In many ways, an online business is just like any other business. While there are usually some expenses associated with traditional businesses (like office or retail space, facility and maintenance costs, some staffing and insurance costs, etc.) that don’t apply to an online business, the process of starting the business is the same.
And every successful business begins with a plan. So, let’s explore how to create a business plan for an online business.
Importance of a Business Plan
Some people think they don’t really need a business plan unless they seek investor funding or bank loans. However, even for an online business, even if you consider it a side gig, a business plan is absolutely critical. Here are a few of the reasons why creating a business plan is so important:
Creating a Business Plan Helps You Organize Your Thoughts
Going through the process of completing a business plan enables you to think through all the steps toward creating your business, mapping the market and competitive landscape, identifying your target customer and marketing strategy, and more.
So many entrepreneurs get caught up in one aspect of their business and don’t think through every detail. Getting organized with a business plan helps you focus on the whole picture and catch things you may have overlooked.
A good business plan sets your goals and targets. A good business plan includes your future goals and expectations. This sets out measurable goals from the beginning of your business and makes the plan a living document you can refer back to over time to measure your success.
A business plan is a communication tool. It helps you communicate your plans, goals, strategies, and obstacles to potential partners, investors, lenders, or anyone else. Communicating clearly and efficiently about your business makes you look more prepared and more professional, crucial to success.
Writing a good business plan takes commitment to your goals and vision, along with attention to detail and careful planning. It requires research and information, consideration of obstacles and alternatives, patience, and a desire to make your dreams a reality.
In other words, the skills it takes to make a good plan are the exact same skills it takes to run a business. Think of it as a rehearsal.
What Goes into a New Business Plan?
According to the Small Business Administration, a good plan for a new small business should include:
An Executive Summary
The first part of the plan is your overview. The summary provides a brief overview of the plan and shows why your business will be successful. In addition, it includes vital information about your team, location, and high-level financial forecasting.
The Company Description
In the second part, share your recipe for success. Describe the products or services you offer and how they benefit your customers. Describe your potential customers and the key factors that set your business apart from others. Do you have unique expertise, or a key innovation, or some other special ingredient? Share it here.
In the third section, describe the current market for your business. Then, take a look at the whole industry and which companies are leading the pack. What sets you apart from everyone else, and how will you compete with them?
Your Business Structure
In this section, share how your business will be organized. Include the legal structure and what type of business entity it is. Include an organizational chart that shows the value of each team member. If you or a team member have significant expertise or experience, include their resume and/or qualifications.
Your Products and/or Services
In this section, explain what your business offers. Describe your product lifecycle and what sets your products apart. If you have registered patents or trademarks, share them here.
Marketing and Sales Strategy
In this section, share how you will attract customers. For example, what is your marketing strategy, and where will you advertise? How will you attract new customers, convince them to buy your product, and ensure that they are satisfied with their purchase?
In this section, you will make a financial plan for the coming years. Your projections include income, balance, cash flow, and expense projections. For the first year, reflect quarterly projections and make annual projections for the first five years of your business.
The amount of detail in your plan depends a bit on how it will be used. For example, if you are seeking a bank loan or investment, you may want to add more details backed by research, statistics, and numbers.
On the other hand, if you are using the plan for yourself and your team members, it may not need to be formal. Since every business is different, you may also want to add other sections or include other documents that are especially relevant for your plan.
How to Make a Business Plan
The truth is, despite the detailed sections above, this is simply the format for a basic, traditional business plan. There are dozens of templates and formulas that can add more detail, tell a more compelling story, or make a persuasive pitching or lending case.
You can review several templates online at the SBA (Small Business Association) website or use a software package to make your business plan easier to write and more professional when it’s done.
You may also consider using a service like LivePlan, which offers over 500 sample business plans, simplifies financial reporting and forecasting, and uses an SBA-approved format designed to help small businesses secure funding.
LivePlan uses a simple step-by-step process where you answer questions about your business, and they then format your data into an attractive, professional business plan. Entering your industry and location, LivePlan creates benchmark data to see how you stack up against the competition.
Answering questions about your revenue plans allows LivePlan to automatically project your cash flow, creating accurate budgets and forecasts quickly and easily. You can invite team members to collaborate on your business plan, download your business plan, share it online, or export it to a PowerPoint presentation.
Even better, LivePlan offers expert guidance and great support, so you have resources available 24/7 for questions and advice. It’s a quick and easy way to create an SBA-approved business plan that starts you off on the right foot, and LivePlan offers a free 60-day no-risk trial.
Common Online Business Plan Mistakes to Avoid
No matter how you create your business plan, here are some common mistakes to avoid:
Spelling and Grammatical Errors
It may seem basic, but correct spelling and grammar show professionalism and attention to detail. If that isn’t your strength, you may consider investing a little money in a professional proofreader to make your plan as good as it can be.
It’s a great idea to collaborate with partners and experts when making your business plan, but make sure that it doesn’t read as though each section was written by a different person. Keep the same tone and style throughout the document.
If you are applying for a loan or using the plan to find investors, they will be more interested in the numbers than anything else. Include your break-even analysis and return-on-investment calculations to show the potential of your business. Include an exit strategy to reassure potential investors of how you plan to protect their capital.
Keep It Short
Although a good business plan includes all of this information, detail, and documents, that doesn’t mean that every section needs to be several pages long. Instead, convey the information efficiently so your reader doesn’t have to read for a long time to get to the point.
A good business plan can be about 15-20 pages long and includes all the necessary information and detail.
Avoiding these common mistakes will help you create a business plan that works harder for you and your business and shows your online business in the best possible light.
Creating a business plan for your online business, even if it’s only for yourself, helps to ensure that you’ve thought of everything, made a solid plan, created a roadmap to follow, and given yourself short-term and long-term goals to achieve.
It then becomes a tool you can use in the future to measure your progress, make sure you’re on track, and see how far you’ve come. Many people revisit and revise their business plan every year, making a new plan for the years ahead and mapping out their future growth.
Creating a business plan can take a long time, although using online tools and templates can make it faster and easier, it’s well worth doing a good job. The time you invest in your plan is time you’re investing in your online business, and isn’t your business worth the investment?