This year remains to be a battlefield for many online brands and businesses.

Those who fall have a few common characteristics:

• No focus on finance.

• No flexible workforce.

• Crippled IT architecture.

Let’s break them down.

❌ Financial Focus

During covid many e-commerce companies faced uncontrollable growth. Doubling orders and revenue became common in lots of sectors. This leads to logistical challenges, problems hiring enough new employees, upgrading your hosting capacity and having enough stock to supply demand.

Expensive f*ckups are covered by massive revenue growth. Exponential revenue growth paralyse your ability to spot flaws in your financial situation.

When revenue growth starts to weaken, all those flaws come to light and have a direct and massive impact on your profitability.

Signed an expensive 3 year deal during COVID? Better break out the piggybank.

❌ Workforce

During COVID one of the biggest challenges businesses faced was hiring enough (logistical) people to support the growth. People became more expensive. But what the heck, revenue is through the roof so you hired them.

Payroll always is a big chunk of your cost structure. But post-COVID, when revenue is challenging, the chunk gets bigger and bigger. And notoriously difficult to solve (unless your facing bankruptcy).

Signed a few expensive people with a permanent contract? Better break out the piggybank.

❌ IT Architecture

During COVID, investing in your tech stack probably wasn’t on your road map. To support explosive growth in orders, you decided to expand your IT capacity in stead of optimising this. So you increased hosting and let your development agency build some custom tools you thought you need.

Signed a 24 month deal on extra hosting capacity? Better break out the piggybank.

So clearly you need to step up your game if you want to win this game. Winning companies;

• Have strong products with good margins.

• Have a clear customer retention strategy.

• Have a healthy traffic channel distribution.

✅ Products

Strong products with good margins are the core of your success. I’ve seen too many items with low margin that take up space in your warehouse, eat up your cashflow and have zero contribution to your profit.

Here’s a benchmark breakdown:

• <30% : Stay. Away.

• 30% - 50% : Most e-commerce businesses operate at this tier. Most of them are resellers. I call it the volume game. You can only have a viable business if you can scale it to a big enough volume.

• 50% - 70% : This is a healthy margin. Keep a tight grip on your prices (discounts are killing your value) and your number one focus should be quality. People are willing to pay for quality. Don’t fool them.

• 70% : This is your goal. Be aware that competitors want to take a piece of your pie and settle for lower margin.

Keep in mind. Margin% tells a lot, but Margin$ pays the bills.

You should consider return% of your industry as well.

A margin of 50% and a return rate of 30% is a challenging business.

✅ Customer retention

Acquiring new customers is expensive and it is getting more and more expensive every day. You should focus on getting more $$$ out of your existing customers. You have the data. Use it to set up customer profiles and target them with relevant messages.

Your current customer base is one of your biggest assets you have. Work on it.

✅ Channel distribution

Need more revenue right now? Google Ads is the easiest way to get there. However, your focus should be on creating and maintaining a healthy channel distribution.

Getting over 50% of your traffic from Google Ads? Better work on your organic, e-mail and affiliate channels. Ideally, you don’t want one channel to account for more than 30% traffic.

Don’t put all your eggs in one basket. Take control of your traffic.

Make the best of Q4 people!

Have a great Sunday!
Erik

Whenever you’re ready, there are three ways I can help you.

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