Drop Shipping Business Plan Template
If you want to start a Drop Shipping business or expand your current Drop Shipping company, you need a business plan.
The following Drop Shipping business plan template gives you the key elements to include in a winning business plan. It can be used to create a business plan for a drop shipping company or an ecommerce drop shipping business plan.
Drop Shipping Business Plan Example
I. Executive Summary
Business Overview
[Company Name], located in [insert location here], is a drop shipping company that focuses on providing drop shipping services to individuals and businesses in the surrounding community. The Company will work with the top suppliers to ensure affordable, on-time delivery. We will have an impressive list of integrations and sophisticated inventory management tools to support a large number of suppliers and products. The Company’s goal is to become one of the leading drop shipping companies in the area.
Products Served
[Company Name] will provide high-quality drop shipping services to its clients, for the following categories:
- Toys
- Home Goods
- Apparel
- Appliances
- Mobile Phones
- Shoes
Customer Focus
[Company Name] will primarily serve households and businesses within a 100-mile radius of the business location. The demographics of the customers is as given below:
- Households- 82%
- Businesses- 18%
Management Team
[Company Name] is led by [Founder’s name], who has been in the drop shipping industry for [x] years. [Founder] has a business degree. He has extensive experience in the drop shipping industry, working for leading drop shipping companies prior to starting his own company. He will have the help and support of his business partner, [Insert Name], who will handle the marketing and admin tasks for the company.
Success Factors
[Company Name] is qualified to succeed due to the following reasons:
- There has been significant growth in the drop shipping industry over the past few years. In addition, the company surveyed the local population and received highly positive feedback pointing towards an explicit demand for these services, supporting the business after launch.
- The management team has a track record of success in the drop shipping business.
- The Company will provide high-quality drop shipping services.
- The drop shipping company is a proven, successful business in the United States.
Financial Highlights
[Company Name] is currently seeking $160,000 to launch its drop shipping company. Specifically, these funds will be used as follows:
- Build-out and Startup costs: $62,000
- Working capital: $98,000 to pay for marketing, supplies and salaries until [Company Name] reaches break-even.
Top line projections over the next five years are as follows:
| Financial Summary | FY 1 | FY 2 | FY 3 | FY 4 | FY 5 |
|---|---|---|---|---|---|
| Revenue | $560,401 | $782,152 | $1,069,331 | $1,379,434 | $1,699,644 |
| Total Expenses | $328,233 | $391,429 | $552,149 | $696,577 | $776,687 |
| EBITDA | $232,168 | $390,722 | $517,182 | $682,858 | $922,956 |
| Depreciation | $7,000 | $7,000 | $7,000 | $7,000 | $7,000 |
| EBIT | $225,168 | $383,722 | $510,182 | $675,858 | $915,956 |
| Interest | $6,016 | $5,264 | $4,512 | $3,760 | $3,008 |
| Pre Tax Income | $219,152 | $378,458 | $505,670 | $672,098 | $912,948 |
| Income Tax Expense | $76,703 | $132,460 | $176,985 | $235,234 | $319,532 |
| Net Income | $142,449 | $245,998 | $328,686 | $436,864 | $593,416 |
| Net Profit Margin | 25% | 31% | 31% | 32% | 35% |
II. Company Overview
Who is [Company Name]?
[Company Name], located in [insert location here], is a drop shipping company that focuses on providing drop shipping services to individuals and businesses in the surrounding community.
The Company’s primary service includes delivering a wide range of products from globally recognized manufacturing brands at rock bottom prices to its customers within a 100-mile radius of the business location. The Company will run 24 hours a day and 7 days a week, with an effective and timely delivery system.
We will also have an impressive list of integrations and sophisticated inventory management tools to support a large number of suppliers and products. The Company’s goal is to become one of the leading drop shipping companies in the area.
[Company Name]’s History
[Founder’s Name] is an entrepreneur with a passion for drop shipping who seeks to provide a one-of-a-kind upscale drop shipping experience to the community by offering a wide selection of drop shipping services in one place. [Company Name] will become a known drop shipping company in [Location] that will engage in all aspects of business services synonymous with a standard organization operating in the drop shipping industry.
Upon surveying the local customer base and finding the potential retail location, [Founder’s Name] incorporated [Company Name] as an S-Corporation on [date of incorporation].
[Founder’s Name] has selected an initial location and is currently undergoing due diligence on each property and the local market to assess the most desirable location for the drop shipping company.
Since incorporation, the company has achieved the following milestones:
- Developed the company’s name, logo, and website
- Determined the list of services to be offered
- Determined equipment and inventory requirements
- Began recruiting key employees with experience
[Company Name]’s Products/Services
The Company will be offering drop shipping services in the following area:
- Toys
- Home Goods
- Apparel
- Appliances
- Mobile Phones
- Shoes
III. Industry Analysis
[Company Name] competes against small, individually owned drop shipping companies. The Drop Shipping market size is expected to grow exponentially over the next five years, reaching $125.45 billion.
Growth is mostly attributed to the increase in online shopping, coupled with the rising trend of cross-border e-commerce trade. Hence, the rise in demand for drop shipping services is predominantly influenced by the growth of the e-commerce industry. Rising smartphone penetration, coupled with increasing consumer disposable income, is contributing toward the growth of the e-commerce market, thereby driving the demand for drop shipping services.
IV. Customer Analysis
Demographic Profile of Target Market
[Company Name] will serve households and businesses within a 100-mile radius of the business location. The area it will serve is populated mostly by moderate to affluent people; as a result, they have the means to pay for higher quality services.
The precise demographics of the town in which the business resides is as follows:
| San Antonio | Fort Worth | |
|---|---|---|
| Total Population | 1,526,097 | 890,725 |
| Square Miles | 505 | 355 |
| Population Density | 3,789 | 2,710 |
| Forecasted Population Change by 2014 | -0.02% | -3.76% |
| Population Male | 48.04% | 48.84% |
| Population Female | 51.96% | 51.16% |
| Target Population by Age Group | ||
| Age 18-24 | 3.68% | 3.52% |
| Age 25-34 | 5.22% | 4.50% |
| Age 35-44 | 13.80% | 13.91% |
| Age 45-54 | 18.09% | 18.22% |
| Target Population by Income | ||
| Income $50,000 to $74,999 | 11.16% | 6.00% |
| Income $75,000 to $99,999 | 10.91% | 4.41% |
| Income $100,000 to $124,999 | 9.07% | 6.40% |
| Income $125,000 to $149,999 | 9.95% | 8.02% |
| Income $150,000 to $199,999 | 12.20% | 11.11% |
| Income $200,000 and Over | 32.48% | 54.99% |
Customer Segmentation
The Company will primarily target the following customer segments:
- Households: The biggest consumer will be households. Households purchase the most goods online and therefore require drop shipping services for a majority of their purchases.
- Businesses: Businesses have shifted to purchasing a majority of their supplies via ecommerce and thus require drop shipping services as well.
V. Competitive Analysis
Direct & Indirect Competitors
Shipify
Shipify is one of the leading providers of drop shipping services in town and has been in business since 1999. Shipify provides all types of drop shipping services from apparel to appliances to gadgets. Shipify provides both domestic and international shipping services.
Shipping USA
Shipping USA has been in the industry for xx years, catering to various groups of customers. Shipping USA provides drop shipping services in the area of sports and fitness, toys and games and electronics, etc. Shipping USA focuses on select product categories, vs. a vast product catalogue.
Drop Ship Inc.
Drop Ship Inc. is one of the leading providers of drop shipping services in town and has been in business since 2004. Drop Ship Inc. offers drop shipping services in consumer electronics and video game items. Drop Ship Inc.’s strength lies in its ability to focus on a market niche. Its services are only available domestically.
Competitive Advantage
[Company Name] enjoys several advantages over its competitors. These advantages include:
- Management: The Company’s management team has x years of business and marketing experience that allows them to serve customers in an improved and sophisticated manner than the competitors.
- Relationships: Having lived in the community for xx years, [Founder’s Name] knows all of the local community, media, and other influencers. Furthermore, he will be able to draw from his existing personal and professional relationships to develop an initial client base.
- Great services at an affordable price: The complete array of drop shipping services offered by [Company Name] nearly equals the most premium positioned competitor, [Competitor Name]. However, [Company Name] will offer these services at a much more affordable price.
VI. Marketing Plan
The [Company Name] Brand
[Company name] seeks to position itself as a respectable, upper-middle-market competitor in the drop shipping market. Customers can expect the best drop shipping experience for the services provided.
The [Company Name] brand will focus on the company’s unique value proposition:
- Offering a wide collection of high-quality drop shipping services
- Comfortable, customer-focused environment
- Moderate price point
- Providing excellent customer service
Promotions Strategy
[Company Name]’s promotions strategy to reach the audience includes:
Pre-Opening Events
Before opening the drop shipping company, [Company Name] will organize pre-opening events designed for prospective customers, the local community, and press contacts. These events will create buzz and awareness for [Company Name] in the area.
Advertisement
Advertisements in print publications like newspapers, magazines, etc., are an excellent way for businesses to connect with their audience. The Company will advertise its company offerings in popular magazines and news dailies. Obtaining relevant placements in industry magazines and journals will also help in increasing brand visibility.
Public Relations
[Company Name] will hire an experienced PR agency/professional(s) to formulate a compelling PR campaign to boost its brand visibility among the target audience. It will look to garner stories about the company and its products in various media outlets like podcasts, television stations, radio shows, etc.
Social Media Marketing
Social media is one of the most cost-effective and practical marketing methods for improving brand visibility. The Company will use social media to develop engaging content and post customer reviews that will increase audience awareness and loyalty.
Word of Mouth Marketing
[Company name] will encourage word-of-mouth marketing from loyal and satisfied clients. The Company will use recommendations and word-of-mouth marketing to grow the customer base through the network of its existing customers. The Company will be incentivizing its existing customer base to encourage their friends to come and try their services for the first time.
Special Offers
Offers and incentives are an excellent approach to assisting businesses in replenishing the churn in their customer base that they lose each year. The Company will introduce special offers to attract new consumers and encourage repeat purchases, which will be quite advantageous in the long run.
Pricing Strategy
[Company Name]’s pricing will be moderate, so customers feel they receive great value when availing of the drop shipping services. The customer can expect to receive quality services at a more affordable price than what they pay at an ultra-premium drop shipping company.
VII. Operations Plan
Functional Roles
To execute on [Company Name]’s business model, the company needs to perform many functions, including the following:
Service Functions
- Logistics and Operations Manager
- Sales manager
- Customer service
Administrative Functions
- General & administrative functions including legal, marketing, bookkeeping, etc.
- Hiring and training staff
Milestones
[Company Name] expects to achieve the following milestones in the following [] months:
| Date | Milestone |
|---|---|
| [Date 1] | Finalize lease agreement |
| [Date 2] | Design and build out [Company Name] |
| [Date 3] | Hire and train initial staff |
| [Date 4] | Kickoff of promotional campaign |
| [Date 5] | Launch [Company Name] |
| [Date 6] | Reach break-even |
VIII. Management Team
Management Team Members
[Company Name] is led by [Founder’s name], who has been in the drop shipping industry for [x] years. [Founder] has a business degree. While [Founder] has never run a drop shipping business himself, he has been active in the industry. He has extensive experience in the drop shipping industry, working for leading companies as a manager and managing it for xx years prior to starting his own drop shipping company.
Hiring Plan
[Founder] will serve as the Chief Executive Officer. In order to launch the drop shipping business, the company will need to hire the following personnel:
- Sales and customer service [Number]
- Part-Time Bookkeeper (will manage accounts payable, create statements, and execute other administrative functions)
- Human Resources and Admin Manager
- IT Manager
IX. Financial Plan
Revenue and Cost Drivers
[Company Name]’s revenues will come from drop shipping services. The major costs for the company will be the cost of supplies and salaries of the staff. In the initial years, the company’s marketing spend will be high to establish itself in the market. Moreover, rent for the prime location is also one of the notable cost drivers for the [Company Name].
Capital Requirements and Use of Funds
[Company Name] is currently seeking $160,000 to launch its drop shipping company. The capital will be used for funding capital expenditures and location build-out, hiring initial employees, marketing expenses, and working capital.
Specifically, these funds will be used as follows:
- Build-out and Startup costs: $62,000
- Working capital: $98,000 to pay for marketing, supplies and salaries until [Company Name] reaches break-even
Key Assumptions
The following table reflects the key revenue and cost assumptions made in the financial model:
| Number of client contracts | Annually |
|---|---|
| FY 1 | 40 |
| FY 2 | 45 |
| FY 3 | 55 |
| FY 4 | 65 |
| FY 5 | 70 |
| Average Commission | 70% |
| Annual Lease (per location) | $50,000 |
5 Year Annual Income Statement
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||
|---|---|---|---|---|---|---|
| Revenues | ||||||
| Product/Service A | $151,200 | $333,396 | $367,569 | $405,245 | $446,783 | |
| Product/Service B | $100,800 | $222,264 | $245,046 | $270,163 | $297,855 | |
| Total Revenues | $252,000 | $555,660 | $612,615 | $675,408 | $744,638 | |
| Expenses & Costs | ||||||
| Cost of goods sold | $57,960 | $122,245 | $122,523 | $128,328 | $134,035 | |
| Lease | $60,000 | $61,500 | $63,038 | $64,613 | $66,229 | |
| Marketing | $20,000 | $25,000 | $25,000 | $25,000 | $25,000 | |
| Salaries | $133,890 | $204,030 | $224,943 | $236,190 | $248,000 | |
| Other Expenses | $3,500 | $4,000 | $4,500 | $5,000 | $5,500 | |
| Total Expenses & Costs | $271,850 | $412,775 | $435,504 | $454,131 | $473,263 | |
| EBITDA | ($19,850) | $142,885 | $177,112 | $221,277 | $271,374 | |
| Depreciation | $36,960 | $36,960 | $36,960 | $36,960 | $36,960 | |
| EBIT | ($56,810) | $105,925 | $140,152 | $184,317 | $234,414 | |
| Interest | $23,621 | $20,668 | $17,716 | $14,763 | $11,810 | |
| PRE-TAX INCOME | ($80,431) | $85,257 | $122,436 | $169,554 | $222,604 | |
| Net Operating Loss | ($80,431) | ($80,431) | $0 | $0 | $0 | |
| Income Tax Expense | $0 | $1,689 | $42,853 | $59,344 | $77,911 | |
| NET INCOME | ($80,431) | $83,568 | $79,583 | $110,210 | $144,693 | |
| Net Profit Margin (%) | - | 15.00% | 13.00% | 16.30% | 19.40% |
5 Year Annual Balance Sheet
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||
|---|---|---|---|---|---|---|
| ASSETS | ||||||
| Cash | $16,710 | $90,188 | $158,957 | $258,570 | $392,389 | |
| Accounts receivable | $0 | $0 | $0 | $0 | $0 | |
| Inventory | $21,000 | $23,153 | $25,526 | $28,142 | $31,027 | |
| Total Current Assets | $37,710 | $113,340 | $184,482 | $286,712 | $423,416 | |
| Fixed assets | $246,450 | $246,450 | $246,450 | $246,450 | $246,450 | |
| Depreciation | $36,960 | $73,920 | $110,880 | $147,840 | $184,800 | |
| Net fixed assets | $209,490 | $172,530 | $135,570 | $98,610 | $61,650 | |
| TOTAL ASSETS | $247,200 | $285,870 | $320,052 | $385,322 | $485,066 | |
| LIABILITIES & EQUITY | ||||||
| Debt | $317,971 | $272,546 | $227,122 | $181,698 | $136,273 | |
| Accounts payable | $9,660 | $10,187 | $10,210 | $10,694 | $11,170 | |
| Total Liabilities | $327,631 | $282,733 | $237,332 | $192,391 | $147,443 | |
| Share Capital | $0 | $0 | $0 | $0 | $0 | |
| Retained earnings | ($80,431) | $3,137 | $82,720 | $192,930 | $337,623 | |
| Total Equity | ($80,431) | $3,137 | $82,720 | $192,930 | $337,623 | |
| TOTAL LIABILITIES & EQUITY | $247,200 | $285,870 | $320,052 | $385,322 | $485,066 |
5 Year Annual Cash Flow Statement
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| CASH FLOW FROM OPERATIONS | |||||
| Net Income (Loss) | ($80,431) | $83,568 | $79,583 | $110,210 | $144,693 |
| Change in working capital | ($11,340) | ($1,625) | ($2,350) | ($2,133) | ($2,409) |
| Depreciation | $36,960 | $36,960 | $36,960 | $36,960 | $36,960 |
| Net Cash Flow from Operations | ($54,811) | $118,902 | $114,193 | $145,037 | $179,244 |
| CASH FLOW FROM INVESTMENTS | |||||
| Investment | ($246,450) | $0 | $0 | $0 | $0 |
| Net Cash Flow from Investments | ($246,450) | $0 | $0 | $0 | $0 |
| CASH FLOW FROM FINANCING | |||||
| Cash from equity | $0 | $0 | $0 | $0 | $0 |
| Cash from debt | $317,971 | ($45,424) | ($45,424) | ($45,424) | ($45,424) |
| Net Cash Flow from Financing | $317,971 | ($45,424) | ($45,424) | ($45,424) | ($45,424) |
| SUMMARY | |||||
| Net Cash Flow | $16,710 | $73,478 | $68,769 | $99,613 | $133,819 |
| Cash at Beginning of Period | $0 | $16,710 | $90,188 | $158,957 | $258,570 |
| Cash at End of Period | $16,710 | $90,188 | $158,957 | $258,570 | $392,389 |
