Monday, December 22, 2008

The basics of a business plan

I am going to briefly discuss a business plan today. A business plan is essential to the success of any business. I have seen thousands of businesses fail because of one reason: They never planned for failure.

In my business plan, I outlined the following sections for each venue and site I operate, Gravity Video Warehouse, House of Blu, and my store on

1. Mission Statement - What am I offering that sets me apart, and how I will use it to my advantage. For instance, the design of, and the product line, is exactly what a visitor would expect to see in a HD movie store. I specifically designed the site to make it as Blu-Ray themed as possible, and cut the product line to cater only to that segment of customers.
2. Goal - Where I want to be in the same time next year, which is updated monthly.
3. Market Analysis of what I sell - This took weeks to research, and I update it at least every couple months.
4. Strategy to succeed, and 5 different common scenarios for failure.
5. Profit Margin - How much I gross per sale, minus processing costs, supplies, hosting cost percentage of the sale, and labor.
6. Excel spreadsheets where I enter sales and profit weekly compared to all projections, as well as calculate cashflow and credit payments for merchandise. If it has a number, it is entered into these spreadsheets.
7. Effect of Competition, which shows the ways I can succeed and fail to win customers over both established online businesses, brick and mortar businesses, as well as mom-and-pop eBay type businesses. On Houseofblu, I was able to get fantastic pricing to offer the product for closely competitive prices to a couple other popular HD movie stores, except I offer free shipping on top of the competitive pricing.
8. Quarterly Projections for 3 years, and I was very conservative. To show how conservative, I have doubled my sales for this quarter already on both Alibris ($5340) and ($3058), but have fallen far short on Gravity Video Warehouse mainly due to my marketing strategy.
9. Marketing - How I will bring new customers, and keep old customers to shop with me.
10. Current Goals achieved - This is where I write that I have doubled my projections on Alibris and Houseofblu, and my strategy to continue that trend. It will also show how I intend to build Gravity Video Warehouse to the same success rate.
11. Exit strategy - If the water gets too hot, how to close the business with respect for customers and suppliers, and at what stage to close with zero debt.
This is almost an exact breakdown of a business plan I actually saw from a seller. What a business plan is not:
I want to sell widgets for $50.
I will pay $25 for my widgets.
I expect to sell 100 widgets a month and make $2500 a month doing it on eBay.
I will start moving my eBay customers to buy from me on XXXXXXX's auction site, so I can make more profit since there are no fees.

Unsurprisingly, that seller is no longer selling the same widgets. Unfortunately, thousands set out with the same plan, including myself in 2002 when I began selling. It took about 6 months to realize I needed to account for what I was making from the business, and eBay at the time didn't have all the Quicken downloads and business management sections in "My eBay." I downloaded a free version of Business Plan Pro, and still use it to this very day.

If you do need a business plan (which you do if you sell anything online) then visit here for an outline.
You don't need to purchase any software right away, and can probably find the software you need free when you are ready. Take the time to do this, it is more worth it that you will realize until you have failed.

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