How to plan an online business
What is a business plan?
A business plan is a document that describes the business as a whole, its products or services, and how it earns (or will earn) income. It includes strategies for growing the business and its activity in the market, deadlines and financial goals.
Through this plan, the company's chances of success increase, while risks are reduced. It brings clarity during the process of decision-making regarding the main aspects of the business such as capital investments, the company's position in the market, its objectives, costs, etc. Essentially, the business plan is the framework of your business.
A business plan benefits all companies, but especially those that:
- Are in the startup
- Are seeking investors or partners
- Want to grow their business
Why do you need a business plan?
The business plan is one of the most important documents you will put together for your company. Below are some of the main benefits of having one:
Clarifies your business
When you write a business plan, you clarify your ideas and gain a greater understanding of your business. Therefore, as you build the plan, you will be able to answer questions like: What products and services will you offer? Who will be your ideal customers? Where will you work from and how will you work? If you have numerous ideas, it can help you select which of them to implement, and to clarify the decisions you make for your business.
Determines the required capital
Every entrepreneur needs to invest some capital in their company. A business plan helps identify exactly what investment is needed, and how it should be put to use.
Creates a vision of the future
In this document, you will describe the growth strategies of your business, its goals, and ambitions for the future. This will give you a clearer idea of where you're heading and what challenges you'll need to overcome to get there.
Helps create partnerships and collaborations
When writing a business plan, you will understand whether or not you need business partners or collaborations with other companies that complement yours. Having a clear picture of your vision, audience and marketing strategy will make it easier for potential affiliates to identify you.
Components of a business plan
A business plan can contain a large number of components, which you may or may not include, depending on the type of your business. Some of its main components are:
Executive summary
It serves as an introduction and outlines your business. The executive summary outlines the reason for your company's existence, the problem it solves, its target market, expectations and financial key points.
Company overview
This part of the business plan should answer two basic questions: who are you and what do you plan on doing? The answer to these questions explains why you are in the market, what sets you apart from other companies, and what are your mission, vision and values.
Ownership and management
This section defines the legal structure of the company, and how ownership is divided. You may also have a graph with the hierarchy of managerial staff, human resources, and other employees. For each employee, you will describe their skills, experience and responsibilities within the company.
If you have an online business, you can also include ad-hoc contractors or experts to whom you outsource work.
Market analysis
Through it you will be able to determine the knowledge you have gained within your industry, and your position in the market. You will identify your competitors and see how your products are positioned compared to theirs. You will use this information to differentiate from them.
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
SWOT analysis helps you create a realistic image of your business and the position you hold in the market in which you operate. Through it, you will determine what you do better than your competitors and where you need to improve.
If your competitors are online businesses, studying and analysing their moves is even easier.
Products and services
Your products and services will be mentioned in other parts of your business plan too, but it is important to allocate for them a space where you outline their most important details and the way you plan to market them.
Logistics and operations plan
If you are a business that sells products, it is important to provide details around their production, supply or storage. You can also create an inventory structure for the prices of your products and the total costs of operating in the market.
Operational plan
The operational plan includes the day-to-day tasks that each employee must accomplish to achieve the business objectives, as well as timelines. If you sell products online, add shipping information too.
Marketing plan
Explain how you plan to advertise your product in the market. Determine what ways and means you will apply to reach your targeted customers. Whatever your marketing plans are, you can describe them here.
Online businesses can make good use of digital marketing as part of their marketing strategy.
Financial plan
The financial plan sets out the current situation and long-term monetary goals, as well as the strategy to achieve those goals.
In this section your will describe your financial plans by answering questions like:
- What will be the source of the funds you are investing?
- What assets that you already own can you provide to the business?
- What volume of sales will your business need in order to be profitable?
- How long can you survive in the market without sales revenue?
- What do you estimate to be the monthly and annual expenses and profits of your business?
Here you can also place financial projections for the next 2-3 years.
Exit plan
This is the strategic plan of the entrepreneur to sell their ownership to investors or to another company. An exit plan gives the business owner a way to reduce or liquidate their shares to investors. If the business is successful, the entrepreneur can have a substantial profit from selling their company.
If you plan to attract investors, it's advisable to always have an exit plan, because investors will want to be clear regarding the terms of departure of the founder(s) from the company.
Legislation
To run your business, you'll need to be familiar with the legislation and legal issues of the field where you operate. It's a good idea to mention in your business plan some of the laws that affect your business and how they affect it, such as:
- Laws regarding online sales, if you have an e-commerce shop
- Tax laws
- Employment laws
- Financial and marketing laws
- Privacy laws
- Healthcare laws, etc.
Tips for creating a business plan
There are a few things you can do in order to build a well-structured business plan.
Clarify why are you building the business plan - The business plan should be more detailed and structured if the goal is to secure funding for your company. Otherwise, if you are building it for yourself or your staff, it may have a simpler structure.
Do thorough research - The business plan will be built mostly based on your ideas and vision, however, that alone is not enough. For the most important information, you'll need to do in-depth research and use various sources.
Avoid unnecessary content - No matter who you are writing it for, the business plan should be structured and comprehensible, without unnecessary content or information. If you have related documents that you think might be useful, you can attach them to the final document.
Avoid technical jargon - Many vital aspects of running an online business may not be understood by non-technical persons, banks or investors. Try to explain them in the simplest language possible.
Review your plan - After you've completed the writing of your business plan, do not skip reviewing and editing it. At this stage, you need to make sure that the whole document has a logical flow, and the style used is consistent and objective. You should check for mistakes that may have been made during the writing of the plan, and add or remove information as needed, so that the final document is satisfactory.
Summary
A business plan can contain a number of components, which can be selected based on your needs and objectives for the business in question.
It is especially important when you're looking for investment from third parties, but in any case it helps you better understand your business and move it forward.
