As the recession deepens thousands of smart people are going to be out of work. They may sit at home whinging, maybe work at B&Q, but for many this is the time to use that redundancy package to start a business,  maybe an e-commerce website.

What are investors looking for?

A successful business needs four things to succeed:

1. The Idea
2. A Market
3. Smart people
4. A way of delivering the product at a profit

If the idea is bad, the people are dumb, the market is not there, or the profitability is not there then the business will fail. So the business plan is going to focus on these areas.

1&2 The idea and the market

You need to be able to explain the idea in non-technical terms and why you think there will be a demand. There must be something which no-one else claims to do - a Unique Selling Proposition (USP).

Maybe there isn't a USP. Maybe you can succeed against competitors who sell the same thing at the same price and who are already established. If so you will be relying on massive marketing costs to overwhelm the competition. Plumbers don't need a USP but in the e-commerce world you need something, a niche, a benefit, to lift you above the competition.

3 Smart People

The CVs of the key staff are an essential part of the mix. If it is an internet-based business, do they understand how the internet works? If not, you had better learn. 

We are working with a startup in the logistics business that is going like a train. The senior staff are all senior ex DHL people, and they have the smarts, the industry knowledge and the contacts to drive the business forward. If you or I tried we would be lost. Industry knowledge is vital.

4 Delivery and profit

An important part of the financial package is a cash flow forecast. Create a spreadsheet with months along the top and revenue and cost headings down the left. Add up the revenues for each month and add up the costs. The last line is the bank balance per month.  Model cash flow with different assumptions about things like conversion rate or marketing costs. You may be able to identify critical numbers which you may need to research further.

This is where the number crunching comes in. The profit is the different between two large numbers, costs and sales. You can estimate costs to the penny, but sales are probably a wild guess. The marketing plan needs to somehow identify the cost of getting a specific number of sales.

If the enterprise is an ecommerce website, PPC (Google Pay Per Click) may be a very important part of the marketing mix. A fairly simple website and a small budget should give you a really good idea of PPC costs. Find out from the Google tool what cost per click to expect from each keyword, then buy those keywords at a much lower price. Then ratchet the price upwards in small increments until you begin to see click-throughs. You may find that the Google estimate is a tad optimistic.

PPC  estimates will give you a good idea of the cost of getting each visitor.  Multiply this but the percentage of visitors you expect to buy (conversion rate) times the average expected sale (your best guess)  to give you a sales figure for a particular PPC budget.

I can't help you with average sale, but conversion rates are available from a couple of places:

• Coremetrics (UK and US)
• Fireclick index (US)

Interestingly the UK conversion rates tend to be higher than US but are heading downwards year on year. Generally if you get over 5% I would say you are doing quite well. You can buy more detailed conversion rate data for your industry from Coremetrics.

Unfortunately the modelling can turn into an exercise where you find the numbers that give the right answer. Beware - this is a trap. You have to be objective and conservative. I had a discussion recently where the entrepreneur insisted he was going to achieve 10% conversion - in fact his model depended on it.

Hey, I have only been in the internet business for 14 years - what do I know? 

About the author Bob Browning has been working on web development projects since 1995. He heads a small team of web developers in London who work with designers on their web projects. If you need help with web technology please check our website: http://www.textor.com By the way, there is a handy checklist of ecommerce questions on the Textor website which you may find useful. Article Source: http://EzineArticles.com/?expert=Bob_Browning