease of entry into the world of Ecommerce lets many people forget about one crucial thing:

An ecommerce store is still a business.

And, for a business to succeed, it needs to be built on a solid foundation, part of which is formed through planning and research prior to launching.

An ecommerce business plan is by far one of the most powerful documents one can create in order to launch an online store.

In fact, creating a business plan will help an ecommerce business to grow faster and achieve its goals much quicker.

Let’s look at how.

What A Good Business Plan Will Help You With

Before we look at how to write an ecommerce business plan, let’s discuss what are the benefits of writing one. A well written business plan will help you with:

  • Checking the Profitability of Your Niche

A lot has been written online about choosing the most profitable niche. In spite of that though, many people never go beyond checking the traffic in External Keyword Tool and perhaps if anyone actually advertise the product (usually through Adwords – helps to establish if there is a customer demand for it).

However, all this is not enough to discover the profitability of your niche. You should know way more before deciding to invest at least 6 if not 12 months of your life to building and developing your store.

By writing a business plan you will naturally have to discover more about the market you want to operate in (and mind you, that includes not only the niche but potential customers, the product demand as well as the competition) and also your business. This knowledge will help you to assess if the niche you want to enter is really worth it or not.

  • Developing Your Value Proposition and a USP

One thing that plagues many ecommerce stores is that they all look the same. In fact, in some niches, it is actually quite hard to distinguish one business from another.

However, for a business to truly succeed, it has to stand out. This is usually achieved through two things: value proposition and a Unique Selling Proposition.

A business plan requires you to come up with both. You usually do it based on the research you have done prior to writing your plan.

  • Taking a Holistic View of Your Business Idea

A well written business plan will allow you to take a very broad, holistic and quite objective look at your business idea.

Through a business plan you are able to truly assess if the type of online store you want to open, the niche you want to operate in or even the technology you want to use is feasible and can actually make you profit.

  • Setting Up Business Goals

A business plan will also help you to come up with realistic goals and objectives for your ecommerce store and specify a road you need to take to complete them.

  • Establishing Milestones

One of the key aspects of a business is the ability to measure progress. The most common way of doing so is by setting up milestones.

By its nature, a business plan forces you to look very broadly at your business idea and helps you set up realistic milestones that will mark various stages of your business’ development.

  • Avoiding Making Costly Mistakes

A business plan will also help prevent you from making costly mistakes in your online store.

Is your business idea any good? Are people interested in the products you sell? Is there large enough market to sustain you and your competitors in business? A business plan will help you answer those questions before you dive into the operation and realise your mistake when it’s too late.

  • Getting the Finance

A business plan is also one of the required documents if you are looking for any form of financial help with launching your ecommerce business, from a bank loan to a some form of grant or investment.

What Makes a Good Business Plan

Now that you know why you should consider writing a business plan for your ecommerce store, let’s look at what elements you should include in it.

A typical business plan is broken into 4 parts:

Business

This part explains everything about your business. From your idea, how your ecommerce store will operate, what makes it unique among other online retailers to generic details about the company such as a business name, address and who the owners are.

Information to include:

  • Mission Statement
  • Keys to Success
  • Company Summary
  • Ownership Info
  • Startup Summary
  • Products You Want to Sell

Marketing

This section, as the name might suggest, deals with how you are going to promote the company. In this section you should state what marketing plans and ideas you have, profile your target customers, state their likes and dislikes as well as how you are going to make your store attractive to them.

One of the key elements of this section is a SWOT analysis for your business, an indepth look at both internal and external factors that may affect your business’ development.

Information to include:

  • Market review
  • Target market and customer profile
  • Marketing plan
  • Projected marketing spend
  • SWOT Analysis

Finance

The finance section should include all the financial data about your business, from startup costs, operation costs to loans, assets, current accounts, cash-flow forecasts and more.

Information to include:

  • Funding requirement / Startup costs
  • Use of funds
  • Budget
  • One, two and three years running costs
  • Three year income projections
  • Breakeven analysis

Management Team

Lastly, you should also outline all key members of the company’s management. Even if it’s only you running the business, don’t neglect this section. It will be important also for yourself to list your responsibilities within the business.

Information to include:

  • Who are the owners
  • What is their previous experience in business
  • Their track record

There is also one other part, the Executive Summary which as the name suggests serves as a summary of the entire plan and is usually the very first thing any reader of your plan will see.

Few Tips for Writing an Ecommerce Business Plan

  • Be Clear About Your Business Idea – One of the most common problems amongst ecommerce businesses is a lack of clear business idea. Starting up an online store isn’t one. Starting up a store that delivers a particular product to a particular market, is.
  • Write for a Reader Point of View – Even if you write the plan for yourself only, write your business plan as if you were writing it for your bank manager in order to get a loan. Or a potential business partner that could come in with a lot of money. This way, you will focus not on the information you would want to read there but what others might be searching for within your plan.
  • Focus on Details – As the old saying goes, the devil is in the details. Avoid spelling mistakes, use a clear structure and form, check all the facts and numbers, avoid assumptions and focus on accurate data.
  • Make Sure Your Numbers Are Correct – Numbers are everything in business. A small mistake in calculations or predictions can have a catastrophic effect on your online store. Therefore, double and triple check if all your numbers are correct and Excel formulas you use (if any) are also error free.
  • Spend Significant Amount of Time Researching the Competition – Regardless of whether you like it or not, your competitors are an integral part of the market you want to operate it. Therefore, don’t neglect including them in your market research, instead, dedicate a section of it to other online stores you will be competing against.

Over to You

What is your view on writing an ecommerce business plan? Do you think your business needs it? Or could you get away without it? Let us know in the comments.

Pawel Grabowski is a SaaS writer, working with B2B SaaS companies primarily.

3 thoughts on “Why Writing an Ecommerce Business Plan Is So Important

  1. Ron Miller

    I agree coming up with a business plan even for an e-commerce site is important. It really is a business and you should treat it as such, you wouldn’t start a brick and mortar business without a well thought out plan. I write business plans and grants, and it amazes me how people are not prepared to start a business.

    If you need any help or advice on starting a business, funding or with a business plan just let me know. Good article Pawel.

    Reply

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