Developing an Internet Business Plan*
If you are interested in developing a new business on the Internet or
expanding your current business onto the global information superhighway,
it is important to develop a business plan as part of your preparations.
Like a regular business plan, your Internet business plan must give
details of the proposed venture, along with expected needs and results
(Kuratko and Hodgetts, 1992). In addition, it must take into account the
unique nature of electronic commerce.
Purpose of a Business Plan
A business plan is a proposal for a new venture. It is designed to
convince the reader to support the proposed project. If the presenter of
the plan is an entrepreneur, the plan's purpose is to raise capital for
the project from investors. If the plan is being presented by an
employee within a company, then the plan's purpose is to convince
internal management to undertake the new project. This planning also has
another purpose: to force the entrepreneur to do thorough and effective
Internet Business Issues
Electronic commerce on the Internet is relatively new and poses many
unique challenges. First, most people do not know exactly what the
Internet is or what it can offer businesses. This is a hurdle that must
be overcome in your business plan. Second, resources that are taken for
granted in the real world often do not exist or are in formative stages
in the on-line world. For example, payment systems, ad page pricing, and
market demographic tracking are all in various stages of development
on-line. Third, the pace on the Internet is dizzying. Keeping track of
the rapidly changing trends, technology, and competitors is crucial to
the success of your business.
How Much Work is it?
Just like in any endeavor, you would not make substantial investments without careful research and understanding of what you are doing. One example of "Intellichild," a real "dot com business plan," has been posted at www.bplans.com. To my knowledge, this is the only site offering a variety of real business plans free, on line. You can judge the effort required to put together a plan that builds a significant business case.
The Ten Sections of an Internet Business Plan
(all but #5, #6, and #10 are required for our course)
- Executive Summary (required): This
section must concisely communicate the
basics of your entire business plan. Keep in mind that your reader may
be unfamiliar with the Internet and its tremendous potential.
- Business Description (required): In this section discuss
your firm's product or service along with information about the
industry. Because your business plan revolves around the Internet,
spend some time explaining it first. Then describe how your product
and the Internet fit together or complement each other. As with
any business plan, consider your audience. If the readers are
technically unsophisticated, make sure
you include definitions along with any technological terminology.
- Marketing Plan (required): With the business described,
must discuss your target market, identify competitors, describe product
advertising, explain product pricing, and discuss delivery and payment
- Customers: You must define who your customers are and how many
of them exist on the Internet. There are demographic studies by
organizations such as The Internet Society and The Internet Group that
can help you determine this.
- Competitors: Use Internet search engines to look for known
competitors or similar products to yours. Be sure to use several search
engines, because each uses different search techniques. After you have
identified your competitors, perform a new search every few weeks or
months. Companies are continuously joining the Internet. Remember,
readers of your business plan will be very interested in how you are
going to beat the competition.
- Advertising: Describe how you are going to tell the Internet
community about your product or service. Designing beautiful Web pages
is only a first step. You must also get the word out about your Web
site. Some tips: add your Web address to the databases of search engines
such as Lycos and WebCrawler, submit it to What's New at NCSA Mosaic, and
add it to the bottom of all of your e-mail messages.
- Pricing: How are you setting prices for your products or
services? If your product is intangible information delivered over the
Internet, you should try to create some sort of pricing model to justify
your prices. You could start by researching what others are charging for
- Delivery & Payment: How are you going to deliver your product
and get paid? E-mail alone is not secure. Consider encryption
techniques like PGP, and on-line payment services such as DigiCash.
- Research & Development (required): This is where to
get into the
technical aspects of your project. Address where the project is now, the
R&D efforts that will be required to bring it to completion, and a
forecast of how much the project will cost. Since the Internet is
continually developing, you should also address continuing plans for R&D.
- Operations & Manufacturing (not required): In this
section, discuss the
major aspects of the business, including daily operations and physical
location. Also, what equipment will your business require? Will you be
using your own Web server, or will you be contracting with another
company? Who will be your employees -- will you hire Internet
knowledgeable staff, or train them in-house? Be sure to include cost
- Management (not required): This segment must address who
will be running the
business and their expertise. Because the business centers around the
Internet, be sure to discuss the management team's level of Internet
expertise and where they gained it. Also, describe your role in the
- Risks (required): In this section, you must define the
major risks facing
the proposed business. In addition to regular business risks such as
downward industry trends, cost overruns, and unexpected entry of
competitors, also include risks specific to the Internet. For example,
be sure to address the issues of computer viruses, hacker intrusions, and
unfavorable new policies or legislation.
- Financial (required): Potential investors will pay close
this area, since it is a forecast of profitability. As in a regular
business plan, include all pertinent financial statements. Remember to
highlight the low expenses associated with operating on the Internet
compared to those of other business.
- Timeline (required): In this section, you must lay out the
steps it will
take to make your proposal a reality. When developing this schedule, it
might be helpful to talk to other Internet businesses to get an idea of
how long their Internet presences took to establish.
- Bibliography and Appendices (not required): In addition to
references, include some Internet references in case your readers would
like to learn more about the Internet as a part of studying your proposal.
You should now have a better idea of what is involved in developing a
winning Internet business plan. Remember, the most important points are:
addressing the uniqueness of the Internet, explaining its business
advantages and potential, and keeping your audience in mind. For further
information, the following two sources may be helpful.
Kuratko, Donald F., and Hodgetts, Richard M. Entrepreneurship: A
Contemporary Approach, Dryden Press, 1992.
Resnick, Rosalind, and Taylor, Dave. The Internet Business Guide:
Riding the Information Superhighway to Profit, SAMS Publishing, 1994
* Adapted from a document by Michael Yellin, MBA/MS-MoIS Student