What is a Business Plan? Importance, Steps to Write, and More

Business Plan Guide

Ever wondered what’s the secret behind starting an e-commerce business successfully?

You are not alone in searching for that secret sauce. You might have been investing your time and energy in finding products to sell, selecting the right business model, building your online store, and more. How can you ensure that you do it right and without fail?

Look no further than creating an effective business plan. If different aspects of starting an online business are considered different circles, a business plan is what converges them to work together in your favor. Whether it is about identifying potential customers, roadblocks, or validating your product idea, everything will be included in a business plan. 

The strange thing is: not every e-commerce business launches with a business plan by its side. This can be considered one reason why the risk of failure is high. Even if you have gone deeper into planning the launch of an e-commerce store, it makes sense to find value in taking time to step back and what it takes to create a business plan. 

All it takes is a little understanding of how to make a business plan that will work best in your case. Let’s jump in.

What is a Business Plan?

A business plan is a well-defined document for a business describing its products or services, goals around how it will earn (or earns) money, go-to-market plan, leadership, staffing, operation model, business purpose, and similar other details essential to its success. 

The primary purpose of a business plan is multifold:

  • It summarizes a company’s strategy for the long term.
  • It helps secure financing from investors.
  • It helps forecast future business demands.

In entrepreneurial terms, everyone’s got a product idea(s) to start a company until he/she puts it on paper and realizes its feasibility. Think of a business plan as an entrepreneur’s way to prove the worth of your business idea.

Why Should You Write a Business Plan?

Before we talk about how to write a business plan, let’s tackle a bigger question first: Why does writing a business plan matter?

The truth is that it is important to further solidify the feasibility of your product idea in your eyes and that of investors (if you are looking for them). Here are other compelling reasons why you should consider writing a business plan:

  • If you have got several business ideas in mind in the initial stage, creating a rough business plan for each of them can help you understand where to focus most of your time and energy.
  • Creating a business plan is an invaluable task that can clarify your ideas and help in understanding the scope of your business and the resources you will need to get started.
  • A crucial step of writing a business plan is to perform competitive analysis and research your ideal customer – information that will define various strategic business decisions.
  • The business plan is one way to communicate the vision to potential hires in the early stages of growth.

In short, a business plan is an excellent starting point to lay out your thoughts and ideas in a structured way.

Business Plan Formats at a Glance

How long should a business plan be? 

Well, that depends on the type of business you want to start and the information you need to include in it. In any case, the goal remains the same – to convey the most important information to the readers. The following table covers some of the most common formats of business plans:

Business plan formatDescription
Traditional These plans are asked for by venture capitalist firms and lenders. The plans take a long time to write as they include dozens of pages of important information.
Non-profitThis format is meant for entities that operate for social or public benefit. Donors often ask for this plan.
LeanThis format is the shorter version of the traditional plan and includes only the most important sections, not all of them. 

How to Write a Business Plan: 7 Easy Steps

  1. Describe your business/company
  2. Analyze the market
  3. List your products/services
  4. Segment customers
  5. Build a logistics and operations plan
  6. Build a marketing plan
  7. Plan out your finances

Creating your business plan with a well-structured outline is how you should start with it. Here, we’ve put together a high-level overview you can consider for your blank document and get started. If you think the above steps are enough to begin with, it’s time to fill it out further. 

  • Describe your business/company

This section should include who you are and what you have planned to do. Clearly define your company description why you want to be in the business you are starting, what makes it different, and why you are a good fit for investors. Think of it as an opportunity to put some important intangible business facets to paper. 

You should also include the following elements in your company description:

  • Legal business structure (LLP, private limited, etc.)
  • Business model
  • Mission, vision, and value proposition
  • Industry
  • Short-term and long-term business objectives
  • Key personnel in your team

Interesting Read: A Comprehensive Guide to Starting a Dropshipping Business

  • Analyze the market

Choose the right market for your offerings that has plenty of customers who need your product – and you are good to go toward success. Choose the wrong one or even the right one at the wrong time and you may find yourself struggling for sales.

This is where detailed market research comes up as a part of your business plan. It should include an overview of the expanse of the target market, an overview of your competitors, and relevant industry trends/trajectories.

  • List your products/services

While your product or service lineup will feature in most parts of the business plan, it’s important to include them in a separate section that outlines the key details. If you sell a wide range of products, include general information about each product category. If you are only starting with a few, include them in detail. You can also include new products that you will launch in the recent future. 

Besides this, it is important to note the product sourcing aspect. For example, handmade products are to be sourced differently than the ones having mass appeal during a particular trend.

  • Segment customers

Your ideal customer should form the foundation of both your business and marketing plan. To include a holistic overview of an ideal customer, perform customer segmentation to find out:

  • Their location
  • Age group
  • Education level
  • Common behavioral patterns
  • Their earnings
  • Values, preferences, and beliefs.

This information may vary based on what you want to sell through your online store. For example, a 45-year-old business executive has different shopping habits than a college student. Your business plan must take this into account.

  • Build a logistics and operations plan

Think of it as the workflows to be implemented to make your product ideas a part of reality. Here, you will need to include different parts of the operations and logistics, such as:

  • Suppliers from whom you will get the raw material or ready-to-sell products
  • Production setup if you choose to make or manufacture the products on your own
  • Physical facility where your team members will work (include its cost and location)
  • Equipment needed to get the operations up and running
  • Shipping strategy based on whether you want to hire a third-party logistics partner or not
  • Build a marketing plan

Your business plan should also have a brief or detailed marketing plan as its subset. Your business marketing efforts are based on the ideal customers, which is what this plan should cover. You need to research and find which channels are most suitable to reach your target audience.

To simplify things, cover these four primary aspects in your marketing plan:

  • Product pricing
  • Product USP
  • Channel of selling your product(s)
  • Right channels to find/reach your customers

Interesting Read: Marketing Budget in 2023: How Much Should You Spend?

  • Plan out your finances

Irrespective of the value your product can deliver, your business can live or die based on its financial health. The level of financial details to be included in your business plan depends on your goals and audience. Typically, it caters to the three sides of business financials:

  • A balance sheet detailing your equity in the business, business assets, and liabilities
  • Cashflow statement covering both revenues and expenses
  • Income statement

To get more information on how to write a business plan, check out this complete guide

Get started with creating your business plan today

A business plan can help you follow clear next steps to build your business and see gaps in your approach before they become big issues. The steps given above are useful whether you want to write a business plan for an e-commerce business, a new retail storefront, or the growth of an existing business. 

Having a business idea in mind? Read this complete guide to starting an e-commerce business.

 

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