More often people tend to have the impression that a business plan is more geared towards securing capital from investors to start a business. But this is only an aspect which gets spoken about which misses the larger picture.
A business plan can be called a guiding document that covers an entire gamut of subjects associated with the business. In technical terms, it is a document that establishes the goals and the methods that shall be employed in accomplishing goals by a business.
Going further, it identifies a future business opportunity or an existing business by identifying, describing, analysing and examining its technical, economical and financial feasibility. It is more like a business card that introduces the business to banks, investors, public bodies and any other stakeholders associated with the business.
This write-up seeks to interest readers about the importance of a business plan for retail and online business. While the former is the most commonly known business around, the latter is relatively new and has only risen into prominence in recent times. However, the business fundamentals that govern both businesses remain the same.
Key Components of a Business Plan for Retail & Online Business
Having understood the scope and utility of a business plan, let’s now understand the key components that go into making a business plan. The underlying notion here is about developing an effective business plan. Here we go:
- Executive Summary: It is considered critical to the success of a business plan consisting of an overview of the entire business plan. It brings out the key points that get elaborated in the rest of the document. This is where you get the attention of the investors and other relevant stakeholders by compelling them to read further.
- Business Architecture: This part will describe the nature of the retail and ecommerce business and primarily covers the business structure, stakeholders involved, target customers, revenue potential channels, operations strategy along with the products or services being offered. This part of a business plan must be written in simple language for easy & better understanding with less jargon.
- Marketing Strategy: This would spell out how you plan to penetrate your target market or go-to-market strategy and it is where you shed light on the desired image and the branding strategy. You must be able to provide details on your marketing strategies (online & offline) and potential marketing partnerships which need to be backed by documented research supporting the plan.
- Products & Services: In this part of the business plan, you have to talk clearly about your product and service and its unique value proposition (UVP). Meaning, how do you stand out from similar products already in the market. You would have to analyse your pricing strategies and margins. In addition, investors are mostly keen on knowing why users will purchase the product and how much the company stands to make out of it.
- Management Plan: Here you are expected to reassure the investors that you have the necessary human resources to make the business a success. Mostly, it would involve disclosing the key personnel associated with the business and their backgrounds. It would also include your staffing needs along with the compensation and associated benefits. The scope of the management plan includes organization structure and top level management team members skillset/ experience levels as well.
- Financial Plan: This is one of the difficult parts of a business plan and relates to the company’s revenue and profitability model. It will assess the amount of capital required, how the funds are going to be allocated and the expected future earnings. The financial plan can include sales forecasts, break-even analysis, capital investment, operating costs and cash flow statements. Investors expect a financial plan to contain a monthly break down of the financials for the first year and annual details for the next 3-5 years or so.
Importance of a Business Plan for Retail and Ecommerce
As mentioned earlier, it is particularly important if you happen to seek investment from potential investors. It need not be a long 200-page document but should be able to inform your investors or bankers that there is a market for the ‘solution’ you are offering backed by essential financial statements and sales forecast. Let’s look at other factors that make a business plan important, here it is:
- Streamlines Spending Decisions: The growth of the business will require you to make decisions regarding – new hires, possible expansion and impending purchase. All these decisions need to have clarity, and by closely following the forecasts mapped out in the business plan, a business owner remains in control about major and sometimes crucial spending decisions.
- Better Understanding of Cash Flow: The cash flow statement happens to be integral to the financials of a business plan. By reviewing cash flow statements regularly as part of your business plan review will allow you to observe any changes in cash flow beforehand. This will preempt any cash crisis at the company before it becomes a major issue.
- Helps Minimize Risk: For an entrepreneur who is starting his/ her journey, there is a lot of uncertainty about factors like customers, competition and even operations. A good way of minimizing the risk associated with the business, in general, can be through a robust business plan. By regularly reviewing your business plan will allow you to uncover your weak spots and develop contingency plans to overcome them.
- Enables Strategic Planning & Improves Efficiency: A business plan remains a great avenue for mapping how your sales and revenue goals fit with your expense budget. By drawing a clear connection on what you are investing and the results you hope to achieve will increase your chances of success.
Moreover, developing an effective business model enables the owners to explain their team how the company hopes to achieve its long-term goals. Making everyone aware of the long term vision will enable all to work towards the common goals with higher productivity and efficiency. From the very beginning, the company must be able to take all team members into confidence and must regularly communicate the progress towards the goals.
- Allows achievement of SMART Goals: A good business plan will come with SMART goals (Specific, Measurable, Achievable, Relevant, & Time-Bound). Skipping on goals and milestones in a business plan can make the business plan a whole less useful. Vague goals and milestones for the company and team that aren’t aligned to the strategy spelt out in the business plan will make it daunting for team members from identifying and working on priorities associated with the business.
- Improve the Valuation of the Company: Down the road, if you have plans of exiting the business, having a solid business plan increases your chances for a higher valuation. The business value increases, if the business model, target market and opportunities for growth are clearly specified within the business plan. It will make it easier for potential investors to make sense of the entire business and understand viability of the business model for sustainable development.
Why YRC for Creating an “Effective” Business Plan?
Your Retail Coach (YRC) comes with the experience of having closely worked with numerous clients with the development of a business plan from scratch for retail and online businesses. We enable businesses to create a business plan through a step-by-step process with all the necessary components required in a business plan that can impress potential investors and bankers. We are equipped with technical expertise and knowledge on business model development, business strategy planning, corporate level strategy, strategy development plans and well versed with the business plan development process
Our in-house business plan consultants come with academic training and hands-on experience in developing business plans and understand the subtle nuances of creating one. We have worked with various industries but come with special expertise when it comes to retail business plans and ecommerce business plans. YRC remains one of the leading management consultancies in India providing business plan advice within India and around the globe. All our past clients have found success in their business through a well written and articulate business plans from YRC finance experts.