How to Prepare Dynamic e-Commerce Business Plan

Although the title of my article points to e-Commerce, the techniques that is mentioned here can be used in any sector on any platforms. e-Commerce is used to explain better with the following example.

You may find countless business plans and templates on internet for your ebterprise and they are very easy to adapt for you. But there is a basic problem on those plans. They are static plans. They are not dynamic and cannot be easily modified when some factors change. As usual on this blog you will be reading the subjects that you cannot easily find on internet or other media. So some static and classic subjects will not be explained here. Business Plan has 2 important components;

1. Don’t let the Templates to limit you plan: Business plan is not prepared for entrepreneurs to feel good about themselves. Plans must be checked during all the progress. Convenience to plan and the distance to targets must be measured periodically. At the same time plans can be revised an uptaded easily to adapt in change of all factors like marketing budget, inflation, product profit margin etc.

2. To gain this flexibility and to watch the change in balace sheet, ROI, break-even point, the plan must be simulated.

Don’t let the word “simulation” scare you. A mid-level Microsoft Excel knowledge is enough to simulate. Now let’s get to action…

Let’s say that you want to build an e-Comerce site to sell book. You want to make a projection ofincome statement for 2 years. You want to get the maximum profit by using you budget effectively. We need to define some parameters for the simulation.

1. Average Cost of keywords that you will use for your site in an Ad Campaign (ie. google Adwords) like “Book”, “E-Book”, “novel”, “publish”. Let’s say that it is $0,30

2. CTR (Click Through Rate): Measures the efficiency of the links and ads of your site. It is the click count divided by the count of links shown by link exchange, ad or twitter etc.

3. Conversion Rate : The percentage of your visitor who takes the actions that you want (signing up or shopping) in your site. Let’s assume that 2% of your visitors shop, who visit your site by clicking your ad. Conversion rate is determined seperately for all of your channel like, ad, search engine, twitter, direct visitors etc.

4. Average shopping profit. For our example lets say that shoppers spend 50$ for one single order.

5. Profit margin of products. For our example let’s say taht net profit margin of book is %30, DVD %10, Music CD %10 and e-book %50.

6. The portion of products in aggregate sale. For our example let’s assume that 70% of our sales comes from books, 15 % comes from DVD, 10% from Music CD and 5 percent comes from e-books.

You defined your parameters now ley’s create our simulation excel.

First Traffic Sources;



e-Commerce Business Plan


We decided to use the traffic sources mentioned in the above table. We set the values of first 4 parameters and formulate it in excel. By this way we can see the effect of increasing & decreasing marketing budget to our sales and also the effect of twitter follower count to our sales. We can create our predicted income statement by changing the parameters in time.

Now let’s take a look at the product category distribution of sales.


Product Categories eCommerce Business Plan


The profit gained from the previos traffic table will be distributed to product categories. We can get the cost of product and sales income by formulizing net profit margin.

Other monthly expenditure is placed in the monthly income statement.

So for January 2010 our income statement turns out like this;

Income Statement e- Commerce Business Plan

This example is prepared fot 1 month. 6 Month , 1 or 2 year of prediction can be made to calculate the break-even point of your business.

eCommerce Business Plan Breakeven


Determined parameters can be changed in time by your experience to make more realistic projection for your business. You may give more accurate answers to questions like “How does my income effected if / i change my marketing budget / i increase my twitter followers / i increase my blog subscribers”. Or you may decide product that you have to focus on.

The full excel to help you take very strategic decision can be gained from me totally free. (You don’t need to answer any questions, fill a form or answer a poll, totally efforless hust mail your request to me with any questions you want to ask.)

e-mail :mehmetguzel35@gmail.com

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