When you first get started with an eCommerce business, your primary goal is to help it grow. You need to carve out your space in the market and get yourself heading in the right direction. But once you do this—and this is no small task—what’s next? Obviously, you want to keep the business growing, but what should you be doing as an eCommerce entrepreneur to help make sure you keep moving in the right direction?
There are lots of options. You could expand into a new product area; you could pursue new marketing strategies to increase your reach; or you could launch a branding campaign to help increase awareness and loyalty. All of these are noble pursuits, but there is something else you could be doing that would encompass these actions but in a more holistic way, allowing for a more comprehensive growth strategy moving forward.
Working to increase the value of your eCommerce business has tons of benefits. The most obvious is that a valuable business is a good business to own. It possesses many of the qualities we would all like our businesses to have anyway but that we often overlook when so focused on growth.
It also helps you narrow your long-term focus, and it prepares you for the potential sale of your business down the road. This might seem farfetched now, but lots of eCommerce businesses do end up selling, freeing their owners up to work on other projects. By taking the steps now to increase your business’ value, you’re setting yourself up for a much more favorable payday when it does come time to exit the business.
Here are some tips to help you increase the value of your eCommerce business now:
Make sure your records are up-to-date
When you take a look at what makes a business valuable, many people are surprised to see accurate records near the top of the list. Of course, it’s good business practice to keep track of revenues and expenses, but what does this really have to do with the value of a business?
First, it provides evidence that your business is really worth what you say it is. Following the 2.5x rule (the guideline that a business is worth 2.5 times its yearly revenue), you’ll have to reliably demonstrate what your yearly revenues are to make sure you receive offers that accurately reflect the business’ true value.+
But even before you decide to sell the business, accurate record keeping boosts its value through the insight it provides to your business. The more data you have about the performance of the company, the better, as this will allow you to make more data-driven decisions about the future. In the beginning, it might be okay to act on instinct and general knowledge of the market, but as you grow, you’ll need to have an accurate indication of what the business is doing to be able to make sound decisions moving forward.
One thing you should be tracking beyond just sales and expenses is customer activity. The more you can find out about the people that make it to your eCommerce store, the more information you’ll have about the areas you need to pursue. Do people coming from Facebook spend more than Instagram? Are most of your customers the result of paid advertising? How much does it cost to generate a new customer?
There are lots of great tools out there to help you do this, and they will help you find the answers to these questions through data, helping you increase the value of your business both now and in the future.
Have risk management strategies
The world of eCommerce is growing, and in general, this trend is expected to continue, as seen by the massive closures in traditional retail stores. This, however, does not mean the industry is risk-averse. Competition from giants such as Amazon, as well as the entry of traditional retail stores into the space, are great challenges to the future success of any eCommerce business.
Plus, with changes in regulations coming from the government (the sale of activity by ISPs and the fall of net neutrality, to name a few), and the ever-increasing threat of cyber attacks, there are definite areas of concern.
To increase the value of your business, the best plan of action is to have a plan. So many businesses, both small and large, do not properly assess and plan for risk, and they pay for it down the road. Should you decide to sell your business in the future, investors will want to see how well you have done this, as they’ll want to know what kind of chance they are taking.
But even more than this, taking these steps now is a move to help your business today. Once you’ve made it past the initial growth stage, you need to diversify into new markets or expand your product line so that you are not so dependent on just one thing. “Don’t put all your eggs in one basket.” It’s cliché, sure, but it’s also true, and it’s something you should be considering as an eCommerce entrepreneur.
Optimize your processes
Typically, eCommerce businesses run a bit differently than a traditional business, mostly because the vast majority of the employees are remote. Plus, there are lots of moving parts, from marketing and web design to order fulfillment and so on. When looking at the value of a business (and this may be hard to accept), those that rely on you and your employees less are often more valuable. This isn’t to say you aren’t important, but the more processes and strategies you have in place that can be repeated and carried on, the better.
This isn’t only relevant for selling the business. It’s just good practice. Having plans in place so that day-to-day activities get done as quickly as possible will free you and your employees up for more long-term planning and strategizing. It’s impossible to grow when you have your head buried in the daily minutiae of the business. Consider automating or simply implementing processes that can help free up this time for other things.
Working to build value into your business is not just a way to prepare for its eventual sale. Instead, it’s a way to help improve the overall health and functionality of your company so that it can expand in the way you want to. Wouldn’t you want to run a business that is worth a lot? It’s a bit of a no-brainer. Consider taking these steps to help set up your business for both long and short-term success.