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Who should write a business plan?

Do you feel ready to take the plunge and set up your own ecommerce business?
Have you been over your idea a thousand times in your head, run it past all of
your friends, family members and colleagues?

Maybe youre already up and running, but need to secure investment to develop
your business. Or you might be wondering which direction to take if your initial
strategy has proved less successful than youd hoped

Every type of business can benefit from a business plan, and while the most
obvious time to write one is at the beginning of your venture, its never too late.
There is always something to gain from being prepared for the future and informed
about the market which is exactly what a business plan should achieve.

Most small online businesses dont need to produce an elaborate document

containing copious calculations. Even if you arent looking for investment, you will
still benefit from bringing your ideas into focus, establishing some solid foundations
and defining an operational framework.

What is a business plan?

If the thought of writing a business plan makes you break out in a cold sweat
just take a deep breath, relax and read on.

A business plan maps out what your business is, how it works and why it will be
successful.

It isnt rocket science: you just need to approach it in the right way. This user guide
will show you how to write a simple business plan that really packs a punch.
Well go through each section that any self-respecting business plan should
contain, explaining what information should go where. Its up to you to decide
how complex your business plan needs to be, which mostly depends on whether
youre doing it for yourself or trying to raise funds so keep your audience in
mind and tailor the document accordingly.

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 ? Why do you need a business plan?

For two main reasons:

1. For yourself: Your business plan will give structure to your idea and test the
feasibility of your project. Its great to have the information in your head, but
getting it down on paper will bring the business into focus and reveal any areas
youve overlooked potential risks, competitors, financial outlays, new markets
all of which influence the way you manage your business.

2. For others: Anyone who is interested in financially backing your ecommerce

venture will want to see a business plan. Whether its a bank, a potential supplier
or a supportive friend, you need to be able to demonstrate exactly how your busi-
ness will work, why it will work, and what the estimated financial return will be.

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contents
CONTENTS

The structure of this guide follows the basic structure of a business plan, feeding
you a logical flow of bite-sized information thats easy to digest. Well clarify any
mysterious, fear-inducing terms, coach you on methods for analyzing the market,
and point you in the right direction to find further information.

1. PRESENTATION RULES!

2. THE EXECUTIVE SUMMARY

3. THE COMPANY

4. THE PRODUCT

5. MARKET ANALYSIS

6. THE MARKETING PLAN

7. OPERATIONAL STRUCTURE

8. FINANCIAL PROJECTIONS

9. FUNDING

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 1. PRESENTATION RULES!

The way you present your business plan will determine the all-important first
impression you give. There are several golden rules to follow to ensure your
business plan is professional and easy to read:

Cover letter
Whether youre sending your business plan to someone by email or handing over
a hard copy, its courteous and diligent to address it to a specific person. As with
any cover letter, you should include their address, your address and contact
details, and a brief text explaining what youre giving to them and why.

Title page
The first page of your business plan should contain just a few basic but very
important pieces of information:

The company name

The logo
The words Business Plan
The date

m Tip: You could also include a picture of your product on the title page just
make sure this page doesnt become muddled and crammed with information.

m Tip: General design and presentation: Go for an easy-to-read font and a

straight-forward layout. Dont go overboard with color and design gimmicks.
Simple = professional.

Contents page
The second page should be dedicated to your table of contents. This is a vital
element as different readers will be interested in different parts of your plan. A
table of contents will allow them to move directly to what they want to read,
without wasting time flicking back and forth through pages.

m Tip: Breaking your business plan down into small sub-sections will avoid
information getting lost in solid blocks of text.

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 2. THE EXECUTIVE SUMMARY

The executive summary is your big chance to hook the reader and convince
them that your idea is original, dynamic, financially viable and that they should
carry on reading your business plan!

As your sales pitch, the executive summary should provide investors with a
sharp, engaging and concise overview of your business concept, the rationale
behind it and its potential worth.

This is a great exercise even if you arent looking for investment as it helps you to
refine your concept and focus on your core objectives.

A good executive summary is short definitely no longer than 1 page, and often
less for small startups. It should highlight all of the key points covered in your
business plan. For this reason, it is the last section to write: think of it as a
conclusion thats been bumped up to headline VIP status.

The information contained within your executive statement will differ depending
on whether youre already established or a startup, and whether youre trying to
raise funds or not.

Here are some key points to cover:

Mission statement: Your companys activity and purpose (1 line to 1

short paragraph).

Company vision: Your goals and your companys development objectives.

Company information: Date established, legal structure, names of foun-

ders, number of employees, location, etc.

Product information: A concise description of what you sell, emphasizing

what sets it apart.

Target market: Who will buy your product and how will you sell it to them?
What is the size of the market?

Achievements: Do you have any patents, prototypes, exclusivities,

contracts or test results?

Growth highlights: If youre already in business, include a summary of

how youve evolved over the last few years (e.g. increase in
sales/turnover, geographical expansion, number of employees hired).

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 Financial information: A summary of the companys current financial
situation and your projections.

Funding request/future goal: How much investment youre asking for,

the conditions (debt/equity) and repayment schedule. What will you do
with the money and where will it take you?

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 3. THE COMPANY

3.1 Business concept

Introduce what your company is and what it does. This short, clear description
of your companys purpose and activities is called a mission statement. It should
communicate what your company intends to provide and under which conditions
- what is your approach, what are your ethics?

m Tip: make it snappy, dont be generic this is where you need to capture the
essence of your company.

After the mission statement, you can add some more details such as when you
started, the nature of the business (i.e. what do you sell and how?), which market
segment your products cater to, and the context of the wider industry. This is the
first, but definitely not the last time youll bring up your customers: who are they
individuals, businesses, or organizations? Why is there a need for your product
and how do you respond to that need?

m Tip: you can go into more detail about your products, the industry and your
target market later, just give a broad overview in this section

3.2 Vision, values, and goals

Defining your company vision and goals will help you to fix targets for yourself
and show outsiders how you intend to grow.

The company vision is how you see the future. Where do you ultimately
want to be? What is your ambition? This statement should be compelling
and inspiring. It should also be the logical outcome of your mission
statement.

Listing your company values your rules of conduct, your company

culture/spirit and ideal working environment will help you to build a
corporate identity. This serves to differentiate you from your competitors
and to establish a reputation amongst your customers, suppliers,
employees and investors.

In order to achieve your company vision, you need to set out some
tangible business goals and objectives. These should be specific and
measurable, and cover both the short-term (6-12 months) and the
long-term (1-5 years). Think about your growth strategy and market share,
the expansion of your product line or extra services, and the amount of
sales you intend to generate.

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m Tip: Displaying your company values and mission statement on your website
will help you to forge a relationship with your customers.

3.3 Ownership
What is the legal structure of your company? Are you the sole proprietor? Is it a
partnership, a cooperative or a corporation? You need to present the legal fra-
mework within which you operate, and the breakdown of who owns what (shares/
stock/equity).
For more information on choosing a legal structure for your business, take a look
at the following links:

(UK) Official government website

(US) Official government website for small businesses (SBA)

3.4 Management
Clarifying roles and responsibilities will favor smooth business operations and
inspire trust in potential investors. Even if youre working on your own, you need
to demonstrate why youre the right person for the job!
This section should cover the following points for each person involved in the
business:

Name
Role
Responsibilities
Background: relevant achievements, experience, skills, education
Salary (if any!)

Once youve introduced these people, you might want to say what makes you
such a great team!

You could also explain how you expect each member to evolve (in terms of
responsibilities and salary), and if there are any other particular profiles that you
intend to recruit. The amount of money you quote for current and projected
salaries will be used again later in the financial plan.

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3.4 Exit Strategy
When you set up a business, it might seem absurd to talk about how you will
leave it, but its actually an important strategic consideration. As your business
grows, it will increase in worth, but how do you intend to release the cash your
company represents?

Do you intend to sell it on to an employee or seek acquisition by a larger

company? If so, what makes you think this will be possible? Who would be
a potential buyer?

What would happen in the event of liquidation? Would your stock and
assets cover your debts?

Deciding on an exit strategy shows you are going into business with a responsible
attitude, and that your business will be prepared should an unexpected situation
arise (accident, injury, etc.).

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 4. THE PRODUCT

4.1 Product description

Describe the products you sell! Give details about where you source them, and
how they are made. Maybe you have a primary product with a supporting range?
This is where you present your stock think of it as your shop window.

m Tip: Use annotated pictures

m Tip: If you offer a wide range of products, or they are highly technical, you
can include a more exhaustive list or detailed specifications in the appendix.

4.2 Unique selling point

Here you need to explain what makes your product or range of products so
special. What is the gap in the market and how does your company fill it? In other
words, what is unique about your product?

List the advantages you offer: quality, speed, price, rarity, location, personal
expertise

Focus on what distinguishes your product or product range apart from the
others, e.g. the high-quality craftsmanship of hand-knitted sweaters, or maybe
you offer the widest choice of flavors, or a particularly extensive size-range.

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 5. MARKET ANALYSIS

This is where you need to prove youve done your homework and tapped into
whats going on in the big wide world

To really give this section depth and credibility, you should draw on a mix of
primary and secondary sources, qualitative and quantitative data.

Search for official statistics on the web, but also at the library and your local small
business center. Carry out your own research with surveys, questionnaires or
focus groups.

m Tip: only include results and conclusions any relevant research (along with
its methodology) belongs in the appendix

5.1 Industry dynamics

Illustrate your knowledge of the industry and the market by describing the general
environment. What characterizes the industry? Is it growing? Which trends have
an impact? Who are the major customers? Are there any barriers (initial set-up
costs/changing technology etc.)?

A good way to make sure youve got all of the angles covered is to carry out a
PESTLE analysis:

P Political: What is the governments stance on the industry? Maybe it

actively supports it (e.g. healthy food)? Are there any particular tax laws
that concern your product (alcohol or high-sugar foods)?

E Economic: How is the industry affected by exchange rates, interest

rates or inflation (especially important for import/export businesses)?

S Social: What is the social context of the industry? How large is the
demographic? What kind of implications do factors such as expendable
income, health and education have on it?

m Free government resources available to help you evaluate demographic data:

http://www.pewinternet.org/
https://www.sba.gov/content/demographics
http://www.entrepreneur.com/article/202334
http://acorn.caci.co.uk/
https://www.cia.gov/library/publications/the-world-factbook/

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 T Technology: What role does technology play in the industry? Are your
products produced using highly technical processes? Is there consi-
derable R&D going on in this field? How will technological innovations
affect the cost and lead times associated with your product?

L Legal: What laws and regulations apply to your sector of activity? Are
there health and safety regulations (especially for food/perishable
goods/electrical goods)? What are the official rules, how do you intend
to comply, and what financial impact will this have on your business?

E Environmental: Both consumers and governments are becoming

increasingly conscious of environmental issues. Where does the envi-
ronment come into your business? It could be your production methods,
your logistics and delivery channels, or the lifecycle of your product (is
it particularly long-lasting, energy efficient or bio-degradable?).

You might not need to address every point, but the idea is that you give a feeling
for the underlying forces at play, the risks involved and the potential of the indus-
try.

5.2 Your target market

This section should demonstrate that you really understand your customers, and
that there is a demand for your product.

If you only have a vague idea of who youre selling to, youll quickly run into
trouble as you struggle to cater to too many different customers and end up
pleasing none. Identifying your target market will enable yourself and others to
assess your businesss potential.

Pinpoint exactly who you are pitching your products to:

What is the demographic: age/sex/location/mobility/profession /income

Define their habits: what characterizes your customers lifestyle?
What are their fundamental needs and values: price, quality, originality,
ethics?
How are their needs met at the moment?
What is the size of your target market? Is it a growing market?
What proportion of this market do you expect to serve i.e. how much
market share do you intend to achieve?

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 m Tip: When carrying out primary market research, try to reach beyond your
family and friends to some objective consumers.

m Tip: If your site is already up and running, use Google analytics dashboards
to gather information about your present customers.

m Tip:
Estimating target market size:
The size of your target market is the total number of potential customers, rather
than your estimated market share, which is the number of those potential
customers you actually think you can sell to. Estimate the size of your target
market by breaking it down into quantifiable groups.

5.3 Competitive analysis

This point is not one to breeze over not only does it give you a clearer picture
of the industry and who youre up against, it can also be a source of inspiration.
Benchmarking means looking at the best and figuring out why theyre so
successful. You can then decide whether to adapt your offer in an alternative
vein, bypassing the competition, or go head on and try beating them at their own
game with an even better product or offer.

Split your competitors into direct (those who are competing for the same
customers) and indirect (supermarkets, web-giants etc.) and perform a SWOT
analysis to obtain your strategic fit (i.e. your place in the market):

S Strengths: Why are your competitors successful? What do they offer in

terms of price, delivery times or rates, discounts, product range, image
etc.?

W Weaknesses: What do the critics say? What could they improve on?

O Opportunities: Is there a window? How could you do better than your

competitors or complement what they offer? Which customer segments
could you win over?

T Threats: How will your competitor react to your presence? What could
put your business at risk?

Then do this same analysis for your own business.

m Tip: Market share: create a pie chart to show how the market is currently
divided between your different competitors

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 6. THE MARKETING PLAN

Its now time to create a marketing plan that draws on your understanding of
what drives the industry and your conclusions from the market research youve
carried out.

A marketing plan details the strategy that you will adopt to reach out to your
customers and bring in those all-important sales.

6.1 Position
How exactly are you going to position yourself in relation to the competition? Use
your unique selling point to explain why customers will be attracted to your
products and how you will break into the market. Once you have established
your initial customer base, how do you intend to grow and increase your market
share?

Supply a visual description of your position by creating a positioning chart that

plots you amongst your competitors on an appropriate scale. This could be cost
vs quality, design vs functionality, or product range vs speed; whatever the relevant
values are in your market.

6.2 Pricing
Pricing is a very delicate subject, and getting it right can make or break your
online business. Based on your market insight, you should explain the following
pricing points:

How have you designed your pricing structure?

How does it relate to the customers?
How do your prices compare to your competitors?
If they are higher, what justifies the difference and what makes you
think your customers will accept to pay it?
Do you intend to offer discounts for bulk buys, first-time or repeat
customers?
Will you offer free shipping and absorb the cost into list prices?

Once you have outlined your pricing structure, detail your gross margin levels
to show how much you will make on each sale.
Maybe some products have higher gross margin levels than others: why is this,
and how does it even out across your business (e.g. smaller profits on high volume
sales)? This is where you should show how your offers translate into profits.

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Your gross margin level shows what percentage of your sale prices come back
as profit. It is calculated by subtracting the variable costs associated with a
product (materials, wages, transport etc.) from your total revenue, then dividing
that figure by the total revenue.

E.g. Your site sells tea. Lets say that a bag of tea costs you $7 to source, $2 to
deliver and you take $1 as wages. If you sell that tea for $20, your gross margin
level is 50% (20-7-2-1=10, 10/20=0.5 or 50%)

6.3 Publicity
How are you going to tell your customers that you exist? Your strategy will
depend very much on your product and market, but here a few starting points:

Think about your identity and the associations that people make with it,
and work out how you can use this to reinforce your brand.
Link your promotional material to your unique selling point and your
competitive advantages to target the right people through the right channels.
Brainstorm, be creative, and consider future customers as well as existing
ones to generate interest through compelling publicity campaigns.
Do you intend to use free methods (blogging, social networks, SEO,
mailing lists), paid methods (advertising, CRO.), or a mixture of both? If
youre going to use paid methods, outline how much you intend to spend
over a given period.

6.4 Sales funnel

Marketing doesnt stop with publicity. Once your customers land on your site,
how will you guide them through to making a purchase? How will you present
your products on your site? What kinds of categories, search filters and payment
methods do you propose?

Based on your market research, who do you see as your first customers? How
many sales will these people generate?

And dont forget about customer service! What is your returns policy? Will you
offer any guarantees for your products? What kinds of customer support
platforms will you use?

m Resources from our blog

https://www.prestashop.com/blog/en/how-to-find-the-right-products-to-sell-online/
https://www.prestashop.com/blog/en/increase-ecommerce-conversion-rate/
https://www.prestashop.com/blog/en/the-anatomy-of-ecommerce-return-policies/

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 7. OPERATIONAL STRUCTURE

7.1 Processes
So youve got a great website and the orders are flooding in but what is the
process from the moment the customer pays to the moment they receive the
product? How exactly do you deliver your promise?

Do you rely on outside service providers (accountants, suppliers, shippers etc.)?

What are their separate functions and how are they coordinated?

Even if its a one-man-show, you need to detail the different processes involved
in your business (e.g. updating the website, answering queries, ordering or
creating stock, dispatching orders and processing returns).

m Tip: using diagrams can be a good way of illustrating organizational

structures and operational processes: the aim is that people reading this plan
get an instant understanding of how your business works.

7.2 Supply chain

Most ecommerce sites depend on a chain of suppliers and service providers to
fulfill their offer. If this is your case, then the efficiency of your business depends
as much on your suppliers ability to uphold their promises as your own. With this
in mind, answer the following questions:

How do you source, stock and deliver your products?

How did you choose your suppliers and partners?
Is there a particular risk of shortages or delays? What kind of precautions
have you taken against this?
Could you deal with an unusually large order or a Christmas rush? Or
would your products go out of date if they arent sold within a limited
timeframe?
What situation would you be in if your main supplier closed down?

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 8. FINANCIAL PROJECTIONS

Time to get down to some number crunching! Apart from accountants, not many
people like gathering and compounding figures, but it is a fundamental aspect of
any business. If your business idea is not financially viable, you need take a long
hard think about how you can improve its prospects, and if its even worth
pursuing it all. Any financing body will want to see that your business is
profitable, and how long it will take for them to get their money back.

Theres no avoiding it, you just have to get up close and personal with your
bottom line, i.e. how much money youre making, or plan to make. Using
financial projections, you also need to demonstrate how your ecommerce will
sustain itself and grow.

If youre already up and running, this section should include data relating to
your companys performance over the last 3 to 5 years, depending on how long
youve been in business. Both new and established companies will then need to
provide financial projections covering the next few years.

The financial plan includes three statements: the income statement, the balance
sheet, and a cash flow statement. You should include a short summary for each
document that briefly highlights its major dynamics.

m Tip: If you need some help with the details, we recommend using SCOREs
templates: click here to browse their site.

8.1 Income statement

The income statement, also known as the profit and loss statement, shows how
much money you expect to be coming in and going out of your bank account. It
details all of the businesss revenue and expenses to show the net profit, or loss,
at the end of a given period.

The calculation is simple: subtract your operational expenses (wages, rent etc.)
from your gross profit (total income minus cost of goods sold). Just make sure
you dont overlook anything! You also need to factor in depreciation, the cost of
interest on any loan repayments, and taxes to obtain your net income.

This projection should be generated on a monthly basis for the first year,
quarterly for the second, and yearly thereafter for the length of time covered by
the business plan (usually 3-5 years).

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8.2 Cash flow statement
The cash flow statement is similar to the income statement in that it describes
your income and expenses, but it also illustrates the liquidity of your business,
i.e. when you will receive income compared to when you have to pay out.

Many businesses run into trouble simply because they dont have enough
liquidity to operate a common example being that you need to pay a lump sum
for your stock before you recover the money through individual sales spread
over a period of time.

A cash flow statement will show you where funds are low, and how much you
need to cover your operations. This helps you to forecast your spending
requirements, and reveals why, how much and when you might need an outside
cash injection.


8.3 Balance sheet
A balance sheet provides a snapshot of your business by dividing it into 3 areas:
assets, liabilities and equity. This essentially shows whether the amount of money
you have put into the business and the amount of money you have to pay out are
equal to what your company owns and is owed.

Your assets are divided into current and fixed (long-term), current being any
cash, accounts receivable and inventory that will turn into cash within the next
year. Fixed assets refer to anything you own but dont intend on selling in the
near future, such as machinery, equipment and business premises.

Next come your liabilities, which are again split into short-term (accounts
payable, taxes etc.), and long-term (bank loans etc.).

Lastly, you need to show how much owners equity (invested capital and
retained earnings) your business holds.

This document should be generated on a yearly basis for the time covered by
the business plan.

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 9. FUNDING

If youre making a funding request, this is where you need to say how much you
want and where youre going to spend it.

9.1 Request
Based on the projections you have made in your financial plan, state how much
money you are asking for and under which conditions. Do you want an interest-free
loan, an overdraft, or are you selling shares in your business? What is your
proposed repayment plan?

9.2 Allocation
Explain, or demonstrate using a chart, how you will spend the money you are
asking for.

m SCORE, a US volunteer-run organization, has a great set of free templates

and resources for small businesses just starting out. Download balance sheets
and other financial planning templates and start working out the nitty-gritty
details that will help you launch your business with confidence.

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CONCLUSION
CONCLUSION

Each section contained within this guide could be the subject of a whole book,
and there is no end to the amount of research and depth you can give to your
business plan. Our advice however, is to keep it as short and concise as possi-
ble, cutting out anything potentially superfluous or confusing. Most small startups
dont need to go into elaborate details; it is more important that your business
plan contains relevant, realistic information.

There are many resources available on the Internet to help you, including tem-
plates for 1-page business plans that aim to focus entrepreneurs on only the
essential drivers, risks and costs of their business.

For help with legal and financial structures, and any other long-term commit-
ments youre considering to make, approach your bank, lawyer, or local busi-
ness support center for personalized, up-to-date advice.

Once youve got your business plan together, show it to friends, family or collea-
gues before presenting it to potential investors and ask them for constructive
criticism!

When youre ready to open your online store, PrestaShop has an ecommerce
solution for you.

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www.prestashop.com