If you want to start an eCommerce business, it’s important to learn about the different business models you can use and, of course, to make a business plan. In the past few years, dropshipping has gotten a lot of attention, and right now, about one-third of online stores use the traditional or reverse dropshipping model. Google Trends shows that the dropshipping trend is always going up. This shows that the dropshipping market is getting more and more crowded, even though dropshipping is a successful and appealing way for eCommerce entrepreneurs to do business.
This is because everyone in the world is connected, so it doesn’t take long for a business idea or strategy to spread around the world and get a lot of attention. This was also true for dropshipping. When eCommerce business owners found out about dropshipping, they were able to make big money quickly because it required a small initial investment and gave them an edge over their competitors. But dropshipping is still worth it and can make you money if you do it right, even though it is a very competitive eCommerce method these days. This is exactly why you need a great dropshipping business plan to make your store a success.
This article is a step-by-step guide to dropshipping that will help you understand what it is and how to make a good business plan for it.
What does dropshipping mean as a way to run a business?
Dropshipping is mostly a method and model of Supply Chain Management (SCM). The most important thing about this model is that the business doesn’t have to keep stock of the products it sells to customers. The process of dropshipping is pretty easy, and it goes like this:
- The customer places an order on the business’s website. This order is usually sent to the supplier or manufacturer automatically using plug-ins.
- The supplier accepts the order and sends the reseller an invoice for the goods.
- The supplier or manufacturer ships it directly to the end customer on behalf of the eCommerce retail business owner. The supplier keeps the reseller updated on the status of the shipment, and the reseller tells the end customer. The end customer receives the order and leaves feedback with the reseller or opens a dispute for a dropshipping return, if needed.
- Dropshipping might seem easy based on this, but it also has its own problems. For example, as a reseller, you have to work with the best supplier for your business that gives you the most benefits. This could take some time and a long list of questions to ask your potential supplier before you start working together.
What is a business plan for dropshipping?
A dropshipping business plan is like any other business plan in that it shows how your business will be set up, run, make money, and stay ahead of the competition. It also explains what the business’s goals are and how they will be reached.
How to make a business plan for dropshipping?
Research is always the first step in making a business plan for dropshipping. First, you’ll need to figure out what niche your business will be in, what kind of dropshipping business you want to build, and how you want to grow your business in the future. Make sure you don’t undervalue the power of data and research so you can avoid the most common dropshipping mistakes you could make as a beginner.
To get started with your dropshipping business plan, you need to think about the following things about your new business.
Who you are as a business
Everything starts with the name and voice of your business, which will help you stand out from your competitors. Before you can start working on your business plan, you need to know exactly how you want your business to look. In this case, the strategy is to be clear about what your business will do and why it will do that thing. Outlining these will also help you in the future when you are making your marketing plan with the 5 C’s. It will also help you keep the integrity of your business over time without taking you away from your core values.
Vacancies in the market
To be successful, a business needs to solve a problem for its customers and fill a need in the market. These gaps can be caused by products that don’t exist in the market you’re trying to reach, a niche that isn’t being met right now, or bad customer service that makes online shoppers unhappy. When you know where the market is lacking, you can position your business better and make money in untapped areas.
What your niche is about and who it is made up of
In business, it’s important to know your customer. This is the hardest information to find because neither dropshipping books nor dropshipping courses have exact lists of characteristics. You’ll have to do your own research. To make a buying persona and build a profile of your customers, you’ll need to keep researching your market and keeping track of your customers’ demographics and needs and wants. Knowing your niche better than your competitors can not only give you an edge over them, but it can also make it easier to change your business model and strategy to meet your customers’ changing needs.
Examining the competition
When you’re making your dropshipping business plan, it’s important to do a competitor analysis. Since your suppliers also work with your competitors, you can’t help but learn about their businesses and where they do well and where they fall short. First, you’ll need to look at their market share, product lineup, strengths, and weaknesses. Then, you can expand your research to include their marketing efforts, tone of voice, and sales channels. This will give you a good idea of what strategies are working best for them and what needs to be changed. Make sure you come up with a conclusion and use what you’ve learned in your dropshipping business plan.
What does a business plan for dropshipping look like?
To start, you’ll need to make a framework for your dropshipping business plan and fill out each section based on what you’ve learned from your research. You’ll notice that a dropshipping business plan is almost the same as any other eCommerce business plan, so the sections will be pretty standard. If you want to start a dropshipping business, you’ll need to include the points below in your business plan. You can also add to this list if you want to.
The Bottom Line
This part of your dropshipping business plan will be very important when you start your business. Even though this part of your dropshipping business plan will probably be the shortest, it will also be one of the most important and hardest to write. It will be the first part everyone reads and decides what to do with. When you want to attract investors who will help you grow and expand your business in the future, it is very important to have a compelling executive summary. The purpose of the executive summary is to give your readers an idea of your dropshipping business and a sense of what to expect from the rest of your business plan. In this part of the overview, you should briefly talk about your targeted niche, product offering, marketing and operations strategy, and finances.
Goals and dreams
When you talk about the mission and vision of your dropshipping business, you give the reader a better idea of who you are and what you want to do with your business in the future. This section will tell them about your business and what makes it special, so they can understand what your goals are. In this part, you can talk about the structure of your business, your experience and background in eCommerce retail, and the needs of your business. Think of this as a chance to show off your skills even more and set the tone for the rest of the document.
This section is there so that you can show that there is a market niche that you can successfully target and make money from. Here, you can use the research we talked about above to talk about your competitors and how you plan to take market share from them. This part of your dropshipping business plan will also help you figure out how you will market and sell your products in the next parts. To break down your market analysis, you’ll need to include three main types of analysis here:
- An analysis of the industry that will explain what the industry is like and what the market is like in general. This can be done with a PESTEL analysis, which looks at the political, economic, social, technological, environmental, and legal factors in the market you want to get into.
- An analysis of your niche market that includes the traits of your buyer persona and the best way to reach this group;
- An analysis of your competitors that lists the most important things about them. Here, a SWOT analysis can help you figure out what your competitors’ strengths, weaknesses, opportunities, and threats are.
- Your product portfolio
- In this section, you can talk about the products you’ll be dropshipping and show them off. You can also talk about the dropshipping suppliers you’ll be working with. You should also write down what makes your supplier the best for your business. This will allow you to go back and check on them from time to time to make sure they are still the best fit. This section can also be a “reality check” for you in the future. It can help you stay focused on the industry you want to work in and not rush you into new ones that are out of your league.
When it comes to dropshipping, your marketing plan is probably the most important thing you can use to stand out from your competitors. Since you won’t have to worry about keeping track of inventory or processing orders, you’ll have more time to focus on marketing and making sure you reach your niche in the best way possible. In this section, you need to list and explain all the marketing channels and tools you’ll be using. You should also come up with a plan for each one and talk about its benefits. By carefully planning your marketing efforts, you can make sure that you only spend money on effective advertising techniques and channels that will bring sales to your dropshipping business.
Plan for operations
As a dropshipper, this section will probably be the easiest to write because your suppliers will handle most of your business. Here, you can write down the questions you want to ask your supplier and how you plan to handle dropshipping returns.
Last but not least, as part of your dropshipping business plan, you’ll also need to make a financial plan. This section will talk about the first money you put into your business and how you’ll use it to make money. This part of your business plan will be the longest because it needs to be as detailed as possible and include a balance sheet, a cash flow statement, and an income statement. Having a good financial plan will not only help you keep track of your money, but it will also give investors the confidence to put money into your business when you need more money to grow.
When you first start your own business, it will help you a lot to have a well-thought-out and solid dropshipping business plan. This will help you a lot on your journey as an eCommerce store owner. Make sure you have enough time and money to finish your business plan and that you keep going back to it and making changes as your business grows. This plan can help you make a long-term plan for your dropshipping business so you can always know what’s going on in your business.