5 Classic ECommerce Business Plan Mistakes To Avoid in 2021

Are you doing these ecommerce business plan mistakes in your online store journey?

The proverb goes that a business plan is always wrong. But e-commerce is undoubtedly one of the sectors where this truth is verified the most!

As much for a classic trade (shop, bakery, company of photovoltaic panels), there are methods to estimate with more or less integrity its future turnover (and more) and its profitability, as it seems on the internet that entrepreneurs (and investors!) are often very far from the truth.

Indeed, we detect the same errors of anticipation among e-commerce entrepreneurs—a brief review of the 5 classic and common ECommerce Business Plan Mistakes that explain these differences.

Top 5 ECommerce Business Plan Mistakes

1. You have never compared your offer to the market before writing your business plan

To launch an e-commerce website (as with any business), you must validate your project’s viability before writing a business plan.

I’m not talking about long market studies here, but rather a full-scale “test,” with a “minimal” version of your site, but which will allow you to verify in the field that you are getting traction (even low) in your market. It is essential that your business plan can relate to the fact that you have already made your first sales, even before you take the pen.

Beyond the “validation” aspect, an initial test will also allow you to collect valuable feedback from your customers and to see for yourself the main obstacles or areas for improvement in your business.

You will then be even more seasoned to carry out your business plan and make realistic and viable financial forecasts.

2. Your business plan underestimates expenditure on salaries and external services.

The entrepreneur thinks that the rest will be done automatically by the internet. He decides not to hire too much. But that’s overestimating your strengths!

• • If the number of your orders increases, then the return rate will likely increase, and you will need to hire someone to handle the service.
  • Your bookkeeping will take time, and the question of marginal cost will arise: is it better to spend one day on bookkeeping or pay someone to do it while you take care of other things? Another option is to invest a few euros per month in accounting software, manage part of it yourself, and delegate the balance sheet and income statement at the end of the year.

It is sometimes illusory to want to manage everything.  It is better to spend time on the activity that will generate the most margins and outsource the other tasks.

3. Your business plan underestimates the development costs of your e-commerce site

Once you have validated that your idea is profitable and that you have made the decision to get started, you will undoubtedly want to spend the second on your e-commerce site itself and in particular:

• • improve the look & feel of your online store,
  • use a more professional e-commerce platform,
  • automate certain processes,
  • etc.

As an entrepreneur, we often want to limit costs, and we seek to save money everywhere: we do it ourselves, we use low-cost tools, we call on knowledge who develop sites the Sunday after- noon. But some savings are costly!

Wanting to minimize the costs of creating an e-commerce site can prove to be more expensive in the long term: you will have to plan for a longer development time because your freelance will not be 100% on your project, you will have difficulties in upgrading the site, or you will encounter technical problems that you will be unable to resolve.

4. Your business plan provides for a shallow marketing and advertising budget

This is a classic mistake because entrepreneurs tend to overestimate the buzz effect. “With Facebook and Instagram, we are going to attract people. There are cases of companies that have generated buzz without resorting to advertising, it is true (for example, the French slip). But keep in mind that these are exceptions.

Just like any business that must invest in advertising and communication to make itself known and find customers, an internet e-commerce business must invest in marketing, and the cost of customer acquisition can be very significant  :

• • There are Google Ads investments, and depending on the keywords, it can be costly (especially if your conversion rate is low, especially at the beginning)
  • There are advertising campaigns to make yourself known (on Facebook, for example)
  • Your Business Plan is the investment in the brand  to give confidence and avoid the obstacles to the purchase (design of your logo and your graphic charter in particular)
  • There are investments in marketplaces that can erode your entire margin (price comparators, marketplaces, etc.)

All these marketing levers are not free, and they represent a high cost for any e-commerce site. Your business plan must take them into account.

5. Your business plan does not indicate your customer acquisition cost anywhere

Customer acquisition is the sinews of war in e-commerce. This is why the reader of your business plan will want to know your customer acquisition cost.

Without this information, it is impossible to gauge your project’s risk level and its likelihood of success. Likewise, it will become difficult to measure your marketing investments’ accuracy if you don’t know how much it will cost you to gain a new customer to your site.

Going deeper into this subject will also allow you to ask yourself other crucial questions concerning your future customers:

• • Will you be successful in creating recurrence?
  • How often will they buy from your site?
  • How long will they be with you?
  • What lifetime value will they have?
  • Etc.

Conclusion

A business plan and its financial forecasts are inherently false because predicting the future is impossible. However, it is possible to avoid the mistakes already made by e-commerce sites.

We must not forget that the costs of launching an application or site are above all investments. They are the ones that then generate revenue.

Gone are the days when the internet was a Wild West where you could get rich without investing. Think of your e-commerce site as a regular business. By drafting a more realistic business plan, you will better anticipate your financing needs and invest wisely.