Automating Your Ecommerce Business
How Your Can Grow Exponentially and Increase Your Exit Value
Gone are the days of buying a product off Alibaba, slapping a logo on it and profiting. Modern ecommerce requires a full ecosystem that enables brands to connect with their customers on multiple platforms, manage inventory while selling through three or more channels and developing quality products, effectively communicate with their customers and track sales information.
While small businesses tasks can be handled by a hungry entrepreneur, as that business scales the owner needs to find ways to automate and outsource various operational tasks or they will soon find themselves selling products that are out of stock, forgetting to fulfill orders, spending too much on marketing and not being able to break away from the computer.
In addition to helping you scale more rapidly and get your life back, for the entrepreneurs that are looking to ultimately sell their business, successful automation in the business is one of a handful of factors that serious buyers such as private equity companies and search funds look for. When determining what valuation multiple to pay for a business, these companies look at how replicable the current operating procedures are and how capable the business is of further growth. Utilizing exceptional software and well trained employees to run your business in a more passive fashion will prove to be an investment that pays for itself many times over.
Growing Pains For Thriving Ecommerce Brands
The first hurdle for aspiring ecommerce brands is to figure out what products to sell, source those products and get them in the hands of the consumers. Once the product market fit has been found and you are able to scale your business up, the next growing pain is how to automate the marketing process for your business.
Automating the marketing process
Automating the marketing process could mean many different things. It could mean finding a freelancer to develop great images, a great offer and to create social media ads to put the offer in front of the right people. For email marketing, the process can be streamlined with great automation software such as Jilt.
Whenever there is an option to do so, it is recommended to automate your business tasks with software. Not only are saas solutions much more reliable than freelancers, they take less of your time and can scale with you as you grow.
Managing Inventory and Fulfillment
Cloud based inventory management may sound like a large step if you are still a small e-retailer. However, it is a jump that you will likely have to make at some point.
If you are a stocking dealer with 100+ SKUs, It is advisable to move to a cloud based inventory management system as soon as you can afford to do so. Not only will this save you heaps of time by not manually tracking your inventory which requires checking and double checking; you’ll also be able to reorder products in more accurate quantities by tracking what is selling and what is not.
For brick and mortar retailers that have turned to e-commerce to survive the pandemic, you may be realizing that you are able to scale your business online. This may mean closing your brick and mortar facility all together and hiring a 3pl to store and fulfill your products.
Many of these retailers may elect to sell through Amazon FBA. Although it is difficult to build a brand on Amazon, they remain a strong solution for retailers who are looking to outsource their ecommerce fulfillment and acquire customers online.
Other Common Bottle Necks to Ecommerce Growth
Some more tasks that cause digital entrepreneurs headaches are: Charging the appropriate amount of sales tax, creating and managing membership sites, integrating with shipping software and accurately tracking your traffic, sales and customer value.
While Shopify has been a popular platform due to its ease of use, WordPress is still the content management system of choice for many entrepreneurs who need a greater degree of customization and don’t want to pay the high ticket price the Shopify demands for both their apps, payment processing and CMS.
For merchants that utilize Woocommerce, there are hundreds of third party plugins and extensions available to help you streamline your operations and solve many of the above mentioned problems for a low upfront cost.
Hiring and Training Great Employees
No matter how much we would like to automate all of the business management tasks, there is inevitable some part of the business that demands human interaction. In order to streamline your business so that it runs smoothly even without you being present, it is paramount that you find capable employees or contractors, train them on what you expect and set expectations for them.
Job boards such as Indeed can be valuable as well as freelancer marketplaces such as Upwork. Once you find capable operators for your business, try to document as much of their responsibilities as possible. Not only will this help you to replace them in the event they don’t meet your expectations, it will also help a buyer get comfortable with how your business is run and pay a higher price for your business.
How To Make Your Ecommerce Business More Valuable
Business valuation is very subjective. There are some attributes that are highly sought after by some investors while avoided by others. However; there are some business attributes that all investors like. We’ll outline each of those attributes here:
- Automated Management. As mentioned previously, investors are not looking to buy themselves a job. Automate as much of the business through software and quality employees as possible.
It may sound counterintuitive, but the less you work in your business, the more you’ll be able to sell it for.
- Scalability. Buyers are looking to grow the businesses they buy. This means that having great products with great reviews is very important when calculating the value of your business. It also means that relying on software to automate day to day tasks ensures the company will have the bandwidth to grow the business.
- Clean Financials and Customer Metrics. Like most small businesses, you likely don’t have audited financial statements. However, plugging your business into Quickbooks, linking your business with tracking software like Google Analytics and keeping track of your customer interactions in a quality ecommerce email software will help assure the buyer that your business is all that you hype it up to be.
- Reasonable Valuations. Unlike the world of silicon valley, ecommerce businesses trade for a multiple of their annual profit. Depending on the size of your business, industry, track record and a litany of other factors, your business could be worth anywhere from 2.5 – 6 X annual profit. To get a more in-depth valuation of your business, you can request a valuation through either an ecommerce valuation calculator or an Amazon FBA valuation calculator for those businesses that only sell on Amazon.
About the Author:
Mark Woodbury is a serial entrepreneur who has focused his career primarily on financing, buying and selling small to mid-market digital businesses. As managing member of Minerva Equity, Mark invests in and acquires businesses in Southern California with $1M to $5M in EBITDA. In addition, Mark represents sellers of digitally native businesses and direct to consumer brands with Upward Exits.