Entrepreneurs often ask if they really need a business plan for online businesses. Well, only if they expect this business to succeed! Anyone with an internet connection and an idea can start an online business, but most people don’t. It’s not because they don’t have good ideas or ambition – it is because they don’t know how to start or who to go to for financial assistance and implementation support. Or, it’s because they don’t think they need one.
A business plan for an online business will differ slightly from that of a bricks and mortar plan. There are fewer costs associated with location, but other factors will require as much if not more attention than traditional business plans.
Investors Might Ask for a Business Plan
It is true that investors might not want to read dozens of pages about a business when they are being pitched an idea, but if the person doing the pitching hasn’t gone through the exercise of writing a business plan, they will crumble when the investor begins to ask them questions about their snazzy PowerPoint slides.
Customers Appreciate It (Even if They Don’t Know It)
When customers are limited by geography (only people who live in or are visiting the neighbourhood will go to the neighbourhood pub for a pint) the market is more readily identified, but in the case of online businesses, the market is not “everyone”. Using this shotgun approach to marketing, the entrepreneur will waste time and money on promotions that deliver anaemic returns. A business plan will give the entrepreneur a clear idea of who their target audience is and a blueprint for reaching them. And those customers will feel wanted.
Business Plans Contain Important Milestones
In a traditional manufacturing business, there are sales milestones such as breakeven and reaching manufacturing capacity, but what about in an online business? Milestones still need to be set, and courses of action planned for these milestones. Some to consider might include reaching a certain capacity of users in order to create network effects, gaining a certain number of affiliate sites, or getting a certain percentage of paid subscribers.
Business Plans Help You Grow
Businesses of all kinds experience growth and have new capital requirements when they reach the growth stages. Online businesses that don’t plan for growth and its associated costs may find themselves burning brightly and then fizzling out before they reach their full potential.
All businesses need exit plans, and this is particularly true for online start-ups. Every college kid dreams of creating a spectacular online business that will get bought by one of the big players, but simply sitting back and waiting for it is akin to the sullen teenager waiting for Simon Cowell to discover their garage band. Without a plan to put into action, it won’t happen.
Have you started an online business? How did writing your business plan prepare you for success?
Photo Credit: Don Hankins via Creative Commons