When someone starts a business, one of the very first steps he or she should take is to write a business plan.
A business plan is a formal, written document containing your company's intentions and projections. It usually contains a description or profile of your company, and outlines your goals for the next several years.
If you're an online seller—on eBay or elsewhere—you shouldn't overlook writing a business plan.
Anyone who sells online and makes money at it is in business, says Cliff Ennico, attorney, author and business expert.
"And every business needs a plan," he adds.
Plan helps create a 'clearer' picture
Writing a plan for your business helps create a clearer picture of what you want as a business owner, and how you intend to get what you want
Business plans are essential for small online sellers because it's easy to lose a lot of money and time if you don't know exactly where you're going every time you make a sale.
Building a plan for your business in written form helps create a clearer picture of what it is you want as a business owner, and how you intend to get what you want. Otherwise, unrealized profits can end up in your latte fund and opportunities for growth lurk in the shadows.
As an entrepreneur, your goal is to manage and grow your business, Ennico says. And one of the biggest mistakes sellers make when it comes to business plans is not having them at all.
"A business without a plan will find it tough to grow," he adds.
Keep your business plan handy
Note also that business plans are not meant to be written and filed away. They are platforms that serve to focus your goals and help you gauge how your business is coming along.
This may be especially important for online sellers. If you're too caught up in the day-to-day activities of filling customer orders, Ennico says, you lose sight of the more important questions, such as:
- Am I selling the right merchandise?
- Am I targeting the right customers?
- Am I advertising in the right places and using the right tools to attract customers?
- Am I making enough money on each sale to stay in business and have a decent life?
- What changes can I make to improve my operating margins?
- Are there any competitive threats on the horizon that will make my business or merchandise obsolete?
- Are there any costs that can be cut?
- Are there any legal or tax issues I may be overlooking?
Setting aside at least two hours a week to work on your business plan will help you look at the big picture and see how things are changing
Ennico thinks a business plan is an evolving document that requires regular maintenance as your business presses onward.
"Setting aside at least two hours a week to work on your business plan will help you look at the big picture and see how things are changing," he reports. "Sometimes you just need to lay out the best roadmap you can and then update and revise it 'on the fly.'"
How long should your business plan be?
Writing a business plan is not nearly as daunting as it may initially seem. While larger companies need plans as thick as 30 pages or more—especially those who seek financial investments—the small online seller only needs enough to give a well-rounded body to their business in a way that helps them.
The Small Business Administration provides information on what should be in a business plan, but you can also find innumerable templates and examples with a simple Google search.
What goes into the plan?
Online retailers who don't need to raise venture capital can create a successful plan very easily, and it can be as fancy or as simple as they like. Ennico provides the following suggestions for writing your plan.
First, start with an executive summary. In one or two paragraphs, give a snapshot of your company's profile and goals.
Next, thoroughly describe your target market. Define the demographics, including income, age, gender, location, etc.
Include in your business plan the strategies you have for driving traffic to your store. Consider social media sites as well as blog content
Ennico also urges sellers to figure out what passions or fears your target market has that will drive them to buy your merchandise. These are the only two reasons why anyone buys anything, he reports.
Include in your business plan the strategies you have for driving traffic to your store. Consider social media sites like Facebook and Twitter, as well as blog content and offline promotions.
List your key competitors and take note of any advantages you have over them. Ennico says every business has competition, and if you don't recognize who yours is, you need to look harder.
Finally, create a cash flow projection for the next six to 12 months.
"[This is] basically your cost of goods sold plus operating or overhead expenses each month, and the revenue necessary to cover these each month," Ennico says.
Don't kill your plan
While having a written plan is essential to the health of your business, overanalyzing all its contents can choke it to death.
Ennico has seen clients suffer "paralysis by analysis," he says. They want every fact and number nailed down, and, in doing so, they stall their business.
"Windows of opportunity don't stay open very long, and there are often many detours from the way you thought things would happen," Ennico says.
So as you build your plan, try to have a sensible relationship with it. Give it some body, add a couple wings, let it breathe and then watch to see how it unfolds.