After the excitement of launching your business and delivering your first sales to your first customers it’s time to embrace the day to day running of a successful online business.
The reality is that the vast majority of online businesses don’t make it to 6 months, let alone 12. So if you are going to make a real go of this then it’s time to put a plan in place and define what success is going to look like for you.
Starting with the question:
What is this online store going to represent in my life?
If you answered “a multi-million dollar business that runs itself and brings me fame and freedom” you may have gotten ecommerce confused with the lottery. While there are stories of wild success in the world of online retail, your chance of hitting the perfect storm of product, market, promotion and pricing off the bat is about as likely as winning the lottery. So if you think this is going to be as simple as just putting up a website, then save yourself some time and invest your money in scratch tickets.
For the rest of you who aren’t afraid of a bit of hard work and learning new things, let’s look at this practically. The amazing thing about selling online is the range of forms it can take as a business. It can be creative or practical, products can be virtual or hand crafted, you can run it from anywhere, and do it in your own time.
If you want a no fuss business that makes $1000/week with only a couple of hours work per day, work hard and have laser focus on that goal and you have a good chance to achieve it in a years time.
If you want a high volume business that sells $1m of product a month, well that might take a couple more years and the hiring of some staff, but it’s all do-able.
If you are looking to make ecommerce a full time enterprise, or you are adding an online sales channel to an existing “brick and mortar” retail business, you can learn more about scaling up in the GROW section of this website.
For now lets look at what separates successful enterprises of any size with the thousands of stores that have fallen by the wayside. It comes down to one word: Processes.
You need to be willing to plan out the way you approach the everyday tasks that happen within your business so you can track what is working. Then you need to document them to make them bulletproof and easily repeatable.
This may sound obvious, but for most of us it’s an entirely foreign habit that goes against the creative, risk-taking, entrepreneurial instinct that drives us to start down this path in the first place.
Nothing kills the excitement of diving in the deep end and throwing it all to the wind than having to carefully write out the instructions in language that a 6 year old can follow.
However the logic behind process mapping is solid;
- Repeatable, proven and streamlined processes can be reliably outsourced. Either overseas to more cost effective labour OR to machines. Software loves process. In fact it is just a bunch of processes. So if you want your business to run like a “well oiled machine” get ready to start thinking like a machine.
- Processes have their own value. What you are developing is Intellectual Property, your own set of instructions for making money. This is, in many cases, worth more than the website, stock and customers to someone looking to buy your business.
- Processes make it easy to integrate and scale. Having a solid set of instructions about how things operate in your business allows you to easily evaluate new systems. It puts you in control and allows you to reliably calculate the benefits of investment can deliver and were there is room for growth.
So where do you start with all these magic “Processes”?
Well lets start with a look at the 5 main “cogs” in the ecommerce machine:
- Customer Experience
- Software Systems
Marketing: Is so important that we dedicated an entire section of this website to it, and you can check that out for more details on the hows and whys of internet marketing. The most important processes to track in this area will be the ones that let you know if your marketing is effective or not.
There are different processes you will put in place depending on the marketing channel you are using. They can mostly be managed with the help of applications such as Google Analytics and SEMrush and specific programs that are used for one type of marketing like MailChimp (email marketing) will also have built in metrics.
The key metrics you are looking for when it comes to marketing is Cost Per Acquisition (CPA) and Average Cart Value/ Lifetime Value of Customer.
Using these marketing processes you can analyse the amount of advertising dollars you spent to attract the attention of a paying customer in a particular channel vs the amount of money they are likely to spend with you. Thankfully most software integrates with Google Analytics to make this achievable, although if you are new to selling online it’s worth getting an expert in to set up your tracking correctly at the start.
From these processes you can identify which channels and advertising material is converting to sales and you now know where to best spend your marketing dollars.
Other important processes in the marketing realm will be around the creation of content. A Content Strategy will define the processes of identifying content that is popular with your audience, creating content and tracking the popularity of this content. At the start it is advisable to create it yourself and learn how to monitor what works for blogs, social media, press releases, newsletters, infographics, videos and ads based on your branding. Once you have an idea of the most popular content and channels for your content you will be in a position to write out the processes that allow you to outsource the work.
Money: It’s what we define our success by in ecommerce and you better believe that having your books in order is one of the key processes you need to be successful.
But this goes beyond accounting (which is why it’s called Money) and includes planning, budgeting and projecting. You need to set up the processes to manage the money in your business and have those reports synced so you are in control.
One of the first things to do is define success and then work back. This goes back to the first question, what does this business represent to you and what is the price tag?
So lets say you want a low touch business, say 2 hours a day, that gives you an extra $500 a week, in your pocket. That becomes the aim then, all your processes are going to be built to hit that target and maintain it. This is success, once you are there you can skip on to the GROW section.
So you set up a website to sell a limited fashion range, your average sale is $120, and your margins are 30%. So a quick back of envelope calculation and you are making $36 per sale. To hit your $500 profit you need to get 14 sales a week. Only 2 a day! sounds easy. You know there is more to it though. So much more.
Lets start with all the marketing costs you had to make those 2 sales, these are sometimes referred to as your CPA (Cost Per Acquisition or Cost Per Action).
In eCommerce we plan at a 2% conversion rate. This means for every 100 people to you store 2 will buy something.
So lets work out what the cost to get those 100 people a day is. If you are paying for Google Ads we can use the industry average for eCommerce of $1 per click, it’s now costing $100/day to make your 2 sales, or an extra $700 a week.
Your $500 a week profit is now at a $200 loss. Every sale is costing you $50 (your CPA). With an average profit of only $36 per sale, your are in trouble. Google ads may not be the way to go, or maybe you just need to find lower cost keywords with higher click through rates.
Luckily there are a lot of other options out there to attract people to your website, you might try Facebook ads, Content Marketing and Blogger outreach as more cost effective ways to attract shoppers. Additionally you might try other ways to increase your conversion rate, increase the average cart value or your margins to maximise your profitability. So you see why it it important to have these processes in place. You need to be constantly tracking your CPA so you know which marketing activities are profitable.
Next you need to look at the costs associated with running your business. Things like software subscriptions or hosting costs are direct costs associated with your online store. Your monthly Shopify fees, MailChimp subscription, SEMrush subscription and PayPal fees all add up to a monthly cost that needs to be covered before you pay yourself, and then you need to be paying off the stock you bought. After that you need to put some money aside for the tax man and only then can you put that $500 in your pocket.
But don’t be discouraged, because the fact is that you are already ahead of the vast majority of ecommerce “entrepreneurs” because you have defined what success looks like.
So you can see that it’s important to have the processes in place to track your path to success, an this is where your Accounting Software will come in.
There are a wide range of accounting packages that integrate with the top ecommerce shopping cart software. Let’s look at a few of the options:
While QuickBooks may have been around for some time now, the Online version of the accounting software has bought the functionality to the cloud. QuickBooks Online provides a reliable and cost-effective eCommerce accounting system. It also has the benefit of being based on the robust framework of their globally successful tried and tested PC based bookkeeping system.
Features of the QuickBooks system include:
- Easy-to-use navigation
- Common accounting tasks at the push of a button
- A range of advanced tools
- Full sales recording with credit and debit card friendly invoices and payment notifications
- Downloadable bank transactions
- Categorises and reviews deposits and expenses
- Full mobile integration
The system has online support and pricing is based on four subscription levels (starting at $7 a month) that will scale with your business.
If you are looking for a cloud software program with the benefits of a proven track record in web based accounting and the ability to integrate with shopping cart platforms like Shopify, QuickBooks Online will tick all the boxes.
The Xero accounting software program provides a wide range of eCommerce accounting procedures making it an good choice for small and medium sized online businesses.
Xero handles all aspects of bookkeeping for your online store, from generating quotes and invoices to reconciliations. It integrates with all the main shopping carts including Shopify and has all the functions that you would expect from any industry standard eCommerce accounting software package, such as:
- Multi-currency pricing
- Tax bundling
- Payroll software
- Bank reconciliation
- Cloud-based system
The system comes with full customer support and the various pricing options from $25 – $60 month (AUD).