The fast pace of eCommerce makes it a high-risk venture for many first-time business owners, and unfortunately, some online stores will shutter. According to the Bureau of Labor Statistics, approximately 20% of all small businesses fail in their first year, and about 50% fail by their fifth year.
Dozens of different obstacles can block the path to business success, from market trends that turn on a dime to being undercut by competitors to being locked into long-term vendor relationships. Popular products consistently change, and attribution models reveal new avenues for reaching customers by the second.
All of this means your business needs to be constantly propelling itself forward with around-the-clock effort if growth is your goal. However, it’s important to note that constant growth is not always the ultimate goal for every eCommerce seller. Some entrepreneurs view their eCommerce business as a lifestyle endeavor. Once they achieve their desired revenue or profit, they may choose to invest their time in personal goals, hobbies, or family.
This article provides tips for those who are still on their journey of business growth and aim to achieve further success. If you’re looking for tips on how to automate your business to unlock more time for your personal growth outside of your business, stay tuned for an upcoming article.
Improve Inventory Management
- Work with a 3PL service that can manage your distribution network.
- Never rely on a single supplier for critical products or supplies.
- Create a real-time dashboard of your inventory levels, especially if you sell across multiple platforms.
- Automate, and then automate some more.
Optimize Cash Flow
According to U.S. Bank, 83% of small business failures are driven by cash flow challenges. It doesn’t matter if your business had an excellent quarter if you’re out of funds by the following one. Develop spending strategies, revenue forecast models, and strict budgets to keep your cash flow in check. You’ll need funding; it’s critical to align funding payment cycles with your business cycles. Don’t use mid or long-term loans for short-term needs. And don’t use short-term financing for long-term needs. Leverage credit cards, but don’t allow them to build a balance.
As you’re building your business, you can leverage credit cards to generate points (non-taxable). Make sure to pay them off on time. You can leverage short-term financing products to pay down credit cards – enjoying the interest free period on the credit card and reducing the time you’re borrowing short-term funds, which will reduce the associated fees.
Here’s an example. Buy your inventory on a credit card early in the billing cycle. About a week before payment is due, go to your preferred short-term financing provider and draw funds to pay off the inventory you purchased on your credit card. You’ve enjoyed 30 to 45 days of interest-free borrowing plus, received credit card points, and have likely received your inventory. The average inventory turnover cycle in eCommerce is 54 days. Now, take out short-term financing for 60 days – you’ll typically lower the price by 30% to 50% as you’ll need the money for a shorter period of time.
While your budgets and campaigns may change throughout the year, creating a general plan helps protect your business. Along with ensuring your expected inflow of cash stretches across off-peak months, you should also develop strategies for emergency cash so you can make it through rough patches without having to panic.
Stay Consistent with Marketing Efforts
Continuously market and advertise your brand and your products to generate demand. This includes paid ads, social media marketing (organic and paid), influencer campaigns, email marketing, earned media programs, and more. As you reach consistent sales, paid advertising becomes a recurring investment; one that short-term lenders will fund. Or, use your credit card, receive your points, and draw from your short-term lender when you draw for inventory. Because you’re drawing for 60 days, you’ll save money while avoiding maxed-out credit cards, high-interest credit card fees, and penalty fees.
Multi-Channel eCommerce and International Expansion
One of the advantages of having an online business, as opposed to a traditional brick-and-mortar store, is having simpler means of introducing products to a larger audience. One way to grow your business more quickly and unlock more revenue streams is through selling your products on more eCommerce platforms. If you sell using Shopify, consider expanding to Amazon or a newer online platform such as TikTok. You’ll reach new audiences faster. In addition, there’s a risk factor if you only sell on one platform. For example, if that platform changes its ad regulations and site maintenance to a degree that you do not like, you have no other option to fall back on.
Further, if your product has global appeal, consider adding international shipping to your offering. It may sound daunting at first, but international shipping can be as simple as domestic shipping IF you find the right software. Look for a shipping solution that offers all the benefits of domestic shipping such as discounted labels, tracking updates, and shipment fulfillment. Importantly, also find a software partner that can auto-populate customs forms, calculate the best harmonized code for international orders, and use multiple carriers.
Shipping expenses generally eat up 5% to 12% of total revenue, so this is another expense to fund on a credit card, generate points, and then consider using working capital financing to pay down over time. Given the short time frame between shipping a product and receiving sales proceeds, be careful not to over-extend yourself. Some expenses are better paid and not borrowed against to draw out the time to repay. That said, if your credit card is maxed out, you won’t be able to pay for the shipping label to send your next order.
Improve Tech Stack and Infrastructure
This matters for both customer experience and internal workflow management. Assess your business’s current tech stack to strip away as many manual or non-standard processes as possible. Prioritize automation and hands-free functionality, especially if you work alone or only have a small team.
Out of all the markets, eCommerce might just be the one that changes the fastest. While the tech market continually evolves and general retail is full of fads and sudden twists in focus, eCommerce bears the brunt of both factors. That means your online business needs to be propelling itself forward with around-the-clock effort if that aligns with your goals. But always remember, if constant growth is not your priority, it’s perfectly valid to reach a comfortable level of success and then focus on other life pursuits.
Whether you’re aiming for the next big milestone or enjoying the fruits of your current success, these tips can help you manage your eCommerce business effectively.
Eric S. Youngstrom is Founder and CEO of Austin-based Onramp Funds, an innovative funding provider that supports the growth of eCommerce businesses. Eric leads a team steeped in eCommerce, providing financing and other resources to empower online merchants to scale their businesses and achieve their dreams.
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