There are many reasons to write a basic business plan for your retail venture. For example, a business plan can help you get funding. It's a jumping-off point for you to get advice from more seasoned business owners. A plan can also help when you’re negotiating a commercial lease. Or it can simply give you a clear vision and a course to steer toward.
But where do you start with a basic business plan? While you’ll be able to compile some of this information yourself, you'll need to do a certain amount of market research if you’d like even a basic business plan to be as accurate (and useful) as possible.
The good news is that you don’t need a 400-page document to enjoy some of these benefits. Creating a business plan can seem like a daunting task, but it doesn’t have to be. Even just collecting a few relevant sections of information can help you formulate a skeletal business plan to jumpstart your retail venture.
That’s why we’ve put together an outline for a bare-bones business plan to get you started. Here are the crucial components of a basic business plan with some guidance on how to compile the info you need.
The first place to start is to articulate what your business is. Easy, right?
While you probably have a solid idea about your business swirling around in your head, actually articulating it in a succinct way is more difficult than you might think.
Think of this section as an elevator pitch of what you do. Try to summarize your business in three to four lines. That brief summary should include the basics of your business — who are you and what you sell, primarily.
It can also be helpful to actually try out your elevator pitch on others. Ask people who you’ve talked to about your business. What do they think that you do? This can help you get a better sense of how you’re presenting your business to the world and what you need to tweak so that people have a clear picture of what you’re trying to do.
OK, so you know what your business is, but who cares? Obviously, you do, or you wouldn’t be doing this, right? But now you'll need to communciate why others should buy from you.
The next crucial section of your basic business plan is your value proposition, which essentially lets the world know why other people should care about your business, too. What are you selling, and how does your product or service solve a problem for your customers? How are you different from your competitors?
According to Forbes, your value proposition is “a positioning statement that explains what benefit you provide for who and how you do it uniquely well. It describes your target buyer, the problem you solve, and why you’re distinctly better than the alternatives.”
In other words, your value proposition separates your brand from everyone else who might be doing something similar. This could be part of your business summary, or it could function as a standalone “North Star” statement for you and your company.
While the business summary and value proposition include some information about your target customer, it’s important to do a deep dive into who you’re selling to.
Who is your ideal customer? Do you have several? Maybe there are a few different markets that your product targets for different reasons. Get as specific as possible by creating buyer personas for your target market. Include factors like age, gender, income level, and location, but also include information about their habits, other products they like, and information about their hobbies, values, and how they spend their time.
To glean some deep insights on your potential customers, interview a few different people in your target market to dispel any assumptions that you’ve made about their needs. Interviews with real potential customers can also ensure that your value proposition holds true in the real world.
Knowing more about your target market will also help you to make decisions about branding, marketing, and pricing your products, and will guide decisions about new product releases and your company’s overall direction.
While crunching numbers may not be the most fun part of your basic business plan, compiling a picture of your company’s financial future is definitely one of the most important pieces.
Financial projections should include your costs (both upfront and ongoing), anticipated revenues, and any debts your company might take on in the future. This section should also offer timelines as to when your company will start to see a profit.
It’s also important that your financial projections have some basis in reality. If you’re not sure what something costs, call around for a few quotes. Unsure of what your revenue will look like over your first year? Do some market research to see what the norm is. If you can, ask other business owners about their experience and what you might be able to expect at different stages of your business’ growth.
Clarifying your company's current and projected financial status can help you establish some realistic goals and also understand where you have room in your budget versus where you should save.
The easiest place to start when looking at your company’s financial future is to examine your known costs. While costs vary from business to business, some things to consider include:
- The actual cost of your product: This should include the physical cost, but also factor in any of your own time spent researching, designing, and creating your product. If you're housing your own inventory, also include rent costs for the space.
- Branding: This might include a logo and direction for the look and feel of any content and packaging you create for your brand.
- Website building and hosting: You might build an ecommerce website yourself via Shopify, or you might hire someone else to create it for you. Either way, you’ll also want to consider the cost of hosting your website and having a custom domain name.
- Product packaging: Whether you have an online or brick-and-mortar shop, you’ll likely need to create some packaging to get your product to your customer.
- Marketing: These costs will depend on your target customer. They can include traditional marketing costs (classified ads, print materials like pamphlets and flyers, etc.) as well as digital marketing expenses (Google AdWords, paid social media ads, influencer marketing). Different demographics use different platforms or may also find your target customers primarily get their product info offline. Regardless, you’ll need to create a realistic marketing budget to promote your products. Don't worry — we'll outline more about creating your marketing plan later.
- Incorporation of your company: Depending on the size of your company when you start out and whether it’s a side hustle or full-time venture, it’s important to consider the costs to incorporate. If you do decide to go that route, don’t overlook the added fees and taxes involved.
- Point-of-sale system: You’ll need a way to let your customers pay for your product in person. Whether you intend to sell in a storefront or at markets, fairs, and festivals, you’ll need a point-of-sale system like Shopify POS to process transactions and keep track of inventory. So, budgeting for and selecting the right POS system for you is a vital part of your business plan.
- Accounting software and professional support: Tax time can be tough, particularly on entrepreneurs. It’s a lot tougher if your business expenses aren’t in order. You may decide to take care of your bookkeeping and accounting yourself, or it might be worth hiring those services out to a pro. Either way, it’s a cost to keep in mind when building out your budget.
- Staff: This is another expense that depends on the size of your business out of the gates. But even as a small online retailer, you might need additional help during busy times of year or if you’re taking your products to a fair or market in real life.
Revenue can be a trickier concept to nail down. If you’re just starting out, you might not have any data on which you can base your anticipated revenue. You can, however, look into what’s common in your sector and go from there.
Look at a few different scenarios, from bleak to optimistic, and run the numbers to see what your revenue could look like over the next few years.
Don’t forget to take into account things like seasonality (for example, sales might be strong in the lead up to the winter holidays, but take a big dip in January).
Especially in retail, there might be some upfront cost that you won’t be able to recover until your all your product have sold.
Simply looking at overall costs and revenue won’t give you a complete picture of your day to day financials, so keeping track of your incoming and outgoing purchase patterns over the year is another important piece of the puzzle.
The break-even analysis is exactly what it sounds like — “a calculation that will tell you how many units of something you need to sell to break even.” It will let you know how many sales you need to make in order to cover all of your upfront and ongoing expenses.
Learn more about doing your break-even analysis here.
“Keep your friends close, but your enemies closer.” Alright, so seeing competitors as your enemies may be a bit dramatic, but you should definitely know what they’re up to and how you stack up in comparison.
For instance, if the market is already saturated with brands selling similar products, how is yours different? Maybe you’re offering different value to your customers, or maybe you’re targeting a market that’s never been tapped into before. Either way, knowing what else is out there and analyzing your competitors’ approaches will help you get an idea of any obstacles you might come up against.
Your target market, product, budget, and value proposition will all help to inform the approach that you take for your marketing plan.
Your in-depth market research should include how your target customers decide to spend their hard-earned dollars and where they find information about new products.
For instance, if you’re targeting Millennials and you have a small budget, you might choose to primarily use sponsored Instagram posts. If you’re targeting Baby Boomers in a specific small town, you might decide that using local newspaper ads and sponsored Facebook posts is the best approach.
There are multiple avenues to promote your products, including:
- Content marketing
- Email marketing
- In-store marketing (like pop-of-purchase displays and scent marketing)
- Social media marketing
- Proximity marketing
Evaluate each channel, then weigh its pros and cons. Focus on promoting your products where your audience lives rather than dabbling in every marketing channel. It doesn’t hurt to experiment with multiple marketing channels, but be strategic with your choices.
And most importantly, put your strategy down in writing in your business plan’s marketing section.
Writing Your Bare-Bones Business Plan
Depending on the purpose of your plan, the length and depth of each section will vary. But whatever your motivation, putting pen to paper (or pounding out your plan on your computer) and clarifying your vision and plans will help you measure the success of your business and stay on course as your business grows.
Have you written a basic business plan? Does it include all the sections above? Share your thoughts in the comments.