Setting up an online store: tips for creating your business

A good business plan is a guideline for founding a company, and that goes for online companies too. While your online store is still on the starting blocks, it makes sense to use your house bank or get your personal ac­coun­tant on board. This way, your flour­ish­ing business has a better chance of success; if your founding team lacks a competent and ex­pe­ri­enced pro­fes­sion­al from the financial sector, it’ll be difficult to ac­cu­rate­ly handle your finances. While the bulk of the planning still rests on the shoulders of the founders, ac­count­ing is a mammoth task that is prac­ti­cal­ly im­pos­si­ble without pro­fes­sion­al support. 

Business plans generally follow the same basic structure: usually opening with a summary, which briefly outlines the forth­com­ing points, the first paragraph should work to inform the reader of the most important aspects of the business in order to pique their interest. The key data sur­round­ing the proposed projects are important of course, es­pe­cial­ly a project’s legal status. It’s important to outline the following in­for­ma­tion at the beginning of your business plan:

• name and address of the business and its founder(s)
• date of foun­da­tion
• subject of the business
• legal status
• company structure and tenure status

Only once these have been stated should the business plan address further aspects. Here are the most important features at a glance:

Business ideas/abstract

The business concept is the key to every business and the cor­ner­stone of any business plan. The biggest challenge here is sum­ma­riz­ing your goals and in­ten­tions for your web store in a few key points. The language should be clear and concise with no un­nec­es­sary, technical terms. It’s a good idea to follow the elevator pitch model. This is the concept of pitching your business model to a group of by­standers during a 30-second elevator ride. In this short amount of time, you must be able to outline all the key in­for­ma­tion including your ob­jec­tives, personal aims and business strategy.

Business profile

A brief section about the founder or founding team usually follows the abstract. This generally includes a list of relevant skills, career history, and ex­pe­ri­ence in the sector. Even if you use the business plan for external issues such as financial matters or pro­mo­tion­al purposes, you should still record the founding team’s sig­nif­i­cant soft skills, as well as their ca­pa­bil­i­ties and ex­pe­ri­ence. Highly regarded abilities in the e-commerce realm include:

• technical skills, par­tic­u­lar­ly those that are useful for pro­gram­ming, de­vel­op­ing, and in­stalling online shop software or content man­age­ment systems
• marketing skills that prove at least one of the founders to be an expert in SEO, SEM, or affiliate marketing, as this is a big advantage in e-commerce marketing strate­gies
• lo­gis­ti­cal skills that confirm the founder(s) ex­pe­ri­ence with com­mer­cial man­age­ment systems and pro­cess­ing shipments and/or returns

Other relevant abilities include financial skills (book­keep­ing, ac­count­ing, con­trol­ling), man­age­ment ex­pe­ri­ence (staff man­age­ment, ac­qui­si­tion of goods), service skills, and legal ex­pe­ri­ence.

Target group

Defining a target group is essential when writing a business plan. This target group is integral for later steps such as marketing strate­gies and publicity. Only by de­ter­min­ing the target group in this early stage can the size of the market be as­cer­tained, thus providing the basis for further cal­cu­la­tions. In online trade, pre­sen­ta­tion is key to drawing in potential customers.

Most business owners can identify who might use their web store in the con­cep­tu­al phase. This usually requires an un­der­stand­ing of the dif­fer­ences between B2B and B2C marketing strate­gies. To define the web store’s target market, you must go one step further and try to specify: what are the customer benefits? What are the char­ac­ter­is­tics of potential customers? Are there any cor­re­spond­ing figures or studies to back this up? These are the questions to answer when de­ter­min­ing an accurate target group.

Analyzing the market/com­pe­ti­tion

This part of the business plan should record the target sector’s current market situation. Here, it’s worth including valuable in­for­ma­tion such as market size, existing market struc­tures, and in­flu­enc­ing factors. It’s crucial that this data is measured ac­cu­rate­ly, so it’s useful to use trade as­so­ci­a­tion websites to gain a glimpse into the status of other online stores in your sector. Check out the Planning Shop list of all the major US trade as­so­ci­a­tions here. Busi­ness­es should also contrast the market situation with the pre­vail­ing com­pe­ti­tion. It is essential to gather in­for­ma­tion on facts such as the level of com­pe­ti­tion for your products; for many en­tre­pre­neurs, this can provide the keystone of their entire business model. Com­mit­ting this to paper often reveals potential weak­ness­es. For example, if you are at­tempt­ing to enter a com­pet­i­tive market with high price sen­si­tiv­i­ty, you should consider adjusting your web store’s concept or product line. It’s not worth trying to break into a saturated market unless you have an es­pe­cial­ly unique strategy or in­no­v­a­tive idea.

Marketing strategy

Achieving success in e-commerce relies on gaining a good rep­u­ta­tion and trans­form­ing your online store’s browsers into buyers. The latter is known as ‘gen­er­at­ing con­ver­sions’ in marketing jargon. With the rise of e-commerce, business owners now benefit from the immense range of online and offline marketing strate­gies at their disposal; including newslet­ters, SEM, SEO, billboard ad­ver­tis­ing and flyers. The marketing tech­niques that best suit your online store depend on a variety of factors. This is where the founders’ skillsets play just as crucial a role as knowledge of the target market. On the whole, the marketing strategy stands in direct cor­re­la­tion with the budget plan.

The following aspects should be included in this part of the marketing plan:

• marketing solutions
• pricing
• dis­tri­b­u­tion policy
• any relevant services

In the world of e-commerce, USPs (i.e. quick delivery and free returns) can be the decisive factor in a customer’s decision to use your web store over another. And when it comes to acquiring new customers and managing existing ones, tra­di­tion­al marketing tech­niques should be con­sid­ered just as important as in­no­v­a­tive dis­tri­b­u­tion platforms. As well as an overview of market activity, the business plan should in­cor­po­rate con­trol­ling tools and key figures to measure success.

Or­ga­ni­za­tion/structure

This section of the business plan is about the general or­ga­ni­za­tion of the business, and should go into detail about the relevant aspects of the existing structure and man­age­ment system. The overview should start with an outline of the or­ga­ni­za­tion­al structure, from the man­age­ment level down to in­di­vid­ual employees. The founders’ qual­i­fi­ca­tions and skills come into play once more here, as you break down the company’s hierarchy and man­age­ment roles. The staff structure should also include wages.

This part of the business plan should also contain de­vel­op­ment plans for the marketing and sales strate­gies. Sales are of par­tic­u­lar­ly great sig­nif­i­cance for web stores, as this area includes pro­cure­ment, product man­age­ment, and returns. It’s also important to document ad­min­is­tra­tive issues (i.e. book-balancing, taxes, legal matters) and technical elements (i.e. e-commerce software, page design).

Prospects and risk as­sess­ment

Having gathered all the in­for­ma­tion above, it’s time to delve into the oblig­a­tory analysis of prospects and risks. The business plan is fun­da­men­tal­ly there to highlight the project’s strengths and op­por­tu­ni­ties, but a detailed analysis of possible risks and critical factors increases your cred­i­bil­i­ty.

Here it’s a good idea to create different versions of the business plan for different re­cip­i­ents. This part should be an es­pe­cial­ly high priority for all internal contacts. For example, you can address technical dif­fi­cul­ties, and the un­ex­pect­ed costs that come along with them, and predict the like­li­hood of such a risk. Never oversell the project and concept to employees. It’s crucial for the work en­vi­ron­ment to be built on a foun­da­tion of trust with an honest pro­jec­tion of the company’s de­vel­op­ment.

It’s important to outline these potential risks when pre­sent­ing the business plan to investors and sponsors. This will enhance your cred­i­bil­i­ty and paint you as a serious en­tre­pre­neur, as these donors know no business is without its risks. At­tempt­ing to hide any flaws or un­cer­tain­ties will only come back to damage your web store. In any case, donors often carry out their own risk as­sess­ments before investing. A good analysis of potential risks (from the per­spec­tive of the founders) shows honesty, without making the project look bad. To convince investors of your com­pe­tence, for every risk you predict, you should also present an avoidance strategy or defense plan. Typically, risk analyses list potential financial and growth risks, as well as potential liquidity short­falls, which could emerge from a deviation in sales.

Creating a business plan takes a lot of time and work. However, anyone who has completed this task will tell you that it is certainly worth the effort. In gathering and or­ga­niz­ing this in­for­ma­tion, a full business concept is formed, which often helps en­tre­pre­neurs to identify their weak points and potential problems. In some instances, this can even prevent the collapse of a business. The business plan is fun­da­men­tal­ly a final draft of the business concept to analyze its fea­si­bil­i­ty and potential. It also puts the founders’ en­tre­pre­neur­ial skills to the tests and is critical when applying for subsidies.

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