How to create a business plan for your digital product store

Having a business plan together is absolutely vital when it comes to pretty much any type of business – but this is especially true for digital product stores.

It can be tempting to bypass this crucial step in favor of expediency; if you handle everything yourself, or sell your digital products as a side hustle, you might not see the immediate value in laying it all out. One of the biggest benefits to selling digital products is the increased simplicity – and it might seem like you just don’t need to bother with that boring old brick-and-mortar stuff.

This is a mistake.

In fact, your business plan is the very foundation on which your digital product store is built. Not only is it a useful blueprint for structure and logistics; your business plan guides just about every decision you make, and helps you ultimately create a business (and a brand) that is cohesive – and ideally, well-performing.

In short, it gives you direction.

Sure, there may be times when you don’t have all of the answers, or times when you need to forge ahead through uncharted territory. But, having a clear plan to draw from helps you stay focused, organized, and aware of what’s required to bring your vision to reality.

In addition to identifying and clarifying your goals and strategies, a good business plan communicates your mission to potential business partners and/or investors – and it focuses on your target audience, allowing you to hone in on who they are and the best ways to reach them.

In this week’s edition of The EDDit, we offer some guidance on creating a business plan for your digital product store, along with a template to help get you started!

Start with more than you need

If you haven’t written something like a business plan before, it can seem intimidating! But, most business plans follow a similar structure. We’ll just adapt this structure for digital product stores.

Getting everything together is the first step. You want to have more than you need to work with; when it’s time to actually write your business plan, you can trim everything down.

If you’re just starting out, you might want to peruse our posts about selling different types of digital products to get a better idea of what’s required for your specific venture. We’ve covered eBooks, software, services, audio and music, photographs, graphics and digital artwork, digital courses, video, documents, web-based services (SaaS), WordPress themes, and WordPress plugins.

We’ve also talked about everything from digital product pricing and digital product store security, to launching your product in a crowded market and some common mistakes to avoid when launching your digital product store – so check it out if you need some inspiration!

Once you have a good overview, you can better answer the questions that will help you complete your business plan.

A template designed for digital product stores

Conventional business plans tend to have a summary or executive summary section that highlights the major points, and is often written last (after you’ve fleshed out the bulk of your plan). But, when it comes to digital product stores in particular, I tend to err on the modern side.

There’s no reason why your business plan has to be excessively long. Your goal is to paint a complete and accurate picture, and communicate the most important details.

So, in the spirit of keeping things as clean and succinct as possible, we’ll forego the summary section, and replace it with something straight to the point – and easily readable. This not only helps you get extra clear about your mission; it also makes things a lot more enjoyable for those reading your business plan!

1. Business (or product) description

Your business description will be one of the first things anyone sees when they read your business plan – and it’s an integral part of your brand association. Here’s where you want to be able to describe your business in (ideally) one or two lines.

Your business description should be something that you can easily explain to anyone on the street.

If you’re creating a business plan for a specific product, just focus on your product instead. Some digital product businesses are just a single product (think software, SaaS, etc.).

Example 1:

Easy Digital Downloads is a complete eCommerce solution for selling digital products on WordPress.

Example 2:

Organic Themes provides minimal and responsive WordPress themes and page builder widgets optimized for the Gutenberg block editor.

Example 3:

Looplicious is a boutique live instrument and vocal sample label. We are dedicated to inspiring and enabling electronic music producers with unique and versatile sample packs that are carefully curated for quality and maximum usability.

Questions to answer:

• Who are you and what are your values?
• What are you selling?
• What distinguishes your product from the rest?
• Who are you selling to?

2. The problem

This section paints a picture of why your digital product store should exist in the first place. Why are you creating your store? What’s the problem that you’re aiming to solve?

Highlight the gap in the market that made you want to start your store, or the need you saw for a particular type of product. Write a paragraph or two to communicate these main points.

Example:

We dreamed of an easy-to-use affiliate marketing solution that looked and felt like WordPress. We yearned for a platform that put the utmost importance on reliable tracking and accurate data. And we longed for a system that delivered the features needed to make setting up an affiliate program ridiculously simple.

Fed-up with frustrating experiences using other unreliable systems already in the market, we wanted an affiliate system that we loved to use.

Questions to answer:

• What inspired you to start your digital product store?
• What market are you going after?
• What problem have you identified within that market?
• What complaints or criticisms do people have of your competitors?

3. The solution (your brand / product)

How does your business solve the problems you’ve highlighted? What solution does it provide your customers? How does it fill the market need you’ve identified?

This is a good place to highlight the competitive edge that your store or product brings to the table. What is your unique value proposition?

“Also known as a unique selling proposition (USP), your UVP is a clear statement that describes the benefit of your offer, how you solve your customer’s needs and what distinguishes you from the competition.”

Unbounce

Example:

With AffiliateWP, you get an easy-to-use, reliable WordPress plugin that gives you the affiliate marketing tools you need to grow your business and make more money. It’s designed to help you easily set up and run a successful affiliate program. AffiliateWP takes the hassle out of affiliate marketing so you can spend time focusing on what is most important — running your business.

Questions to answer:

• How does your product improve the lives of your customers?
• What solution does your product provide?
• What makes your product unique or different from the competition?

4. Target market

It’s important to understand your target market and have a vision of your ideal customer in order to effectively sell your products to them. When it comes to your business plan, think about who you think will benefit most from your products, who needs your products, and who wants your products.

You should investigate where your target customers spend their time, what they are looking for, and what kind of money can be made selling your products.

Questions to answer:

• Who are you selling to?
• Are you entering a niche market? Is your market large? Small? Saturated?
• What communities are your target customers a part of? What social media platforms do they use?
• What are the characteristics of your ideal customer? Do you have a buyer persona? What about demographics?
• What problems do these people encounter, and how can you solve them?
• What products do your target customers already buy and use?
• What’s the average profit margin of your niche?

Defining your target market is crucial, because when you’re just starting out, it’s unlikely that you can afford to advertise to everyone. Furthermore, if you want to compete with larger, established businesses, appealing to a specific niche is a must.

If you need help defining your target market, think about your products and work backward from there; what are all of the features? How do those features translate to real-world benefits? Who are the people that would want those benefits?

5. Competition

Give a brief summary of your competition. Where do your customers shop, and how are those businesses similar or different to yours?

You’ll want to investigate how your competitors promote their products, and what else seems to be really working well for them in terms of engagement. Although you can’t necessarily know exactly how well they’re doing sales-wise, you can glean some idea of engagement from their social media posts, for example.

Questions to answer:

• Who are your primary competitors, and who are the frontrunners within your niche?
• What are their strengths and weaknesses?
• What products are competing with yours, and how are they priced and marketed?
• Does your target market overlap entirely with your competitors?
• Can you go after a related market and make a bigger impact?

6. Operations

This is the section of your business plan that covers the overall production, sale, distribution, and delivery of your products, as well as any ongoing considerations beyond the sale, such as support and updates.

Team

Describe your team – this can include freelancers you work with, web designers, product creators, business partners, and staff. If you’re bootstrapping it, list who you plan to hire (if applicable) as you grow.

Questions to answer:

• Who is a part of your team, and what are they responsible for?
• Do you have business partners?
• Do you need to hire any outside help?

Product creation, distribution, and delivery

Think about the process of getting your product from conception to the customer. Describe how you will make your products, sell them, and deliver them.

Questions to answer:

• Who creates the products? What’s your product creation process?
• Do you want to distribute other people’s products as well, or just sell your own?
• Will you distribute your own products on marketplaces to gain traction?
• How will customers receive their purchases?

Documentation

Since digital products are not tangible, and can be infinitely reproduced (in many cases), they are often licensed to the user – not sold. This means that they also require an end user license agreement, and often other forms of documentation that help customers know how to use them, how to get the most out of them, and any limitations they should be aware of.

Questions to answer:

• What kind of documentation do you need to create?
• Will you have a documentation database and/or tutorials for your products?
• Do your products require license agreements?
• What about terms and conditions?
• If you’re distributing other people’s products, do you have specific product submission guidelines, vendor / product creator agreements, etc.?

Support

It’s important to decide how you will communicate with your customers – especially when it comes to support. Some digital product stores keep it limited to a simple support page and contact form; others utilize Facebook, Twitter, and website chat bots, to name a few.

Questions to answer:

• Who’s going to be handling customer support?
• What support channels will be available to your customers?
• Do you need to hire support staff?

Product updates

This can include things like new versions of software, updates to plugins (for compatibility, etc.), and new editions of eBooks, for example. If your products require updates, detail how you plan to provide them.

Expenses

Expenses make up a core part of any business plan – and you’ll want to at least have a rough idea of what you’re going to spend. After all, it’s hard to make financial decisions without having a handle on the baseline amount required to run your store (and create products).

Questions to answer:

• What expenses will you have?
• What’s your estimate for the monthly and yearly cost of running your digital product store?
• What’s your average product creation investment?

Taxes

Digital product taxes can be tricky, especially with the constant changes in eCommerce and related laws. Check out our post on dealing with digital product taxes for some insights.

Questions to answer:

• Do you need to collect sales tax, according to your local jurisdiction? If so, what percentage(s)?
• What tax issues do you expect to run into, and how will you handle them?
• Do you have a tax accountant available to you, or do you plan to hire one?

Risks and obstacles

Acknowledging the risks involved in starting your digital product store, and the obstacles you anticipate is important for several reasons. First, it keeps you cognizant of what you need to be prepared for (and avoid, if possible); and it also shows anyone reading your business plan that you’re realistic, you know what you’re getting into, and you have the capability and the plan to get through the ups and downs.

Questions to answer:

• What are some risks you’re taking, and some potential issues you might run into?
• What are some common obstacles when it comes to your specific niche, your products, your budget, etc.?
• Do you have backup plans of action, should those issues arise?

7. Marketing

Now it’s time to outline your plans for promoting your products. Think about what you plan to use for marketing – and ideally, what you’ve found through research to be effective with your target audience.

Here are a few common channels and methods you might include:

• Social media platforms
  • Facebook
    • Posts using video, images, and written content
    • Stories
    • Live videos
    • Sponsored posts / ads
  • Instagram
    • Posts using video, images, microblogging
    • Stories
    • IGTV
    • Influencer marketing
    • Instagram takeovers
  • Twitter
    • Mentions and retweets that interact with industry figures and your target audience
    • Posts with lead generators like how-to guides and other downloadables
    • Community engagement
  • YouTube
    • Product reviews or mentions on popular or industry niche channels
• Promotional videos / ads
• Content marketing
  • Blog posts on industry topics
  • Tutorials and how-to guides
  • Lists of tips or resources
• Email marketing campaigns
• Google Ads
• Cross-promotion
  • Guest blog posts
  • Interviews
  • Co-branded promotions
  • Joint advertisements
• Competition, contests, and giveaways
• Podcasts
  • Ad placement
  • Topical information
  • Product reviews
  • Advice and how-to recommendations

8. Financial plan

Finally, it’s time to define your revenue goals, funding needs, and financial expectations. Whether you are raising money or bootstrapping your business entirely, it’s good to have these things in writing.

Questions to answer:

• How much revenue do you need to make per month to break even?
• What’s your starting monthly revenue goal? Your yearly goal?
• What are the specific milestones you aim to reach in your first year?
• What amount of funding do you need in order to launch your store?
• Are you taking out any loans? If so, what goals do you need to meet in order to repay them, and what’s the timeline?

Don’t be afraid to show a bit of passion

Although creating a business plan can feel a bit dry, business trends are pointing more and more toward personal elements that create emotional connections with people. So, whether you’re using your business plan for your own purposes, or showing it to others – including potential business partners, investors, people on your team, or even customers – don’t be afraid to be yourself, express your personality, your values, and passion for what you do!

Nothing is more compelling than believing 100% in what you’re doing, and having the research and detailed plan to back it up. It’s okay to share things like mistakes you’ve made and learned from, obstacles you have yet to overcome, and problems that you want to solve in the future.

What drives you to create your digital product store? What are you passionate about?

These are the questions that will help you write a business plan that’s in line with what you’re all about – and that’s the plan that will keep you on track and help you along the journey to building a thriving digital product store!

Have you created a business plan for your own digital product store? Is there something we should add to this post? Chime in below and let us know!

Illustration by Jessica Johnston.