How to Develop your Online Business Plan
Learn how to create the basics of your Online Business Plan
LEVEL 1 ARTICLE
Just like your target market and competition analysis, your business plan will probably change a little over time, however take the time in the early days of your business development to write down as much as you can of its details.
The business plan document will outline your business goals, strategies, and how you plan on making money. (If one day down the track, you choose to sell your online business, your business plan will form a part of the documents included in the sale, so don't take the exercise lightly.) Creating a business plan can seem like a daunting task, but it doesn't have to be. Just take it one step at a time and you'll be on your way to success.
Here's a quick overview of what you should include in your business plan:
1. Executive summary: This is a brief overview of your business. Include your business name, what you do, and what your goals are.
2. Company description: Write a few sentences or paragraphs about your company, including its history (if any) and any unique selling points.
3. Products and services: Describe the products or services you offer, including any unique features or benefits.
4. Market analysis: Research your target market and describe them in terms of size, demographics, needs, etc. When you are looking for ways to describe your market, consider using the commonly accepted acronyms of TAM, SAM and SOM.
TAM, SAM and SOM are sometimes seen as the key measures of a company's success in the marketplace. They stand for Total Available Market, Served Available Market and Share Of Market, respectively.
Total available market is the entire market for a product or service. If you are selling dog treats for example, that would be the total population of dog owners in the world willing to buy dog treats.
Served available market is the portion of the total market that a company can reach with its current marketing efforts. Still speaking of dog treats, if you are massive pet food store chain, you are able to reach all dog owners living in the locations of where your pet stores are located, as well as those that visit your website, etc; if you are a teenager starting to make dog treats in your kitchen, you SAM is probably the dog owners who have somehow found out about your efforts.
Share of market is the percentage of the total market that a company serves. In the example of the teenager making dog treats, that is the number of people actually buying the treats from them.
SAM and SOM are important measures because they give insights into a company's competitive position. If a company has a large TAM but only a small SAM or SOM, it suggests that the company is not effectively reaching its potential customers. This could be due to poor marketing or a lack of access to key channels. Conversely, if a company has a small TAM but a large SAM or SOM, it suggests that the company is very effective at marketing and has a strong competitive position.
TAM, SAM and SOM are important measures for companies to track, especially as they look to expand their businesses.
By understanding their TAM, SAM and SOM, companies can better assess their opportunities and make strategic decisions about how to grow their businesses.
5. Marketing and sales strategy: Outline your plans for marketing and selling your products or services. Don't worry if you haven't worked out what they are yet, that will be the topic of another post you can check out.
6.Financial projections: Include financial statements, such as a profit and loss statement and balance sheet. Check out some of our other posts for more details what these projections will include.
7. Appendices: Include any additional information, such as market research data, information on the management team of the business or customer testimonials (if you have any at this stage).
So, let's have a look at a mock business plan framework you could work from. While the concepts dealt with in this example are not based on a real company, ask yourself how you will answer each of the topics addressed.
XYZ Widgets is a new company that will provide quality widgets to the public at an affordable price. We have a three-year business plan to become profitable. The founders of XYZ Widgets have extensive experience in the widget industry and have developed a good business model to make the company successful. How about your business idea? What product/content/service are you planning on developing? What will be the company name? Is it new or a branch of an already existing brick-and-mortar company?
XYZ Widgets will be a widget manufacturing company located in the United States. We will sell our widgets through a variety of channels including online retailers, brick and mortar stores, and our own website. Our widgets will be made from high-quality materials and we will have a wide variety of widgets to choose from. How will you develop your product? Who will be responsible for its creation/development and who will be responsible for its distribution? How will you deliver it to your target market?
Product and Service Description
XYZ Widgets will offer a wide variety of widgets made from high-quality materials. We will have a standard line of widgets as well as a custom line of widgets. Our custom widgets will be made to order and will be more expensive than our standard widgets. What exactly will you offer to your target market? What will be the differentiating features of your product?
The widget market is a $2 billion industry and is growing at a rate of 5% per year. There are a variety of widget manufacturers in the market, but XYZ Widgets will be able to compete by offering a higher quality product at a lower price. This could be a good place to record the TAM, SAM and SOM of your target market.
John Smith, CEO John has over 20 years of experience in the widget industry. He has a proven track record of success and is well-connected in the widget community. Jane Doe, COO Jane has over 10 years of experience in manufacturing and operations. She has a degree in engineering and is responsible for our manufacturing process.
Marketing and Sales Plan
XYZ Widgets will use a variety of marketing and sales strategies to reach our target market. We will use online advertising, print advertising, and direct mail to promote our products. We will also offer a discount to customers who order our widgets in bulk. Have you started thinking about how your clients/customers will find out about you? Perhaps not yet, so have a look at some of our other posts to flesh out this section in more detail.
XYZ Widgets will have $1 million in initial funding from our investors. We expect to generate $5 million in revenue in our first year and $10 million in our second year. We will be profitable by the end of our third year. In the initial stages of online business creation, this section could be arguably the most difficult to complete with any degree of certainty. When you are at this stage of your business plan, this is a good time to plan your future business expenses and perhaps adjust the prices of your products if required.
Our investors will exit the company through a sale or an IPO within five years. You don't necessarily need to plan on selling your business when you are just starting it, however having a clear potential exit strategy in mind will be helpful in passing on the torch to the next business owner for a good price, if ever you do decide to focus your energy elsewhere.
Risks and Mitigation Strategies
There are a few risks associated with our business, but we have mitigation strategies in place to address these risks. The first risk is that our widgets may not be of high enough quality to compete in the market. This risk can be mitigated by ensuring that our widgets are made from high-quality materials and that we have a robust quality control process.
The second risk is that our sales and marketing efforts may not be successful. This risk can be mitigated by hiring experienced sales and marketing professionals and by using a variety of marketing channels to reach our target market.
Here you are thinking deeper about the nature of your business idea and about the way you are planning on conducting your business. Keep in mind to look at the holistic picture of your endeavor. That is to say, if you are planning on making dog treats, don't just think about the risk of accidentally making a dog unwell with your food, but also consider the risk that your dog treats will not be profitable if you spend too much money on ingredients or the cost of running your kitchen. So, the risks include aspects relevant to the business, as well as aspects relevant to how you are going to run it as a business owner.
This is just a brief example of what a business plan might look like. Creating a business plan may seem like a lot of work, but it's an essential part of starting your own business. By taking the time to do it right, you'll increase your chances of success!
Typically, at this point of your journey, your business idea is fleshed out, you know what you would like to do, how you are planning on doing it, you've done some research and believe that you can be profitable in this niche and you are ready to get started. Almost always, one of the first things an online entrepreneur will do is create their business website. How do you go about that? Read on in our other blog posts!