Setting up an online shop: 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 sum­mar­ising your goals and in­ten­tions for your online store to 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 online shop in the con­cep­tu­al phase. This usually requires an un­der­stand­ing of the dif­fer­ences between B2B and B2C marketing strategies. To define the 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.

Analysing 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.

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 shop’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’ skill sets 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 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.

Or­gan­isa­tion/structure

This section of the business plan is about the general or­gan­isa­tion 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 or­gan­isa­tion­al 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 online shops, 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 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 defence 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 or­gan­ising 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 analyse its feas­ib­il­ity and potential. It also puts the founders’ en­tre­pren­eur­i­al skills to the tests and is critical when applying for subsidies.

Please note the legal dis­claim­er relating to this article.