No matter, what type of business you plan to start, you need a detailed plan accounting for various scenarios. Even if your project does not require high amounts of initial investment (luckily, it is exactly true in the case of dropshipping), it will be wise to plan ahead to better understand the market and avoid unnecessary risks. Even if you have a clear understanding of the dropshipping business model, you need to go beyond these general ideas to make your business work and bring profit. Working on a business plan makes you clarify each step, answer important questions, and think through your strategies for the best-case and worst-case scenarios. Sometimes it may be unpleasant to write down elaborate answers to questions like “What will I do, if I do not make enough sales?” or “What will I do, when a supplier fails me?”. But thinking about such situations in advance is a crucial part of your success. Here are the more particular goals that are solved with the creation of the dropshipping business plan:
- Estimate the amount of investment and get external funding when necessary.
- Develop a growth strategy.
- Put your finances in control and cut down avoidable expenses.
- Determine your niche, and your target audience, and choose a suitable dropshipping platform.
What Type of the Business Plan To Choose
Before writing your own dropship business plan, you can study several samples, created by other dropshippers or published for educational purposes. If you read several of them, you will notice, that they follow roughly the same structure. Moreover, there are two types of documents, and you need to choose one of them depending on your goals.
- The business plan in its traditional form consists of several dozen pages and thoroughly describes every detail of your project. If you want to attract investors or plan to loan money from a bank, this is the type of business plan you need. For the potential investor, it serves as proof, that you have clear plans to make your business profitable.
- The lean business plan is more often used for startup and eCommerce projects. With dropshipping, you do not need to make an expensive investment from the very beginning, so you can start your project without getting a loan. Consequently, you won’t need a traditional plan and can use a lean approach to business planning, as it requires fewer efforts while keeping track of all significant factors.
The Components of Dropshipping Business Plan
The exact contents of an eCommerce dropshipping business plan will vary depending on the niche, product category, and platform, but there are key components that are present in almost all cases. Below we list important questions and topics you definitely need to consider while creating your business plan:
- The identity of your store. What do you do and for whom? Describe the idea of your business in one or two sentences. For example: “I sell cat toys to cat owners in the US who care about their pets”. Try to define, what is the main difference between you and your competitors. For the above-mentioned case: “I offer safe and durable cat toys made of natural components”.
- What problems do you solve for your customers? Why do they want to buy something from you in the first place? Example: “Mass-marketed cat toys are often unsafe for the pet or break very fast. Many pet owners want an alternative option”. If you can, support your claims in this section with market research data or analytics, that can be gathered from various sources, such as lists of most promising niches and categories.
- Who are your customers? In your dropshipping business plan, describe, where your potential customers live, of what gender and age they are. Do not forget to mention this income level – it helps you to set the prices right.
- Who are your competitors? Gather information about other eCommerce stores working in the same niche. Remember, you can always learn from your competitors and use their tricks to attract your target audience. Highlight the differences between your dropshipping store and others, so the clients can see your benefits.
- What channels will you use to reach your audience? What social media will be more effective? What advertising platforms can you use? What are your options for free advertising? For a dropshipping business model, this aspect is especially important, because marketing is what you concentrate on to attract customers and make your store look compelling to them. You do not need to worry about storing goods or organizing delivery, but you need a clean and smoothly working website and a well-planned advertising campaign to make a profit with this type of eCommerce.
- What will be the main source of your revenues? Obviously, the main stream of profit comes from the goods your sell, but you can consider additional ones, for example, affiliate programs.
- What expenses does your business involve, in the beginning, and in the later phase? What unexpected costs can arise? Note, that if your use one of the popular dropshipping platforms, such as Shopify, you will pay monthly. Often the better option is to buy a plugin for dropshipping, which can be integrated onto your website and requires one-time payment only.
To better understand, how all these components work together, you can find dropshipping business plan examples online and compare them to your ideas and the specifics of your project. Learning from the other’s experience is useful, but anyway, you will also need to practice on your own and maybe create several versions of your business plan until you find the best approach.
Mistakes to Avoid While Creating Your Business Plan
Knowing how to write a dropshipping business plan is important, but it is equally important to know, how not to write it. Here is an addition to our list of typical mistakes you need to beware of while starting your dropshipping business:
- Do not rely on a single vendor. Even if you think, that you have found a reliable supplier, which will provide your store with high-quality goods so you will make stable profits from them, keep at least several other options at hand. This way, even if some problems with your main vendors arise, you won’t have to stop your operations temporarily to find an alternative.
- Be realistic. While writing their first dropshipping business plan, people often let themselves follow their dreams and forget about unpleasant scenarios. Remember: your business plan is not a description of an ideal situation and your dreams about high profits, but a realistic document that includes a detailed evaluation of possible risks.
- Do not overestimate your business idea. In addition to previous advice, do not get overhyped. Even if the idea of your store is viable and solves the problems of a target audience, it is better to underestimate its potential a bit and be pleasantly surprised, than go in the opposite direction.
- Do not ignore your weaknesses. Every company has its weak spots, and it is impossible to hide them indefinitely. The better option is to lay out a strategy in advance to compensate for possible flaws.
In addition to this advice, study some dropshipping business plan samples, and you are ready to start your own business. You may order a ready-made store or build your own website – in any case, a thorough plan helps your eCommerce project to grow and thrive.