How to write a business plan for an online store: A step-by-step guide

There are many reasons to do some deep research before you start writing a business plan. A good business plan helps you define your strategy, identify potential obstacles, decide what you need, and assess your growth prospects before you launch your business.

When opening your store, you will have a long list of things to do, such as taking product photos, launching advertising campaigns, and managing social media accounts. But before all of this, you should create a business plan.

Yes, not every successful business started with a formal business plan, but many entrepreneurs say it is really useful and helped them better understand their idea and the market, as well as assess the scale and determine the right strategy. That is why we have created a guide to help you write a business plan correctly.

What is a business plan?

A business plan is a document that outlines the activities of a business, including its products or services, income prospects, staffing levels, how to find funding to implement the business idea, defining the business model and strategy, and many other details that are important for successful development.

Why is it necessary to draw up a business plan for a successful business?

The main reason for writing a business plan is to get an early estimate of how successful your business can be and to understand the steps needed to get it started.

But having a business plan can also help in other situations. For example, if you want to get funding to implement your business idea. Investors always study a business plan before funding it, so they can assess the profitability of the business. Therefore, a business plan is sometimes compared to the documents required to obtain a loan.

There are other good reasons to learn how to write a good business plan, even if you don't need funding:

• Planning Skills: Creating a plan is an invaluable exercise in clearly presenting your ideas, helping you to estimate the scope of your business, and to keep track of the time, money and resources you will need to get started.
• Comparing business ideas. If you have several ideas, a sample business plan for each of them will help you identify the one that has the best chance of success.
• Deep dive into the topic. To write a business plan, you need to research your ideal client and competitors. This is the information that helps you choose an effective strategy.
• Defining your company's goals. Your business plan is one of the easiest ways to communicate your vision to potential employees. It greatly enhances their trust in the enterprise, especially if you are in the early stages of growth.
• Partnership Formation. If you plan to approach other companies with a partnership proposal, then having a specific plan, target audience, and growth strategy will make it much easier for potential partners to determine if your business is right for them. Especially if they are more experienced and already have a successful business.
• Entering Contests. There are many business plan contests that offer prizes such as grants or investment capital. To find relevant contests in your industry and region, try Googling "business plan contest + [your location]" or "business plan contest + [your industry]".

A business plan is a great starting point if you are looking for the right way to put your thoughts and ideas together and share them with the people who can have a big impact on your success.

Here's how entrepreneurs comment on the benefits of a business plan:

"We had some experience in marketing, but not much experience in the other things that go into running an e-commerce business. These include operations like finance, manufacturing, and technology. Putting together a business plan helped us see the gaps and made it easier to identify areas where we needed help or at least more training". - Jordan Barnett, Kapow Meggings.

"We have a jewelry business that migrated from Magento to Shopify. We put together a business plan for the move. It included an overview of why we needed to move, the challenges of the current business, the benefits of moving to a new platform, potential challenges during the transition, key tasks, additional costs, and timelines. It really covered everything we thought was important. The business plan took into account everyone involved in the project, from the photographers, to the marketing team, to the developers. This way, we were all on the same page. It worked out really well the first time, and even better the second time". - Jeff Moriarty, Tanzanite Jewelry Designs.

Step-by-step guide to creating a business plan

There is nothing more intimidating than a blank page, but you have to start. Writing a business plan starts with identifying the bullet points and key details of what goes into each section. This is the most important first step you need to take.

Below is a template of sections you can copy into your blank document to get you started, rather than sitting in confusion in front of a blank page.

Here are the main sections of a standard business plan:

1. Resume.
2. Company description.
3. Market analysis.
4. Management and organization.
5. Products and services.
6. Target audience.
7. Marketing strategy.
8. Logistics and operations plan.
9. Financial plan.

You can also start by reviewing the article on business plan templates and use the sample business plan provided in the article to help structure your own plan.

Now that you have a business plan outline ready, you can start filling it out. We will look at each section separately to make it easier for you to understand them.

Resume

A good executive summary is one of the most important sections of your plan. But it should be the last section you fill out.

The purpose of the executive summary is to bring together all the information and provide a concise overview. It should be the kind of text that will convince (for example, potential investors or lenders) to read further into your business plan.

Again, since this is a summary, you only need to highlight the key points that you have identified in the process of writing the outline. If you are writing the outline for your own purposes, you can skip this step. However, you may want to try it, even just for practice.

The summary should be no more than one page. Of course, this limitation may make it difficult to include all the important information, but it is possible. Here is what your business plan summary should contain:

• Business Concept. What is the scope of your business?
• Business Purpose. What does your business strive to achieve?
• Description of goods or services. What do you sell and how is it different from other offers?
• Target Market. Who are you selling to?
• Marketing Strategy. How do you plan to attract customers?
• Current financial status. What income are you currently receiving?
• Projected financial status. What income do you plan to receive?
• Specific amount. How much money do you need for development?
• Team. Who is involved in the business?

Company Description

This section of your business plan should answer two fundamental questions. Who are you and what do you plan to do? The answers to these questions provide insight into why you are in business, what makes you different from others, and why you are a good investment bet.

Clarifying these details will be helpful even if you are the only person who sees them. It is an opportunity to put additional aspects of your business on paper, such as your principles, ideals, and cultural philosophy.

Here are the key points you should include in your company review:

• The structure of your company (whether you are a sole proprietor, a member of a partnership, a limited liability company, etc.).
• Your business model.
• Your industry.
• The concept of your business, as well as the value of your offering.
• Background information about your business or its unique history.
• Short-term and long-term goals of your business.
• Your staff, including key personnel and their salaries.

Many of these points are simply statements of fact, but some will require more thought and time, especially when it comes to your business's values ​​and mission. It helps to even better understand for yourself why your business exists, what you want to achieve, and what principles you stand for.

To determine your values, think about the people your business interacts with, including owners, employees, suppliers, customers, and investors. Think carefully about how you want to do business with each of them. As you make this list, you will identify your core values.

Once you've defined your values, you can create your mission statement. Your statement should convincingly explain why your business exists, but it shouldn't be longer than one sentence.

An example is Shopify's mission statement: "To make shopping worthwhile for everyone". This is a clear answer to the question about the company's mission, and does not require further explanation.

Next, write a description of how you envision the future. What impact will your business have, and what results should you expect from its activities? Phrase this as a statement - start with "We will". This description, unlike the mission statement, can be longer than one sentence, but try to limit it to three. The best vision statements are usually succinct.

Finally, a company review should include both short-term and long-term goals. Short-term goals should generally be achievable within the next year, while long-term goals should be achievable within one to five years. Make sure all your goals are SMART: Specific, Measurable, Achievable, Realistic, and Time-bound.

Market Analysis

No matter what type of business you are starting, it is no exaggeration to say that choosing a market makes all the difference. To be successful, you need to choose the right market for your product - one with a lot of customers who are interested in and need your product. If you choose the wrong market or the right market at the wrong time, you will have to fight hard for every sale.

Market analysis is a key section of your business plan, even if you are writing it just for yourself. It should include an overview of how big the market is for your product, an analysis of your business's position in the market, and an overview of the competitive landscape. Careful study of these data is essential both to convince investors and to confirm your own assumptions about your business's performance.

What is the size of your potential market?

A potential market is how many people need your product or service. You can imagine sky-high sales figures as much as you like, but you need to have as much independent data as possible to back up your ideas.

Since this is quite a complex process, here are some general tips to help you through this stage of your business plan:

• Research your ideal buyer profile, especially in terms of demographic characteristics. If you're targeting millennial consumers in the U.S., you might first look at government data on the size of this group. You might also look at projected changes in the number of people in your target age range over the next few years.
• Pay attention to trends and the rate of growth in your industry. If your product is aimed at retirees, try to find data on how many people will retire in the next five years, and look for additional information on consumption patterns among this age group.
  If you sell fitness equipment, it may be helpful to research gym membership activity and health and fitness data for your target audience or the general population. Additionally, find out whether your industry is projected to grow or decline in the next few years.
• Make only informed judgments. Because the market is characterized by unstable dynamics, you will never have perfect and complete information about its size. Your goal is to base your assessments on as much reliable data as is sufficient for confident predictions.

There are additional resources that can help you obtain market data, including government statistics agencies, industry associations, academic research, and reputable news outlets that cover your industry.

SWOT analysis

A SWOT analysis looks at your strengths, weaknesses, opportunities, and threats. What’s the best thing about your company? What are you not so good at? What changes in the market or industry can you take advantage of and turn into growth opportunities? Are there external factors that threaten your success?

This analysis is often presented in a table format, with each cell listing the most important information. Strengths and weaknesses are listed first, with threats following in the next row of the table. This visual representation allows you to quickly see the factors that can impact your business and determine your competitive advantage in the marketplace.

Here is an example of a table with SWOT analysis:

Analysis of competitiveness in the market

There are three main factors that characterize business in a competitive environment:

• Price Leadership. You have the opportunity to maximize profits by offering lower prices than most of your competitors. Examples include companies like Mejuri and Endy.
• Offering unique products or services. Your product or service stands out from the competition in your industry and has no equivalent. Companies like Knix and Qalo have chosen this path.
• Targeting a narrow category of buyers. You focus on a very specific target market or niche, and concentrate all your efforts on winning over a smaller audience before moving on to a broader market. Great examples of this strategy are companies like TomboyX and Heyday Footwear.

To understand what is best for you, you need to know everything about your business and also have a good understanding of the competitive landscape.

Even if you have an innovative product, you will always have competitors in the market, so it is important to include a competitor overview in your business plan. If you are entering an established market, list the companies you consider your direct competitors and explain how you plan to differentiate your product and business from them.

For example, if you run a jewelry business, your competitive differentiator might be that, unlike other jewelry stores, you donate a percentage of your profits to a well-known charity or offer your customers a special discount system.

If it's hard to identify direct competitors in your market, consider indirect competitors - companies that offer similar or substitute products. For example, if you sell a new, innovative piece of kitchen equipment, you might mistakenly think that because the product is new, you have no competitors. But you should pay attention to what your potential customers are doing to solve the same problems that your product solves.

Management and organization

The Management and Organization section of your business plan should tell you who runs your company. This is the step in writing your business plan that should detail the legal structure of your business. Include information about how you plan to register your business (sole proprietorship, limited liability company, etc.).

If you have a management team, use an employee organization chart to show the internal structure of your company, including the distribution of responsibilities. Explain how each employee contributes to the success of your startup.

Products and services

Your products or services will take center stage in different sections of your business plan, but it is important to properly format the section that will provide the main information about them.

If you sell a lot of different products, you can include more general information. If you only sell a few, provide additional information about each of them. Describe any new products you plan to launch in the near future, and add your own ideas. Indicate how this will improve profitability.

It is also important to note where the products are coming from, for example, if you are going to start a dropshipping business, then trendy dropshipping products will suit you, not handmade products.

Target audience

Your ideal customer is the foundation of your marketing plan, even your business plan as a whole. You need to keep this in mind when choosing a strategy, so it is important to research potential buyers and include an overview of their key characteristics in your plan.

To provide a complete picture of your ideal target audience, describe a range of general and specific demographic characteristics. This overview often includes:

• Place of residence;
• Age range;
• Level of education;
• General patterns of behavior;
• What do they do in their free time;
• Where do they work;
• What technologies are used;
• How much do they earn;
• Spiritual level of development, values, beliefs.

This information should be specific enough to make it clear who you are trying to reach and why you have chosen that particular target audience.

For example, a college student has different interests, buying habits, and price sensitivities than a 50-year-old Fortune 500 executive. Your business plan and future decisions will depend on which of these is your ideal customer.

Marketing strategy

Your marketing is directly related to your ideal customer. Your plan should describe your current solutions and future strategy, with an emphasis on how your ideas fit this ideal customer.

For example, if you plan to invest heavily in Instagram marketing, it might make sense to highlight whether Instagram is the leading platform for your audience. If not, it might be a reason to rethink your marketing plan.

Most marketing plans include information in four key sections. How much detail you need to cover in each section depends on both your business and your target audience.

• Price: How much does your product cost and why did you make this decision?
• Product: What do you sell and how do you differentiate it in the market?
• Promotion: How do you introduce your product to your ideal customer?
• Location: Where will you sell your products?

Promotion can be the bulk of your plan because it's easier to detail, but the other three areas should also be well covered - each is an important strategic lever for your marketing.

Logistics and Operations Plan

Logistics and operations are the work processes you will undertake to bring your ideas to life. If you are writing a business plan just for yourself, this section is still important. Although it may not be as detailed as if you were looking for investors.

Review all your planned surgeries, including:

• Suppliers. Where do you get the raw materials you need for production, or where are your products manufactured?
• Manufacturing. Are you planning to manufacture, produce or dropship your products? How long will it take to produce and ship your products? How will you handle busy seasons or spikes in demand?
• Premises. Where will you and all your team members work? Do you plan to have a physical retail space? If so, where?
• Equipment. What tools and technology do you need to do your job? This includes everything from computers to light bulbs and more.
• Shipping and order fulfillment. Will you handle all shipping tasks in-house or use a third-party shipping partner?
• Inventory. How much inventory will you keep in stock and where will it be stored? How will you ship the goods? How will you manage the warehouse?

This section should demonstrate that you have a good understanding of the supply chain and that you have a solid contingency plan in place to avoid potential losses. If you are writing a business plan just for yourself, this section will give you a basis for making other important decisions, such as when your initial investment will start to pay off or how to price your product to cover anticipated costs.

Financial plan

No matter how great your idea is and how much effort, time and money you put in, a business lives or dies based on its financial health. At the end of the day, everyone wants to work with a business that has good prospects for growth.

The level of detail in a financial plan depends on your audience and goals, but there are typically three main types of financial figures: the income statement, the balance sheet, and the cash flow statement. You can also include financial projections.

Helpful: Download a spreadsheet template that includes everything you need to create an income statement, balance sheet, and cash flow statement, including some examples. You can edit it to create your own forecast, if needed.

Profit and Loss Statement

Your income statement is designed to show your sources of income and expenses over a period of time. These two components can be used to summarize the profits and losses your business has made over a specific period of time. If you haven't launched your business yet, you can create a forecast based on the forecasted data.

Balance sheet

This report shows how much equity you have. One column lists all of your business's assets (what you own), and another lists all of the company's liabilities (what you owe). This gives you an idea of ​​your business's equity, which is calculated as follows:

[Assets] - [Liabilities] = [Equity]

Cash Flow Statement

A cash flow statement is similar to an income statement, but it has one important difference: it takes into account the dates when revenues are earned and expenses are paid.

If your cash inflow is greater than your cash outflow on a given date, your cash flow is positive. If it is not, your cash flow is negative. Ideally, a cash flow statement will help you track when cash is low, when you might have a surplus, and when you might need a contingency plan to request funding to keep your business going.

It is especially useful to forecast this report to identify weak points or negative cash flow and adjust operations as needed. Here is a guide to creating a cash flow forecast for your business.

You might find this helpful: You can download all three templates at once to help you create financial statements for your business plan.

Why does a business plan not work?

Yes, your business plan can fail. You definitely don’t want your time and effort to go to waste. To avoid this, avoid common business mistakes:

• Bad business idea. Not every idea is good. Sometimes your idea may be too risky and you will not find an investor for it. In other cases, it may be too expensive or there is no demand in the market. Focus on small business ideas, they require little money, and sometimes you can start a business without any start-up capital.
• Lack of a Profit Strategy. Investors looking at your business plan want to know one thing: will your venture make them money? If you don't show them a plan to exit the business with a profit, you won't get funding.
• Unskilled employees. A good product idea will get you into the market. But a creative team of employees will take it to the top. Unfortunately, many business owners miss this fact. They assume that investors want to see potential profits, without caring how you get there. If you are coming up with a new software idea, it makes sense to have at least one developer or IT specialist on the team.
• No financial projections. Your numbers are the most interesting part for investors. Don't forget about the balance sheet, cash flow statement, and profit and loss statement. To create a successful business plan, include a risk analysis and ROI calculation. Sometimes, you may need a loan to grow your business. Check out our guide on how to get a business loan to understand what type of loan is right for you.
• Spelling and grammar errors. Some business owners believe that hiring a professional editor is unnecessary. In fact, all successful organizations hire an editor to proofread their documents. If you have typos in your business plan, how can you trust that you won't have errors when implementing it?

Sample Business Plan. You can download a copy in Microsoft Word or Google Docs format and use it for your own business: Sample Business Plan from Shopify.

Tips for Writing a Business Plan for Small Business

There are a few key points to keep in mind when writing a business plan:

• Who are you writing your business plan for? When you know who will be reading your plan (even if you're just writing it for yourself), you can tailor the language and incorporate the necessary information. It also helps ensure you haven't left out important details and allows you to leave out sections that aren't essential.
• Clear Goal. You will have to put in more effort and prepare a more thorough plan if your goal is to get funding for your business rather than just developing a plan for yourself.
• Do your homework . The sections of your business plan will be based largely on your ideas, but some of the most important information you will need will require independent confirmation. You will also need to spend time identifying your target audience, the level of demand for your product, and researching your competitors.
• Keep it short and to the point. No matter who you're writing for, your business plan should be short and easy to read. Typically, no more than 15-20 pages. If you have additional documents that you think might be important, you can simply add them as appendices.
• Stick to one style. The best way to do this is to assign the writing of the outline to one person or find time for quality editing.

Business plan - the basis for business development

A business plan helps you identify the right actions to take to grow your business, even if you never plan to approach investors. It allows you to see gaps in your plan before they become problems.

Whether you are writing a business plan for a new online business idea, a retail store, or to grow your current company, you now have all the information you need to get started. You can confidently begin implementing your business plan!