July 6, 2023
Adam Hoeksema
Welcome to the ever-evolving world of ecommerce—a space where countless businesses are launching every day. If you've landed here, we're guessing you too are gearing up to start your own ecom business. Yet, entering ecommerce is not just about setting up a website and listing products—it involves a robust plan that encompasses every aspect from customer acquisition to cash flow forecasting. That's why we've crafted this comprehensive guide. This Ecommerce Business Plan Guide, complete with a sample business plan, should help you check this project off the list.
Although we focus on ecommerce financial models, we know that some of our clients also need a full business plan, so I decided to take a deep dive into the topic. I plan to cover:
With that as our guide, let’s dive in!
Why write a business plan for an ecommerce business?
It might feel like writing a business plan is a waste of time, and honestly, writing a 40 page plan probably is a waste of time. So why write a business plan? I like to say that you write a business plan primarily because the people with the money (the lenders and investors) are asking for your business plan and projections.
Although I think a business plan could be a good exercise for any ecommerce startup, I know the real impetus for writing a business plan is likely the fact that your potential investors or lenders are asking for one.
What to include in an ecommerce business plan?
I don’t think your business plan needs to be a 100 page dissertation, our ecommerce business plan example is roughly 10 pages. We include the following sections:
Ecommerce Business Plan Outline
We suggest the following business plan sections for your ecommerce business plan:
- Executive Summary
- Company Description
- Market Analysis
- Product and Service Offerings
- Marketing Plan & Customer Acquisition
- Operating Plan
- Financial Plan
How to Analyze the Market for an Ecommerce Product?
Analyzing the market for an ecommerce product is a vital step in any business plan. It gives you a better understanding of your potential customers, competitors, and overall market dynamics. Here's a step-by-step guide to help you do this effectively:
- Identify Your Target Audience: Understanding who will buy your product is crucial. Segment your audience based on demographic and psychographic factors. This might include age, gender, location, lifestyle, interests, income, and more. Analyzing these factors will give you a clear picture of who your customers are and what they need.
- Market Size Estimation: Determine the size of your potential market. This involves looking at the number of potential customers who might be interested in your product. Market size can be categorized into three segments: total available market (TAM), serviceable available market (SAM), and serviceable obtainable market (SOM).
I like to use Google Keyword Planner Tool to see how many people are searching for keywords related to the product I plan to sell as a quick and free way to estimate the market size. For example, let’s assume that we are selling a yoga mat. According to Google Keyword Planner Tool there are roughly 90,000 monthly searches for that keyword.
To put some additional rough math to the opportunity, the first organic search result will often get roughly 40% of the clicks, and a solid ecommerce site will have a 3% conversion rate of visit to purchase. So if you ranked first and received roughly 36,000 clicks with a 3% conversion rate you could sell 1,080 mats per month.
- Competitor Analysis: Understanding your competitors is as important as understanding your customers. Identify your direct and indirect competitors, analyze their products, pricing, marketing strategies, customer reviews, and their market share. This will help you identify gaps in the market that you can exploit.
Read More: How to Write a Business Plan Competitor Analysis
- Trend Analysis: Investigate current market trends related to your product. Look at the growth of the market, customer preferences and behavior, and the impact of technology and environmental factors.
I like to suggest using Google Trends to see trends in popularity in your market. If we stick with our yoga mat example we can see the following seasonal trends and trend over the last 5 years for the search term yoga mat.
- SWOT Analysis: Carry out a SWOT analysis - strengths, weaknesses, opportunities, and threats related to your ecommerce product. This analysis will help you understand your product's position in the market.
- Pricing Analysis: Understand the pricing strategies of your competitors and the pricing willingness of your potential customers. It will help you to set a competitive and profitable price for your product.
- Regulatory Environment: Check the regulatory environment related to your product. It includes legal regulations, trade policies, and standards that might impact your ecommerce business.
- Customer Behavior and Preferences: With the help of analytics and customer feedback, understand what drives customer behavior. Consider their shopping habits, their product preferences, and what influences their buying decisions.
Each of these steps will provide valuable insights that can shape your ecommerce product's marketing strategy, positioning, pricing, and much more. Remember, market analysis is an ongoing process—it needs to be repeated periodically as markets evolve over time.
How to Analyze the Competition in Ecommerce?
There are a couple of tools that I like to use when analyzing the competition in ecommerce.
- Google’s Ads Transparency Tool – with this tool you can simply enter in the domain name of a competitor and Google will show you all of the ads that they are running. This is a nifty way to get an idea of ads that might be working well and areas you might be able to compete.
- Ahrefs – Ahrefs will allow you to look up a competitor’s website and you can see how much organic traffic they are getting and exactly what keywords are sending that traffic. For example, REI ranks 3rd organically for the keyword “yoga mats” so we looked up their Yoga Mats page on Ahrefs and found that they receive roughly 2,200 organic visits per month to that page:
We can also see what keywords are sending the most traffic to that page below where I have highlighted the monthly organic traffic estimate for each keyword.
How to Estimate Customer Acquisition Costs in Ecommerce?
I like to use Google Keyword Planner Tool to estimate customer acquisition costs as well. As we saw with the Yoga Mat example below the average cost per click to advertise for that keyword was between $0.39 cents and $3.13.
Again if we stick with a 3% conversion rate and assume 50 cents per click that means you are likely to spend roughly $16 to acquire one customer. Not a whole lot of room for margin in this business right? In this case you would need to hope that you can sell multiple products to the same customer over time.
Your customer acquisition costs will be a fundamental assumption in your financial model. Let’s dive into that next.
How to Create Financial Projections for a Bar Business Plan
Just like in any industry, the ecommerce business has its own unique factors that impact financial projections, such as online traffic, conversion rates, and customer acquisition costs. Utilizing an ecommerce financial projection template can simplify the process and increase your confidence. Creating accurate financial projections goes beyond showcasing your ecommerce venture's ability to generate sales; it's about illustrating the financial roadmap to profitability and the realization of your online business goals. To develop precise projections, consider the following key steps:
- Estimate startup costs for your ecommerce business, including website development or platform setup, inventory acquisition, branding and marketing expenses, and initial fulfillment and shipping costs.
- Forecast revenue based on projected online traffic, conversion rates, average order value, and potential growth in customer base.
- Project costs related to product sourcing or manufacturing, packaging, shipping, and fulfillment services.
- Estimate operating expenses like website maintenance, hosting fees, digital marketing expenses, customer support, and administrative costs.
- Calculate the capital needed to launch and sustain your ecommerce business, covering initial expenses and providing working capital for continued growth.
While financial projections are a critical component of your ecommerce business plan, seek guidance from experienced professionals in the ecommerce industry. Adapt your projections based on real-world insights, leverage industry resources, and stay informed about digital marketing trends and evolving consumer behavior to ensure your financial plan aligns with your goals and positions your ecommerce venture for long-term success.
Example Ecommerce Business Plan
Explore our E-commerce Business Plan, presented below. If you prefer, you can access a downloadable Google Doc version of this bar business plan template, allowing you to personalize and tailor it to your specific needs. Additionally, a helpful video walkthrough is available, guiding you through the process of customizing the business plan to perfectly align with your unique Ecommerce business.
Table of Contents
Executive Summary:
- Business Description
- Market Analysis
- SWOT Analysis
Marketing and Sales Strategy
- Branding and Identity
- Website, menu, and social media platforms
- Marketing materials and promotional items
- Marketing mix
- Product
- Pricing
- Place
- Promotion
Operations Plan
- Organizational Structure:
- Location and Facility:
- SOP (Standard Operating Procedures):
- Health and safety protocols:
Financial Projections
- Startup Costs and Use of Funds
- Annual Sales, Gross Profit and Net Profit
- Key Financial Ratios
- Income Statement at a Glance
- Income Statement Annual Summary
- Cash Flow Statement Annual Summary
- Balance Sheet Annual Summary
Conclusion
I. Executive Summary
Our ecommerce store, "Eco-Friendly Fashion," aims to provide consumers with stylish and environmentally-friendly clothing options.
Our target customer is the eco-conscious, fashion-forward individual who is looking for sustainable alternatives to fast fashion.
The ecommerce market is growing rapidly, and there is a growing demand for sustainable fashion products. We believe there is a gap in the market for an ecommerce store that offers a wide range of eco-friendly clothing options at affordable prices. Our unique selling proposition is to offer high-quality, stylish clothing that is also environmentally friendly, at a price that is accessible to our target customer.
We plan to launch with a product line of 50 items, including t-shirts, hoodies, and dresses, made from organic cotton and recycled materials. Our products will be manufactured in fair trade factories, ensuring ethical labor practices. Our initial funding will come from personal investments and a small business loan. Our financial projections show that we will break even in the third year of operation and achieve a profit by the fourth year.
II. Company Description
Eco-Friendly Fashion is a newly established ecommerce store that will offer a wide range of eco-friendly clothing options for both men and women. The company was founded by two friends, Jane Doe and John Doe, who share a passion for sustainability and fashion. Jane has a background in fashion design and John has experience in ecommerce and marketing.
Eco-Friendly Fashion is a limited liability company (LLC) registered in the state of California. Our team also includes a product sourcing specialist and a freelance graphic designer. Our office and warehouse are located in Los Angeles, CA.
III. Market Analysis
The global ecommerce market is expected to reach $4.9 trillion by 2021, with a significant portion of this growth coming from the fashion industry. Consumers are increasingly turning to ecommerce for their fashion purchases, and there is a growing demand for sustainable fashion products.
Our target customer is the eco-conscious, fashion-forward individual, aged 18-35, with a moderate to high income. This demographic is highly concerned about the environmental impact of their clothing choices and is willing to pay a premium for sustainable fashion options.
Competitors in the eco-friendly fashion market include established brands like Patagonia and smaller, niche brands like Tentree. However, these brands tend to focus on outdoor and athletic wear, rather than everyday fashion, and their products can be expensive. Our competitors in the sustainable everyday fashion market include companies like Reformation and Everlane, but these brands have limited product offerings and their products can also be expensive.
Our marketing and sales strategies will focus on leveraging social media, influencer marketing, and targeted online advertising to reach our target customer. We will also attend sustainable fashion trade shows and events to network and showcase our brand.
IV. Product and Service Offerings
Eco-Friendly Fashion will launch with a product line of 50 items, including t-shirts, hoodies, and dresses, made from organic cotton and recycled materials. Our products will be manufactured in fair trade factories, ensuring ethical labor practices. Our products will be designed in-house, with a focus on creating stylish, on-trend pieces that are also environmentally friendly.
Our pricing strategy will be to offer high-quality, stylish clothing at a price that is accessible to our target customer. Our products will be priced slightly higher than fast fashion options, but lower than sustainable fashion competitors like Reformation and Everlane.
We will continuously expand our product line and source new materials and manufacturing partners to ensure we are always offering the latest in sustainable fashion. In addition to our clothing line, we will also offer a recycling program for customers to trade in their old clothing for store credit. This will further demonstrate our commitment to sustainability and encourage customers to make more sustainable fashion choices.
V. Marketing Plan & Customer Acquisition
Our plan to grow our ecommerce business and reach our financial targets will follow a 5 pronged marketing approach in order to acquire customers.
Brand Awareness:
- Partner with influencers and bloggers in the sustainable fashion and lifestyle space to feature your products and increase brand exposure.
- Utilize social media platforms such as Instagram and Facebook to showcase your products and educate your audience on the importance of environmentally responsible and ethically sourced apparel.
- Participate in local events and festivals that align with your values to increase visibility and connect with potential customers in person.
Content Marketing:
- Create a blog that features articles on sustainable fashion and how your products are made in an environmentally responsible and ethical manner.
- Offer styling tips and suggestions for incorporating eco-friendly fashion into everyday outfits to engage and educate your audience.
- Share customer testimonials and reviews on your website and social media channels to build trust and credibility with potential customers.
Email Marketing:
- Build an email list by offering an incentive such as a discount code to customers who sign up.
- Send newsletters that include information on new product launches, sales, and events.
- Use email automation to send abandoned cart reminders and follow-up emails to potential customers who have shown interest in your products.
Paid Advertising:
- Utilize targeted Facebook and Instagram ads to reach a wider audience and drive traffic to your website.
- Partner with eco-friendly and sustainable lifestyle websites to run display ads and reach potential customers who are already interested in these topics.
- Consider using Google Ads to target customers who are actively searching for environmentally responsible and ethically sourced apparel.
Referral Program:
- Encourage satisfied customers to refer friends and family by offering a discount code or other incentive for each successful referral.
VI. Operating Plan
Eco-Friendly Fashion will operate as an online ecommerce store, with all sales taking place through our website. Our website will feature a user-friendly interface, detailed product descriptions, and multiple payment options. We will also offer free shipping on all orders within the United States, with the option for international shipping at an additional cost.
Our fulfillment and delivery strategies will include partnerships with established logistics companies to ensure efficient and cost-effective shipping. We will also implement a comprehensive returns and exchanges policy to ensure customer satisfaction.
Our ecommerce platform will be powered by Shopify, which offers a range of tools and integrations to manage our website, inventory, and customer data. We will also use a customer relationship management (CRM) system to track customer interactions and improve our marketing and sales strategies.
VII. Financial Plan
Our start-up costs will include the cost of product development and manufacturing, website development, marketing, and rent for our office and warehouse. Our initial funding will come from personal investments and a small business loan.
Our financial projections show that we will achieve $75,000 in sales in the first year, increasing to $500,000 in the second year and $1 million in the third year. Our expenses will include product manufacturing, marketing, salaries, and other operating costs. Our projections show that we will break even in the third year of operation and achieve a profit by the fourth year.
To minimize risk, we will continuously monitor our financial performance and adjust our strategies as needed. We will also implement a thorough risk management plan, including carrying appropriate insurance coverage and implementing strong data security measures to protect our customer information.
All of the unique financial projections you see below were generated using ProjectionHub’s Ecommerce financial projection template. Use PH20BP to enjoy a 20% discount on the template.
Startup Costs:
Projected Financial Summary:
Annual Sales, Gross Profit and Net Profit:
Key Financial Ratios:
Watch how to create financial projections for your very own ecommerce business:
Income Statement:
Balance Sheet:
Cash Flow Statement:
VIII. Conclusion
Eco-Friendly Fashion is poised to fill a gap in the sustainable fashion market, offering a wide range of stylish and environmentally friendly clothing options at affordable prices. With a growing demand for sustainable fashion and our commitment to ethical and sustainable business practices, we are confident in our ability to succeed in the competitive ecommerce market.
Our team is dedicated to offering the highest quality products and customer service, and we are excited to bring our vision of sustainable fashion to life. Our next steps include finalizing our product line and manufacturing partnerships, launching our website, and beginning our marketing and sales efforts.
Ecommerce Business Plan FAQs
How do I start an ecommerce business?
To start an ecommerce business, you'll need to identify your target market and products, create a business plan, set up an online store or website, source or create products, establish secure payment and shipping methods, and implement marketing strategies to drive traffic and sales.
Which ecommerce platform should I use for my online store?
Popular ecommerce platforms include Shopify, WooCommerce, Magento, and BigCommerce. Consider factors such as ease of use, customization options, scalability, pricing, and integration with other tools or marketplaces when choosing the right platform for your business.
How can I drive traffic to my ecommerce website?
You can drive traffic to your ecommerce website through various strategies, including search engine optimization (SEO), social media marketing, content marketing, influencer partnerships, email marketing, paid advertising, and utilizing marketplace platforms such as Amazon or Etsy.
What are the essential elements to include in product descriptions for ecommerce?
Essential elements for product descriptions in ecommerce include clear and concise product titles, detailed descriptions highlighting key features and benefits, high-quality product images, pricing information, sizing or specifications, and customer reviews or testimonials, if available.
How can I optimize the checkout process to increase conversions?
To optimize the checkout process, streamline the steps involved, offer guest checkout options, provide multiple payment methods, ensure security and trust indicators, display shipping options and costs upfront, minimize form fields, and offer incentives such as discounts or free shipping for completing a purchase.
