Dropshipping Business Plan: 9 Steps to Opening a Store

Like any other business, dropshipping has its own nuances that you should learn before you start working. It is not as easy as it seems at first glance, but taking the first steps, you will discover the amazing world of entrepreneurship and its great opportunities.

For example, you can sell products to customers even if you don’t have inventory. And you don’t have to pay for products upfront. If you’re serious about the success of your business, you can easily create a sustainable source of income in the long term.

If you are planning to get into dropshipping, then take a close look at the business and financial steps outlined in this business plan. Some of them are mandatory, while others are just good ideas and tips for getting started. But knowing all the details up front will save you time and headaches in the future.

How does the dropshipping business model work?

Dropshipping is an order fulfillment method that allows store owners to sell products directly to consumers without having to hold any inventory. When a customer buys a product from a dropship store, a third-party supplier ships the order directly to the customer. The customer pays the retail price you set, you pay the wholesale price to the supplier, and the rest is your profit. This way, you don’t have to assemble the order, invest in inventory, or pay for a warehouse.

There are two common ways to find a supplier for your dropship store:

• Through a supplier database such as Dropship Direct, Alibaba or AliExpress.
• Using an integrated supplier directory such as DSers.

Oberlo makes dropshipping for Shopify stores easy and fast. You can source millions of products from Oberlo's marketplace via AliExpress and import them directly into your store with just one click.

When a customer makes a purchase from your store, Oberlo fulfills the order automatically. All you have to do is check that the order details are correct and click the " Order " button. The product is then shipped from the AliExpress dropshipping supplier to the buyer, no matter where they are.

In the dropshipping business model, you are responsible for creating your own brand and website, as well as choosing a niche and marketing the products you plan to sell. Your business is also responsible for shipping costs and setting prices that will ensure you a good profit margin in the future.

9 Steps to Building a Profitable Dropshipping Business

Be Responsible When Starting a Dropshipping Business

Like any other business, dropshipping requires a lot of effort from you at the start, and you will only see fruitful results in the long term. If you are hoping to earn a six-figure income in six weeks of working a couple of hours every three days, you will be sorely disappointed. If you approach your business without inflated expectations regarding investment and potential profit, you will be much less likely to become discouraged and quit.

When starting a dropshipping business, you will have to invest a significant amount of money using one of two main currencies: time or money. So you need to be prepared for this.

Investing Time Into Your Dropshipping Business

Bootstrapping is a great approach, especially for newbie dropshipping entrepreneurs. Bootstrapping is preferable to investing a large amount of money for the following reasons:

• You'll learn how a business works inside and out, which will be critical to managing others as your business grows and scales.
• You will know your customers and the market well, which will allow you to make more informed decisions.
• You will learn not to spend large sums of money on frivolous projects that have little to do with your success.
• You will gain useful skills that will make you a better entrepreneur in your niche.

Most people aren’t in a position to quit their jobs to spend six months building a new online store. It’s not exactly easy, but as long as you set appropriate expectations for customer service and fulfillment times for your customers, it’s entirely possible to start dropshipping even if you’re still working a 9-to-5 job. Once your store starts to take off and you’re happy with the revenue stream, you can transition to a full-time business.

Every business and entrepreneur is different, but on average, it is quite possible to earn $1,000 - $2,000 in monthly income after 12 months if you work on building your business approximately 10-15 hours per week.

If you have the ability to work on your business full-time, then this is the best option to quickly increase your store profits and run a successful dropshipping business . Focusing on marketing, which is especially helpful in the early days, will be crucial later on. Based on our experience, it usually takes at least 12 months of full-time work with a focus on marketing for a dropshipping business to generate an average of $50,000 per year in revenue.

At first glance, this may seem like a lot of effort for little return, but there are two things to keep in mind:

• Once you get your dropshipping business up and running, it will take up far less time than working 40 hours a week. Much of your investment will pay off through effective strategy and the business expansion that the dropshipping model offers.
• When you build a business, you are not only creating an income stream, but you are also creating an asset that you can sell in the future. Be sure to consider the cost of capital invested, as well as the cash flow generated by the business you have built, when considering your current income.

Investing Money in Dropshipping Business

It is possible to start and grow a dropshipping business by investing a ton of money into it, but we don't recommend it. We've tried both approaches to growing a business (bootstrapping ourselves and outsourcing) and had the most success when we did most of the work ourselves.

In the early stages, it is very important that if you use outside help, they have a vested interest in the success of your business. Without understanding how your business works at every level, you will be at the mercy of expensive programmers, developers, and marketers who will drain you of money and not lead to a successful outcome. This does not mean that you should do everything yourself, but we strongly recommend that you understand everything thoroughly in the early stages of your venture.

Regardless, you will still need a small cash cushion of $1,000 to get your business up and running. This amount is needed for small operating expenses like web hosting and dropshipping suppliers , as well as any registration fees, which we will cover later in this article.

Choose a niche in which you will run your dropshipping business

The second step in starting a dropshipping business is to conduct the necessary market research. Just like you would if you were opening a retail store and researching different locations, competitors, and trends, you need to research the niche you are interested in and decide how profitable it can be. Coming up with product ideas to sell is not an easy task.

To inspire you to come up with a successful dropshipping business idea, Shopify creates a list of trending products based on the best-selling product categories on the platform. By focusing on trendier products and a popular niche, you can attract customers and build your own reputation without competing with larger companies that have become established in the market.

Products in a high-demand niche often have a more engaged customer base, making it much easier to sell to your target audience. Fitness, fashion, beauty products, electronics, phone accessories, and yoga-related products can all be good entry points for starting dropshipping without any initial capital.

Here are some examples of directions for a dropshipping store that wants to take on a popular niche:

• Bow ties for dog lovers.
• iPhone cases for iPhone owners.
• Camping equipment for tourists.
• Exercise machines for those who do fitness.

You can also use the following tools to test your dropshipping business ideas.

Google Trends

Google Trends can help you determine the dynamics of a product's popularity, as well as the seasons in which it is most in demand. Note that Google Trends does not show search volume, so if you decide to use it, be sure to cross-reference the data with a keyword tool like Keywords Everywhere to determine the popularity of a product in the search engine.

KeywordsEverywhere

This tool is designed for keyword research . Keywords Everywhere will show you the monthly search volume for a product and the level of competition. You can use this information to assess the popularity of your dropshipping business idea and for new ideas in the future.

Sales stats from Oberlo

On Oberlo, you can search for products based on order volume from other stores to determine the potential of your business idea.

Despite the growing opportunities for e-commerce for beginners, it is quite a competitive field. This means that you need to study your competitors when creating a dropshipping business plan to be successful in selling your products.

Study your competitors

Once you have decided what exactly you are going to sell in your store, you need to look at who your competitors are and how they operate. This research will give you clues and help you build a stronger marketing plan for your dropshipping business.

If there is a lot of competition in your niche (which is great for dropshipping), choose about five other dropshipping companies, including one or two of the larger ones, like Walmart or Amazon . This will help you better focus and plan your next steps.

Here are the most popular ways to study competitors:

• Search Google. The search engine is obviously the starting point. Use Google to create a list of your top five competitors. Start with simple keywords like “sunglasses.” The top 10 results will show you who your top competitors are and how they market their products. If you want to focus on a specific country, you can use additional tools like Ahrefs or SEMRush to find keyword data in a specific region.
• Use competitor spy tools like SimilarWeb and Alexa. These online tools are great for tracking your competitors' online activity. They provide you with a list of information about your competitors' websites, such as their social media profiles, top traffic sources, number of visitors, and information about who your competitors' competitors are.
• Don’t forget about social media. Find Facebook ads that are relevant to your niche and check out the best brands in the market. See how the company communicates with its customers, how its feed is designed, how much engaged audience it has. You can even follow the account and monitor its feed to make sure you don’t miss any events. Use this information to find new ways to stand out and improve your social media marketing strategy.
• Subscribe to your competitors' newsletters. Want to receive updates from your competitors straight to your inbox? Subscribe to their email newsletters. This way, you can understand what marketing strategy they are using. You will also be able to find out what promotions and offers they use to attract customers.

Find out everything you can about your main competitors: their website, prices, marketing methods, product descriptions, reputation, etc. Organize this data in a spreadsheet so that you can use this information as a reference when developing your marketing strategy. For example, if you want to use email marketing to promote your business, you can look at your spreadsheet to see if your competitors are doing it, what tactics they are using, etc. You will have all the data in one place, which is very convenient for saving time.

Choose a dropshipping supplier

At this point, you have already identified the products you want to sell and know that they can be profitable. Now you need to make sure that you find a dropshipping supplier that will provide you with high-quality services. E-commerce platforms like Shopify offer a plug-and-play way to find potential suppliers by connecting DSers to your online store.

DSers is a marketplace that makes it easy to find products to sell online. Whether it ’s electronics, fashion, toys, or other trendy items, you can find products with good profit potential from dropshipping suppliers around the world and add them to your store with just one click. The DSers app forwards orders to your dropshipping supplier, so you don’t have to worry about shipping, packaging, or inventory.

DSers uses AliExpress to help you find and add products to your store. If you want to learn more about product quality, delivery times, or check the reliability of a supplier, you can do so on the DSers product page.

When you click on a supplier's link, you'll be taken to their AliExpress page where you can read reviews, see their best-selling products, and more.

Keep in mind: If your supplier is from China, try to sell DSers products with ePacket delivery. ePacket is an affordable way to deliver dropshipping products from China to countries like the US, UK, and Canada. Instead of waiting months for a package from China, your customers will receive their order within two weeks, and the shipping cost will be only a few dollars.

Create your eCommerce store

The next thing you'll need for a dropshipping business is an e-commerce platform like Shopify . This is where you'll drive traffic, sell products, and process payments.

Shopify makes it easy to create and launch your e-commerce site. It is a full-fledged marketplace that allows you to sell in multiple locations, in multiple currencies, easily manage your products, and handle financial transactions.

You don’t have to be a designer or developer to use Shopify . There are tools to help you with everything from a domain name generator to logo design. Plus, you can easily change the look and feel of your store with Shopify’s store builder and themes.

If you need help building an online store, try Shopify for free for 14 days and read How to Create a Shopify Store: A Step-by-Step Guide.

Decide on a business structure

If you are serious about your business, you will want to set up a legal company. This is not legal advice, but for your reference, we will list three commonly used business structures:

Individual entrepreneurship

This is the easiest business structure to implement, but it does not provide complete protection for your personal assets. In the event that your business is sued, your personal assets may also be at risk. The documentation requirements are minimal, you simply report your business income on your tax return. No other documents are required to run a business.

Limited Liability Company

When you open an LLC, your business acts as a separate legal entity. This structure provides greater protection than a sole proprietorship. Registration may require compliance with additional requirements, a package of documents, as well as payment of registration and other fees.

Joint Stock Company (C Corporation)

Most large corporations use this structure because it provides the most protection for your interests. It is likely to be more expensive to incorporate, and the company is subject to double taxation because income does not flow directly to shareholders.

So which structure should you choose? Again, we are not lawyers and recommend that you consult with a specialist before deciding to register. Most small entrepreneurs choose either a sole proprietorship or an LLC. We have used an LLC for all of our dropshipping companies because we believe it is the best compromise in terms of protecting personal interests and financial autonomy.

EIN numbers for your business

The IRS requires all businesses to have an Employer Identification Number (EIN), which acts as your business’s Social Security Number. You’ll need this number to file your taxes, apply for wholesale dropshipping accounts, open a bank account, and do just about anything else that involves your business.

Don't worry, getting an EIN is easy and free. You can apply for an EIN online .

Information about the business structure and EIN (Employer Identification Number) is only required for entrepreneurs in the United States. For information on registering a business outside the United States, you should research the information on this topic in your country.

Get your finances in order

One of the most common mistakes new entrepreneurs make is mixing personal and business finances. This causes confusion, complicates accounting, can lead to additional business liabilities, and is a big red flag for the IRS if they come to audit you.

In order to separate your business and personal money, it is best to open new accounts in the name of your business. Here is a list of the necessary accounts for a business:

Current account for business

All your business finances should go through one main checking account. All business income should be deposited into it and all expenses should be paid from it. This will greatly simplify bookkeeping.

Credit card

You should have a business credit card that is used only for business expenses and dropshipping purchases. Since you will be buying a lot of products from suppliers, you can rack up some good rewards with travel loyalty programs. We have found that Capital One has a great rewards program, and Fidelity Visa/American Express has a great cashback program.

Local Law Licenses

Most cities and towns require businesses to obtain a business license, which must be renewed regularly. However, these requirements may differ for dropshipping businesses, many of which will operate from home offices. You should check your local laws and regulations to see what is required of you to comply.

Registration outside the US

It can be complicated, but foreign entrepreneurs can register their business in the US, which will give them access to US dropshippers and customers. To complete the necessary paperwork, the seller will have to travel to the US in person and have a trusted US business partner who can act on their behalf. Alternatively, they can hire an agency to arrange everything.

The resources below can help you navigate this process, but we strongly recommend consulting with an attorney before making any decisions:

• "Doing Business in the United States: A Guide for Foreign Businessmen," written by New York attorney Aaron Wise.
• "Delaware Non-Resident LLC and Corporation" which is formed under the authority of a Delaware corporate headquarters.

Marketing for your dropshipping store

Now that you already know how to start a dropshipping business, it’s time to talk about marketing your new store. You can focus on advertising to stand out in your market and become more popular.

Many things for dropshipping are automated, you can do marketing and promote your business in the following ways:

1. Paid Advertising (Facebook and Google): The average cost of advertising on Facebook, according to research, is about 97 cents per click, which is very affordable if you are new to advertising on the social media platform. Facebook advertising is very effective and encourages audiences to make impulse purchases. On Google, you can run Shopping Ads and target a bunch of keywords that shoppers are more likely to make a purchase. Generally, the price competition is higher for Google ads, but this approach will give you productive results.

2. Influencer Marketing: It’s possible that you have a limited budget to market your business when you’re starting out. Influencer marketing is an affordable way to reach your target audience, as people tend to trust influencers more than traditional advertising. If you go this route, consider working with a well-known person in the public eye to offer them a percentage of sales rather than a flat rate. This is a win-win situation for both of you. In this situation, you both make money on every sale you make, and your out-of-pocket costs are lower.

3. Content Marketing: If you want to generate long-term traffic for your store, then include content marketing in your business plan. Start a blog dedicated to your dropshipping niche , create content that will interest and offer useful information to your target audience. You can also start a YouTube channel, create infographics, or start a podcast to build awareness of your brand.

4. Communities: Join groups where people who are interested in your niche are. You can start communicating with potential customers on Reddit , Facebook groups, or online forums. Remember that when communicating in a community, you should not push sales. Aim to build relationships with your potential customers to build trust in your brand and a desire to buy from you.

5. Mobile Marketing: This is a broad term that involves connecting your business with customers via their mobile phones. For example, you could create a VIP club and invite website visitors to sign up for exclusive offers and promotions. Or provide live chat customer support via Messenger . With a mobile marketing platform like ManyChat, you can create automated ad campaigns to engage your audience, keep customers from abandoning their purchase, and increase your sales and dropshipping business revenue.

As with any successful online business, it’s important to keep track of which channels are working and which aren’t. Especially if you’re investing money in them, like paid ads. As your business grows and improves, you can always adjust your marketing strategy to reduce costs and increase revenue.

Constantly analyze and improve your dropshipping business

After all the marketing and management work, you can finally see the results of your labor. Shopify analytics will help you answer the most important questions about your online store, such as:

• Sales. Which channels are the most effective? Where should I spend my advertising dollars? Which products sell best? Who is my target audience?
• Buyer behavior. Which method do people use to make a purchase: via mobile phone or desktop computer? What is the conversion rate for each device?
• Profit percentage. Which products are the most profitable? What is the profit dynamics compared to the previous month? How much has profit increased over the past six months?

You can also use tools like Google Analytics and Search Console to measure your search traffic flow over a period of time and conduct search engine optimization (SEO). Additionally, if you use a third-party social media marketing app or Messenger , check the reports monthly to ensure your strategy is working.

When building a dropshipping eCommerce store, don’t neglect a real data analytics system. Stay consistent and measure your store’s performance against clear KPIs. This will help you make smarter decisions for your store and grow to the next level over time.

Where to find a ready-made dropshipping business

If you don't want to start a dropshipping business from scratch, you can buy a ready-made dropshipping business on Exchange, where you can choose from ready-to-work small stores, dropshipping e-commerce companies to the most popular corporations. There are more than 10,000 online stores for sale on the sites. You can easily find a dropshipping business that suits your interests and budget.

Exchange gives you access to information about the dropshipping business you’re selling, including traffic and revenue data. The data comes directly from Shopify and isn’t editable by anyone, so you know exactly what to expect when you buy a dropshipping store.

You can learn more about this in the article: "Step-by-step guide: how to buy a business on the stock exchange" .

Open your dropshipping store now

No matter how familiar you are with e-commerce, a dropshipping business is a great way to start selling online with minimal risk and cost. With various apps and marketing automation tools, running an online business is easier.

Let this dropshipping guide inspire you to win and achieve financial freedom so you can live the life you’ve always dreamed of, like so many other eCommerce entrepreneurs. And if you’re looking for alternative ways to make money, check out our guide to making extra money online.