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01 / 08 / 2018

Experts advices to success in e-Commerce

How to write your e-Commerce business plan 

Our e-Commerce experts give you the key to understand how to do a business plan for  your e-Commerce project

icon idea business plan e-Commerce

1 -Define your project: 9 quick steps to structuring your e-Commerce project

2 - List your e-Commerce needs: how to create a site that converts and generates qualified traffic

3 - Estimate your marketing budget and your projected turnover

Download the Business Plan

If you are reading this it’s no doubt because you have an e-Commerce project (site creation/migration, connection of your site to an ERP) and you have arrived at the stage where you require a business plan. This document allows you to visualise your requirements, and stay in control of costs related to the creation, maintenance and management of your e-Commerce site.

Business plan definition - What is a business plan?

A business plan is the written document that allows you to plan the creation of a project or a new activity. To do so, it is important to fill in a number of features on it. The goal is to present all the benefits and actions that your company will perform to sustain itself. It will show the expenses related to the accomplishment of the objectives and when they will be reached.

Writing a business plan makes possible to present your project to potential investors or banks to apply for a loan and to attract more potential capital contributors.

Here, our Oxatis experts give you insight into the thought processes required to write an effective business plan:

    • How should you structure your e-Commerce project?
    • How can you measure the financial costs of your project (site, hosting, traffic)?
    • How can you estimate your online turnover?
    • How do you know if your online business will be profitable?

To answer these questions, download the free business plan template provided and follow the 3 practical steps outlined to develop your e-Commerce business plan:

    • Formal structuring of your project in the Business Model Canvas.
    • Defining your e-Commerce needs: getting a site that works, and qualified traffic.
    • Planning your acquisition strategy: estimating the costs and benefits of creating and managing your site.

1 - Define your project: 9 quick steps to structuring your e-Commerce project

Prior to any formalisation of your project, you must study the competition, the market, your target(s), and so on. You must differentiate yourself via your product, your approach, your philosophy, your target, your catchment area, etc. To help you get your ideas structured, draw up your project with the Oxatis e-Commerce canvas, available for download:

    • Key Partners: identify the stakeholders necessary for the implementation of your e-Commerce project (partners/suppliers/software publishers).
    • Key Activities: indicate the nature of your project (sale of x).
    • Key Resources: what resources do you have available to sell your products/services (content, brand, 1 graphic designer, etc.).
    • Value Proposition/Offer: what value do you bring to your customers? What customer problem are you responding to? What is your main offer?
    • Customer Relationships: how are you going to attract customers? How will you encourage them to buy? And to buy again?
    • Channels: of distribution (marketplaces, website, etc.), and of communication (social networks, emailing, etc.); how can you reach your customers.
    • Customer Profile: who are your customers? (B2B/B2C) Build a portrait of your customers.
    • Cost Structure: list all the costs related to your project: stock, logistics, e-Commerce website, etc.
    • Sources of income: How will your customers pay? By subscription, a one-off payment, rental or leasing?

Once this preliminary step is completed, you have all the requisite elements to present your project, define your offer, highlight your specialities, find your partners, know where to find your potential customers. etc.

2 - List your e-Commerce needs: how to create a site that converts and generates qualified traffic

You now need a site that turns visitors into repeat buyers. For this, you must meet 3 requirements:

    • Create a site that converts: that is, which turns visitors into buyers and ultimately into loyal customers. To do this, find yourself the right partner who can offer you an efficient and professional design, user friendliness at the service of customer satisfaction, and an optimised purchasing tunnel.
    • Generate qualified traffic: Visitors who land on your site find the product they are looking for. To achieve this, you must develop an effective marketing strategy: list the traffic sources needed to capture qualified traffic.
    • Choose a partner who meets your needs and assists you in developing your online business.

You will report the costs related to these 3 blocks in your balance sheet.

3 - Estimate your marketing budget and your projected turnover

Why should you write a business plan? Simply put: to build your project, gain credibility, and crucially, to talk to banks. Your bank advisor will require a business plan from you to understand your project, so you must check that you will be able to repay the loan, but also to verify the seriousness of your approach. A business plan is essential if you want to open a business account, for example.

A/ Developing a strong marketing strategy: finding the balance between a good conversion rate and traffic acquisition costs

The cost of creating and maintaining an e-Commerce site can take many forms. As mentioned in Part 2, in listing your needs you will be able to identify the partners and technological solutions to work with in line with your growth ambitions.

As for the traffic, it always has a direct cost (SEM) or indirect (SEO, SMO). To accurately estimate and predict these costs, you need a concrete web marketing plan. This plan will give you the projected traffic volumes and turnover from your different sources (natural traffic, display network, text ads, affiliation etc.) and especially an estimate of your short- and medium-term ROI (Return On Investment) on each of these levers. You have to bear in mind that the most beautiful site in the world is of no use if it is not visited. You must therefore consider the number of visitors which will lie behind your revenue projection. We will therefore calculate together the turnover that you can generate the during the first year of your activity.

B/ Establish a complete overview of your traffic sources

You have already studied the market, the competition and the target you are addressing, so you know where your future customers are. Now it's time to talk to them directly! Depending on your budget and your acquisition strategy, you will disseminate your messages or content more or less widely. You can estimate your budget once your levers have been selected:

    • SEO: organic search engine results
    • SEM: sponsored SEO
    • SMO: Social media
    • Membership
    • Marketplaces
    • Price comparison sites
    • E-mailing
    • Other …

C/ Estimate how much revenue you need to generate on your site

icon chart business plan e-Commerce

Everything is a question of projections and business sector. Estimating your revenue is not an exact science, but an estimate of what you can achieve in a year by implementing a particular feature, or investing a specific budget in AdWords campaigns. Market research will help ensure that your short- and long- term forecasts are realistic and well-founded.

How many sales will you be able to make in the first year of launching (or migrating) your site? To obtain this information you need to build an economic model based on tangible data. Be careful, every single line of your income statement should be justified.

To estimate the turnover that your business can generate in the 1st year, you have to build your acquisition strategy right now, because that is how you will attract users to your site. This is the reason why the main levers have been explored a little earlier.

A quick reminder about Google's billing principle: you pay when someone clicks on your ad based on a quality/bidding system: the more relevant the ad is to the user, the lower the click-to-click price will be and the clearer the announcement displayed.

How can you calculate a monthly Google AdWords budget (the Google ad network)?

Google AdWords is an ad network that displays ads or banner ads on Google or the Display Partner Network, which are targeted based on keywords that the user types, or based on users' browsing histories.

1/ Your monthly budget is £3,000 on Google AdWords campaigns

monthly budget AdWords business plan e-Commerce

* Google AdWords Conversion Rates: you need to consider the fact that conversion rates on Google AdWords optimise over time as your campaign settings change. Gradual selection of ads and keywords giving the best results allows on the one hand to improve the auction costs (average CPC) and on the other hand to identify which data converts the best.

Average CPC estimate: calculated based on Google data. The Google Ad Planner (now Google Display Planner) provides a CPC average to get a set of Google AdWords ad positions on the first page.

Note: In launching campaigns the CPC is often more significant. We therefore simulated a cost optimisation of around 30% over 6 months. It is extremely important that you understand the importance - or rather the necessity - of finding the right people to advise you. To reduce the costs of your campaigns I recommend that you take the advice of experts.

2/ How much will your Google AdWords campaign cost you?

- Trimester 1:

    • 1,500 visits
    • 1.5% conversion rate
    • 22.5 orders
    • ROI = Annual Revenue/costs = £2,025/£3,000 = 0.68

- Second Quarter

    • 2,143 visits
    • 2% conversion rate
    • 42.86 commands
    • ROI = £3,857/£3,000 = 1.29

Then you just need to take a macro view of your acquisition budget. To do so you should extend your budget to include the levers you have selected: Google Shopping, Google Display or Facebook, Instagram, Bing Ads, emailing campaigns or sms, depending on your target. If your budget allows you to benefit from the winning combination of organic SEO/paid SEO, then you should take that course as it will certainly pay off!

Obtaining traffic is easy enough when you have the means but optimising your actions to improve conversions and ROI is another story, because the cost of traffic can absorb your profits rapidly. You will understand that there are risks of launching on the web without having notions in web marketing, or without being accompanied by specialised professionals.

Now that you have obtained an estimate of the revenue you can generate through your site, you can now calculate the amount of your expenses.

icon traffic business plan e-Commerce

D/ Calculate your charges

The time has come to list the amount of expense you will have to dedicate to the project. You will find below some budget items which are fairly typical for starting a business: purchases, external charges, taxes, etc.

You should complete information regarding costs related to the purchase of your stock - and all elements other than those concerning the management of your e-Commerce site - in the second part of the document that you have downloaded (see staff costs, depreciation and amortisation, taxes and fees).

To answer the question “What are the costs related to the creation, maintenance, hosting, etc. of your e-Commerce site?” You will have to answer a second question: "SaaS or Open Source?” This is a good way to start listing e-Commerce partners with whom you want to collaborate. The budget items that you will have to delineate:

      • The domain name: to buy and renew.
      • Hosting: included or additional cost?
      • Graphic design: bespoke or standard?
      • The functionalities essential for your activity: requests for quotations, specific configurations, cart recovery or faceted navigation.
      • SEO: amateur or professional?
      • Maintenance, updates, data security: SaaS or Open source?
      • Logistics: this is entirely related to the technology you choose and can represent a minimal cost by automating your shipping process. This budget item can represent more than 20% of your budget and quickly absorb your profts.

You have now calculated how much revenue you can generate. You have also calculated the total amount of expenses you will have to pay. All you have to do now is subtract one from the other!

To conclude

  • Structure your e-Commerce project (partner, economic model, specifics of the offer, etc.)
  • List your needs (site, features, hosting, and so on).
  • Develop your acquisition strategy
  • Calculate the profitability of your project (costs/profits)
  • Choose the right partner: guidance, productivity and cost reduction
  • If you are beginning to master the workings of a website business plan and you want to go even further, ask for advice from Oxatis e-Commerce experts by asking for a free-of-charge personalised interview, at your earliest convenience.