The next step in the process of creating an e-commerce store after choosing a product is to research the product and get prepared. Carrying out extensive research on the product chosen, will provide you with insight into the product and prepares you for what to expect.
The outcome of the research then acts as a guide to how to structure your business plan in other to achieve tremendous results. It comes in 2 phases- research your competition and writing a business plan.
1. Research your competition:
Before venturing into a business it is important to know companies and individuals that are equally selling the same product you plan to sell. This is done to know your competitor's strengths and weaknesses and then come up with an outside the box idea to give your business an edge over competitors. The results from your findings will direct you on how to differentiate your business from competitors and how to win the market over to your side.
Researching your competition doesn't just stop at spying on them, it is a very detailed report of how they run their business. This could be very broad as they are different aspect you might want to research about like their; website, prices, consumer market, funding, shipping protocol, and so many others. A competition analysis gives you an idea of these areas depending on how much information you gather.
Start by getting a list of competitors, then on a spreadsheet highlight the areas of their business you want to research. It is important to do that as this will give you a direction on how to form a conclusion and take action. Doing some hands-on research is a good way of getting information from your competitor by assuming the role of a potential customer. You can do this by:
- Subscribing to their blog
- Following them on social media
- Abandoning a product in your shopping cart and see how they are handled
- You can even go-ahead to purchase a product and evaluating the customer experience
- By conducting a competitive analysis, and evolving your understanding of your market over time, you can help yourself stay on top of your competitors and even learn from them too.
2. Writing a business plan:
A business plan, as defined by Entrepreneur, is a "written document describing the nature of the business, the sales and marketing strategy, and the financial background, and containing a projected profit and loss statement." However, your business plan can serve several different purposes.
As Entrepreneur notes, it's "also a road map that provides directions so a business can plan its future and helps it avoid bumps in the road." That's important to keep in mind if you're self-funding or bootstrapping your business. But, if you want to attract investors, then your plan will have a different purpose and you'll have to write your plan that targets them so it will have to be as clear and concise as possible. When you define your plan, make sure you have defined these goals personally as well.
With your competitive research complete, it's time to write your business plan. A business plan is a roadmap that helps bring your ideas and thoughts together. A business plan is vital in determining what to prioritize and how to effectively reach new customers. A business plan can help you clarify your strategy, identify potential roadblocks, decide what you'll need in the way of resources, and evaluate the viability of your idea or your growth plans before you start a business.
What you should include in your business plan:
- Executive outline
- Business synopsis
- Market analysis
- Products and services overview
- Marketing design
- Logistics and operational conspectus
- Financial plan
I. Executive outline:
An executive summary is a one-page summary of the whole plan. This meant to entice reviewers to read on. It is composed of a summary of everything about your business like- what you do, what you sell, whom you sell to, financial project, and your team. Business synopsis:
II. Business synopsis:
Here you go into details about what you do, and this includes-
Your business structure (Are you a sole proprietorship, general partnership, limited partnership, or an incorporated company?)
- What you sell
- Contingency plan
- Business objectives, both short and long term
- Your business's vision, mission, and values
III. Market analysis:
This is basically how you will market your business and sales strategy.
It's no exaggeration to say your market can make or break your business. Choose the right market for your products—one with plenty of customers who understand and need your product—and you'll have a head start on success. If you choose the wrong market or the right market at the wrong time, you may find yourself struggling for each sale.
This is a very key section of your business plan. Here you estimate the size of the target market and the rate of demand and consider competitors in the market already. This gives an idea of how to approach the market and win it over.
IV. Product and services overview:
In this section, you outline all the products and services you offer and go into details about it.
If you sell many items, you can include more general information on each of your product lines; if you only sell a few, provide more detailed information on each. It's also important to note where products are coming from—handmade crafts are sourced differently than merchandise for a dropshipping business, for instance.
V. Marketing design:
The marketing plan defines all of the components of the marketing strategy. The marketing plan should draw on market research. Your marketing efforts are directly informed by your ideal customer. Your plan should outline your current decisions and your future strategy, with a focus on how your ideas are a fit for that ideal customer.
A proper marketing plan should comprise of:
- Pricing strategy
- Product uniqueness and value
- Market location
Promotion strategy including public relations activities, specific promotions, advertising, and intended viral marketing activities
Your promotion strategy may be what get the most attention as it is what drives the business and it's what get your product to your ideal customers.
Pricing strategy is tricky as it has to be large enough to cover the cost of service but economical at the same time. Your prices should also reflect the dynamics of cost, demand, changes in the market, and response to your competition.
VI. Logistics and operational conspectus:
Logistics is the management of the flow of goods from the supply to the point of consumption. Operation planning is a process that seeks to understand and develop operational processes. The operational plan in a standard business plan format describes how the business functions continuously, as well as the capital and expense requirements related to the operations of the business.
This will include:
- Contingency plan- in event that a distributor fails to deliver
- Shipping and fulfillment- Will you be handling all the fulfillment tasks in-house, or will you use a third-party fulfillment partner?
This section should send a message to readers that you have a very good understanding of the business and should give you a basis to make other decisions.
VII. Financial plan:
The financial plan is a reasonable estimate of your company's financial future. Include a few paragraphs on the main features in the financial plan and back this up with financial projections.
The following are the most important financial documents to include in the financial plan:
- Start-up expenses and capitalization: description and explanation of what it will cost to launch the business and where you expect to get this money
- 12-month profit and loss projection (month-by-month) and a three-year profit and loss projection (quarter-by-quarter)
- A 12-month cash-flow projection and a three-year cash-flow projection (quarter-by-quarter)
- A projected balance sheet
- Income statement: Your income statement is designed to give readers a look at your revenue sources and expenses over a given period. It should be generated monthly during the first year, quarterly for the second, and annually for each year thereafter.
- Balance sheet: Your balance sheet offers a look at how much equity you have in your business. On one side, you list all your business assets (what you own) and, on the other side, all your liabilities (what you owe). It is generated only on an annual basis for the business plan and is a summary of all the preceding financial information broken down into three areas: Assets, liabilities, and equity.
- Cash-flow statement: Your cash-flow statement is similar to your income statement, with one important difference: it takes into account when revenues are collected and when expenses are paid. It should show a schedule of the money coming into the business and expenses that need to be paid. The result is the profit or loss at the end of the month or year.
When the cash you have coming in is greater than the cash you have going out, your cash flow is positive. When the opposite scenario is true, your cash flow is negative. Ideally, your cash-flow statement will help you see when cash is low, when you might have a surplus, and where you might need to have a contingency plan to access funding to keep your business solvent.