If you're looking into how to start a dropshipping business, you've no doubt come across articles about what is drop shipping, how to dropship, and how dropshipping works.
But, that information is useless if you aren't using it to help craft a detailed and actionable dropshipping business plan. This single document can outline how your business operates, give you ideas for carving out your dropshipping niche, and more.
Keep reading to learn what a dropshipping business plan is, how to create one, and access our free template to get you started.
What Is a Drop Shipping Business Plan?
A dropshipping business plan is a document that outlines the structure, finances, operations, and competitive advantages of your business. The business plan acts as a roadmap that will guide your decision-making and help you grow your business and dropshipping profit margin.
How To Make a Drop Shipping Business Plan
Drafting a dropshipping business plan starts with a lot of research. You need to understand what type of business you'll build, clarify your dropshipping business ideas, and establish guidelines for future employees. Don't underestimate the value of data, or you'll be making one of the most common dropshipping beginner mistakes and hamstringing your business before you start.
Here are the things you'll need to look at before drafting your plan:
- Business Identity. If you don't already have a clear picture of what you want your business to be, you're not far along enough to draft a business plan. Ask yourself what your business will do and why they'll do it. This will play a major role in your dropshipping eCommerce marketing and dropshipping ads in the future. It will also help keep you on course as you grow, so you don't just jump on the latest eCommerce trends as they happen.
- Problems in the market. Your business needs to be solving a problem that consumers are having if it's going to succeed. This problem may be an underserved niche, poor customer service for dropshipping, or even a complete lack of the types of products you'll be selling. Determining the gaps in the market now will make it much easier to position your new business for success.
- Customer demographics. Knowing who your prospective customers will be, what motivates them, and how they like to shop are valuable factors in growing your business. Unfortunately, this isn't information you'll find in dropshipping books or in a dropshipping course. You'll need to do your research on the market, track the activities of your prospects, and build a profile for your ideal customer. This will make it much easier to adapt your model to meet their needs.
- Competition. It's nearly impossible to start a business that has no existing competitors. This is especially true for dropshipping, where your dropshipping suppliers will likely also be working with your competitors. You'll want to understand what they do right, what they get wrong, and areas where you can show that you're the right business to buy from. You may discover they used the wrong dropshipping website builder or that you can use drop surfing to undercut their prices while maintaining your margins. The more information you have, the more dangerous you'll be.
- Sales and marketing channels. You'll be building a dropshipping website for sure, but what else will you be doing? Social media marketing may be on the table or traditional advertising may be a factor. Take a look at some of the best dropshipping websites in your chosen niche and click through various social media links to see how they market their products. Learn from their successes and failures and stick with the channels that seem to work best.
Dropshipping Business Plan Outline
To start off on the best foot, you'll need to create an outline for your business plan. In the end, this document will likely end up as ten or more pages, but not every section you include will be as long or valuable. Luckily, a dropshipping business plan is nearly identical to an eCommerce business plan, so the sections are pretty standard.
You need to include the following sections in your dropshipping business plan:
1. Executive Summary
This first portion of your business plan should act as a summary of everything that follows it. In the simplest terms, try to distill your business into a single page. Cover your business concept, product offerings, target market, competitive advantage, finances, and more. A mistake or missed opportunity on this page can cost you investments and loans. Most investors go straight to this page before deciding whether they'll even continue reading. If you can't answer "is dropshipping worth it?" in this section, you'll never get the money you're seeking.
2. Company Mission and Overview
Here, you'll take a bit of a closer look at who you are and what defines your business. You should view this section as an introduction to your business that can establish what makes you unique and further clarify why you're worth investing in. Make sure to address the business structure, your background and experience, and what team members you'll need (think of the various dropshipping jobs available). This is a great section to emphasize your strengths and set up the expectations for the rest of the document.
3. Market Analysis
All of that research we told you to do above will come in very handy in this section. You'll want to outline the competitors in the field and how you'll be able to take market share from them. The most common way to do this is to perform and include a SWOT analysis. This is a breakdown of your business's strengths, weaknesses, opportunities, threats. This section really highlights what qualities you bring to ensure your business will be a success. For some insight into how they work, here’s an example of SWOT analysis for restaurant.
4. Product Types Offered
Here, you'll want to go in-depth about the different dropshipping products you'll be selling. Try to be as specific as possible and cover each different category you plan on operating in. You can also include a timeline if you plan on rolling out different categories at different times for seasonal demand planning. The big value in this section is that it will help keep you focused in a particular industry and keep you from trying to expand too quickly into areas that you aren't well-suited for.
5. Marketing Plan
Whether you're looking to score investors or just want to increase sales, your marketing will play a major role in your success. You'll need to explain what channels you want to advertise on and why. If you choose to use eCommerce PPC ads or affiliate marketing vs dropshipping, you'll need to create a dedicated budget. The more specific you are here, the more likely you are to avoid excessive spending or adopting networks that offer little return.
6. Operations Plan
Your operations plan helps define how you go about finding, buying, selling, and shipping products. Luckily, part of this section is easy to explain as having your suppliers handle the shipping is how to make money dropshipping. Still, you'll want to explain where you find these suppliers and what types of criteria you'll use to weed out products and suppliers you don't want to work with.
7. Financial Plan
Finally, you'll need to explain what your initial capital is and how you'll use it to create a profitable business. Usually, this section will include an income statement, balance sheet, and cash-flow statement. This section is often the largest in a business plan and needs to be thorough and mistake-free. Nobody will want to invest in a business that doesn't have a strong understanding of finances and how to make money. Think of things like, "Which one of the best banks will you open an account with" and "How will you accept payments?" Answer these questions here before an investor has to ask, and you're more likely to get funding.
Dropshipping Business Plan Sample
You can also build your dropshipping business plan using this free downloadable dropshipping business plan sample.
Once you download it, give it a look through. You’ll see an example of a food dropshipper's business plan for reference. We've included all seven sections and a few subsections to help you see the amount of detail expected in a business plan. It's mostly filler text, so you can edit the areas that you need and remove the rest.
Luckily for this business owner, BlueCart’s online marketplace is a great choice to find food suppliers for your burgeoning dropshipping business. With over 92,000 buyers, BlueCart offers one of the best dropshipping platforms on the market, and we can help you take your business to the next level with exposure and access to buyers and sellers alike. Not to mention, we have a strong bank of dropshipping articles that can help you go from asking questions like, "is dropshipping dead?" and "is dropshipping legal"? to making money.
Frequently Asked Questions About Dropshipping Business Plan
Since dropshipping business plans can feel overwhelming to create, there are a few topics that come up regularly. Let's take a quick look at the most frequently asked questions.
Do You Need a Business Plan for Dropshipping?
Yes, you need a business plan for dropshipping! You should never start a business without planning out how you'll grow it for long-term success and dropshipping businesses are no different. You may consider using a business process flow chart template to map out your processes.
How Profitable Is Dropshipping?
Dropshipping businesses can be very profitable if you choose the right niche and manage to market yourself well. Though margins can be low, the costs are also very low, and you can scale at a much faster pace than other business models.
How Much Do Dropshippers Make On Average?
Most dropshippers make a profit of between 15%-20%. However, the most successful dropshippers have seen a margin of nearly 300%. Since costs are very low, most dropshippers choose to keep all the profit themselves, rather than reinvest the money in the business.
That's the Plan, Stan
Creating a solid and informed dropshipping business plan will go a long way to helping you build a successful business. Do your research, invest in the right people and tools, and adjust your business plan as you grow. These steps can help you build a long-term business with strong margins.
For more guidance, check out our dropshipping for dummies guide where we cover topics ranging from dropshipping automation to reverse dropshipping and more.