An ecommerce business plan is like the instruction booklet that comes with a piece of flat-pack furniture. But in this case, it’s a guide to the main components of your venture and how they fit together. Creating a business plan is crucial if you hope to secure funding, get partners on board, and register your business. But it’s much more than that.
The business plan for your ecommerce store provides focus, helping you to achieve your objectives. It’s a document you can refer to repeatedly to keep you on track. As Stanley R. Rich and David E. Gumpert at Harvard Business Review explain, “Even though its subject is a moving target, the plan must detail the company’s or the project’s present status, current needs, and expected future.” There’s a long-standing, proven model for what business plans should entail. Here, we’ll guide you through each element of an ecommerce business plan in detail, showing you how to construct each section in order.
Step 1 – Executive Summary
Start with an overview of your business and summarize what’s to follow. The purpose in this opening summary is to provide a high-level sense of your ecommerce business concept and its target customers, structure, standing in the market, and finances.
Here’s an excerpt from a sample business plan’s executive summary:
As you can see, it is a useful introduction to the rest of the document. It has a captivating opener, mentioning impressive financial returns. The summary also explains the purpose of the business plan and a list of the sections to come.
Make the executive summary alluring so that the reader wants to continue. If your business plan serves as a pitch to a potential investor or a financial institution, you can include your request here, detailing the amount you seek and what this investment will be used for. Further outline what the investor receives in return, such as equity in your company or profit share payouts.
Though the executive summary is the first section of the business plan, it’s honestly easier to write after you’ve completed the other parts. That way, you can pull the main points from the document and share them concisely. Remember what this section is meant to do, and continue drafting the main body of your business plan.
Step 2 – Company Overview
Describe your company in detail here, outlining who your business serves, how you’ll help, and why your online store will succeed. Whether for yourself or investors, this section reinforces the need for your products and the reason for your company’s existence.
Consider answering the following questions in this section of your business plan:
Who do you serve? Be as specific as possible in your answer, including demographic and psychographic information about your target customers. For example, an eco-conscious baby care or clothing company might start with a focusing line like “Our range of products will target new parents who care about sustainability.”
What problems do your products solve? Outline the specific pain points of your target customers that your products resolve. Continuing from our previous hypothetical, a good example would be stating, “Eco-friendly products are expensive across the board. We aim to offer an affordable option to environmentally conscious people preparing for a new child, a time when expenses are already high.”
What is your overall mission? Include a mission statement covering your brand values and origin story. For example, “Our company founders noticed parents buying expensive diapers only to send them to the landfill after one use.”
What are your unique selling points? Describe what organizational or logistical factors put you ahead of competitors at this point in your ecommerce company’s existence. You should also cover what differentiates your products from existing products. For example, “Our team has 50 years of combined experience in the sustainable fashion industry. Customers no longer need to go through the hassle of purchasing products from a range of different sources. Our Eco Baby Starter Kit contains a complete set of reusable items which they can reorder at will or set up regular reshipments of.”
This section is similar to an About page on a company website. Just as that section of your ecommerce site should speak to customers about why your business is the right choice for them, this section of your business plan should highlight the values of your brand, the virtues of your product lines, and who those products are tailored for.
Step 3 – Organization and Management
Now you’ll lay out the organizational structure of your ecommerce business. This provides a summary of the individuals who lead and run your business and emphasizes how your company structure will be set up for success.
First, note the current or intended legal structure of your business, which may be one of the following:
- Sole proprietorship – One individual owns and runs the company. This may be a starting point for your ecommerce store before you grow the business.
- Partnership – Two or more partners own and manage the business together. This shares responsibilities among partners but can lead to issues in terms of whether individuals are pulling their weight or the division of assets, for example.
- LLC or other corporation – The business is owned by shareholders. This format separates business liability from personal liability, meaning members aren’t responsible for debts or legal problems. For this reason, it’s likely the best option for your ecommerce business once you’ve grown beyond what you can handle yourself.
Name any owners, partners, investors, or shareholders where applicable and what assets they own. It’s also useful to note any valuable or persuasive credentials each party brings to the table and how they’ll contribute to your online store’s success. For instance, “Jane McCommerce is our Public Relations executive and the creative mind behind the success of [Brand].”
Also, discuss what type of ecommerce business model you intend to pursue. You might be a traditional retailer that sells CPG products made by others, a dropshipper, selling subscriptions or memberships, or something else.
Finally, clearly display the current or intended organizational structure. Depending on the size, scope, and maturity of your business, it may look something like this:
This maps out exactly how the company will be run, defining the key roles and responsibilities, including who reports to whom and who is ultimately responsible for certain facets of your business.
Step 4 – Your Products
The purpose of this section is to describe your product offerings and how your selection or product lines may grow or change. Talk about how what you sell helps customers and forecast product life cycles, from when it will enter the market to how long it will last and what stages it will go through.
First, define what you sell. It may be a specific product to focus on or multiple product categories you offer. Provide details about what makes your products unique and their benefits. For instance, you don’t just sell CCTV cameras. Rather, you “keep families safe.”
Make sure you define how you source or manufacture the products. Outline the production process if you’ll operate a direct-to-consumer business. Or, explain how you use wholesalers or other suppliers to source the products you sell. You don’t need to go into a ton of detail on the logistics of the entire process, as you’ll cover that in its entirety a bit later on.
Growth is something else to scope out here. Describe how you’ll stay on the pulse of consumer demand by monitoring industry trends or implementing a customer feedback loop, for instance. Are there any developments you’d like to pursue as a brand in the future, such as using novel technologies, manufacturing processes, designs, or sales strategies?
Step 5 – Market Research
Market analysis in your business plan will give you and any readers an in-depth understanding of how you’ll serve your customers, plus how you’ll beat the competition.
A common tactic here is to create customer personas and profiles of prospective target customers’ demographics, pain points, habits, values, needs, and desires. You not only want to go into deep detail about your customer personas, but you’ll also need to back up your claims with hard evidence gained through research.
With an in-depth understanding of target customers, you’ll demonstrate your ecommerce business’s ability to develop better products that address customer needs. Furthermore, it’ll help with your branding and messaging. Using the information you have, you can position your product in a way that appeals to your target customers the most. This is, of course, more effective than casting out a wide net.
Conduct a SWOT analysis as well to define the strengths you’ll utilize to put you ahead of the competition and identify potential roadblocks or oversights you’ll need to address. The results of this can be packaged in your business plan as a four-quadrant chart that breaks down your company’s strengths, weaknesses, opportunities, and threats.
Next, use competitor analysis to demonstrate your position in the market. Identify gaps and competitive advantages and disadvantages.
A good rule is to find three to five existing or potential competitors and profile them. Include their target markets, why they choose their branding, their marketing and sales strategies, unique selling points, and so on. Chart your strengths and weaknesses in comparison to these other companies, along with possible solutions to your weak points.
Step 6 – Marketing Plan
You’ll need a marketing and sales strategy specific to your brand that will help you acquire customers, encourage repeat purchases, and create ambassadors for your online store.
Find and list the online channels your audience uses most, as well as how you’ll use them to draw in customers. If your target customers are new parents, chances are Instagram, Facebook, and Pinterest are their preferred platforms. Or, if you’re targeting fans of video games, you’ll prioritize channels like Twitch, YouTube, and Discord.
Also, provide an overview of your marketing and sales funnel, detailing how you plan to convert customers. Get as granular as you can about how the customer journey manifests in relation to your online store.
Mention any specific sales strategies you intend to employ to get your first customers on board, such as a welcome offer.
In recent years, brands like Harry’s have achieved monumental growth by implementing customer referral programs from the outset, letting their first wave of customers bring in the second wave by earning a freebie for inviting friends to purchase from Harry’s as well.
It’s vital you share key sales strategies in this way. They’re a major contributing factor to the success of your online store and, thus, a big element in your business plan.
Step 7 – Logistics and Operations
Another important aspect of your business plan is a summary of how your business model will work from production to order fulfillment. The purpose here is to define how your idea will come to fruition in the real world.
Here are the four main areas to cover in this section:
- Production – If you manufacture the products, detail the kind of facilities you’ll need for doing so, along with any special equipment and a forecast of operational costs. If you’re operating a more traditional retail model, describe any outside manufacturers or wholesalers you intend to use and how you will source items from them.
- Supply – When manufacturing your own products, this is where you’ll detail supplier relationships for securing materials. However, if you’re selling products made by someone else, you’ll cover this fully in the previous area.
- Fulfillment – Outline who will be responsible for packing and shipping customer orders, whether internal, third-party, or a combination of the two. List ideal timeframes for fulfillment based on customer origin and whether you’ll ship internationally.
- Inventory – Describe how much inventory you intend to have at a given time and where it will be stored. This may represent another unique selling point. For example, having a large backstock of inventory may let you offer quicker fulfillment than competitors. List any software or systems you’ll use for inventory tracking and order fulfillment, including any related features on the ecommerce platform you use.
Step 8 – Financial Forecast
The last section of your business plan should focus on financial projections for the next five years. Prove to investors, partners, and yourself that you have a financially viable and stable ecommerce operation in the making.
Income statements are the first thing you should include. This shows your bottom line of profit and loss for the given time period, calculated by subtracting expenses from revenue.
Next, you’ll want to display a balance sheet showing the amount of equity in a business. It’s calculated by subtracting liabilities from assets.
Last, provide a cash flow statement of how much incoming and outgoing capital has moved during a given time period.
If your ecommerce business hasn’t been around for long enough to have these figures and data, you can use some combination of the following instead:
- A detailed list of your startup costs, enumerating every expense associated with starting the business.
- A summary of projected revenue for the next three to five years. You may wish to add a more detailed chart in the appendix.
- Break-even analysis to show how many units solid or dollars in sales it will require to start turning a profit.
- A detailed projection of profits and losses for the next three to five years, similar to an income statement.
Once you’ve put this in place, don’t forget to go back to the first step and finally draft your executive summary based on what you’ve put into the rest of your business plan. With that in place, review it with your partners or other stakeholders in your ecommerce business before putting the finishing touches on it.