every new online business needs B u s i n e s s F i n a n c e

Planning an online business is similar to planning for any startup venture in that it centers on a business plan. Every new online business needs at least an informal business plan. A business plan is a written document that identifies a company’s goals and outlines how the company intends to achieve those goals and at what cost. It includes both strategic elements (e.g., mission statement, business model, value proposition, and competitive positioning statement) and operational elements (e.g., operations plan, financial statements) of how a new business intends to do business. Medium and large businesses, or those seeking external funding, must have a formal business plan.

The primary reason an entrepreneur writes a business plan is to use it to acquire funding from a bank, an angel investor, a venture capitalist, or the financial markets. Similarly, in an existing business, a business case needs to be written for any new large e-Commerce project so management can decide whether to fund it. A business plan also is important for a new venture as a tool to recruit senior management and to convince business partners to make a commitment to the business. A business plan helps ensure a thriving business by encouraging an entrepreneur to set goals, anticipate problems, set measures for success, and keep the business on track after starting it. A business plan forces the entrepreneur to be realistic about the business’s prospects. Sometimes the most successful outcome of a business plan is a decision not to proceed.

An existing brick-and-mortar business looking to move online needs a business case—a document that is used to justify the investment of organizational resources in a specific application or project. A business case for a large, resource-intensive e-Commerce project resembles a business plan. For a small or medium-size project, the business case can be much simpler. If the business is considering a number of different initiatives, you should prepare a separate business plan or case for each one. If the initiative is for a new business, it will require a more comprehensive business plan. A useful approach is to define the problem, propose a solution, and describe the expected outcomes or impacts.

Discussion Questions:

1. What is a business case and how does it contribute to business success?

2. Describe the steps in becoming an e-business and the major activities involved in the process.

3. Discuss some of the issues involved in transforming to an e-business.

4. Discuss some of the things you should consider when planning an online business.