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10 Steps to writing the ultimate e-commerce business plan

Growth Secrets|09.09.2015

All too often, a business plan is seen as a chore. Actually, getting it right could make a real difference to your ecommerce success. Here's a step-by-step guide for any online retailer that wants to build an effective plan in no time.

It's crucial to dedicate a little time to plan your business's success, and writing your plan is a big part of this.  It forces your to consider all aspects of your business and how you plan to grow it. 

Gov.uk is a great resource for information about setting up a new enterprise, and we have used their template as a basis for the business plan structure we abalyse below.

1. Executive summary

This sums up your business at a glance. You need to be clear and concise - this is what you might use to present your idea to your bank manager or potential investor.

Make sure you include:

  • What product you will be selling
  • How it is different, and what its advantages are
  • Is there a gap in the market for your e-commerce product? If so, explain how and why
  • Who makes up your management team
  • Your financial projections: make these realistic, if anything be conservative with figures
  • What funding you will need? This should be complimentary to your financial projections.

Investors will make judgments based on the executive summary, so make sure that it is well thought-through, brief, and uncomplicated.

2. Your business

Explain the fine detail here, the real background to your business. Some of the things you should include are:

  • How long have you been thinking about this business? 
  • If you have already started work on it, what have you carried out so far?
  • What is the ownership and staff level? Is it two partners 50/50? Will you have people in a bricks and mortar retail store?
  • How your product will stand out from other e-commerce competitors
  • How you will be able to adapt your business to changes in customers' needs
  • The external factors influencing your business - Consider using the PESTLE (political, economical, social, technological, legal, environmental) model as a way of considering these. For example changes to tax on imports may effect your trading and may mean a readjustment in your business model.

You should also include some constraints - what could go wrong? what would the ramifications be? - but keep these simple, so as not to give a potential investor or bank manager the impression yours is a high-risk business.

3. Your target market and competitors

Show you a fully aware of the market you are focusing on and of your competitors, and that you can challenge them.

Ensure that you've done some in-depth market research to further justify the need for your product. Market segmentation is key here - what is the key demographic you're going to target? You will need to consider:

  • How big is the market segment you are looking at entering? Is it growing? 
  • What is it that makes you think there will be a gap in the market in the future? 
  • Explain the demographic: age, sex, occupation and interests. Researching all details will prove useful in future to plan your advertising efforts.
  • Have you sold any of your product already? If so, list figures and explain who bought it and why.

As well as the market it's crucial to understand your competitors. What are the competing products in this market? Who sells them? Consider:

  • The pros and cons of your competitors' products
  • Illustrate how your product is better then theirs
  • Explain the long-term process that you will carry out to gain revenue from competitors losses. 

4. Marketing & Sales

Marketing and sales are the key to revenue and profit. It's no coincidence that marketing and sales departments work closely together in any successful business. Approach this with real focus:

  • Consider how your product will meet the needs of the consumer
  • Is anyone doing anything similar?
  • If so, why will your product meet the needs of the consumer in a better way?

Describe how you are going to position your product:

  • Price - what category does your product fall into in consideration to price? 
  • Quality - are you Primark or Alexander McQueen? Define where you'll fit in the market.

List the avenues you will choose to sell to prospective customers. There are plenty of online advertising channels you could use, such as:

  • Google AdWords
  • SEO - search engine optimisation will increase your chance of getting nearer the top of Google
  • Social network activity and advertising - Twitter, Facebook, Instagram presence and potentially ads too
  • Affiliate marketing - pay affiliates to increase good quality traffic to your site
  • Ad banners - adverts on other peoples web pages.

Two important promotion avenue also are:

  • PR - create a great press release and a PR plan to gain as much exposure as possible
  • Direct mail - if you have lots of contacts, send them a mail shot and tell them to spread the word. You can build a good online mailing list using Mailchimp.

A final consideration is, what contribution each part of your business will make to your overall profit? For example, you may be an electronics retailer, but 80% of your revenue may be from desktops and laptops so include this in your plan.

5. Management team

Explain the skills that your management team possess. This is crucial to build a team with a compatible and complete skill-set.

  • What are your strengths and weaknesses? 
  • What is the background of each individual? How is this relevant?
  • How are you going to cover the vital areas of the business?
  • What skills will be distributed to what person? Take into account each person's background and experience.

6. Operations

Give detail of the assets of the company and the operations that will exist in your company.

  • Do you need your own website? Some online locations such as eBay and Amazon are a good place to start before investing in your own site.
  • What facilities will you need? A warehouse? A landline for customer care calls? A camera for the online photos of your products?
  • Are there any limits to your production ability? If so how will you go about overcoming these if you expand?
  • Stock longevity - how long will you keep stock for? Will there be a problem with over stocking?
  • How many staff will you need? What will their cost be? 

7. Sales forecast

A really important factor here is to try to keep sales forecasts realistic.  Yes, it's very difficult to forecast, but take some time to think through all the factors that contribute to your sales figures:

  • How long will it take you to start selling?
  • Will you be able to churn out a lot of your product readily and easily or is it a slow burner?
  • How will you capture your leads/potential customers?
  • What percentage of leads will turn into sales?
  • The average price of your stock within a certain category. You may have 7/8 different categories so come up with an average for each, for example categories may include plates and cutlery, tea towels, cups and bowls.
  • What's the potential for return custom? Some products are purchased frequently, for example printer cartridges, whereas some are only every few years.
  • Is the quick sale true in your industry, i.e. can you get the money straight away over the internet? Or is a longer educational sales process involved?

8. Financial forecasts

This is the financial proof behind your previous statements about your intent for the business. Again, try to be realistic with your forecast, some useful factors in your forecast should be:

  • What will your income be per month? Express this as an upper and lower estimate.
  • Your cash flow, which should show the amount of money coming in and going out.
  • Does your business have enough money for it to thrive in todays tough environment? What's the worst case scenario? What will your monthly outgoings be?
  • Will factors such as operations, sales revenue and wages be a problem to your cash flow?
  • At what point will you be cash positive i.e. at what point will you have more money coming than going out?
  • Include your profit and loss forecast. This gives the investor a clear view of what you want to achieve in the future.
  • If you are a relatively big startup, you will also need to look into projected balance sheets.

Consider showing best, expected and worst case scenarios. It's worth realising that financial predictions will change quite a lot so keep on top of it, perhaps schedule a monthly meeting to see what factors have changed.

The cash flow forecast will show how much you will need to keep the company afloat

9. Risk Assessment

Consider where your business could go wrong. For example:

  • Could you expand too quickly and then lose customers?
  • Could you lose a large amount of staff all at the same time?
  • What contingency plans are in place for these issues?

Consider the worst case scenario: have you arranged some finance to be covered in any circumstance? Risk assessment is a key part of the business plan and running a business. 

10. Presenting the plan

The person reading your report will have limited attention, so make sure you present your plan in a way which will impress. Make sure that:

  • The business plan isn't too lengthy, what are they key points the reader needs to know? Be concise.
  • Make it clean, organised and as professional as possible, in a well-presented document, and spell-checked.
  • Include a title page, contents page, the logo (on the front page), document headers and footers - all these will give the plan a more legitimate feel.
  • Save it as a PDF so that you can be sure it will display correctly on other computers and printers (Word documents can appear differently on different operating systems). You can convert from Word to PDF easily.

Proof read the document for any errorsShow the plan to friends and expert advisers and ask them for comments.

Conclusion

Spend some time making your business plan a guidance tool to your whole business, be it because you're trying to secure a loan or investment, or quite simply because you need to have a clear vision of where your business is going, what the potential for growth and success is, and where your limitations lie. Cover every step and you will be ready to react to any situation without jeopardising your chances to success. 

 

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