Preamble
Hello everyone! Some time ago me and my partner started a new project which should conquer the world. Despite the fact that we are fully confident in its success, investors did not feel the same. And we had to make a business plan. It should reflect our vector of development that we want to get in the future and how we will achieve it.
Having studied a decent number of materials, we started to work.
About this guide
We will split our business plan into the several logical parts: Traffic, Conversion, Product, LTV, Costs, Revenue. Each part will be calculated on a separate sheet of the spreadsheet for ease of use and clarity of the information (by the way, I recommend to do this always). We will use 12 month period.
Business plan - it is always a dynamic model, which is based on multiple iterations. In this guide, we will act as well as in real life. We will make some assumptions, and then will correct it.
Who can use this framework
Almost any web platform / service / e-commerce. We will consider our business plan based on the example of a startup that helps people to find a job. We have 4 tariff plans, which vary depending on the functionality.
Part 1. Traffic
A good start is half of success :) Now we need to define the channels, where we will get traffic. For ourselves, we have identified the following methods to attract users:
- Cost Per Click (Adwords, Bing and similar networks)
- Social Media (Facebook, Twitter)
- Organic search
Let's begin. Fill the first column with the channels in the following form and we'll talk about each of them a bit more.
Contextual advertising
There are so many sites for contextual advertising. A leader in this field is undoubtedly Google Adwords (and we count on it). The best way to check the price of a click for your search queries - practice. However, at the time of writing a business plan, you probably will not have a good statistic. In this case, I can recommend to check the price (but do not think that the recommended prices are really the ones that you have to pay per click. Practice shows that your clicks will cost much less) using the keyword planner.
By the way, it is also a great way to estimate the approximate number of search queries.
And here's a list of sites where you can also place the advertising:
Media.net http://media.net/
LookSmart http://www.looksmart.com/
Clicksor http://www.clicksor.com/
We estimated our cost per click and now we assume how many people we can attract (in the following parts we will adjust this value). And got this version:
As you can see, one of the cells I painted over the green. With these flags we will mark our improvements. For example from the 4th month, we expect to reduce the cost per click (due to the fact that we can find a more successful keywords) and further downward trend.
Social media
Social Networks - a great option to get traffic, especially for B2C companies.
We chose Facebook as a platform for several reasons:
- Wide coverage of audience
- Ability to target
- Greater probability of additional free traffic (due to virality)
In Facebook, you can choose a classic model CPC (pay per click) or CPM (cost per 1k impressions).
Technically speaking, there is no differences between the two models. Just in case of the CPM you can (theoretically) lead significantly more traffic.
Attention! Selection of CPC vs. CPM - everyone's business. If you are not sure about your ads then CPC model might be more attractive for you.
For information. Since the model is CPM - Click Through Rate is an important indicator. Conventionally, it is possible to divide the indicator in three categories:
1) CTR 0,01% - Bad.
2) CTR 0,03% - Normal. We believe that we will achieve this value
3) CTR 0,1% - Very cool!
If your CTR on a large number of displays much higher than 0.1% - you're a genius. Please, write to me.
Let’s fill our expectations:
As you can see, we expected that in some months, we will have to increase the cost-per-impression (due to seasonal factors: decreasing the numbers of vacancies. Thus, the competition will increase), but then we rely on a downward trend.
Organic search
The king of cheap traffic is organic search. Users will be able to find you on relevant keywords in search results.
Why it's cool:
- Traffic is very cheap
- It's really a lot of visits. For the most websites, visitors from search queries constitute 50-70% of all traffic!
What's the cons:
- To be in the search results need to do a lot of work. To bring the site into the top ranks of the search results you need at least 4 months (if it’s competent SEO).
- The conversion depends strongly on the theme of your site. Therefore, quite often the traffic is not really targeted and the conversion is poor.
We assume that it’s possible to receive significant figures only after 5 months:
For approximate calculation, we used the growth rate of 70% (for the first months) and 40% for the following. Coefficients stored in a separate row for convenience.
Growth formula is very simple:
Email Marketing - perfect channel for reactivation. With emails you can return the user (very cheap) to make him active and convert his session into a purchase.
We enable users to subscribe to our newsletter (like, news, improvements and special offers). Therefore, in order to evaluate the possibility of the channel, we need to understand how many users can be subscribed. For this, we introduced indicator 'subscription rate', which shows what part of all traffic become subscribers.
In additional row we wrote subscribed users (quantity). Remember that here we specify subscribers cumulatively. With this in mind, the formula is as follows:
One of the most important indicator in email channel is Click Through Rate. This indicator shows how many people go to your site via a link. In our business plan we point out that the CTR will rise. This is because we can find a more interesting subject line, and we will try to improve improve letters quality every month.
Let's apply our changes to the business plan. We get the following picture:
I can advise you several mail services:
Mailchimp http://mailchimp.com - simple and nice to use. Support custom templates (you can find a lot on the themeforest.net), good email analytics.
Aweber http://www.aweber.com/
Bottom line
We just made a traffic plan for our project. This is only the first step in building the entire business plan. In the following parts, we consider planning of the conversion, as well as will model the purchase of different subscription plans.
You can find our Business Plan (from this guide) here: business plan
You can download it and use as a template for your project.