So you have an idea, a product to sell and the drive you’ll need to run an ecommerce business. Time to start writing your ecommerce business plan!
If you’re serious about starting an online business – or even if you already run one – you can almost definitely benefit from a business plan. These handy roadmaps don’t just teach you how to budget or prepare for what’s in store for your business; they can also shape the very language you use when you tell others about your business.
At their core, ecommerce business plans compel you to think critically about every major component of your online store.
At their core, ecommerce business plans compel you to think critically about every major component of your online store. You may discover that you need to rethink or revise some of your strategies prior to launching your store – or you may realize that you are on track!
An ecommerce business plan is the roadmap for how you’ll run your online store. It forces you to think through every aspect of your business, from how to budget to how you’ll market to your customers.
Do I Need A Business Plan?
The short answer is yes! Every ecommerce company can benefit from a solid business plan. However, here are a few great reasons to create one, if you need extra convincing:
You’re Just Starting Out: A business plan will help you set clear goals and create an action plan to achieve them (including what resources you will need to succeed).
You’re Seeking Outside Funding: A business plan is a standard way to show potential investors why it’s worth betting on your business. Most financing options require a business plan before moving forward.
You’re Considering Going All In: If you’re considering making your ecommerce business a full-time job, a business plan can help you determine if its a viable option.
If you already have a business plan, great! Use the info below to verify that you’re on the right track, and revise your strategy if needed. If you don’t yet have one, here is where you can learn everything you need to know to lay down a strong foundation for your online store. Here's an example of a business plan we made up for an ecommerce store: read on to learn how to develop yours!
Here’s How an Ecommerce Business Plan Works:
For the most part, a business plan for your online store will look quite similar to the business plans you’d see for a brick-and-mortar shop, a restaurant or even a large company. The level of detail you provide for each main point may vary, and that’s just fine; for some people, business plans are 100-page books that cover every possible detail or circumstance, and for others, ten pages is enough to get the creative juices flowing and to establish a basic rubric or guide to follow.
Business plans should feel manageable, helpful and creative, so don’t turn them into a daunting project if you don’t have to!
If you’re applying for a business loan or seeking funding from an investor, the U.S. Small Business Administration recommends a 30-50 page plan. If you’re not looking for outside funding, we suggest starting small, with a goal of a few paragraphs per bullet point. You can always expand as you see fit. Business plans should feel manageable, helpful and creative, so don’t turn them into a daunting project if you don’t have to!
As you move through our suggested outline, remember that unless otherwise specified, you can start with any section you like. While it does make sense to move linearly, if you’re most passionate about the marketing part of your business or you’re an accounting whiz and you want to start with what you know best, go for it! Beginning with the part that excites you the most will give you the confidence and momentum to complete the rest of the business plan.
In most cases, your business plan should contain the following elements at a minimum. (Want to work with a template? Here's a handy one from SCORE!)
1. Executive Summary
The Executive Summary is the last part you’ll write, but it frames your entire business plan. Think of it as the “book jacket” for your business, introducing key elements and sharing your passion for what you do. Even if you think you have a good understanding of your business at the outset, it’s still a good practice to write this last; it will likely feel more organized and pull in more information once you have the rest of your business plan nailed down. There might also be a particularly salient point or poignant benefit that emerges in the process of writing the plan, and you’ll get to include it here!
The more objectives you establish, the better direction you’ll have, but do keep all objectives funneled toward the singular goal outlined in your mission statement.
Consider adding the following to your Executive Summary:
- Mission Statement: Why is your ecommerce business here, and who does it intend to serve? How does it fill a need or improve an aspect of your target audience’s life? This is your chance to explain, in a sentence, a paragraph or whatever makes sense for you, how your business will impact the world. Mission statements heavily guide decision-making down the road. For example, does your marketing strategy help further your mission? What about your product selections? Your ecommerce business has a purpose, and keeping that purpose paramount will strengthen your drive, enhance your communication and help you through the rough patches.
- Objectives: Objectives are similar to a mission statement, but they’re a bit less high-level and more goal-oriented. If you’re starting an online dress shop, your mission statement might be to “outfit women in fun, affordable clothing that inspires confidence, embraces originality and allows women of all sizes and backgrounds to find a community of similarly fashionable peers.” One of your objectives, then, could be, “to become the place people think of when they’re looking for quirky dresses,” or “to develop an online community of women who share a love of fashion and can inspire others to consider the brand.” The more objectives you establish, the better direction you’ll have, but do keep all objectives funneled toward the singular goal outlined in your mission statement.
- Start Date, Founders, and Current Key Players: Touch briefly on when the business started, who the founders are, and who operates it now. You’ll be providing more detail on this in your Company Description section, but it’s nice to provide a quick “role call” in your Executive Summary.
- Your Products: Provide more information on what, exactly, you sell and tie it to your mission statement and goals whenever possible.
- Differentiators: How will your ecommerce business stand out from the crowd? What makes you different as a company? What makes your individual products different?
- Summary of Growth: If you’ve been selling your products online in any form, this is your chance to brag about your accomplishments. It could be something like, “Became the exclusive provider of X brand,” “sold out our inventory in X months on Etsy,” or “Developed a strong community of 1,000+ on Facebook.” If you haven’t set up your online store yet or sold online before, don’t sweat this part!
Outside of the mission statement and objectives, the rest of your Executive Summary is covered in more depth in other parts of your business plan.
2. Company Description
Your company description is a longer overview of your business, providing fewer high-level goals and diving more into the details about what makes your company tick. Your company description may include:
- Ownership: Who owns your ecommerce business? Is it the same as the founders? Do you have multiple owners? If it’s just you, share a bit about your background and what qualifies you to run this particular ecommerce business. This can be business-related (“managed a successful brick-and-mortar for ten years”), education-related (“Master’s from the University of Texas school of business”) or product-related (“five years of experience in the dress industry”). If you don’t feel like you have these qualifications, now is the perfect time to take some online business, marketing, or design classes and start familiarizing yourself with the ecommerce world!
- Operations: Provide a brief look at where and how you’ll be operating, and who will be involved. This is also a fitting section to briefly touch on any start-up expenses you’ll incur and how you plan on offsetting those costs - but you’ll be covering that in more detail later.
- Need: Why did you start your business? What gap did you spot that you can fill, what interests/desires can you address, or what opportunity did you see in your products?
- Business Model: Are you Business to Business or Business to Consumer? Do you sell physical or digital products? Do you hand-make your items, use a manufacturer, or partner with a dropshipper? Are you wholesale? Do you offer subscriptions? If you ever get stuck, you’ll be able to use this business model as a frame of reference for your research.
Now it’s time for the fun part: Describe what you’re actually selling! Start with a high-level look at the products you currently sell along with products you plan on selling in the future, focusing on their specifications and benefits.
Emphasize the common theme among your products: You aren’t just selling dresses, you’re selling whimsical or quirky dresses.
Emphasize the common theme among your products: You aren’t just selling dresses, you’re selling whimsical or quirky dresses. You can also add a little bit of a “human” element about why you chose those products and what makes them so special to you. Then go into a bit more detail with the following information:
- Acquisition: How will you acquire your product? Reiterate some of the information you provided in the “Business Model” section above (ie, “I’ll be buying wholesale from fringe artists and designers”), adding more detail to include how you will find new designers or expand your existing set of manufacturers. You can also include information about the manufacturing process in this section.
- Differentiators: There are plenty of quirky dresses out there, so what makes yours different? Perhaps each dress is handmade (or handmade-quality) and fully-lined, which is a huge differentiator in today’s current atmosphere of “fast fashion” or disposable clothing. If they are high-quality, maybe you sell them at a price that’s lower than the typical price point for dresses of that caliber. Maybe you only use U.S. designers and manufacturers. Perhaps you hand-design original fabric that nobody else sells. Try using the “in a world” format to make this section a little easier: “In a world of X, my product does Y.”
- Costs: This doesn’t need to be a full financial run-down (we’ll get to that later; lucky you!) but should instead provide a basic overview of how much your products will cost, on average, to acquire, and how much they’ll cost for the customers. Consider referencing competitors in this section to make sure your pricing is standard for your industry – or better!
- Life cycle: How long do your products last? If they are seasonal, when and how will you acquire new stock, and what will you do with the old? How often will your target market expect to see new items? With dresses, for example, people might return often to check out what’s new – particularly as events come up or as seasons change.
4. Market Analysis
Now it’s time to talk about the people who will be shopping at your ecommerce store. In this part of your business plan, you’ll explore:
- Segmentation: What key demographics are you going to serve? Where do they live, how old are they, how much money do they make, and what do they value? As you think about your target audience, it is helpful to create “Buyer Personas,” which are separate individual characters representing your various demographic sets. If you’ve sold your product already, discuss who made the purchases and what they purchased. Once you’ve explained who your market segment is, discuss what their future outlook is: Are they growing? Are their tastes going to change as they age? Will you adapt to their changing tastes, or will you sell to a new generation?
- Industry Analysis: What does the market look like for your industry overall? Has it grown or changed over the years? Do you anticipate it changing in the future? Are there factors that could impact its growth? You will almost certainly have to do some research for this part. Fortunately, whitepapers and research are abundant on almost any industry, as well as free tools like Google Trends. As you research, try to find information about your industry as it relates to the ecommerce world specifically, as the online space is vastly different from the brick-and-mortar space.
- Competition: Provide an overview of who your main competition is in the general sense (ie, “ecommerce shops that sell novelty print dresses and individual Etsy vendors who make dresses to order”) and then list out a few competitors. Identify your competitors’ key strengths and weaknesses, focusing specifically on where you can outshine the competition or add value to the offering. You can also take a quick dive into their presence online: Is their SEO performance stellar? Do they have a huge social media following? Are they neglecting their PPC ads? This section segues nicely into your Marketing Strategy section.
5. Marketing Strategy
Now that you know what makes your products stand out, how will you communicate it to the customer? Moreover, how will you get found in the first place?
The Marketing Strategy is a crucial part of your ecommerce business plan; brick-and-mortars can rely, to an extent, on foot traffic, but you have no such luxury.
The Marketing Strategy is a crucial part of your ecommerce business plan; brick-and-mortars can rely, to an extent, on foot traffic, but you have no such luxury. Instead, you’ll be thinking about web traffic, which takes time, dedication and know-how to acquire. Your marketing strategy will discuss the following:
- Content Strategy: While your content plans will arguably be part of your SEO strategy, we’re making it a separate point because your content can shape your marketing strategy as a whole. What “voice” or messaging will you use in your copy? Will you have a blog, and if so, what will make it a “destination” blog in your industry? Will you have an on-site “Resource” section full of tips and how-to’s? Will you be designing a user-generated content campaign, leveraging social media and customer stories? Who will write your content and how often?
- SEO: Organic visibility is crucial to the success of many ecommerce shops. What will your SEO strategy look like? Will you do it yourself or outsource it to a professional? If you’re keeping it in-house, what tools will you be using and how will you be learning? What will your keyword strategy look like? Provide some information on the tactics you’ll use for on-site SEO (keyword research, meta data, content, category and product optimization and technical elements) and off-site SEO. You can keep your off-site SEO section relatively brief, as the PR section will discuss most of the specific tactics you’ll be using during your off-site SEO campaign. It will most likely look something like this: “Off-site, we plan on generating social media awareness, creating YouTube videos and acquiring links from high-quality blogs our target audience reads.”
- PR: How will you get the word out about your website and products? Will you offer products for bloggers to review or will you write guest posts? Will you be running any “newsworthy” campaigns or promotions? List a few blogs who would be your ideal target blogs in this section, too.
- Paid Search: If you are planning on running PPC (pay-per-click) ads, what does your budget look like? What sort of competition will you be looking at? Are you going to run a Shopping Feeds campaign as well? What about retargeting or banner ads? If you will be devoting resources to paid ads, explain why they’re a good fit for your business.
- Social Media: What platforms does your target audience use most frequently? Discuss each one in detail, including information about how you plan to engage your audience on that platform. An example could be: “My target audience loves to share clothing and quirky products on Pinterest. I’ll meet them on this platform by curating a number of boards that cater to their likes, working my dresses into the mix. I will also like, follow and otherwise engage with users who fit my target demographic.”
- Email Marketing: For many ecommerce shops, email marketing is a cornerstone; it’s nearly as timely as social media, but users will not have to navigate to your social media page or spot an ad to receive the information. How often will you update your new or returning customers on what’s in store for your products? What additional copy will you include to entice them to read the email? How will you encourage email signups in the first place? How will you segment your email marketing list so that each group is getting the type of email most relevant to them?
- Promotions: How often will you run promotions, and what type will they be? Will you be running any competitions on social media? List one as an example, or share your entire promotional calendar. How will you get the word out about these promotions?
- Customer Loyalty: How will you encourage repeat buyers? Will you be sending out a newsletter, creating retargeting ads or setting up a rewards program? Will you offer promotions to people who can get a friend to purchase your products? Are there exclusive deals for people who are “in-the-know?” Customer loyalty can be a key component in keeping your ecommerce business sustainable – and having a loyal following will remind you why you’re running this business in the first place!
6. Operational Plan
Now for some nitty-gritty stuff. Your operational plan may feel like the “boring” part of your business plan, but it’s important – and it’ll give your creative brain a break for a little while.
- Hours: The “hours” section is usually reserved for brick-and-mortars (ie, “we’ll be open 9-5 Monday through Friday”) but we believe it’s just as important for ecommerce merchants to consider their “hours of operation.” This obviously doesn’t mean you’ll be shutting your store down after hours (pro tip: Never shut your store down, even for maintenance! It’s bad for SEO). It does mean thinking about how many hours per week you will be working; and if you have a staff, how many hours they’ll be working.
- Staff: Who’s on your team? What is their experience level? Will they be full-time employees or contractors? What are your hiring goals in the future? If you’re planning on outsourcing any element of your business, mention that here, too.
- Management Team: If you have a management team, discuss their credentials in more detail, highlighting the experiences and skills that make them great fits for the job. If your management team consists of yourself and your two corgis, that’s perfectly okay! Most people won’t have a management team and will not need to fill out this section.
- Place of Operation: Will you be using a home office, a co-working space or renting an office? Are you shipping from your garage or a warehouse? Briefly touch on where and how you’ll be working.
7. Financial Plan
Ah, the dreaded Financial Plan. For many people, this is the most difficult part of the business plan, and frankly, the least fun. However, it’s extremely important. In fact, if you don’t want to write a business plan at all, you’ll still need to do this part. If you’re seeking outside funding, this is the part that should contain the highest degree of detail – investors care about where their money is going and need to be reassured of an eventual return on their investment (or that you won’t default on your loan).
Planning your finances can make the difference between a successful, scalable business and getting caught completely off-guard by unexpected expenses or unsustainable profit margins.
If you’re not seeking outside funding, this section is still critical, and the more you put into it, the more you’ll get out of it. Planning your finances can make the difference between a successful, scalable business and getting caught completely off-guard by unexpected expenses or unsustainable profit margins. At a minimum, your financial plan should examine:
- Raw Operational Costs: This means the cost of every single component of your business. Don’t worry about getting too detail-oriented here; if you want to mention that roll of tape, do so. Also mention:
- Office or warehouse rent
- All costs associated with product acquisition, including the raw cost of the products, shipping and how much you’ll need in stock at any given time.
- Employee pay – if it’s just you and you’re not paying yourself a salary, it’s still important to note that, along with some information about how long you can expect to keep that going.
- Web hosting fees
- Payment processing fees
- Shipping fees
- The cost of any custom design work, marketing service or anything else you plan on outsourcing
- Photography equipment (if you’re planning on using a high-quality camera to take product photos)
- Computer programs like Adobe Creative Suite or video editing software; if you need to upgrade your computer to accommodate these programs, add that cost in, too
- Marketing tools (Hootsuite, Mailchimp, etc)
- Office supplies and daily work-related expenses
- Travel expenses, if travel is required
- Shipping supplies
- Advertising budget
Many people separate this section into “Fixed Expenses” and “Variable Expenses.” Fixed expenses include things like rent, employee salaries, hosting fees and other things that won’t change monthly. Variable expenses include payment fees, shipping fees and other things that will fluctuate.
Bust out the ol’ Excel sheet and enter the amount of money you’ll lose with each product, including raw product cost, shipping and payment processing.
- Current Assets: Make sure you have enough to cover at least the fixed costs, if not the variable costs. If you’re running your business full-time, you’ll also need enough to accommodate the fact that you won’t have a salary for awhile. Set aside enough money to cover you (and/or your family’s) expenses for six months to a year.
- Projected Profit and Loss: This is the “meat and potatoes” part of your financial section, if not your entire business plan. Bust out the ol’ Excel sheet and enter the amount of money you’ll lose with each product (you can average this or itemize individual products), including raw product cost, shipping and payment processing. Then add your expected revenue (assuming you listed your costs as a negative number). You now have the expected profit of each product in the ballpark sense, and it’s time to start relying on research, goals and market assumptions to determine longer-term profit. You can play around with numbers, using a couple of scenarios as starting points and changing items like the price of the product or the cost of customer acquisition. You’ll also want to factor in variables like sales, promotions (“free shipping on orders of $50 or more”) and the possibility that you won’t be able to sell a particular product at all.
- Cost of Customer Acquisition: Given all your data, how much can you afford to spend on acquiring each customer? If each customer spends an average of $75 at your shop but you spend $500 to acquire them, it’s time to rethink your acquisition strategy. That said, many marketing tactics will naturally be pricier up front than the profits you’ll make, but over time it will balance out when a large fan base develops due to your efforts.
- Break Even Point: Using your profits and loss sheet, determine how much you’ll need to sell before you can break even – and now we’re including the raw operational costs, too. Is this a reasonable number? How long do you think it will take to achieve that goal?
- Scalability: How will you scale up as you acquire more customers?
Now that we’re done with our finances section, we can get back to the fun stuff: milestones! Milestones are important metrics by which to measure your progress and make changes if something isn’t working out. They are also hugely motivating and worth celebrating upon reaching. Set as many milestones as you want, from making your first sale to breaking even. Consider adding things like:
- First sale
- First 100/500/1,000 “likes” or follows on your social platform of choice
- First positive review
- First write-up on a blog or in the press
- First sale from organic/social/paid traffic
- First 50/500/1,000 sales
- Breaking even!
- First part-time/full-time employee
- Moving to a bigger office
List your milestones out and put them in a place where you can see them every day. Get creative if you want, making a “game board” or another visual image and visibly crossing off or moving past each milestone. Keep your larger goals in mind, but don’t be afraid to celebrate even the smallest accomplishments along the way. This is hard work, and you deserve to acknowledge and appreciate every success.
9. Funding Request
If you’re writing your ecommerce business plan to receive outside funding, this final part is where you make the ask. Be as specific as you can about what your financial needs are, what you will use the money for and when you will pay it back. Include a timeline if you can. If you’re looking at investors, stipulate the terms of the investment. Finally, make sure the plan is well-presented and visually attractive. This includes formatting it correctly, checking for spelling and grammar, including a title page and a table of contents and saving it as a pdf for proper printing across computers.
If you’re just writing your business plan for yourself, you’re done at step 8. Celebrate a business plan well-written (did you put it on your milestones?), and go create the ecommerce shop of your dreams!
Have any questions about writing a business plan, or have you already written one that worked for your store? Let us know in the comments!