Friday, February 29, 2008

The Ecommerce Business Plan

Simply put, business plans can make or break your business. Starting a Drop Ship business online is no different from starting a traditional non-online business. With the strong emphasis individuals place on writing business plans for starting up non-internet-based companies, it is equally crucial to prepare a business plan for your online business.

A business plan serves many important purposes for the online business. First, because the business plan has a detailed list of the tasks to undertake, it is a call to action for you to promote your business actively and not procrastinate on your marketing efforts. Second, it provides a blueprint that describes your company effectively: the market, the products and the steps you need for effective marketing. This serves to guide your business through the months ahead.

Business plans normally comprise of five sections:

1) The Objectives. This section will describe the objectives for the venture, and the mission statement that defines the online business. It states both the financial and strategic objectives and is normally about one page long. There should be a concise description of the Drop Ship business at the start. A brief example:

'Magical Stores Online is an internet company that provides quality tools and resources for magic tricks. We aim to consistently provide magicians with reliable tools for conducting magic tricks, and also accurate information and guides on how to properly perform the magic tricks with our tools. In our first year online, our target is to have U.S. $400,000 in revenues and $100,000 in profits. This can be achieved by attracting an average of about 5000 visitors to our website every month through effective internet marketing. Our strategy is to attract recurring traffic to our website by continually updating the useful resources and information on our website. Magicians will constantly return for more useful tips on magic tricks. This cuts our marketing costs drastically and adds to our profit margin.'

2) The Executive summary. The executive summary should contain a few important details. It should outline the basic model of the company, how the business functions, the market environment, and also the business opportunity in the market. A continuation from the previous example:

'Magical Stores Online is a retailer of magic products on the internet. We specialize in card and coin tricks and stage magic, and classify our products according to age group, skill level, features, and the occasion they are used for. Magicians can browse the product catalogue on our website and buy their products with a shopping cart software. They can choose to pay either by credit cards or by checks. We use a third party credit card merchant to process our payments, hence eliminating the need to have a merchant account ourselves. A profit is realized whenever a sale is made, because we obtain our products at a wholesale price and we sell them at a retail price. Since our supplier, Company XYZ, drop ships the products directly to the customers' address, we do not need to hold any inventory. Our market comprises of magicians of any age group who specialize in card and coin tricks and stage magic. The opportunity lies in the internet as a marketing medium for magic products. Since the rise of the internet in the mid 1990s, we find that the major magic product retailers do not use the internet effectively to market their products. With effective internet marketing skills, we believe that we can reach a wider audience than the other major players, thus claiming a large market share.'

*Note that in a real business plan, the business owner should aim to provide a more detailed version than the examples given above. The examples here only serve to illustrate an overview of what the basic business plan should encompass.

3) Marketing Strategies. In this section, you will describe the steps you intend to take in order to market your business effectively on the internet. There are a few basic marketing methods available on the internet. Mentioned below are three of the most popular methods.

- Email Marketing. Ezines and newsletters are powerful tools. It is simply the most cost-effective form of marketing on the internet. Sending out email promotions or newsletters to your subscriber base costs virtually nothing, except for the time you spend on writing your newsletter. With the web form on your website, you can capture the names and email addresses of the customers who subscribed to your newsletter. I do not recommend that you send your subscribers with product promotions regularly, but you should continually provide them with useful tips and information. In this way, you establish your credibility as an expert and maintain a strong relationship with your customers, instead of appearing as someone just out to make money. Promotions for your products should only be sent out about once or twice a month.

- Search engine optimization. Optimizing your website for high search engine results on google, yahoo and msn, is a powerful way of getting large volumes of traffic at low cost. However, you have to put in a lot of effort for a long period of time, as top rankings do not appear overnight. There are two factors for search engine optimization: On-page or Off-page optimization. On-page optimization involves tweaking the page title, header and meta tags to include the website keywords. It also involves scattering the keywords throughout the page to improve the site relevancy. Off-page optimization, on the other hand, is much more important than on-page. It involves soliciting links from relevant websites. The more the websites that link to your site, and the higher the importance/relevance of the website linking to yours, the higher your website will be ranked on the search engines. Google places a very strong emphasis on this.

- Pay-per-click (PPC) Search Engines. This requires you to pay a sum of money for every visitor that clicks through the search engine to your website. The higher the amount you pay, the higher your website will be ranked on the PPC search engine. The basis for profiting with this marketing tool is by bidding less than the amount that each visitor to your website is worth. Overture is definitely the market leader for pay-per-click search engines.

4) Competitive Analysis. In this section, you have to analyze the strengths and weaknesses of your competitors, and the factors that will differentiate your products or services from your competitors. You have to analyze your competitors and record what makes them so successful, and also the weaknesses you can capitalize on to get an edge in the market. For example, competitors may not be using email marketing effectively to promote the products to customers. You can capitalize on this by using newsletters more intensively, establishing your credibility as an industry expert. To differentiate an online Drop Ship business, it is more viable to provide a reliable service from your website. This usually means providing a wealth of tips, articles and information for your visitors. This will attract them to continuously return to your website for the latest tips and resources that will benefit them. Fast response to their email queries and also fast shipping are also good services you can provide.

5) The financial projection section. In this section you can project the profit-loss statements and the cash flow statements for your business. The profit-loss statement records the monthly profit/loss realized over the months, while the cash flow statement records the difference between revenue and expenditure over the months. The costs for an online Drop Ship business will include:

- One-time costs for software like shopping cart software, email marketing software, and also search engine optimization software.

- Recurring costs for the wholesale price of the products, web hosting fees, a proportion of revenue paid to your third party credit card merchant to process your payments, and also internet marketing costs.

This section will be useful for you to gauge how your Drop Ship business performs according to your expectations.

In conclusion, business plans do not only apply to real-world businesses, but are equally critical to online businesses as well. They serve as blueprints of the companies and also as strong calls to action for the aspiring internet entrepreneurs to achieve their success in ecommerce.

About the Author: Ray Yee is the founder and president of Dropshipperscentral, a website which provides a wealth of informative articles, tips and resources on everything you'll ever need to know about setting up a Drop Ship Business and marketing it. Click here for the Wholesale Drop Ship Directory from

Creating The Perfect Ecommerce Website

If you're thinking of jumping on the bandwagon and going into business with your own ecommerce website, you'd do well to look at a few examples before you start. Finding out what a good ecommerce website looks like will help you know what to include - and what to avoid - when you start to set up one of your own. Here are some of the things you'll find on the perfect ecommerce web site:

A good ecommerce web site sells something that people want to buy.

This is probably the most important fact of all. It's all very well to decide that you want to set up an ecommerce web site (after all, a lot of people are doing it, and doing it very successfully, too), but first of all, make sure you know what you're going to sell - and whether or not it's something people will want to buy. That means doing market research, and market research can be time consuming and boring, but you'll never create a successful ecommerce website without it.

The most successful online stores sell products that are high in demand and which fulfill a need.

Before you even think about starting an ecommerce website of your own, you'll need to work out which group of consumers you'll be targeting, and just what kind of thing they want to buy.

A good ecommerce website has a simple yet eye-catching design.

Never underestimate the importance of finding a great design for your ecommerce web site - but don't over-estimate it either. While your ecommerce web site design is one of the things your customers will remember you for, if you get things right, they'll be far more interested in what you're selling than in how you're selling it. Make sure your ecommerce web site is easy to use and navigate, and that your products are displayed to their best advantage.

A good ecommerce website makes it easy for customers to pay.

Have you ever found something you want to buy on an ecommerce website, and got to check out only to find that you need to make a phone call to the company in question to complete your transaction or, worse, print out an order form and send it through the mail? Frustrating, isn't it? Your customers will think so too. Install an easy to use, straightforward payments mechanism which allows your customers to pay safely and securely using their credit or debit cards - they'll thank you for it by coming back for more!

The perfect ecommerce website is easy to find.

Last but not least, make sure your ecommerce web site shows up on search engine listings. If it doesn't, no one will ever find it, and you may as well not have started it at all. Search engine optimisation (the art of getting your web site listed on search engines) can be tricky and time consuming, so if you're not sure how to do it, find someone who can - it'll be worth every penny you spend on it!

Amber McNaught is co-owner of Hot Igloo Productions Ltd, a website design and online marketing firm offering high quality designs at affordable prices.