Financial Planning – A Vital Part of Online Business Success
Your business plan is an integral part of starting a successful online business, which has different demands than a traditional business. In addition, often the startup costs are much less. Of course, that does depend on what you are selling and how much stock or licensing you must invest in as well as the necessary technology.
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Although a number of your projections may be based on pilot projects and statistical averages, these are recognized as the educated guesses they are. Online revenue generation is created much differently than in a traditional business. In addition to your goods/services, you will need to determine if you are going to take advantage of other revenue sources that are available.
You will also need to determine how you are going to generate the necessary traffic to create sales – are you going to use SEO, free products, advertising, etc. What are your budgets going to be? These figures need to be included in your business plan and it is important that you are realistic. If you have never had an online business before, don’t guess – rather make sure you do your research and contact companies that specialize in these areas.
You will need to determine your projected cash flow, and you should assume that you will have virtually no sales in the first year of your online business. It takes time to get ranked in the search engines and established online (if you don’t use paid traffic), often longer than in a traditional new business environment where people begin to wander into your storefront almost right away.
You will also need to determine what your startup fees are and what your operating budget will be.
Below is an example of what your breakdown might look like.
Online Business Costs and Operating Budget
One time costs:
* Business Incorporation Filing $300
* Register Internet Domain Names (2 years) $50
* Accounting Software $300
* Corporate Seal $200
* Web Hosting $200
* Website Design Services $400
* Programming $3000
For a total one time cost of $4450
Then there are the recurring costs per month
* Web Hosting $200
* Link Building $500
For a total of monthly recurring costs of $700
Online Business Cash Flow
Cash flow projections are also included in your business plan. This is a not a projection of your cost of goods or sales. This shows the financial health of your business. It shows your projection of expected cash flow. Again, be realistic.
Online Business Funding
Finally, you’ll want to include your funding requirements. What do you need for start up and your first year of operations? Investors or financiers will be looking for a detailed breakdown of these numbers and how you arrived at them.
(Don’t forget your marketing budgets!)
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Image Credit: Analyzing Financial Data, Dave Dugdale, LearningVideo(dot)com, flickr. Creative Commons Attribution-ShareAlike 2.0 Generic (CC BY-SA 2.0) License.
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