Formal business planning is a process that takes that "great
idea" and subjects it to rigorous scrutiny. It either validates
your premise or else shows you where the idea falls apart.
Business planning forces you to identify costs and develop a
sensible marketing strategy before you start spending money.
Having a solid business plan will also help you to acquire
funding, if necessary.
So what should an Internet marketing business plan address? At
minimum, it should be a written document that covers:
Product/Service
A precise description of the product or service you wish to
market on the Internet. What is it, and what are its
ingredients? What (if anything) makes it unique? Are you sure
you can actually provide this?
Marketplace
A clear definition of the target market(s) in terms of
characteristics and numbers. That is, what need are you going to
fulfill and who are your prospective customers? Is the market
big enough to justify your investment? Is the market wide open
or is it already saturated? Are there any entry barriers to
prevent competitors from easily imitating your success? What
industry association, directories, agencies, clubs or events can
be leveraged to reach your target market(s)?
Are there any distinct prerequisites to participating in the
target market(s), such as industry certifications or association
memberships?
Who are your competitors, and how are they addressing the
market? What do their Websites offer and how are they
constructed? How successful are they (check SEC filings if they
are a public company)?
Strategy
Given what you have learned about the market and the
competition, how are you going to differentiate yourself? Is it
through better service, lower pricing, more features, by
offering different models for each market segment, improved
convenience?what is your "edge?" Why should a customer buy from
you rather than an established competitor with a proven track
record? Unless it is a huge, unsaturated market, save yourself a
lot of time and expense by stopping here if you don't have a
good answer.
What is the most effective way to reach your targeted
audience on the Internet? Through niche directories or search
engines? By search engine optimization? Advertising in targeted
online ezines? Email marketing? How?!
Pricing
What is the going price for the service or product that you
wish to sell on the Internet? What will the market bear? Is this
sufficient to yield the margins you need to have a profitable
business?
What will be your pricing by model or type of service?
If you are considering consulting services, how will you
provide timely bids?
Operations
If you intend to market a tangible product, how will it be
produced at the required volumes and turnaround times?
How will orders be processed? By e-commerce, email, phone,
or fax? Are merchant accounts necessary?
How are you going to fulfill orders? Will you have orders
drop-shipped or handle them yourself? Is electronic downloading
required?
Do you envision establishing a distribution channel, such as
resellers or affiliates? If so, what is required and how long
will it take?
How will customer service be handled? What is your guarantee
to the customer? How will returns be processed?
Costs
What start-up investments are necessary (talent, hardware,
software, outsource services, office space, etc.)?
Where will the start-up funds come from?
What are your production costs?
What are your ongoing costs (Web hosting, PPC advertising,
etc.)?
What type of legal entity will your "company" be (e.g., sole
proprietorship or LLC), and what cost and effort is necessary to
make that happen?
Launch Plan
Identify all the major steps that must be undertaken to
launch your Internet operation and determine which steps must be
accomplished before others (i.e., what are the prerequisites for
each step). Use Microsoft Excel or Project to sequence these by
time.
Who is responsible for each step?
Determine your "go live" target date.
Expected Return on Investment
Create a spreadsheet model to determine when you can expect
to break-even on your investment costs and what your estimated
profitability will be over the next two or three years
(preferably on a monthly or quarterly basis). Format the model
so that it shows:
Expected Gross Revenues by model or type of
service, taking into account a start-up curve. Construct it so
that you can easily enter different variables (e.g., number of
monthly sales by units) to ascertain the impact on expected
revenues and variable costs.
Less Fixed Costs and Variable-Costs-per-unit or service
(tied to expected sales).
Equals Gross Profits Before Taxes.
Then compute Net Profits after Taxes (taking into account
allowable IRS deductions).
When finalized, use standard Excel features to generate at
least two graphs: A line or bar chart
showing the expected revenues, operational costs and anticipated
gross profit on an annual basis. A break-even chart,
illustrating when profits are expected to exceed
costs.
If you are seeking funding, factor in future values using
appropriate discount rates. If you don't understand this, get
someone with a financial background to assist you.
If your "great idea" still makes sense after going through this
sobering process, then by all means proceed. You are way ahead
of someone who just jumps on the Internet with no knowledge of
where they are headed. Unlike those unfortunate souls, you will
know your target, what you are doing (and why), and have a
barometer against which to gauge your progress. Bon Voyage!
About the author:
About the Author
Al Kernek is an Internet marketing consultant and the author of
"Put
Your Business Online," a step-by-step guide for
successfully creating and promoting a low-cost Website.
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