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FBA Business Plan: Why It's a Must for Amazon Sellers

Threecolts
Geri Mileva
Published
May 6, 2024
Modified
May 7, 2024
FBA Business Plan: Why It's a Must for Amazon Sellers

The minimal requirement for opening a Fulfilled by Amazon (FBA) business is a double-edged sword. On one side, almost anyone can open an eCommerce store and profit from it. On the other, with $700 billion worth of products sold last year, the marketplace is saturated. To outshine your competition, you need a well-thought-out FBA business plan.

A Closer Look at Amazon Business Plan

An FBA business plan outlines a comprehensive strategy for successfully selling products on Amazon. It aims to show an organized plan for starting and expanding your business. Three key elements must be evident in your business plan:

  • Business Overview
  • Business Goals
  • Financial Projections

Additionally, it covers various aspects of the business, including but not limited to:

  • Market research
  • Marketing approaches
  • Target demographics
  • Product sourcing
  • Pricing strategies
  • Inventory management
  • Competition analysis
  • Customer service

A business plan lowers risks and costs amid tough competition and evolving eCommerce trends on Amazon. It offers data-driven insights so you can make informed decisions, acting as a roadmap that guides your business to its intended destination.

Your FBA plan will be beneficial when you scale your business. It can help you secure funds when dealing with potential partners, investors, or financial institutions. It also plans out the growth of your FBA business and should be modified yearly as your business expands and changes.

3 Benefits of Having an FBA Business Plan

Detailed planning leads to streamlined and transparent operations. A well-developed business plan can act as your compass.  

  1. It provides a clear roadmap to help your business grow.

Running a business is rarely linear. Every year, the economy changes, new rules emerge, technology advances and digital marketing evolves. Running a business without a detailed plan is like driving blindfolded in this unpredictable environment.

Your FBA business plan is your roadmap, as it:

  • Defines your starting point: It clearly outlines your business's current status. It provides a practical view of which strategies are effective, what requires improvement, and what should be eliminated.
  • Sets your destination: It gives your business a clear direction for where you want it to be in a year, five years, and so on. It helps you define your goals and targets, such as revenue or adding new products. 
  • Plots the best route: It charts the ideal routes to achieving your goals and targets, outlines actions and strategies, and helps you determine the most effective route. 
  • Provides detour options: It provides contingency plans if the best routes are blocked by challenges like market changes, new competitors, or sudden issues with fulfillment services. A well-developed business plan anticipates these challenges and has alternative routes to keep you on track.
  • Tracks your progress: It gives you indicators to see how far you've come. These metrics help you monitor how well you follow your plan and see if it needs adjustments.
  1. It helps your business scale.

A business plan is valuable to a business regardless of its size. However, it has added value for established FBA businesses seeking to scale. Expanding your business requires juggling many balls; without a detailed plan, you're bound to drop a ball or two. 

Your FBA business plan helps you:

  • Identify opportunities to scale: Your plan audits and evaluates your current operations. This data lets you pinpoint scalable opportunities and optimize your FBA success
  • Outline the needed resources: Expanding your business means expanding your resources. Your plan can help you determine the capital and inventory you need to scale and whether you need an additional workforce. 
  • Unify your visions: Your business plan connects your existing strategies to new ones to achieve your long-term goals. This ensures consistency and cohesiveness across the board. 
  1. It aids in raising and securing funding.

A comprehensive business plan means transparency, which is an essential factor for potential partners and investors. Your FBA business plan becomes a crucial tool they'll examine to see if investing in your business is worth the shot. Your potential financiers will need assurance that you have a clear understanding and roadmap of your business. Your documented plan is proof of your business's potential for growth and profitability.

3 Recommended Approaches in Writing an FBA Business Plan

It's important to remember that while Amazon FBA plays a significant role in your business, it's not your overall business. When writing your plan, don't just concentrate on the FBA aspect. 

  1. Do comprehensive market research.

Nine out of ten Amazon sellers say their business is profitable. While it's good news, it also highlights the fierce competition among Amazon sellers. To set your business apart, you must understand your market thoroughly, including your industry, niche, products, audience, consumer behavior, and industry trends. A market-driven business is more appealing to investors than those driven by new technology or services. Your product's market value and profitability potential are more important than its technical features.

Market research can involve various methods and tools. For product research, you can use Threecolts or AMZScout to determine the profitability of your product. Threecolts has a range of services and solutions to help you with specific studies. For instance, if you sell books on Amazon, you can use ScoutIQ to check which books are always in demand. You can also use FW Alerts to monitor your brand reputation.

Make sure to conduct a competition analysis and analyze your rivals. Look into their strengths, weaknesses, marketing, and pricing strategies. This will help you differentiate your selling proposition and avoid frequently used tactics.

  1. Keep your business plan clear and specific. 

This is applicable in two different ways. First, you need to be clear and concise in your wording. Use a professional tone fit for business, but avoid using jargon. High-frequency words can be misunderstood, and fluff content doesn’t add anything of value. Make sure to keep the structure uncluttered. 

Second, have clear goals and specific strategies. Set aside your gut feeling and focus on data-driven insights. Use quantifiable targets, and avoid generic tactics or simple summaries. Outline step-by-step action plans. Specificity reveals your in-depth knowledge of FBA services. Most of all, make sure your goals are SMART. 

Keep your business plan clear and specific
  1. Make regular updates.

Revisit your FBA business plan often to ensure you're on the right path. Conduct a quarterly review to track your progress and update the plan according to changes in market conditions. Neglecting to do this just defeats the purpose of your business plan.

Key Elements of an FBA Business Plan

There are many elements you can include in your business plan. The more your business grows, the more extensive your plan will be. Here are some key elements that should be included:

Executive Summary

An executive summary sums up the critical points of your business, providing a high-level overview. It should persuade the reader, particularly potential partners, to take a closer look.

Ideally, the summary should be one page. That means you highlight only the salient information of your business. Briefly introduce your company and its key members, describe your business model, identify your value proposition, and emphasize the elements that differentiate your FBA business from the competition. 

Despite being the first section of the business plan, it should be the last thing you write. 

Example Template:

(Company Name) is an Amazon FBA business from (location) delivering high-quality products within the (specify product niche) category.

  • Problem: (Briefly identify a main customer pain point or an undeserved need within your target market).
  • Solution: (Describe how your product/s directly solved the stated problem.)
  • Market Opportunity: (Estimate the niche market size and provide growth potential opportunities.)
  • Competitive Advantage: (Provide at least three main factors that make your FBA business stand out.)
  • Financial Projection: (Provide projected sales, profit margins, and growth expectations for the first three years.)
  • Funding Request (If Applicable): (State the amount of funding sought and how the capital will be used to scale the business.) 
  • Team: (List founders and key personnel in your business).

Company Overview

This section is an in-depth look into your company. It should include the business name, history (for established businesses), and owners or founders. As an FBA seller, you should note your FBA business model, such as an arbitrage reseller or white-label. It's essential to add the company's mission and vision. Provide short-term and long-term goals.

Example Template

  • Company Name: (Business name)
  • Location: (Address)
  • Founding Date: (Month/Year)
  • Business Structure: (Specify the legal structure of your business.)
  • Business Model: (Specify your FBA business model.)
  • Product Niche: (Identify your target product category.)
  • Sourcing Strategy: (Briefly note your sourcing methods.)

If you're adding a company history, highlight the key points:

(Owner's name) is an experienced entrepreneur in (industry) who identified a gap in the market for (state product line or category). With a keen understanding of consumer preferences, (Owner's name) founded (Company name) in (year).

Building on (Owner's name) expertise, (Company name) successfully developed distinctive product lines. Initially starting with (mention a few early products), the company quickly gained recognition within (location.) Currently thriving in (location/s), (Company name) has established a loyal customer base and plans to expand (nationally/globally).

Marketing Plan

This critical section comprehensively outlines your business's sales and marketing strategies. Start by listing your key marketing goals with a timeline, and be specific. 

Comparison Table

YES

NO

Grow market share from 2% in 2024 to 6% in 2027. Grow market share.
Increase annual share by 25% or $150,000. Boost annual share.
Boost customer retention by 10% by the end of the year. Improve customer retention.
Made with HTML Tables

Focus on the four Ps of marketing (product, pricing, placement, and promotions) when creating your marketing plan. Organize your strategies around your SMART goals like this:

Marketing Plan

Specify the type of marketing strategies you'll use to achieve your objectives, such as:

Along with the marketing tactics, list the budget per strategy. 

The same thing applies to your sales strategies. Write, in detail, how you will promote your products to increase sales. You can use the following tactics:

Part of the sales and marketing strategy is your tactics to acquire new and retain old customers. Make a list of strategies for customer retention as well. This may include:

  • Loyalty Programs
  • Incentives for Feedback Solicitations

Here's an example of how you can structure your marketing plan:

amazon fba business plan

Competitive Analysis

A huge part of having a business plan is showing that your FBA business differs from your rivals. This section will compare your product, marketing strategies, and operations to those of your competition. A competitive analysis will help you identify your Unique Value Proposition or how your product differs from or is better than others. 

Different methods can present this analysis. A commonly used method is SWOT, which evaluates the Strengths, Weaknesses, Opportunities, and Threats of your and your competitor's products. 

how to do a swot analysis

Don't analyze and list all your competitors. Stick with the ones you're most actively competing (or will likely compete) with. Assess and compare the following:

  • Products: features, services, segmentation
  • Pricing: model, tiers, options, discounts
  • Audience: demographics, psychographics, pain points, habits, needs
  • Marketing: website, email, social media, advertising, PR
  • Differentiators: quality, sustainability, variety, convenience, social impact

At the end of this section, list your competitive advantage outside of what FBA services provide. For example, if you have built a solid social media presence on your own, highlight how you have a base they can reach out to and a community they can be a part of. 

Operation Plan

The operation plan section outlines how to turn your plans into actions using the data you've consolidated. It provides an in-depth description of the daily operations of your business and how each step contributes to achieving your goals. These operations may include, but aren’t limited to:

  • Sourcing your products: List your manufacturer or supplier, the tool you use for product research, lead time, minimum order quantities, and quality control process.
  • Managing your inventory: Detail the sale estimates and inventory refill methods. Use historical data for data-driven insights. 
  • Fulfilling orders: Discuss how using FBA services benefits your business. Describe how you prepare your products in compliance with Amazon requirements. Include if you're using or plan to use a hybrid approach to ensure smooth operations during peak seasons. 
  • Handling logistics: Outline how you ship your products to FBA warehouses to avoid shipping snafu. Note how you handle returned products.
  • Providing customer support: Discuss how you provide customer assistance apart from using FBA services. List the channels and platforms where your potential customers can reach you.
  • Utilizing software and tools: List the software and tools you use to run, scale, and optimize your FBA business, like the ones from Threecolts

Your operation plan sets the benchmark for your business. Short-term goals involve smoothly running the day-to-day operations of your FBA business. Long-term goals are milestones you want to achieve.

Financial Plan

This is one of the most critical parts of your business plan. In general, it's also the most extensive and requires regular checkups. If your FBA business plan is intended for potential partners and investors, this part should be as detailed as possible. Brief or broad, though, your financial plan must be rooted in reality. That means exact sales figures, profit and loss, and costs. For projections and goals, base the assumed numbers on facts. 

Include a financial model for the next three or five years. The financial statements must be broken down monthly, quarterly, and yearly. Included in this model are your:

Income statement (Profit and Loss)

Ideally, your Profit and Loss statement should show substantial growth, stable profit margins, and positive net profit.

income statement profit and loss

Balance sheet (Assets, Liabilities, Equity)

This explains your business's capital structure, investment, and financing policies. To honestly assess the financial risks, your potential partners must see and compare the financial debt level on the balance sheet to the equity value. Any financial debt must be repaid, which increases the risk, while equity doesn't need to be refunded. 

Balance sheet (Assets, Liabilities, Equity)

Cash flow statement

This determines how much money you need to scale your business without draining your resources. Your cash flow statement must detail your operating, investing, and financing cash flow. 

cash flow statement

Apart from these crucial elements, your financial plan section must discuss revenue streams and break-even analysis.

You can add a Management section and an Appendix apart from these key elements. The management section highlights the key members of the business as well as their roles, experience, and expertise. This section is best suited for an established FBA business. A solopreneur or a small business may not need this section. Instead, the names of the personnel can be added to the company overview. 

The Appendix section is not a requirement but a bonus section. It's where you can add more information about your product lines and trademarks. You can put an exhaustive list of your marketing materials and packaging designs. You can also put the company's contact information, including social media profiles.

Final Thoughts on Having an FBA Business Plan 

Benjamin Franklin said it right: "By failing to prepare, you are preparing to fail." Without a well-developed plan for your FBA business, you're putting your company at risk. Help set your business up for success by creating an FBA business plan to serve as your guide to navigating the treacherous eCommerce landscape. 

You can make this easier by using Amazon tools and resources to help ensure your plan is accurate and relevant, such as Threecolts—a multi-solution platform for your Amazon needs. It has unique solutions to help your FBA business grow and thrive against stiff competition. Contact us now to learn more.

Browse through and read our other blog posts that are data-driven insights with our very own proprietary data and learn more on Mother's Day trends and best practices, Easter sales, price elasticity of demand, Amazon FBA fee changes, Amazon product title optimization, winter seasonal products, Amazon end of year sales, Valentine’s Day trends and best Amazon fulfillment centers by location and throughput.

Learn with Threecolts

Small group workshops to help you learn, optimize, and grow.