Ecommerce Business Plan

If you're serious about the success of your online business, then you need to find ways to give yourself every advantage you can over your competition. One strategy that I can almost GUARANTEE your competitors haven't tried is building customized blueprints that outline exactly how their businesses will succeed.

The process of writing the ecommerce business plan - "battle plan" - for your company can be a crucial step in getting your profits to where you want them to be.

If you're thinking, "But I'm just a one-person business working part-time out of my home... I don't need an ecommerce business plan," think again! Unless you want your business to stay small and you want to keep your day job, you desperately need an ecommerce business plan. It's one of the best ways to motivate yourself to DRIVE YOUR BUSINESS TO THE NEXT LEVEL.

And if your business is still just an idea in your head, and you've been wondering for months how to get started, here's your answer: Start planning! Clear your schedule this weekend, print off this article, and get down to business!

What's Your Purpose?

An ecommerce business plan can serve a couple of main purposes: In the world of banking and venture capital, ecommerce business plans play a huge role for people who are trying to secure start-up funding from banks or investors. The better the business plan, the better the chances of landing that big initial investment.

For smaller companies, who (luckily) do not need to rely on outside funding to get started, the ecommerce business plan serves more as a company blueprint. It identifies the company's purpose, products, market, and goals, as well as the steps the company plans to take to reach those goals. So before you start writing, you'll need to decide what purpose your ecommerce business plan is going to serve. If you're writing a formal business plan to secure financing, you'll need to be far more concerned about detail and format than if you're just preparing one for your own personal use.

No matter which approach you're taking, though, you need to know that there are 7 main sections that should be included in just about every ecommerce business plan.

Section 1: The Executive Summary

The executive summary is basically your entire business plan condensed down into a page or two (at the most). If and when you show your business plan to others, this is the only part that 75% of them will actually read. For this reason, you need to MAKE THIS SECTION AS CLEAR, CONCISE, AND EXCITING as possible.

Your executive summary should contain a few key items. You'll want to start out with a brief description of exactly what your business does, who your market is, and what opportunity you've identified as the inspiration for your business. Explain what sets your company apart from others in the same field.

You'll also need to discuss financial information such as projected revenues and, if you'll be using this ecommerce business plan to secure financing, how much money you need and what you will be using it for. Don't go into too much financial detail in this section. You'll just want to include the most important figures.

Also, be sure to MENTION YOUR COMPANY'S ACHIEVEMENTS, including all of the milestones reached to date. Even if all you've done so far is register a domain name, put together a web site, or file a patent application, be sure to include this information in this section of your ecommerce business plan.

Section 2: Description of Business

This section will contain an in-depth description of your company, including what products or services you sell, who your customers are, what your operating structure is (Are you a wholesaler? A reseller? A manufacturer?), the legal details of your company (Is it a corporation? A partnership? A sole proprietorship?), and your distribution methods.

This is the section of your ecommerce business plan where you will identify what makes your company unique and where you'll address the following questions:

- What are you offering that others aren't?

- What SETS YOU APART from your competitors?

- Why will people choose to do business with you instead of other players in the same marketplace?

If you've already been in business for a while, you will also want to use this section to talk about the history of the company. Talk about what inspired you to start the company and how fast it is growing. Address the more concrete details as well, such as how much equipment you own or lease and where your office is located.

Section 3: Market Strategies

Think of this section as your marketing plan. This is where you'll want to go into detail regarding who your target market is and HOW YOU INTEND TO SELL TO THEM. This section will contain information about how big your audience is, how fast it is growing, and how large you expect your market share to be.

Some great sites where you can start this research are:

CyberAtlas -- http://cyberatlas.internet.com

Nua Internet Surveys -- http://www.nua.ie/surveys

MarketResearch.com -- http://www.marketresearch.com

In this section, you will also talk about how you intend to market your product or service to your target audience. Will you focus on pay-per-click search engine traffic? Banner advertising? E-zine sponsorships? How much do you expect to spend on advertising, and what sort of return do you expect from those advertising dollars?

Be sure to think carefully about which marketing strategies to include here. Don't just list off every single advertising technique you can think of. You need to realistically evaluate all the possibilities, and then focus on the two or three marketing techniques that will produce the biggest return on investment.

If you think this sounds like a lot of work just for an ecommerce business plan, think again! This is the kind of legwork and research you should be doing anyway! And once you've figured out how much your marketing and advertising is going to cost, you can put together a schedule of how much you can afford to spend on various campaigns each month.

Section 4: Competitive Analysis

The competitive analysis section of your ecommerce business plan is where you explain, in detail, the strengths and weaknesses of your main competitors. This will allow you to realistically determine where you can position your business in the market in relation to your competition.

Make sure to do an honest appraisal of who your competition is. If your site is selling board games, your main competition is NOT Toys 'R' Us.

Instead, your biggest competitors are other niche sites that focus on selling board games. These are the sites that you can realistically expect to compete with for customers interested in buying your products online.

Nevertheless, you should still pay attention to the "major players" in your competitive analysis. Take a look at how they are marketing to board game buyers, and what areas they are lacking in.

Based on your research, you should be able to capitalize on the weaknesses of others in your market space and SNATCH CUSTOMERS AWAY FROM THEM by positioning your offer to meet a need that everyone else is neglecting.

A great tool for doing competitive analysis is http://www.alexa.com, which allows you to discover how much traffic your competitors are getting in relation to your site and see who they are linking to. Compare your own traffic ranking to your competitors' traffic rankings in Alexa every month or so.

This way, you'll be able to GAUGE YOUR PROGRESS AGAINST YOUR COMPETITION. Spend some time getting familiar with this site -- it will become an invaluable resource tool for you!

Section 5: Development Plan and/or Operational Strategy

If your company is still in the developmental stage (with no product and/or no revenues), this is the section where you will explain how you are going to bring your company into the marketplace. The best way to do this is to write out a development timeline with the projected completion dates for various milestones your company will need to reach before it can start making sales.

This is the section where YOU MUST PLAN TO PROFIT! Failing to do so is one of the most common mistakes made by businesses. All too often, people just set up shop without ever really planning exactly HOW they are going to become profitable!

If your business is already up and running, but is not currently generating a profit (if your revenues are not enough to cover your operating expenses), then this is where you will need to identify how you will make up the shortfall until you become profitable. For many home-based businesses, the difference is drawn from the owner's savings or income from another job.

Regardless of what stage you're at, you should still include a table of projected milestones for your business in this section. Estimate the month and year of the important milestones that you plan to achieve over the next 1 to 2 years. This not only looks great, it also reminds you of your goals every time you refer back to your ecommerce business plan.

Section 6: Management

This section is especially important if you are going to be using your ecommerce business plan to secure funding. I can guarantee that after a prospective investor reads through your Executive Summary, they will flip directly to your Management section before reading anything else. They'll want to get a clear idea of "who" your company is -- after all, a business idea is only as good as the people behind it!

So this is where you introduce your management team or, if you are the only person involved in your business, explain why you are qualified to be running the company. Focus on your STRENGTHS AND ACHIEVEMENTS from your previous ventures or jobs, and explain in detail how those qualities transfer to your business.

Make sure to go into detail about what makes you uniquely qualified to operate this sort of business. What special skills do you bring to the company? How do your areas of expertise give you a distinct advantage over people operating similar companies?

If you have accountants, lawyers, or consultants advising you in an official (paid) capacity, you can mention their names, duties, and qualifications here as well. However, you need to be sure to get their permission before putting their names in your business plan.

Section 7: Financials

If you've had a chance to look through a few ecommerce business plans before, you'll have noticed that the last half of these documents are filled with balance sheets, earnings projections, capital requirements, depreciation estimates, and dozens of other highly detailed financial statements.

Don't let all these numbers put you off! If you aren't going to be using your ecommerce business plan to solicit capital from outside sources, you won't need 90% of this stuff. Instead, focus on your monthly income and monthly expenses. The best way to do this is to put together a simple 12-month cash flow forecast.

HERE'S HOW TO DO IT:

First, estimate how much your business will earn on a monthly basis. Include all your sales, cash you'll be drawing from your savings, or money your business has been loaned. This is your "Total Cash In."

Next, determine what your monthly expenses will be. This should include things like advertising costs, office expenses like phone bills and stationery, the cost of your inventory, equipment purchases, loan repayments, as well as whatever cash you'll be drawing out of the business for your personal living expenses. This will be your "Total Cash Out."

Now, simply subtract your "Total Cash Out" from your "Total Cash In" to get your monthly "Net Cash Flow." If you see that your Net Cash Flow is a negative number, you're losing money!

If that number stays negative for the entire 12 months, you're going to need to re-evaluate your ecommerce business plan... and figure out a way to increase sales or decrease expenses!

IMPORTANT NOTE: You can see why it is so important to be honest with yourself when writing your ecommerce business plan! If you exaggerate the sales you think you'll bring in, your whole business model will be damaged when those sales don't materialize. So much for that hefty advertising budget you planned, as well as the generous salary you hoped to pay yourself!

Do-It-Yourself vs. Hiring Out

If you are going to be using your ecommerce business plan as a tool to attract capital from banks or investors, then your business plan will need to be MUCH more detailed than if you are preparing it for personal use. If you need some extra help preparing a highly detailed plan, you have a few choices. You can:

1) Hire a professional ecommerce business plan consultant to work with you,

2) Hire an accountant to help you prepare the "Financials" section of your business plan, or

3) Purchase a full-featured ecommerce business plan software program.

If you do decide to have a professional write your business plan for you, be aware that the costs vary tremendously! A basic 15-page business plan could cost you anywhere between $500 and $5,000, depending on who you hire.

(A detailed business plan, which can often exceed 100 pages, can easily cost as much as $25,000 -- but these are for companies looking for millions of dollars of start-up capital.)

To locate someone to write your ecommerce business plan for you, just type "business plans" into any search engine -- you'll find tons of companies that specialize in this sort of thing.

You can also have professional writers bid on your ecommerce business plan project at http://www.elance.com. The going rate for a business plan here seems to be between $750 and $1,500.

There are quite a few ecommerce business plan software programs out there. One of the best seems to be Business Plan Pro 2003, available at http://www.bplans.com for $99.95. Other options are PlanWrite, located at http://www.brs-inc.com/pwrite.html for $129.95 and BizPlan Builder, priced at $99.99, at http://www.jian.com .

If you are running a one- or two-person company out of your home or small office, you probably won't need to hire a professional to work on your ecommerce business plan. This option is really more for people who will be using their business plans to attract investors or secure bank loans. Most small business owners should be able to write their business plans themselves.

And unless you are going to be trying to land big investors, I really don't recommend hiring a professional to write your business plan for you. You'll LEARN SO MUCH ABOUT YOUR BUSINESS and your competitors by doing it yourself that it would be a shame to let someone else go through the process for you!

Best ecommerce Business Plan Resources

I've hand-picked a few of my FAVORITE ECOMMERCE BUSINESS PLAN RESOURCES to share with those readers who might be looking for additional information:

- THE UNITED STATES SMALL BUSINESS ADMINISTRATION (SBA) has an excellent resource online that provides a tutorial to help you write your best business plan. Their site also contains all the information you'll need if you plan on trying to get a SBA loan or grant. Check them out at: http://www.sba.gov/starting/indexbusplans.html

- THE YAHOO! SMALL BUSINESS CENTER has a good section about business plans at: http://smallbusiness.yahoo.com/ resources/business_plans.html

- THE ANNUAL MOOT CORP COMPETITION challenges top MBAs from around the world to submit their ecommerce business plans to be evaluated by a panel of investors. The winning entries from the past few years are online at: http://www.businessplans.org/MootCorp.html

- PALO ALTO SOFTWARE has developed a program called Business Plan Pro 2003 (priced at $99.95) that will walk you through the creation of your own business plan. But even if you aren't interested in their software, check out their site at http://www.bplans.com for a huge archive of sample best business plans that you can read for no charge.

You can also find a wealth of information about business plans at your local library or bookstore. The Business section will have tons of books explaining how to write business plans, as well as books with hundreds of sample ecommerce business plans for you to look at.

Final Ecommerce Business Plan Thoughts

Once you've written your ecommerce business plan, you'll be amazed at how often you refer to it. It will become your "battle plan," as well as the tool you'll use to measure HOW CLOSE YOU ARE TO MEETING YOUR GOALS -- or by how much you're surpassing them!

You can even show your business plan to prospective joint venture partners, potential employees, or advertisers. Believe me, a professional-looking business plan will give you a TON of credibility simply because most businesses never take the time to prepare one.

If you're thinking about starting a business, but you're not quite sure how, writing out a ecommerce business plan can be a great way to get things moving. It's also a great way to evaluate how good that idea of yours really is.

For many people, the process of writing a business plan shows them that their business can MAKE EVEN MORE MONEY than they originally thought! Now that's motivation!

If you're already running an online business, the process of writing a business plan can help you decide exactly what aspects of your business are succeeding and which areas could be improved upon. When you do an in-depth analysis of your marketplace, your customers, and your competitors, you'll be amazed by how much you can learn!

And be sure to make your ecommerce business plan a perpetual "work in progress." Go back and review it every three months, and make changes where necessary. If your sales are twice what you expected, go back and update the figures in your business plan. This ensures that your map to profitability is always right up to date.

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