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Title: The Ecommerce Business Plan
By: Author: Ray Yee
Simply put, business plans can make or break your business.
Starting a Drop Ship business online is no different from
starting a traditional non-online business. With the strong
emphasis individuals place on writing business plans for
starting up non-internet-based companies, it is equally crucial
to prepare a business plan for your online business.
A business plan serves many important purposes for the online
business. First, because the business plan has a detailed list
of the tasks to undertake, it is a call to action for you to
promote your business actively and not procrastinate on your
marketing efforts. Second, it provides a blueprint that
describes your company effectively: the market, the products and
the steps you need for effective marketing. This serves to guide
your business through the months ahead.
Business plans normally comprise of five sections:
1) The Objectives. This section will describe the objectives for
the venture, and the mission statement that defines the online
business. It states both the financial and strategic objectives
and is normally about one page long. There should be a concise
description of the Drop Ship business at the start. A brief
example:
'Magical Stores Online is an internet company that provides
quality tools and resources for magic tricks. We aim to
consistently provide magicians with reliable tools for
conducting magic tricks, and also accurate information and
guides on how to properly perform the magic tricks with our
tools. In our first year online, our target is to have U.S.
$400,000 in revenues and $100,000 in profits. This can be
achieved by attracting an average of about 5000 visitors to our
website every month through effective internet marketing. Our
strategy is to attract recurring traffic to our website by
continually updating the useful resources and information on our
website. Magicians will constantly return for more useful tips
on magic tricks. This cuts our marketing costs drastically and
adds to our profit margin.'
2) The Executive summary. The executive summary should contain a
few important details. It should outline the basic model of the
company, how the business functions, the market environment, and
also the business opportunity in the market. A continuation from
the previous example:
'Magical Stores Online is a retailer of magic products on the
internet. We specialize in card and coin tricks and stage magic,
and classify our products according to age group, skill level,
features, and the occasion they are used for. Magicians can
browse the product catalogue on our website and buy their
products with a shopping cart software. They can choose to pay
either by credit cards or by checks. We use a third party credit
card merchant to process our payments, hence eliminating the
need to have a merchant account ourselves. A profit is realized
whenever a sale is made, because we obtain our products at a
wholesale price and we sell them at a retail price. Since our
supplier, Company XYZ, drop ships the products directly to the
customers' address, we do not need to hold any inventory. Our
market comprises of magicians of any age group who specialize in
card and coin tricks and stage magic. The opportunity lies in
the internet as a marketing medium for magic products. Since the
rise of the internet in the mid 1990s, we find that the major
magic product retailers do not use the internet effectively to
market their products. With effective internet marketing skills,
we believe that we can reach a wider audience than the other
major players, thus claiming a large market share.'
*Note that in a real business plan, the business owner should
aim to provide a more detailed version than the examples given
above. The examples here only serve to illustrate an overview of
what the basic business plan should encompass.
3) Marketing Strategies. In this section, you will describe the
steps you intend to take in order to market your business
effectively on the internet. There are a few basic marketing
methods available on the internet. Mentioned below are three of
the most popular methods.
- Email Marketing. Ezines and newsletters are powerful tools. It
is simply the most cost-effective form of marketing on the
internet. Sending out email promotions or newsletters to your
subscriber base costs virtually nothing, except for the time you
spend on writing your newsletter. With the web form on your
website, you can capture the names and email addresses of the
customers who subscribed to your newsletter. I do not recommend
that you send your subscribers with product promotions
regularly, but you should continually provide them with useful
tips and information. In this way, you establish your
credibility as an expert and maintain a strong relationship with
your customers, instead of appearing as someone just out to make
money. Promotions for your products should only be sent out
about once or twice a month.
- Search engine optimization. Optimizing your website for high
search engine results on google, yahoo and msn, is a powerful
way of getting large volumes of traffic at low cost. However,
you have to put in a lot of effort for a long period of time, as
top rankings do not appear overnight. There are two factors for
search engine optimization: On-page or Off-page optimization.
On-page optimization involves tweaking the page title, header
and meta tags to include the website keywords. It also involves
scattering the keywords throughout the page to improve the site
relevancy. Off-page optimization, on the other hand, is much
more important than on-page. It involves soliciting links from
relevant websites. The more the websites that link to your site,
and the higher the importance/relevance of the website linking
to yours, the higher your website will be ranked on the search
engines. Google places a very strong emphasis on this.
- Pay-per-click (PPC) Search Engines. This requires you to pay a
sum of money for every visitor that clicks through the search
engine to your website. The higher the amount you pay, the
higher your website will be ranked on the PPC search engine. The
basis for profiting with this marketing tool is by bidding less
than the amount that each visitor to your website is worth.
Overture is definitely the market leader for pay-per-click
search engines.
4) Competitive Analysis. In this section, you have to analyze
the strengths and weaknesses of your competitors, and the
factors that will differentiate your products or services from
your competitors. You have to analyze your competitors and
record what makes them so successful, and also the weaknesses
you can capitalize on to get an edge in the market. For example,
competitors may not be using email marketing effectively to
promote the products to customers. You can capitalize on this by
using newsletters more intensively, establishing your
credibility as an industry expert. To differentiate an online
Drop Ship business, it is more viable to provide a reliable
service from your website. This usually means providing a wealth
of tips, articles and information for your visitors. This will
attract them to continuously return to your website for the
latest tips and resources that will benefit them. Fast response
to their email queries and also fast shipping are also good
services you can provide.
5) The financial projection section. In this section you can
project the profit-loss statements and the cash flow statements
for your business. The profit-loss statement records the monthly
profit/loss realized over the months, while the cash flow
statement records the difference between revenue and expenditure
over the months. The costs for an online Drop Ship business will
include:
- One-time costs for software like shopping cart software, email
marketing software, and also search engine optimization
software.
- Recurring costs for the wholesale price of the products, web
hosting fees, a proportion of revenue paid to your third party
credit card merchant to process your payments, and also internet
marketing costs.
This section will be useful for you to gauge how your Drop Ship
business performs according to your expectations.
In conclusion, business plans do not only apply to real-world
businesses, but are equally critical to online businesses as
well. They serve as blueprints of the companies and also as
strong calls to action for the aspiring internet entrepreneurs
to achieve their success in ecommerce.
*You are welcome to reprint this article as long as you include
the Author's resource box with the article and the entire
article remains unchanged.
About the author:
About the Author: Ray Yee is the founder and president of
Dropshipperscentral, a website which provides a wealth of
informative articles, tips and resources on everything you'll
ever need to know about setting up a Drop Ship Business and
marketing it. Click here for the
Directory from http://www.dropshipperscentral.com
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