E-Business Guide

Income and Expenditure relate to fields in the cash flow section of the Business Plan.

Free template available for download, Seek further assistance from your advisor.

Cash sales

'Cash sales' means all income from your main business activity which is received at the time of sale.

For most online businesses, it's unusual for their customers to pay in actual cash.

So unless you're planning to allow customers to pick up - and pay for - their items after they have bought them online, it's likely that your Cash sales will be made up of some or all of:

• Debit and credit card payments 
• Payments received through PayPal, Amazon Payments and so on 
• Cheques and postal orders 
• Electronic transfers 
• Payments made through an escrow service - 
• These are typically only used for high value transactions 

To prepare your cash flow, you will need to estimate how much income you will receive over the next twelve months, including VAT.

To do this you will have to estimate

• how many people will visit your site (or another online sales channel that you make use of), 
• how many of them will make a purchase and 
• how much they will spend on goods or services. 

There are a number of things to consider when you make your estimates, depending on the type of e-business you are planning:

Type of business

• who will your customers be. 
• will you be targeting your goods and services mainly at businesses, Including other online businesses (known as 'business-to-business' or 'B2B') or at members of the public ('business-to-customer' or 'B2C') 
• will all your business be online or will you also have bricks and mortar outlets open to the public (such as shops, 'click and collect' points or advice centers) 
• will you target only customers from your country or will you look to sell into other countries. Bear in mind that there are VAT issues if you're planning to sell digital products to customers outside your country. 
• will you sell only through your own website or will you aim to use other online marketplaces such as eBay, Amazon, Not On The High Street and so on 

Your products or services

You may be planning to:

• have an online shop where customers can buy goods which you will then arrange to be delivered or - less commonly - allow customers to collect 
• have an online shop selling downloadable digitised items such as software, books, games, music and so on 
• provide online services such as hotel or holiday bookings or translation facilities
• rovide online gaming, information or other services for a subscription fee 

You might also look to generate extra revenue by selling advertising space on your website and/or through 'affiliate marketing' (providing links to goods or services sold by other businesses and receiving a commission if a visitor to your site follows a link and makes a purchase).

Your website

Unless you're planning to exclusively use online marketplaces like eBay and Amazon, your website will be among your most important assets.

Think about:

• who will design, build and maintain it 
• what will your domain name be 
• who will host your website 
• how you'll make sure that your site is optimised to be viewed by devices with different screen sizes 
• whether it's a good idea to have an 'app' created for smartphone and tablet users 
• who will handle administrative tasks such as tracking and log file analysis, ad-serving, ad sales and search engine submission. 
• Selling advertising yourself can be difficult and time-consuming, so you may decide to use an advertising network or sign up to a service like Google AdSense 
• will you offer customers the opportunity to pay using methods like PayPal as well as by debit or credit card. (Although in the early days of internet shopping it was reasonably common for businesses selling online not to offer an online payment facility, these days the vast majority do) 
• how will you monitor the number of visitors to your website (known as 'site traffic') 
• how will you advertise your website 
• how will you make sure that customers keep coming back to your site 

It's worth bearing in mind that using 'turn-key' hosted services like Shopify or Volusion can be an excellent alternative to building your own site from scratch.

Pricing

Setting the prices is a key aspect of starting up any business.

Conventional wisdom says that online retailers usually offer highly competitive prices compared with the High Street if they sell products that are widely available and this was one of the reasons why online sales continued to grow during the recent economic downturn while the High Street stalled.

Other types of e-business generally set their prices by reference to what their online competitors charge for similar goods and services.

Give some thought to:

• how you'll set your prices for the goods or services you plan to offer
• how often you'll review your prices
• whether you will offer discounts or special promotions
• whether you will charge for postage and, if so, how will you set those charges. 

Some online retailers offer free postage on all orders, others only on orders over a particular value

Competition

The level of competition you'll face is likely to depend a lot on the nature of your e-business.

If you're setting up as an online retailer then you'll be competing against other businesses that sell online as well as with shop-based retailers.

You may need to come up with an effective advertising and customer retention strategy to make sure that enough people find and then buy from your site.

To help with your decisions, contact your business adviser or mentor for guidance.

Once you have worked out a cash sales figure add it to the relevant field in your cash flow forecast.

Source: Santander

Free template available for download,