How to Create a Dropshipping Business Plan That Actually Makes Money in 2024

Thursday May 99th May 2024
12 min. read
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How do I create a dropshipping business plan in 2024?

💡 Quick Answer: Creating a dropshipping business plan for 2024 involves first doing primary and secondary research to identify a niche market with high demand. Next, find reliable suppliers who can guarantee product quality and timely delivery. Since your suppliers are responsible for product fulfillment, finding a trustworthy partner is essential to maintaining customer satisfaction and trust. At your end, leverage a dynamic eCommerce platform to host your business and ensure seamless operations. You’ll need to focus mainly on key marketing strategies, like SEO, social media, email marketing, etc., to drive traffic and gain customers.

Despite what the rumor mills will have you believe, dropshipping is a good low-cost small business idea, even in 2024. Believe it or not, the dropshipping market will be worth a staggering $476.1 billion by 2026. You definitely want a slice of that pie!

If you’ve been on the fence about starting a dropshipping eCommerce business, don’t worry about its viability. Instead, think about creating a foolproof business plan that will help you become a successful drop-shipper.

Today’s article could very well be your starting point.

But what is dropshipping for eCommerce?

dropshipping is an eCommerce order fulfillment method where you outsource the process to a vendor or supplier. You sell products and run a business without an inventory. All you do is advertise and market select products on your online storefront.

Here’s how it works:

Step 1: Your customer places their order via your online storefront.

Step 2: You receive an order confirmation and share its details with your supplier.

Step 3: The supplier takes charge of order fulfillment. From sourcing the product to maintaining an inventory and shipping it to your customer, they take care of everything for you.

You can get started by scouting for suppliers from existing online databases like SaleHoo. It connects you with verified suppliers with proven track records, providing a safer launchpad for your dropshipping business.

The business model is a great entry point for aspiring eCommerce entrepreneurs and those looking to moonlight or supplement their existing income. But it’s not without its share of challenges.

Here’s a blow-by-blow comparison of the good and the bad of dropshipping that will help you visualize the whole picture:

Pros
Cons

✅ It’s a low-cost business model. You don’t have to spend on overheads, inventory, or logistics. In comparison, running an eCommerce business end-to-end is expensive.

❌ It’s a low-profit business model. Your suppliers could charge a fixed fee or ask for a commission per purchase that could vary from 5-20%. Either way, the profit margin is low. 

✅ It’s easy to start a dropshipping business. You can start selling from anywhere in the world as long as you have a stable internet connection, a website, and a dependable business plan.

❌ It’s a highly competitive niche. Because of the low barrier to entry, anyone can start a dropshipping business anytime, and they could be selling at cheaper rates. Unless you have a plan in place, it’s tough to become profitable.

✅ It’s hassle-free because your supplier takes care of everything. You don’t have to focus on anything else besides running an online storefront and marketing the products.

❌ Because dropshipping is so heavily supplier-reliant, any mistake they make becomes your headache, especially because you’re the one communicating with the customer. You’re at the mercy of your supplier to resolve any quality, shipping, or other problems.

✅ It’s great for product testing. Check if there’s a demand for certain products in the market before launching your eCommerce business. dropshipping can very well be the warm-up session to realize your greater business goals without the risk.

❌ It’s challenging to find products that are unique yet low-cost in the crowded dropshipping niche. In most cases, dropshipping products have a shelf-life of 60 months, after which the market tends to get saturated, and you need to look for new products to sell.

✅ It’s a highly scalable business model. You don’t need to invest more effort or time to grow your business because the core model remains the same.

❌ It’s difficult to build a brand as a drop-shipper because what you sell is not unique and has limited scope for branding.

How to start a successful dropshipping business? It’s all in the plan

All things said, dropshipping is still a fairly lucrative business idea in the eCommerce niche. To be successful, you need to start strong, and for that, you need a solid business plan.

A dropshipping business plan is your official roadmap to success, and that’s not an exaggeration.

Business plans form the cornerstone of any successful venture. Research shows that businesses with a plan in place grow 30% faster than ones that don’t have any. Don’t consider eCommerce dropshipping an exception simply because it’s low cost or doesn’t require overheads. 

What is a dropshipping business plan?

It’s the official document that contains the blueprint of your business. Your business plan should help you launch and run your dropshipping venture, set it up for growth, and guide your decision-making.

A good dropshipping business plan should include:

  1. An overview
  2. Primary mission
  3. Short-term and long-term goals
  4. Market research, competitor analysis, and risk assessment
  5. Sales and marketing strategies
  6. Operational guidelines
  7. Financial projections
  8. Legal compliance guidelines
  9. Technical specifications
  10. Exit strategies

In other words, it should be the lifeline of your business. That’s why you cannot take chances when drafting your dropshipping business plan. 

Do you need a dropshipping business plan?

Yes, you do. Every business needs a plan to fall back upon.

In eCommerce dropshipping, a business plan acts as a proof of concept document for prospective partners, investors, etc. But more importantly, it can help you with the following, even if you’re bootstrapping your venture.

  1. Financial and operational decision-making
  2. Determining the long-term feasibility of the business
  3. Setting achievable, timeline-specific goals
  4. Minimizing predictable risks and potential threats
  5. Streamlining resource allocation across multiple business processes

Things to consider before drafting your dropshipping business plan

You need to take a methodical approach to making your business plan. The work begins even before you put your thoughts to pen and paper. It starts with:

  1. Defining a business identity: Eccommerce dropshipping involves selling products, but you cannot look at it through reductive lenses when starting a business plan. Understand why you want to start the business and develop an identity.
  2. Identifying gaps in the market: Since dropshipping is such a crowded and competitive niche, it’s imperative to find gaps in the market that your business can cater to. Select a unique niche with ample demand that your products can fulfill.
  3. Understanding how your business is poised to succeed: The most successful businesses may not be the most unique but have one thing in common — a competitive advantage that sets them apart. It could be a pricing advantage, introducing a product into the market, or anything else that gives you a competitive edge. Whatever the case, you need to consider why and how your dropshipping business will succeed.

Working on these three factors should lay the groundwork for building your business plan.

What to include in your dropshipping business plan

Before you start planning your eCommerce business, be aware that creating this document is not a formality but a necessity. You need to take a strategic approach to writing your business plan. Here are the key elements that you should include in it:

1. Executive summary

An executive summary is the overview of your business and should essentially be a summary of the business plan. All business plans begin with an executive summary because it gives readers a glimpse into your venture. Ensure it’s informative but concise, no more than a page or two in length.

It can serve as an introduction to your dropshipping business for potential investors or your partners and the team.

2. Mission statement

This section should outline what you aim to achieve with your dropshipping business, your USP, and a justification for your business. The mission needs to be unique and convincing because it reveals your reasons for starting the business.

3. Market analysis and competitor research

In the next section, you need to focus on conducting a thorough market analysis and present your findings that validate the viability of your business. While market analysis is essential for any business, it holds even more authority in a highly competitive niche like dropshipping. Without extensive market research, you will not have the social proof you need to build your business.

Market analysis should help you find everything from trending products to high-demand niches you can target.

Don’t forget competitor research, either.

Because of the low barrier to market entry, the dropshipping is crowded. It often has too many businesses selling the same products at cheap rates. If you don’t know your competitors, you will not be able to survive in the market.

4. Product selection

The findings of your market and competitor research should help you with selecting a range of products that you want to sell. So, create a list of products you think can be easily sourced and also fetch you a good price. You can limit your offerings to just one category or target multiple, depending on what you want your dropshipping business to look like.

It’s best to start on a small scale and gradually upgrade as your business grows because it’s a safe bet. Starting at the deep end does not make good business sense.

5. Target audience/customer demographics

Define the ideal consumer persona that you want to target with your business. It’s imperative to find a product-persona match.

Although eCommerce is a way of life now, don’t forget that some people still have reservations about buying certain products online. So, when you choose your product portfolio, consider your customers' demographic because it affects their purchasing habits.

For example, GenZs are your ideal target audience if you want to sell streetwear. However, the demographic will be different if you plan to sell kitchen gadgets.

6. Marketing plan

The next section of your business plan should focus on the sales and marketing strategy you have planned to use to sell your products. And you need to be meticulous with it since this is one part of the business that’s entirely under your control.

Apart from allocating a marketing budget, ensure you do your groundwork before choosing the digital marketing methods you need to sell your products. eCommerce dropshipping is all about performance marketing; you don’t need to invest in branding in a dropshipping business because it’s of no use to you.

You need to go for advertising methods that yield the maximum ROI for the least spend, focus on local SEO and email marketing, and build a social media presence that drives conversions.

Since you don’t have other overheads, you should invest in an eCommerce platform that offers features and integrations that can help you with your marketing needs.

7. Operational processes

This one might surprise you, but remember that dropshipping is not a very low-effort business. You still need to create SOPs, define processes, create checklists, and do the whole shebang.

Ideally, your operational plan should include the selection process of vendors, communication guidelines, process audits, and everything you need to run the business seamlessly.

8. Financial analysis and forecasts

Lastly, you need to lay down the business financials that clearly outline your expenses, like overheads, budget allocation, and projected revenue defined by a timeline.

A solid financial analysis will help you secure funding if you need any help from investors. But more importantly, it will help you keep track of your dropshipping business expenses and contribute to its success.

Even if you have never written a dropshipping business plan, you can use these sections as a template to draft your first-ever one. It may take some time to get it right, but as long as you’re willing to learn and persistent, you will succeed.

Dropshipping business plan template to follow

Here’s a DIY dropshipping business plan template that you can follow:

Page 1:

Company Logo

Head Turners Fashion Co.  (Company Name)

Business plan 2024

By Audrey Hepburn and Callum Scott

226B, Baker’s Lane, Rudolph Avenue

New York

CONFIDENTIAL

Page 2:

Table of Contents

Executive Summary ------------------------------------------------------ Page 3

Mission -------------------------------------------------------------------- Page 4

Market Analysis & Competitor Research ------------------------------ Page 5

Customers —--------------------------------------------------------------  Page 6

Marketing Plan —--------------------------------------------------------- Page 7

Operational Plan —------------------------------------------------------- Page 8

Financial Analysis & Forecasts —---------------------------------------  Page 9

Page 3:

Executive summary

This section should include an overview of your business, the management team, customer details, etc.

Overview: Head Turners Fashion Co. is a U.S.-based dropshipping business that sells a wide range of the latest fashionable clothes, accessories, and shoes to its customers via its online storefront. The company is headquartered in New York with global operations.

Management: We run a fully automated online store optimized to provide a seamless shopping experience to our users on the web and on the app. Visit www.headturnersfashion.co to browse products from multiple fashion categories, add them to your cart, and place an order. Our online store is also equipped with chatbot support for our customers.

Customers: We cater to 18-24-year-olds interested in affordable and latest fashionware from around the world. Our primary market is the U.S. and Canada.

Page 4:

Mission

We aim to become the most trusted seller of everyday fashion, accessories, and shoes in our target market.

Page 5:

Market analysis & competitor research

Include your findings in the form of charts and graphs to explain what the current market looks like, the purchase habits of your target audience, what your competitors are selling, etc. Keep this section visually descriptive for easy understanding.

Page 6:

Customer demographic & division

Include charts and/or graphs to indicate your customer segmentation by geographical location, gender, purchasing power, etc. Keep this section visually descriptive for easy understanding.

Page 7:

Marketing plan

We plan to invest in a SaaS-based eCommerce website host to build our online store with integrated automations for:

  • Email marketing
  • Social media marketing
  • SEO optimization

In addition, we will also invest in paid marketing via Facebook, Instagram, and TikTok ads.

Page 8:

Operational plan

This part should include your daily checklists, SOPs, supplier data with contact details, and all other processes you put in place to ensure the smooth functioning of your business.

Page 9:

Financial analysis and forecast

This section should include a bar graph with three key KPIs: overall sales, gross margin, and a net profit over a duration of time that you think is suitable for your business. Ideally, you should include a quarterwise forecast along with 3-year projections.

In addition, you can also include a breakdown of your initial costs including your marketing budget, operational costs, and supplier rates.

Common mistakes to avoid while writing your business plan

Because it is such a tedious process, errors may unknowingly creep in when drafting your business plan. Even the tiniest mistakes can impact your business outcome. So, you must take precautions against committing the following common mistakes:

1. Setting unrealistic goals

Understand the nature of dropshipping — profit margins are usually low, and it takes a few months for a new business to break even. You cannot expect to start making profits from the first month — if that’s your goal, then it’s unachievable.

Many business owners make the mistake of confusing dropshipping with other methods of doing eCommerce, get demotivated, and abandon their venture. You cannot risk that if you want to make headway and eventually grow your business.

So, be pragmatic when setting the goals for your business.

2. Overestimating profits

To reiterate, dropshipping is not just low cost; it’s low profit, too. Don’t put inflated projections in your business plan because it’s misleading and can also throw your whole plan out of whack. Be realistic and aim for long-term gains.

3. Not defining/rushing processes

Even though you’re not in charge of inventory and logistics, it’s still a business. Don’t skip over creating supplier databases, conducting audits, and putting other operational checks in place. Without definitive task lists, you can suffer from a lack of productivity.

The biggest and the most fatal mistake you can make is creating a business plan in a hurry. You need to take your time with it to ensure it has what it takes to become the blueprint of your dropshipping venture.

4. Poor research

Don’t think you can start your business based on assumptions and guesswork only because it’s dropshipping. Your business has every possibility of tanking unless you perform thorough primary and secondary research.

5. Lack of adaptability

Your plan must be flexible enough to accommodate changes as your business grows and takes a new course. The first-ever plan is a good starting point, but it will not suffice when your business requirements change over time. You would have to start from scratch, and that’s effort duplication.

So, avoid making your dropshipping business plan rigid and non-accommodating.

That said, nobody is infallible, and it’s only natural to make mistakes. But if you’re business-wise, you should cross-check your plan before finalizing it.

Plan your way to dropshipping success

dropshipping is one of the easiest and most trusted ways of breaking into eCommerce. Whether you are a newbie or a seasoned business owner, get your priorities right and start by making a foolproof plan for your dropshipping venture. As long as you take a strategic approach to conducting business, you should become successful.

If you’re looking for a reliable supplier directory to start your dropshipping business, visit SaleHoo to access more than 8,000 prevetted suppliers and a 2.5 million strong product catalog. And if you need any help on the way, just reach out to our 24/7 support staff at any time.

 

 
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