In such a progressive time, generating ideas remains a natural process. We may create a significant breakthrough to solve people’s problems, find ways to satisfy their needs, and make a profit with it. But something lies between an idea and the formation of a business – the business plan.
Some business owners might skip this step and concentrate on the urgent tasks on their to-do list, like launching a website, connecting online payment platforms, and presenting a product. But other founders choose to take some time to research their field, come up with a business strategy, and set goals.
A business plan can be a firm grounding for your startup business. But why are some business plans only valuable until they are shown to startup investors? Why, once the investment is received, do they go on to sit around gathering dust?
What is a business plan?
According to Investopedia, the definition of a business plan is the following:
“A written document that describes in detail how a business – usually a startup – defines its objectives and how it is to go about achieving its goals.”
A business plan is best described as a roadmap from the current starting point to the goal. It includes all the possible ways to get your online store where you want it to be, deadlines, and covers potential issues.
What is the difference: business model vs. business plan?
As we have already mentioned, a business plan describes your business workflow, its development goals, and commercial achievements. At the same time, a business model is a detailed statement of goal objects and action framework. The main idea for a business model is to generate a company’s profit.
According to GoForth Institute, a business model includes these five key elements:
- Business concept: a short description of your product or service, its benefits, and customer profile.
- Value chain position: your business’ place in the value chain.
- Calculating customer value: the estimated value of your product or service for the core audience.
- Revenue sources and cost drivers: sources of income and expenditure.
- Competitive advantage: outstanding unique features.
What is the purpose of a business plan?
If you’re a startup, your online store business plan will show how profitable your small business strategy is and how likely it is to succeed. When presenting your idea to future investors, you may use the most powerful and persuasive words. However, when it is put on paper, your investors will see clear ideas, numbers, and perspectives. As a result, they will be able to evaluate your deal and make business decisions quicker.
Although useful for newcomers, every company would benefit from a comprehensive business plan. Here are the following advantages any business will gain with a business plan:
- Smart planning. Thorough planning of your actions, goals, expenses, and business activities will save your time, money, and business.
- Ideas evaluation. If you find it difficult to stop on one single idea in your head, a strict business plan could help you choose the most successful one and focus all your attention on it.
- Deep research. You will need to find your target audience and research the industry market. Studying your competitors will help you analyze your strengths and weaknesses in order to improve and beat them in the long-run.
- Partnership. If you plan to integrate with other companies, it would be easier for them to understand your company and product by seeing your business plan, especially if these companies are more developed than yours.
Types of business plans: which one works best for you?
There are two different types of business plans: a traditional and lean start-up. The traditional business plan is more widely used, according to the U.S. Small Business Administration. They are standard and contain many details.
The lean start-up business plan uses the same structure, however, it is only a one page business plan, and therefore has less detail. You can download it to try it.
How to write a small business plan step by step
Take a look at this business plan outline with nine crucial sections:
- Executive summary
- Company description
- Market analysis
- Management and organization
- Products and services
- Customer segmentation
- Marketing plan
- Logistics and operations plan
- Financial plan
Now let us tell you about each of them in detail.
Section 1: Executive summary
Even though this is one of the most crucial parts of your business plan, make sure you complete it last. Here you should write all key points about your business. What does it do? What is unique about it? What are your goals? How will you achieve them? How profitable will your business be? Why should your business succeed? These are the core questions, answers to which will sum up your business strategy in general.
Explain how your business will serve the market, what its competitive advantages are to get market’s share. Outline the schedule for taking your business from the idea-making steps to the first sales.
In the case of you already having an established business, you may include your company information. Provide a brief history of your company and product or service. Write which year it was born, who the owners and key staff are. Describe the evolution of your business – how it has grown, including year-over-year revenue increases, profitability, increases in market share, number of customers, etc.
If you are looking for additional financing for expansion, then give a brief financial summary.
Make sure you think thoroughly about all the points and spend enough time writing them down.
Section 2: Company description
In this section, you are to describe what your business is and what you are planning to do. Mention your business format, business model, long-term and short-range goals. Also, write some information about each member of your staff and their salaries.
Your vision and values define your company, so this is the right section to describe what your company will give your customers.
Section 3: Market analysis
Selling online may be a struggle if you choose the wrong market. When looking for a potential market, please pay attention to customer profile, needs, industry trends, and audience size. Your target audience is the one that needs your product or service, who will purchase it and use it.
Consult government statistics offices, various associations, research news articles, and other reliable sources to collect as much precise data as possible. It will be much easier to serve the market that you can identify and classify.
Section 4: Management and organization
The management and organization section should contain information about you and the key members of your team. Tell about their responsibilities, achievements, leadership style, ways of communication that will help your business achieve more tremendous success with your team. You may also show your team structure.
Section 5: Products and services
Expended information on your products and services is expected here. Describe the characteristics, features, and benefits of the products and services. Are you going to launch new products or services? Great! Do mention them, too, and how they will increase the company’s income.
Section 6: Customer segmentation
We were just talking about your target audience, so this is where the full description of your ideal customer will be. Take your average customer and describe them with general and specific criteria, such as location, age, education, behavior patterns, leisure time, occupation, preferable technology to use, salary, employment, beliefs, values, opinions, etc.
You should understand that a woman in her early 20s has different preferences and needs in shopping, traveling, or leisure activities when compared with a 70 year old man. Choose relevant information according to your products or services and find out who your customers are and what they are interested in. It will help you get direct to consumer needs.
Section 7: Marketing plan
First, you need to choose your market and a platform on which you will be selling. If you want to launch an online business on Instagram, you should invest in this platform. However, if your target audience is not on Instagram, you should change your marketing strategy and start selling where your customers may easily find you. To become an e-commerce business owner, you should open an e-commerce store, for example, read about opening an Amazon store.
Set a price for your product or service and explain its value. Describe what exactly you are selling and how different it is from your competitors’ products or services. Explain how you will promote it to your target customers and where you will sell it.
Section 8: Logistics and operations plan
The logistics and operations section is everything you own physically – from technical equipment to a warehouse. All information about the suppliers, production, shipping and fulfillment, facilities, if you decide to have a physical retail space, equipment, and inventory should be mentioned here.
Show that you have a decent understanding of how to run an e-commerce company. Your product pricing will also depend on how much you spend on logistics and other operations included in your workflow.
Section 9: Financial plan
Financial planning helps you track your financial health. Do you have a good command of accounting basics? Is your cash flow positive or negative? Where do you record your business transactions?
The easiest way to keep hold of your accounting is to record transactions with the help of accounting software. Synder provides accounting services for small business owners who use multiple sales channels, payment platforms, and want automatic and precise reconciliation of all financial activities.
With the help of accounting software, you may analyze the following information for your business plan:
- Income statement. Your income statement shows your income and expenses over a month, a quarter, or a year. If you subtract your expenses from your income, you’ll come up with your net profit. Synder lets you compile top-notch P&L statements indicating such useful information as item and customer info, discounts, shipping fees, locations, etc.
- Balance sheet. In order to calculate how much equity you have in your business, you should use your balance sheet. In the left column you write all your assets (machinery, stock, business premises, vehicles, etc.). And in the right column all your liabilities (accounts and wages payable, business loan repayment, business credit card payments, taxes, etc.) If you subtract your liabilities from your assets, you get your business’ shareholder equity.
- Cash-flow statement. Cash-flow statements are almost like your real-time income statements. With Synder, you can synchronize your transactions to your accounting books with just one click and get 100% precise reconciliation.
Business plan tips:
Keep these things in mind when you start the business plan writing process:
- Make your goal clear. If you rely on funding for your business, make sure you write a comprehensive business plan. If you are writing it just for yourself, you can make it less detailed.
- Know your audience. When you know who is going to read your business plan, please include the most relevant information. If you need to omit or add any sections, feel free to do so.
- Keep it short and stick to the point. Your business plan shouldn’t be longer than 15-20 pages. Valuable additional materials may be added as appendices at the end of the plan.
- Invest time in research. Most of the sections can be written according to your vision of the business. However, some sections might require some additional study or a specialist’s consulting.
- Avoid mistakes and inconsistency. It’s advisable that one person writes a business plan, and it should be edited and proofread, so that there are no mistakes that would distract readers, and the structure is consistent and logical.
- Have a plan B. The most important thing for investors is getting profit after investing in your business. They would like you to offer them some ideas on how they can leave the business with maximum profit.
Tying it all together
What is one purpose of writing a business plan before entering the market? It is to be ready for the challenges that naturally occur in every business owner’s life. A business plan is a foundation for your business to grow. Some business plans include more detailed information, some less. You may choose the one that will correspond with your business needs.
If you’re new in the business industry, writing a business plan is not just compulsory. It will help you learn more specific details from the inside about your own company, product or service, management, finances, and much more. However, if you have had your e-commerce store for a while, creating a business plan may help you improve your business services level, increase your profit, set bigger goals, and achieve them.
Synder is one of the e-commerce solutions made just for your business. Its team is ready to support small business owners 24/7. Try a free trial period of the best small business accounting software or book a demo to see that bookkeeping or accounting for your e-commerce business may be done in one place in no time!