So you have an awesome business idea, a superb product to sell online, and the will to launch your e-commerce startup. You may be tempted to set things in motion right away, without a formal e-commerce business plan. But don’t — because that would be a BIG mistake.
Many ecommerce stores shut shop not because they didn’t have a great idea but rather because they didn’t take time to write a formal business plan.
Before we get started, you might be interested to check out our Ready-made eCommerce Business Plan Template with pre-written text and automatic financials which you can easily customize and adapt to your own project, no financial expertise required.
Why is an e-commerce business plan so important?
Glad you asked.
For starters, you can’t dream of getting capital (if you need it) without a thorough ecommerce store business plan. No investor worth his salt would give you the time of day if you approach him without a formal plan.
Secondly, and no less importantly, a well-thought-of business plan serves the function of a roadmap, showing you whether you are heading in the direction you want and with the speed you want — regardless of whether you’ve launched your online store with your capital or investor’s money.
Also, an e-commerce business plan compels you to think about each component of your online shopping website thoroughly. This, in turn, allows you to spot any big problems beforehand and avoid them. Your ecommerce business plan will act as the cornerstone of how you budget your expenses, how you spend money, what products you sell, who your customers will be and much more.
In a nutshell, launching an ecommerce startup without a business plan is a recipe for failure. Don’t want that? Put in the effort and time needed to create a comprehensive business plan.
How long an e-commerce business plan should be?
A formal business plan for an ecommerce store, for the most part, is quite similar to that of a restaurant, a brick and mortar shop, or a big company. How much detail you provide for every point may vary, and there’s nothing wrong with it. Some people go for 100-page long business plans that cover each and every possible circumstance or detail. Some others, on the other hand, compile only a 15-page plan that establishes a basic guide or rubric to follow, and that’s fine too.
In a nutshell, your ecommerce business plan should be manageable, creative, and helpful. You don’t have to transform into an intimidating project just to make it a certain number of pages long!
In case you are seeking funding or applying for a loan, most experts recommend a 25 to 40 pages plan. If outside funding is not the goal, starting small may be the best thing to do — something like a couple of paragraphs for every bullet point.
Another thing to keep in mind is that you can start your business plan by tackling the section you like. If you are a marketing wizard, start with the marketing plan section first. If accounting or finance is your thing, start with the financial plan. That said, avoid taking up the executive summary upfront (even though it is the first chapter of your business plan) as it provides an overview of all sections. It is best to tackle it last.
Writing a Formal Business Plan for Your E-commerce Store
In this section, we are going to cover the broadest aspects, as well as all the important details, of your ecommerce business plan.
An executive summary, while usually written in the end, frames the entire plan. It is the “book jacket” for your ecommerce business — highlighting key elements and demonstrating your passion to pursue such a business.
The must-have sections of an executive summary are as follows:
Your mission statement must be goal-oriented and answer the following key questions:
What purpose will your ecommerce store serve?
Who are your clients?
How does it address a pain area experienced by your target audience or how will it improve some aspect of their lives?
The mission statement provides you with an opportunity to explain the positive impact of your online shopping business. Don’t take your mission statement lightly; it will heavily guide your decision-making in the future. For instance, does the marketing strategy adopted further your mission? And what about the products you are selling online?
Your ecommerce store serves a purpose – your mission – and giving prime importance to that purpose will reinforce your drive, improve communication, and help define the positioning of your online business.
While quite similar to your mission statement, your objectives are more goal-oriented and a slightly less high-level. In case you are launching an online fitness store, you may have a mission statement like “help people realize their fitness goals.”
One of the objectives of your team could be “to establish the store as the first place people think of when they are searching for any fitness equipment, clothing, or accessory.”
Here are a couple of pointers to keep in mind:
Try to write multiple objectives (This will give you a better direction)
Make sure all your objectives, regardless of how many, should be funneled in the direction of the main goal defined in the mission statement
Founders, Key Players, Start Date
Describe in brief the founders, their previous experience, your key team members, and the start date.
Offer a brief summary of your products and link what you sell with the mission statement of your organization.
What will make your ecommerce shop stand out in the crowd? What is special about your company? How are your products different from your competitors’?
Have you sold anything online previously? Maybe through your Instagram account before developing your shopping website? If yes, talk about those accomplishments. It could be on the lines of something like “sold X number of orders in 6 months on Y platform” or “Created a strong page following of 100,000+ on Facebook in 1 year.”
Begin with the basics. Give an overview of the business, listing high-level goals first and then sharing the details regarding what makes your e-commerce business stand out from the crowd.
You may also include a business ownership section — where you talk about the main partners behind the business.
This is the section where you describe in detail your products and what you actually sell online. Begin by describing the products you will offer initially along with those you plan to add later on, focusing on the benefits and specifications of these products.
Main Product Lines – Start with summarizing the main product lines of your ecommerce store. You don’t have to mention all products in the catalogue; instead focus on broad categories, such as “yoga props” or “gym equipment”.
Stress on the competitive advantages or benefits of the product lines you offer. It is always a good idea to describe in brief what makes your products so special and then dive into details a little bit by covering these aspects:
Differentiators – There’s no shortage of yoga props, so what features make yours stand out? Perhaps they are made of superior material or maybe you are offering new types of props that others don’t offer.
Product Sourcing – What are your product sources? Where are your storage facilities located? Include answers to questions such as these.
Costs & pricing – Give a brief overview of the cost of your products and their selling prices.
This is the section where you cover the ‘moving parts’ and logistics of your online business. How will you procure products from manufacturers? How will you get these products to your customers?
Points to include here are as follows:
The location of your business. In addition to your headquarters, list all the spaces you will rent for storing goods or for setting up regional offices.
List the management and staff team involved in running the day to day operations.
List the product suppliers and the shipping providers.
Are you going to use any third-party service providers, such as subscription-based ecommerce tools, ecommerce provider, payment gateways…etc.? If so, list them.
Describe in brief your shipping process, as well as payment collection process.
This section is divided into three sections:
Industry Analysis – What’s the outlook for your specific industry? How has it grown over the years? What factors have had the biggest impact on in the recent past and do you expect the same factors to play an important role in future as well? This is one subsection that requires extensive research. Fortunately, plenty of research material is available on all industries, so if you put in the time, there’s no reason why you will not be able to answer these questions in a comprehensive manner. Make sure you talk about global trends and local trends to make your case.
Audience Segmentation – List all the demographics you plan to serve in this section. Include as much information as possible about your target audience — their age, location, average annual income, and preferences. It would be best if you can create a “buyer persona” for each demographic set.
Competitive Analysis – Start with an overview of your main competitors in the broader sense (that is, “online shops that sell fitness products such as props, apparels, diet supplements, etc.”) and then mention the names of the most important competitors. Describe the key strengths as well as weaknesses of your competitors and focus on areas where you outshine them, i.e. cite your competitive advantages.
Having a well-thought-of marketing strategy is paramount for success. If you can’t woo customers, all other planning remains pointless. Your marketing strategy should clearly define how will you acquire visitors, convert them into paid customers, and turn first-time customers into loyal customers.
Your e-commerce business plan should include a marketing strategy that develops these points:
Content Strategy – Even though your content plans are going to be an integral part of the broader SEO strategy, we have chosen to list it separately because it is the most important part of your online marketing strategy. What messaging are you going to employ in your copy? Are you going to have a blog section? Will you regularly post contents on social media platforms? Will you outsource content? How often will you publish new content?
SEO – Will you do SEO in-house or outsource it? If you plan to do SEO in-house, what tools do you plan to use? What is your keyword strategy? What are you plans for on-site and off-site SEO?
Paid Search – Do you plan to run a PPC campaign? If so, what is your budget? And how long do you plan to use paid ads? What value will PPC add to your business?
PR – What’s your strategy for getting the word out there about your ecommerce site? Are you going to pen guest posts? Will you offer bloggers product samples for writing reviews?
Social Media – Which social media platforms are most popular with your target audience? How do you plan to use each of these social media channels?
Email Marketing – Email marketing can help ecommerce stores get the word out there, win new customers, retain old ones as well as generate sales. How are you going to encourage email signups? How often you will send promotional emails? How do you plan to segment the email marketing list to target different groups differently to drive maximum ROI?
For most people, this is the most boring part, but there’s no way you can skip it, regardless of whether you are seeking funding or not. If you want to raise capital, give all the more importance to this section. Investors want to know how you will use their money and how much will be the return on investment.
Your financial plan should include at least the following sections:
Cost and revenue forecast
Projected profit and loss
Projected cash flows
Projected balance sheet
Gross and net margin analysis
You can go even further by forecasting your Customer Acquisition Cost and Customer Lifetime Value.
Wrapping Things Up
A well-written e-commerce business plan is critical to the success of your online store even if you are not seeking funding. And if you are looking to raise capital, you can’t expect a positive response from investors unless you show them a detailed and compelling business plan. As you have seen, writing a business plan does require effort and time, however this is not something extraordinary difficult. Just follow the tips we’ve discussed in this post, and you will be able to write a powerful and effective ecommerce business plan.