The Science behind Writing a Winning Drop Shipping Business Plan
In 2017, nearly a quarter of the items purchased online was delivered to customers via dropshipping. That’s more than 68 billion pounds. That alone makes it easy to see why people are drawn to open this type of company. In addition to that, dropshipping means that your e-commerce business doesn’t have to store inventory, purchase products ahead of time, or deal with shipping logistics.
Now the hard part. Because this is such a lucrative business to get into, the field is crowded. Many people fail because they simply aren’t prepared. They lack a good business plan!
Why Does my Drop Shipping Company Need a Business Plan?
Often, when many people think of business plans, they see them is a necessary document for obtaining financing. Your business plan will undoubtedly be useful for that, but its utility goes far beyond. A good business plan will be your blueprint as you launch and grow your eCommerce store.
What is a business plan?
A business plan is a blueprint for your business. It contains precise information that clearly defines the type of business, your target audience, what distinguishes you from other companies, how you plan to generate revenue, how you plan to deal with competition, and how you plan to grow. It also serves as the introduction of your team, and a description of your qualifications.
For you and new team members working with you, the business plan to create a plan of action. It clarifies the role you play and the requirements of everybody else who works there. It also solidifies what you plan on doing with your company moving forward. If you work with investors, your business plan details how you will be profitable. This instills confidence in a return on their investment.
A living document
Your business plan will lose its value quickly if it doesn’t keep up with the realities of your company. As your business grows, and you are unsure what works and what doesn’t, you will want to pull out that document and make essential changes.
How long should a business plan be?
There’s no mandatory length for your business plan. As a general rule, your plan should cover at least five years. Of course, you’ll have to modify it before then. Beyond that, your business plan should simply contain the information you need to follow to launch and continue to grow your business successfully. If you work with investors, your business plan needs to have the information they require to understand your company and be confident about investing.
It takes quite a bit of work initially to create a business plan. However, once you do that you’ll be able to use it as a reference guide to help you make decisions. You can use the document to help you determine the next steps, identify areas of growth, and solve problems. As you deal with the day-to-day tasks of running a business, it can be difficult also to manage growth related tasks; your plan will support you with this.
Identifying challenges with your business plan
Dom Marvin of GrabMyEssay works with companies who want to expand their online businesses worldwide. He says that many companies underestimate the challenges they face. According to Dom, “E-commerce for dropshipping is a challenging field. There’s a lot of competition. It’s also a business that can seem deceptively easy. Many people enter assuming they will make plenty of money even when they have little time, cash, or experience to bring to the table. Unfortunately, these are the folks who are unprepared to deal with problems when they arise.”
As you create a business plan, you will be required to consider any issues that could arise. Then, you’ll have to work out strategies to overcome these.
How to write an e-commerce drop-shipping business plan
How you write your business plan will depend on what you aim to do with it. For example, if you want to approach the small business administration for a loan, you’ll want to write a business plan with a formal structure that contains all the necessary elements. On the other hand, if you only plan to use your business plan document for yourself as a road map, it’s more important to include what you need than it is to adhere to the formal structure of a business plan.
If you have attended business school, you probably know a bit about traditional business plans. You know they can be up to 40 pages long. You also know that they have a very specific structure. A less formal business plan is sometimes called a Lean startup plan. This will be shorter because it’s intended for entrepreneurs and the self-employed. They don’t necessarily have formal business training but want to create a document outlining what they plan to do with their business going forward.
Since most dropshipping businesses don’t require external investors, you will probably use the Lean startup model. You’ll be able to write this plan quickly and make changes easily. The document will be lean, simple, and adaptable.
Necessary elements of a drop-shipping business plan
Your Lean startup plan will need to have the following elements:
Your business identity
Dropshipping is a broad category. In your business plan, you need to detail precisely what you plan on doing in this space. For example, one business might drop-ship novelty items, another would be drop-shipping musical instruments, and a 3rd might drop-ship stationery and other office supplies.
This first part of your business plan should answer questions, including:
- What products will I sell?
- Will I work in b2c or b2b?
- Who are my target customers?
The needs your business will meet
People shop for products when they have a need. You’ve identified who your customers are; now you have to determine what needs they have that you will meet. This will allow you to articulate why your customers will want your products.
For example, you might write the following: many people don’t feel safe using standard cleaning products around children or pets. Our safe, organic, environmentally friendly cleaning products will allow people to clean their homes without leaving toxic residue behind.
A detailed customer profile
You are ready to find who your customers will be. Now it’s time to dig deeper and create a more detailed profile. You should answer questions such as where your customers live, what their economic status is, their income, their interests and other details. This will allow you to create a clear customer persona that you can use in later marketing efforts.
For example, you might determine that the target audience for your organic cleaning products are educated, married couples, with children, making more than £50,000 per year. They are somewhat politically active, concerned about the environment, with a fair amount of discretionary income.
List your competitors
Create a list of your top few competitors that you think will be most challenging. Detail why you think they can be a roadblock to your success, and what you can do to overcome that.
Describe the channels you use to reach your audience
How do you reach out to your audience and drive traffic to your eCommerce shop? This is where you will identify paid advertising channels, social media platforms, and other channels that you will use the funnel people to your store. You’ll have many options, but you don’t want to limit your efforts to the ones that give you the most return on investment.
Now, how will you use those channels? For example, most social media channels require you to create and share content. To do that, you’ll need to have the right writing and content creation tools and resources such as:
These will help you find great content, ensure your writing is top-notch, and include compelling visuals.
How will you make money?
Your mainstream of income will be selling items through your eCommerce shop. However, you may choose to add additional streams such as affiliate marketing, or even going offline and selling product at events. For example, if you sell consumer electronics, you can set up a booth at electronics shows, and take orders there. For now, stick with the revenue streams you plan to use immediately or in the very short-term. You can modify your business plan later if you add new streams.
How much will it cost?
Now it’s time to create a list of the costs that you will encounter as you try to start your dropshipping business. Then, list the amount of money you have available to spend on each item. This list might include website development and paid advertising.
Final thoughts: Growing Your Business
How will you achieve business growth? Will you expand your product offerings? Will you work with additional distributors? Stick within a 5-year projection, and list ways that you will develop your business in the near future.
Dorian Martin is a talented part-time copywriter and blogger. Thanks to years of working as a content writer at TrustMyPaper, he is now a popular contributor for several well-known blogs. His interests include content marketing and graphic design, and he is currently learning how to write an eBook about copywriting for web interfaces.