Printer friendly version (PDF)Planning Your Online Store
There are a variety of ways for a business to set up shop online. Whether
adding an e-business component to existing services or building an online store
from scratch, planning provides the best way for businesses to determine what
they need. An e-business plan provides direction for establishing an online
presence. Part of the e-planning process is evaluating yourself and your business.
Where do you want to take your business? How can the Internet help you? IBM
states, “E-business is as much about business vision as technology.”
| Challenges of E-Business
Implementation |
Resistance to developing e-business
because of uncertainty of its applicability for their business or industry |
26% |
Initial cost |
25% |
Trained personnel |
21% |
Costs to convert will not pay
off in the long run |
13% |
Lack access to high-speed Internet |
12% |
Security of transmitting sensitive
information via the Internet |
10% |
| Solutions to E-Business
Problems |
Develop an e-business plan |
33% |
Educate themselves |
22% |
Improve technology infrastructure |
15% |
Funding for training |
15% |
Improve marketing |
9% |
Seek assistance / partnerships |
8% |
Source: Western Economic Diversification Canada ,
The New Frontier: Enterprise and E-Business in Western
Canada , KPMG, 2000.
When Western Canadian small businesses were asked what their greatest challenges
were, they were unsure of how their business could use electronic commerce
and how much it would cost. The most common solutions to implementing e-business
were business plans and education. Although small businesses identified the
importance of having e-business plans, only 24% had specific plans.
The use of a plan can reduce the challenges of e-commerce implementation and
provide the solutions to e-commerce problems.
First Steps
Before you start your e-business plan, you should identify your goals, make
a commitment, and evaluate yourself.
Identify Your Goals
It is important to clearly understand your business’ goals and expectations
before setting up your online store. Once a plan is developed and goals are
set, it is easier to see the steps involved.
78% of small business owners declare, “the
ability to reach new and potential customers” as their primary
reason for having a website.
Source: U.S. Small Business Association, “E-commerce:
Small Businesses Venture
Online,” July 1999. |
Make the Commitment
Setting up an online store involves a commitment of finances and time. If
you want to be successful, you may have to sacrifice personal time to get your
online business up and running.
Small businesses that use the
Internet have higher revenues, averaging $3.79 million in 1998.
Source: U.S. Small Business Association, “E-commerce:
Small Businesses Venture
Online,” July 1999. |
Evaluate Yourself
You should not only evaluate your business, but yourself. Once you have looked
at yourself and your business, you can evaluate trends, voids and opportunities
related to the market and competition.
The E-Business Plan
In electronic commerce, business cycles reflect the Internet’s speed
and efficiency. Bold competitors take advantage of the “wait and see” attitudes
of others. An e-business plan can help businesses move quickly and decisively
by allocating resources and measuring results. A sound business plan acts as:
A reality check
A performance tool
A message sender
A Motivational tool
A management development tool
A road map
An e-business plan should focus on your target customers. Who are they? How
will you attract them? How will you retain them?
Identify Your Objectives
Who is the audience for the e-business plan going to be and what do they need
to know about your company? Different details will be required if your objective
is to obtain financing, develop an e-commerce site, or provide a roadmap for
yourself.
Outline Your Business Plan
Once your objectives are identified, you can prepare the outline of your e-business
plan. Outlines can be as general or as specific as you like. The more specific
a plan is, the easier it will be to write.
Write Your Plan
A sound business plan includes historical financial information and market
research. Financial statements determine which strategies are feasible and
market research dictates whether your strategy will succeed.
Review Your Plan
When reviewing, it may be helpful to have someone, other than yourself, review
your business plan. If they are familiar with planning and business management,
they will be able to provide constructive criticism.
Elements of a Good Business Plan
Business plans will vary from company to company reflecting their different
needs. For example, an established business looking at adding an online component
will be able to focus on integration between the physical store and the online
store. A pure player, a business operating solely on the Internet, will use
its business plans to demonstrate its market analysis and seek funding. Regardless
of use, good business plans generally consist of an executive summary, a market
analysis, a description of the company and its management, a marketing and
sales strategy, and a description of products and services offered. If necessary,
business plans can include funding requests and necessary financial information.
The Executive Summary
Although it appears first, you should write the summary last. Once the entire
e-business plan has been worked through, it will be easier to write a concise
summary. An executive summary normally consists of the following:
Mission statement
Date business began or will begin
Description of facilities
Products and services rendered
Names of founders and functions
Number of employees
Summary of company growth
Location of business
Banking relationships and current investors
Summary of management’s future plans
Market Analysis
What is the likelihood that your products will sell online?
Not all products will sell well over the Internet. By understanding the buying
habits and preferences of your target market before you jump online, your plan
stays focused.
Are there potential sales channel conflicts that you need to be concerned
with?
Businesses that distribute their products through retail stores may find their
associates sensitive to the fact that they are going to be bypassed through
direct sales online.
How will your online store differ from others? Will you focus on a niche
market?
Many people believe that one of the keys to success on the Internet is coming
up with a business plan that targets a very specific market rather than a broad
market. Big businesses who attempt to cover the whole market often leave gaps
that can be exploited. By specializing on a particular market, you may have
a better chance of success.
The Company Description
This area of your e-business plan includes a look at how your physical store
and online store fit together. It is important that you set up your online
business so that it aligns with your physical business – bricks & mortar – from
an accounting, inventory, and pricing perspective. By integrating, you use
a business-proven system already in place and ensure consistency in customer
service and accounting. Integration will prevent you from selling products
that are no longer in stock or at prices that have changed.
In 1997, small businesses earned
an estimated $3.5 billion in e-business sales. Projections for the beginning
of the next decade range from $2.5 billion to over $300 billion.
Source: U.S. Small Business Association, “E-commerce:
Small Business Venture Online,” July 1999. |
Organization and Management
Included under this heading are organizational structure and management profiles.
Establishing clear and specific roles in a business ensures nothing is overlooked
or unnecessarily duplicated. For example, when the orders are placed, a business
must be prepared to package and ship the products. It is important to evaluate
the skills your organization has available to it and update them when necessary.
Companies should be prepared to outsource in areas they cannot adequately address.
In e-business, small businesses often outsource the development of their website,
the hosting of their website, and the maintenance of their website. Larger
companies are increasingly outsourcing order fulfillment processes to third
parties.
Marketing and Sales Strategies
E-business plans identify strategies for promoting websites and products.
They can also be used to identify retention strategies to ensure customers
return. Since there is no single right way to approach a marketing strategy,
several ways to market your online store will be suggested in the following
chapters.
Products and Services
This section should outline the benefits received by your potential and current
customers of shopping online. By focusing on the areas where you have a distinct
advantage, you demonstrate an understanding of your strengths and of market
opportunities. For example, your business may be able to deliver the widest
variety of fishhooks with overnight shipping.
Funding Request
Current and future funding should be included, as lenders will want to know
how the funds will be used in relation to short and long-term financial strategies.
One study shows that 33% of Canadian businesses have not budgeted any money
for e-business initiatives.
To encourage e-business, The Business Development Bank of Canada (www.bdc.ca)
has a program called “techno.net”, a term loan to implement e-commerce.
Under this program, entrepreneurs can cover costs related to implementing a
web presence without delay and without straining current operations. The loan
can be used to expand markets, increase sales, modernize distribution networks
and become more cost-effective. Financing ranges from $25,000 to $500,000 and
is determined by the complexity of the technology and the development stage
of the company.
| How Much is Your
E-Budget |
$0 |
33% |
$1 - $10,000 |
25% |
$10,001 - $100,000 |
10% |
$25,001 - $100,000 |
22% |
Over $100,000 |
10% |
Source: The New Frontier: Enterprise and E-Business
in Western Canada , KMPG, 2000 .
What is it going to cost to sell your products online?
An online store can cost as much as you want to spend, but a typical online
store built with templates will cost around $2400 a year. On the other end
of the spectrum, a custom designed store can cost around $13,000. In a recent
survey, 67% of Western Canadian small businesses have a budget for e-business
and 42% have budgeted more than $10,000. With
the discrepancy between budgets and planning, many small businesses are budgeting
for e-business without formal planning.
| Examples of E-Commerce
Costs |
Internet Access Fees |
Starting at $25 per month |
Merchant Account Fees |
Up to $200 |
Credit Card Transaction
Fees
Chargeback fees
Credit card authorization |
1% to 4% of sales + fee per sale
Varies |
Web Site Design
Template service
Storefront Software
Custom-built brochure ware
Custom-built store |
$45 - $300 per month
$450 – $1000
Starting at $5,000
Starting at $13,000 |
Web Hosting Fees |
$50 to $600 |
Domain Name Registration
Fees |
$50 per year |
Online Marketing Expenses
Affiliate program
Online shopping directories
Registering with search engines
Banner ads
Permission Marketing |
Commissions plus set up
No charge
No charge to $400 per year
Up to $30
$15,000 start-up |
Maintenance Expenses |
$200 per month |
Source: D.L. Andrews, “The Cost of Change,” Alberta Venture,
April 2000, p.46.
The Business Link, “E-Commerce: Exploring Your Options,” online: http://www.cbsc.org/alberta
Financial Information
Historical and prospective financial data should be included in your plan.
Appendix
What appears in the appendix section is dictated by who your audience is and
what you are trying to accomplish. Someone seeking funding for an Internet
venture would want to include market studies and a credit history. An appendix,
not included in the main body of the business plan, could include the following:
Credit History
Resumes of key managers
Product pictures
Letters of reference
Details of market studies
Relevant magazine articles or book references
Licenses, permits, or patents
Legal documents
Copies of leases
Building permits
Contracts
List of business consultants, including lawyer and accountant
Summary
Once an e-business plan is finished, you have a model from which to focus
your energy and ensure nothing is left out. From the plan, you can determine
what type of online store to build, who your customers are, and what financial
resources are necessary to accomplish your goals. By integrating your online
store with your physical store, management will be easier and customers will
appreciate the consistent information provided. For Internet-only companies,
an e-business plan enables management to stay focused on site development expenditures
and realistic revenues. For samples and more information on business plans
visit The Business Link or their website (www.cbsc.org/alberta).
For More Information on these Topics, See:
The Business Link, online: http://www.cbsc.org/alberta
Carroll J. & Broadhead R. Selling Online, (Macmillan Canada: Toronto,
1999).
Cassleman, G., “A Massive Marketplace Emerges,” Alberta Venture,
April 2000, p.34.
IBM, “What is E-Business?” online: http://www.ibm.com/e-business
Industry Canada, “Where to Start,” online:
http://strategis.ic.gc.ca/epic/internet/inee-ef.nsf
/en/h_ee00016e.html.
Industry Canada, “Developing Your Internet Site: An Action Plan,” online:
http://strategis.ic.gc.ca/epic/internet/
inretra-comde.nsf/en/qn00012e.html.
Industry Canada, “Electronic Commerce Info-Guide,” online:
Joscon Networks, “General Business Planning,” online; http://linz1.net/biz/bplan1.
Kosiur D., Understanding Electronic Commerce, (Microsoft Press: Redmond Wash.,
1997).
Whyte, G., “How to Start an On-line Business,” online http://www.about.com.
Endnotes
Western Economic Diversification Canada, The New Frontier: Enterprise and
E-Business in Western Canada, KPMG, 2000.
Western Economic Diversification Canada, The New Frontier: Enterprise and
E-Business in Western Canada, KPMG, 2000.
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