Developing an Internet Business Plan*

Introduction

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 analysis.

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, next you must discuss your target market, identify competitors, describe product advertising, explain product pricing, and discuss delivery and payment mechanisms.
- 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 similar products.
- 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 information.
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 business.
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 attention to 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 business references, include some Internet references in case your readers would like to learn more about the Internet as a part of studying your proposal.

Conclusion

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.

Sources

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