or scroll down to get the highlights

A Winning Pricing Strategy For Your Ecommerce Store

There’s one thing that every store owner should do right now, early in the year. I’ve talked about this before – but right now is the very best time to set yourself up for more profit this year.

In this post, we’re delving into how we set product prices in ecommerce, and I’ll share a pricing strategy that most store owners don’t use. Once you understand how it works and start implementing it in your store, you’ll have the potential to be much more profitable. And you’ll have the confidence to pay yourself, hire help, and make the investments in your business that will lead to long-term stability and growth.

Listen to the podcast HERE or read on to open the door to increased profit.

Don’t Make This Mistake!

Most people have their own system for setting retail prices. Many store owners use a target gross margin percentage, and apply that markup evenly to every item in their store. Others simply set their retail prices at a multiple of the cost of the product.

Even though these strategies seem solid, it doesn’t guarantee that you’ll be profitable.
It’s completely possible that you could find yourself losing money every month, because the actual profit in dollars and cents is not enough to cover your expenses. OR you could be accidentally setting a cap on a given product’s profit.

So many store owners struggle with cash flow. And when you have to let employees go, or cut your ad budget, or can’t pay your bills, it takes an emotional toll. It’s embarrassing and exhausting, because it can feel like a reflection of our abilities.

It’s About Dollars, Not Percentages

When most store owners set prices, they’re often looking only at margin percentages or simplistic markups, but getting strategic with your pricing is more nuanced than inputting cost into a standard equation that “feels” right.

Instead of using a markup formula, try setting your prices based on Margin Contribution dollars. You decide on a minimum amount of Margin Contribution revenue your products must generate.

When each product must contribute a minimum profit in dollars, you can avoid costly pricing mistakes and meet your minimum Margin Contribution by bundling products together or even eliminating products that don’t generate enough profit.

The Pitfalls of Pricing: Karen’t Story

In Episode 166 I talked to Karen Steuer, a long time client, and owner of Tangled Roots Herbal, who has been struggling with cash flow for some time. It’s worth a listen. Fortunately Karen was keeping her financial information up to date, which allowed me to help her take control of her money problem. It’s nearly impossible to troubleshoot cash flow problems if you don’t have your numbers in order and readily available.

Karen’t gross margin was 48.8%, so roughly double her cost, but she still wasn’t covering her monthly expenses. So while she assumed her pricing strategy was “standard” and therefore sufficient, it was draining all the profit out of her business.

You Can’t Afford To Sell Anything For $10

Let’s say you make or purchase a product for $2.50, and your standard practice is to double that and sell it for $5. So each time you sell this product, you’re contributing just $2.50 to your margin. Sell 100 of them? You do all the work to ship those hundred orders, and you’ve only kept $250 for next month’s expenses.

So let’s say you quadruple it and sell it for $10. After 100 orders, you’ve still only got $750 to cover next month. For most businesses, that’s just not enough. I’m not saying you can’t sell $10 products, but I am saying you must consider either bundling them or up-selling something else so that your total order value makes it worthwhile.

What Does It Cost You To Wake Up Every Day?

What does it really cost you to run your store? What is the monthly cost of your Shopify site, your email platform and other apps you need, your shipping materials, your employees, etc? Take a look at all of your monthly expenses and divide that number by 30. That’s the cost of just waking up each day and having an online store.

So if your monthly “run rate” is $6,000, then your daily “wake up” rate is $200. Your sales need to generate more than that number each day to be profitable.

Don’t Forget Yourself

If you’re going to take the time to sit down and implement this strategy, you really must include compensation for yourself. Even if you’re not paying yourself yet. This amount needs to be included if you are to price your products in a way that will get your business to the level you want it to be eventually, where you can hire things out and grow a team. Say you’d like eventually to pay yourself $3k per month. You’ll need to add $100 per day to your margin contribution. Build a pool of margin into your business that will allow you to get help when you’re ready for it.

5 Steps To More Profitable Pricing

1.Set up a call with your bookkeeper, OR if you don’t have one, review your income statement for the last 3-4 months and note your gross profit. This is the  money you have to pay your monthly expenses

2. Compare your monthly expenses to your current gross profit margin. Are they close, or is there a big gap?

3. Jot down your “wake up rate” somewhere you can easily reference it, like a sticky note on your laptop or bulletin board. This number is your new goal.

4. Go back and review your pricing. Consider which products you could add a dollar here or there to in order to boost your profit margin.

5. Consider your unique selling proposition – what is it about you or your product that makes it different from every other product your customers could be purchasing. What are the things people value? What problems do your products solve? You’ll (probably) never be able to compete on price, but you will add value either in the uniqueness of your product, the ease which you provide it to your customers, or even you as a person they want to support. How can you present your product differently so that this value is clear to your website visitors, and you get the sale?

Strategic pricing is about more than just covering costs – it’s about maximizing your business’s profitability sustainably. If you’re still scratching your head, check out this quick video that I made. In it, you’ll learn how to:

• Calculate the amount of margin you need in $
• Set your minimum viable average order value (so you can pay yourself)
• Change your pricing strategy to set yourself up for success

This strategy really will get you closer to earning a paycheck, or having the confidence to hire out the things that will allow your business to reach new heights. I know that chatting about the dollars and cents in our ecommerce stores can feel like a hairy, scary thing…I’ve been there.

But if you’re ready to get off the rollercoaster, there’s never a better time to set yourself up for more profit than early in the year. Spend an hour reviewing your pricing. It might be your most profitable hour of the year.

RELATED LINKS:

The Secret To Getting Paid

https://thesocialsalesgirls.com/the-secret-to-getting-paid/

A Lesson On Fixing Your Cash Flow

https://thesocialsalesgirls.com/a-lesson-on-fixing-your-cash-flow-episode-166/

Grow Up Your Business And Get More Profit

https://thesocialsalesgirls.com/grow-up-your-business-get-more-profit-episode-77/

Gross Profit: Will You Take Charge And Pay Yourself More?

https://thesocialsalesgirls.com/gross-profit-will-you-take-charge-and-pay-yourself-more-episode-188/

New FREE Course

GROW YOUR SALES

(without breaking the bank)

Conversion School is a step by step process to grow your sales,
without spending a fortune on risky ad strategies, or discounting your products.

Works for Ecommerce stores at all stages.

Start getting consistent sales, and see significant sales growth every month.

New FREE Course

GROW YOUR SALES

(without breaking the bank)

Conversion School is a step by step process to grow your sales,
without spending a fortune on risky ad strategies, or discounting your products.

Works for Ecommerce stores at all stages.

Start getting consistent sales, and see significant sales growth every month.

or scroll down to get the highlights

In this episode of the eCommerce Roadmap I sat down with our Member Success Coach, Tina Barron. She’s a fellow ecommerce store owner, and she’s an amazing resource. As Tina leads our team of specialized coaches, her focus is to ensure that every member has what they need to find success while enrolled in our course + community.

In this episode we wanted to talk about what’s coming for The Social Salesgirls in 2024, and what we’re doing to help our members pile up wins this year.

Tune in HERE or keep reading to see how we can help you make this year your best yet.

New Year, New Focus

At the end of last year, our team took a little retreat to set the stage for what we’re delivering to our members this year. We really took stock of what’s been working, what our members need, and most importantly, how to scale these strategies effectively. And we all agreed that this year is about giving our members the right tools and guidance to amplify their results.

New & Improved Trainings

This year, we are introducing several new training modules to the classroom. One that we’re particularly excited about is from one of our ecommerce coaches Melissa, and it’s all about organic strategies to drive traffic. Melissa’s fuss-free organic posting strategy emphasizes the power of consistency and community over costly ads, and her results have been nothing short of jaw-dropping.

Another training we’re adding this year is on creating high-converting product pages. After all the hard work of building an audience and driving them to your website, the last thing you want is to lose them at the product page. This new training will offer a formula to overcome any potential customer objections, so your product pages are as compelling as possible. And you don’t have to be tech-y to create them!

You Can’t Control What You Don’t Track and Measure

The heart of our course, since 2017, has always been to focus on numbers and stats. And the whole reason we do that is so that we stay out of our feelings because numbers don’t lie.

They don’t say, I’m a big loser and everything I’m doing is wrong. They show you exactly where you are today, so that you can make a plan to go forward. 

But this year we are really doubling down on tracking and measuring. Understanding your sales funnel and knowing where to focus your attention is critical. And this month we released our new Excel tracker, which members can use to track their progress monthly. Even if you’re not a numbers person” or Excel sheets make your head hurt, this tool really makes it so simple to plug in your numbers and track your progress. It really is fail-proof.

How Many Eyeballs Are You Getting On Your Site?

One of the most critical (and critically un-discussed,) factors in e-commerce success is visibility. No matter how great your product or website is, if people don’t see it…you won’t get sales. This year, we’re re-emphasizing ‘Ads Made Easy’, a program designed to demystify social media ads and help you achieve significant results with minimal investment. We sometimes joke that we should call the course “Ads Made Easy AND CHEAP” because most people are amazed how little they need to spend to reach a big audience.

We often get a little myopic and spend too much of our time on the bottom of our sales funnel (getting actual sales) at the expense of filling that funnel. But having a huge pool of people see your products at the top should be mission critical. So this year we’re shifting the focus to building a large audience, and our new Ads Made Easy course will focus on the most potent of all content – video ads. Even if you’ve done Ads Made Easy before, you really should come and do it again for the video unit.

Marketing First: Repeatable Strategies That Make Sales

The marketing cycle shouldn’t be complicated. Our approach is about creating mini campaigns – simple, effective emails sent weekly to keep your audience engaged. These mini campaigns are coupled with monthly events, providing customers a compelling reason to make a purchase. It’s not always about discounts; sometimes, it’s about creating excitement and novelty. Our ‘Get Sales Now’ unit is packed with these event templates, making it easy for Inner Circle members to execute successful campaigns.

The Importance of Time and Focus

In the realm of e-commerce, your most valuable resources aren’t your products or your website; it’s your time and focus. The success of your store depends on how you utilize these resources. In the Inner Circle, we provide a structured approach to make the most of your time, guiding you on what to work on and when. It’s about being selective and concentrating on impactful activities that drive your business forward.

The Power of Community and Support

One of the most remarkable aspects of the Inner Circle is the community. E-commerce can be a solitary journey, but within our community, members find support, advice, and encouragement. From sharing success stories to helping troubleshoot problems, the sense of belonging and mutual growth is what makes the Inner Circle special.

Our Coaching Dream Team

With nearly 3,000 calls made in 2023 alone, our team of 10 coaches brings an unmatched depth of knowledge. Covering everything from SEO to Google Analytics and Klaviyo mastery, our coaches are seasoned e-commerce store owners themselves, offering practical, firsthand advice. Whatever you might be stuck on, there’s a coach ready to help you find clarity and direction.

Because we see recurring patterns seen across different stores, regardless of product or niche, it’s easy for us to see what’s going on and where the hang ups might be. We are almost always able to identify issues and provide actionable advice in just a half-hour session.

A lot of our members even schedule regular coaching sessions that go beyond problem-solving, so their coaches can gain a deeper understanding of their unique businesses. When you find the right coach you resonate with, and you are working consistently with them, they become your business ally, guiding you through different stages and even directing you to other experts within our network when needed.

The Journey with Reliable Revenue

‘Reliable Revenue’ is our flagship course, designed to teach you how to bring in consistent sales organically. It’s about understanding your business deeply, setting up automations, and creating a marketing plan that results in predictable sales. This course doesn’t just set you up for temporary success; it’s about building a sustainable, thriving business.

Looking Forward to a Year of Growth

As we embark on this year, our focus is clear: to provide our members with the tools, training, and support they need to succeed. Whether it’s through personalized coaching, strategic training modules, or the supportive community, every aspect of the Inner Circle is geared towards empowering e-commerce store owners to reach new heights.

Join Us on This Exciting Journey

If you’re an e-commerce store owner looking to grow your business, the Inner Circle is where you need to be. With dedicated coaches, a supportive community, and a wealth of resources, we’re here to guide you every step of the way. Check out the show notes for links to the podcast episodes with Melissa’s strategies, and get on the waitlist for the ‘Reliable Revenue’ course to receive a free mini-course. Remember, in the world of e-commerce, you’re not alone. Join us in the Inner Circle, and let’s achieve incredible success together.

New FREE Course

GROW YOUR SALES

(without breaking the bank)

Conversion School is a step by step process to grow your sales,
without spending a fortune on risky ad strategies, or discounting your products.

Works for Ecommerce stores at all stages.

Start getting consistent sales, and see significant sales growth every month.

New FREE Course

GROW YOUR SALES

(without breaking the bank)

Conversion School is a step by step process to grow your sales,
without spending a fortune on risky ad strategies, or discounting your products.

Works for Ecommerce stores at all stages.

Start getting consistent sales, and see significant sales growth every month.

or scroll down to get the highlights

OUR FAVORITE STRATEGIES FOR SUCCESS IN 2024

The ecommerce landscape is evolving, is your marketing plan still relevant? Or is it time for a refresh?

Susan recently spoke to Jane Hamill of Fashion Brain Academy about what we see working NOW for their students. They chose 3 strategies each that focus on practicality, authenticity, and effective communication to stay on top of the game in 2024. 

Listen to the podcast episode here or keep reading for the strategies

Jane’s Top 3 Strategies for eCommerce Marketing in 2024

1. Short Form Video

Jane has found that short-form video has been a game-changer for students lately. Their approach involves creating a consistent video routine, whether it’s one video per week or a batch of four in a month. This content can be shared across various channels, including email and social media, and can provide the basis for the other content you share that week. Jane encourages us to focus on the habit of producing regular content, rather than making each video perfect. Whether it’s showcasing a product tutorial or just offering a glimpse into the personal side of your life, the goal is to establish a routine that keeps your audience consistently engaged.

2. Keep It Quick’n’Dirty

Jane’s pro tip is to keep your marketing “quick and dirty,” trading perfect and professional for messy and intimate. Your followers crave authenticity, so regularly showing up in a genuine, unguarded way is much more engaging than the infrequent “perfect” post. There are certainly appropriate times to go all in, but in the fast-moving world of social media, it isn’t efficient to spend too much time on any one post. And showing up authentically makes you relatable!

3. An Innovative Way To Grow Your List

Jane believes your #1 focus this year should be growing your email list, and something she has seen working for her students lately is what she calls a “product tester event.” This strategy involves inviting customers to test out a new product in exchange for feedback and engagement. This not only generates leads but also provides user-generated content, reviews, and valuable insights into product viability. This is not the same as a giveaway, where entrants may just be seeking free product; this type of event will attract your ideal customer who is excited about what you sell and willing to help your business to succeed. Jane loves that this is a repeatable, low-lift event that you can implement quickly and reap big rewards.

Susan’s Top Tips

1. REACH: The Metric To Track

Many e-commerce store owners waste time and energy obsessing over their social media follower-count. Instead, Susan suggests that REACH is a more valuable metric to track and measure. With the ranked-feed algorithm affecting visibility, your followers may not even be seeing your content at all. Susan suggests studying the content that gains the most reach and creating your content strategy accordingly. By concentrating on reach rather than followers, you can ensure that the content you’re creating is really engaging your audience, not just building a vanity metric that’s worth very little.

2. Get Personal with Email

Unlike social media, email is the one channel that you know your audience will receive. Susan urges us to get more personal with our email marketing in 2024. Recently she has seen Inner Circle members, like Sylvie from eclairlips.com, having huge success by injecting personality into their emails, sharing anecdotes beyond just product promotions. Think of email as a way to build community the same way you would through social media, where subscribers are interested in more than just the products. It’s ok to speak to your audience like friends! Authenticity and relatability trump the traditional, overly polished marketing emails.

3. Volume Over Perfection

In a recent post Susan chatted with Inner Circle coach Melissa from Bike Pretty, who saw her organic reach EXPLODE after she implemented a volume-posting strategy. By posting 3x per day (see Jane’s quick’n’dirty tip above) and repurposing old, successful content, Melissa started driving 15k people to her website per month. FOR FREE. Melissa says the key to getting this right is getting over your desire for a perfect feed, schedule everything ahead of time, then set it and forget it. Commit to an hour or two each week, don’t be afraid to repeat posts, and focus on getting it done rather than making it perfect.

As we step into 2024, these 6 strategies will allow you to adapt to the changing landscape of ecommerce marketing. By showing up authentically and consistently, you’ll be prepared to stay ahead of the curve in the new year. Whether it’s embracing short-form videos, focusing on reach, embracing the quick’n’dirty method, or embracing new ways of growing your list, these strategies will keep you on track for your goals in the coming months.

RELATED LINKS:

Jane Hamill Podcast: https://podcasts.apple.com/us/podcast/jane-hamill-podcast/id1125412597

Sylvie Roy at https://eclairlips.com/ writes the most engaging emails

Hear how Melissa’s content plan got her 15,000 monthly web visitors and reduced her cost of acquiring a customer by 44%
https://thesocialsalesgirls.com/the-stress-free-content-plan-that-built-a-huge-audience-episode-190/
https://thesocialsalesgirls.com/how-melissa-reduced-her-cost-of-acquiring-a-customer-by-44-percent-episode-191/

New FREE Course

GROW YOUR SALES

(without breaking the bank)

Conversion School is a step by step process to grow your sales,
without spending a fortune on risky ad strategies, or discounting your products.

Works for Ecommerce stores at all stages.

Start getting consistent sales, and see significant sales growth every month.

New FREE Course

GROW YOUR SALES

(without breaking the bank)

Conversion School is a step by step process to grow your sales,
without spending a fortune on risky ad strategies, or discounting your products.

Works for Ecommerce stores at all stages.

Start getting consistent sales, and see significant sales growth every month.

or scroll down to get the highlights

So, you’ve embarked on your e-commerce journey. You’ve put in the hours, made the sacrifices, and maybe even taken a few risks. But…what if you’re ready to move on? What if you want to sell your e-commerce business and start a new adventure?

It’s a big decision, fraught with questions, risks, and uncertainties. You’re not alone; many e-commerce entrepreneurs face these dilemmas. And in this post we’re going to talk you through it with Ethan Alexander from Quietlight, a leading voice and authority in the emerging niche of selling and buying profitable online businesses. Ethan is a serial entrepreneur who has successfully built numerous multi-million dollar companies.

Read on and we’ll break down five key areas that can either make or break your e-commerce business when it comes to selling it

Inside A Buyer’s Mind
Almost every potential buyer’s goal for a business is to grow it. So if your business doesn’t have room for growth, it’s like a ship with a leaky hull. Fewer people want to hop on board, and that can drag down your business’s value.

But here’s the silver lining: different buyers are like superheroes with unique superpowers. Some are marketing wizards, some are operation gurus, and others are pros at specific sales channels like Amazon or Shopify. The secret sauce to attracting the right buyer for your e-commerce gem lies in highlighting what your business needs to thrive.

For example, if your marketing game is weak, there are buyers out there who can sprinkle magic dust on it. If your operations are a mess, someone with a knack for streamlining processes can work wonders. And if you’ve just scratched the surface with platforms like Amazon, buyers experienced in that arena can take your business to the next level. So, it’s all about finding that perfect match based on what your business needs. Regardless, there’s likely a hero out there waiting to team up with your business.

Turning Your Business into a Valuable Asset
So many people think there’s very little, or even no, value in their business. But let’s break this down in plain English. There are two main ingredients that cook up your business valuation stew: SDE (seller’s discretionary earnings) and the elusive multiple.

SDE: What’s in Your Wallet?

SDE is a measure of the earnings of a business and is the most common measure of cash flow used to value a small business. Imagine your Profit and Loss statement. You’ve got your income, your expenses (like cost of goods sold), your operational costs, and voila…your net profit. Then there’s another section—addbacks. These are operational expenses (like owner’s salary or health insurance–not technically necessary for the business) that we claim for tax purposes because we can. They’re like little bonuses that won’t dent your valuation. So your SDE is the total of your pre-tax net profit, plus your addbacks.

The Mysterious Multiple
Now, let’s talk about the ‘multiple’. Think of it as the proprietary spice blend for your business stew. It’s everything else that makes your business unique. Your business’s age, industry, brand strength, size, and even your personality all come together to give your business a multiple (of your SDE.) Most e-commerce stores fall between two and four on the multiple scale. 

Making it Tangible
Let’s put this into perspective. If your Seller’s Discretionary Earnings (SDE) for the last 12 months are $200,000, and you’re looking at a multiple of three, that puts your valuation at around $600,000. Simple, right?

The Inventory Conundrum
Now here’s the deal with inventory: most buyers want you to have just the right amount–the ideal is around three to four months’ worth of inventory per SKU–valued at your landed cost of goods sold.

So, if you’ve got $50,000 worth of inventory, add it to your valuation. In our example, that’s $650,000 in total deal value.

Business Value = (SDE * Multiple) + Inventory

See, it’s not rocket science! Your e-commerce business is a valuable asset. Now that you know the recipe, you can start cooking up a fantastic valuation. 

Now onto the 5 key areas that can make or break the sale of your business.

1. Financials: Don’t Let Your Books Be a Hot Mess!
First up, financials. I know, numbers can make your head spin, but they’re the backbone of your business’s value. If your books are a hot mess, it’s time to clean up your act. Specifically, make sure your COGS (that’s Cost of Goods Sold) is done on an accrual basis, not a cash basis.

Here’s the deal: Accrual basis means you record your COGS when the product is sold, not when you buy it. Why does this matter? Because it gives you a true picture of your profitability. Cash basis may keep your cash flow in check, but for valuation purposes, accrual is the way to go. So, if your finances need a makeover, start with this.

2. Risk: Your Business’s Safety Net
Let’s talk about risk. We’re not talking about your skills; we’re talking about your business’s safety net. Buyers want to invest in a business that’s not a ticking time bomb. Ask yourself the question, “what do I really depend on for this business?”Consider things like your sales channels, your marketing channels, vendor relationships, employees. If any one of those went away, would your business still be ok? If your Etsy shop, or your ads account suddenly got shut down, would that take you out? Could you survive if your main supplier went away? If you’re on the knife’s edge, it’s fixable if you work on it now. Make sure you’re diversifying your income streams and minimizing risks. Buyers love a business with a safety net.

3. Growth: Show Them the Money…Potential
Growth is your golden ticket. But not just any growth, profitable growth. We aren’t talking tech companies that grow and grow and grow at all costs, that’s a different business model. Buyers aren’t just buying your business for what it is today; they want to know what it can become. Show them the money…potential!Highlight your growth trends (ie. the past 12 months compared to the prior 12, as well as each month vs. the prior year’s month,) marketing strategies, and expansion plans. The best time to sell your business is when your growth rate is steady. Consistent, profitable growth beats big, impressive numbers.

4. Transferability: Can Your Business Run Without You?
Buyers want to know if your business can run without you. Are you the heart and soul of your operation, or can it thrive with someone new at the helm? Are your vendors loyal to your company, or just to you?To boost your business’s transferability, document your processes, create standard operating procedures (SOPs), and delegate tasks. Make your business a well-oiled machine that doesn’t rely solely on you. Buyers love a business they can slip into like a well-fitted glove.

But what if you’re the face of your brand?
So many store owners in our community are truly the heart, soul, and FACE of their brand, and it’s both a blessing and a curse. If this is you, you’ve likely built a thriving, profitable e-commerce business, and everyone knows you as the face behind the brand. People love what you do because they love you, but will a potential buyer be able to replicate your results without you in the picture?

Let’s use an example–Dave Ramsey. He’s been the heart and soul of his financial advice brand for ages. But recently, Dave has started introducing new faces and voices to his brand. He expanded his team, and now you see others hosting podcasts and taking on more prominent roles. It’s like he’s gradually passing the baton.

Now, why would he do that? It could be because he’s looking to retire, take more time off, or even sell his business. And if it’s the latter, he’s making the right moves. See, when your business is synonymous with you, it can be hard to sell it unless you transition out of the spotlight.

Make no mistake, building your brand around yourself is a smart move. It helps you leverage your audience and supercharges your growth. But once you reach a certain point, it’s time to rethink your strategy.

So here’s the plan: Find a way to gracefully shift the spotlight from you to your brand. Introduce new faces, promote your team members, or focus on the brand itself. This way, your business remains sellable, and you’re not tied to it post-sale.
Start the transition process a few years before you even think about selling. Shine the light on others within your organization, experiment with your branding strategy, and don’t rush the process. It’s a marathon, not a sprint.

5. Documentation: Don’t Be a Data Hoarder
Last but not least, documentation. Don’t be a data hoarder. Buyers want to see your business’s history and performance. Keep records of everything – financials, contracts, supplier agreements, customer data (while staying GDPR-compliant, of course), and anything else that matters.So, what should be in your documentation treasure chest?

First off, we’re talking about the intellectual property (IP) stuff – patents, trademarks, etc.. For instance, if you’re in the Amazon FBA game, having a trademark for brand registry is practically a must-do nowadays. And even for Shopify-based brands, having a trademark can add some extra sparkle to your shine. It won’t magically inflate your business’s value by thousands, it’s more like a security blanket, making your business more trustworthy and resilient.

But the real MVP of documentation is your Standard Operating Procedures (SOPs). Think of them as your business’s how-to guide. Whether you’re a wordsmith or prefer talking things through, recording your processes is essential.
The key is to make knowledge transfer a breeze for the buyer. Whether it’s your expertise or your team’s, having it documented, either in writing or through video, ensures that the wisdom and know-how your business runs on can be seamlessly handed over to a new owner.

That way, even if someone else takes the driver’s seat, your business can keep on truckin’ without missing a beat.

Why Hiding is Not an Option
Ok so you’ve decided to sell your e-commerce business, and offers are starting to roll in. At this stage, everything you’ve presented to buyers is considered true and accurate. But, here’s the thing: once you accept an offer and enter due diligence, buyers will be like Sherlock Holmes, digging into every nook and cranny of your business to verify that everything checks out.

If they feel misled or discover something fishy, the deal could go south faster than you can say “ecommerce.” So, hiding stuff is not a winning strategy.

Now, sure, honest mistakes can happen. Maybe you misunderstood a question or misstated something. That’s human. But once trust is lost, it’s tough to rebuild. 

Selling a business isn’t just about the numbers; it’s also a people business, especially as you get closer to closing the deal. It’s not all about spreadsheets and financials; there’s a lot of heart involved. 

As you approach the finish line, you’ll find that it’s more subjective, more about emotions and relationships than you might expect. That’s why confidence and mindset play a massive role throughout the process.

Timing Is Everything
You might be wondering how long it takes to sell an e-commerce business. While the industry average is around 90 days from listing to sale, it can vary widely.

Most businesses aren’t ready for sale right after the initial conversation. It often takes six to 18 months to prepare. And you know what? That’s perfectly normal.

The key is to understand where you are and where you want to go. Your timeline depends on your goals and how quickly you can get your ducks in a row. It’s all about having a clear roadmap.

So there you have it, five key areas to focus on to make your e-commerce business a hot commodity. Clean up those financials, minimize risk, showcase growth potential, ensure transferability, and be a documentation guru. With these in your toolkit, your business will be more valuable than ever. 

Remember, even if you’re not thinking of selling right now, these improvements will make your business stronger, more profitable, and ready for whatever the future holds. Every e-commerce business is unique, like a puzzle waiting to be solved. But with the right mindset, preparation, and guidance, you can make selling your business a reality and embark on your next exciting adventure.

Connect with Ethan
If you’re feeling overwhelmed or have burning questions about selling your e-commerce business, don’t hesitate to reach out. Ethan is here to help you navigate this journey. Email him at [email protected], and he would be more than happy to chat.

Related Links:

How to calculate SDE and identify add backs: https://quietlight.com/3-types-of-addbacks/

Overview of the entire selling process: https://quietlight.com/guide/process/

Testimonials from businesses Ethan has worked with: https://quietlight.com/advisors/ethan-alexander/#testimonials

Want to Sell Your Business? Here’s Where To Start: https://thesocialsalesgirls.com/want-to-sell-your-business-heres-where-to-start-episode-142/

How To Sell Your Business and Reach Big, Scary Goals: https://thesocialsalesgirls.com/how-to-sell-your-business-and-reach-big-scary-goals-episode-8/

New FREE Course

GROW YOUR SALES

(without breaking the bank)

Conversion School is a step by step process to grow your sales,
without spending a fortune on risky ad strategies, or discounting your products.

Works for Ecommerce stores at all stages.

Start getting consistent sales, and see significant sales growth every month.

New FREE Course

GROW YOUR SALES

(without breaking the bank)

Conversion School is a step by step process to grow your sales,
without spending a fortune on risky ad strategies, or discounting your products.

Works for Ecommerce stores at all stages.

Start getting consistent sales, and see significant sales growth every month.

or scroll down to get the highlights

Supercharge Your E-Commerce Business: A Friendly Guide to Boosting Profits

So, you’ve got your shiny new e-commerce store up and running. You’re selling products you’re passionate about, and customers are starting to trickle in. But, there’s this nagging feeling in the back of your mind – “Am I making enough money?”
Today, we’re diving into one of the trickiest questions that can haunt the dreams of anyone running an online store – Gross Profit. Clear as mud, right? But trust me, it’s super important and can make or break your business. So let’s break it down in a way that’s easy to wrap your mind around.

Gross Profit = Dollars in Your Pocket

A while back, we had a podcast episode where Karen, one of our fellow e-commerce rockstars, shared her cash flow struggles. Sound familiar? She was working tirelessly month after month but felt like she was chasing her own tail, not sure why she wasn’t getting ahead. The answer was simple – not enough Gross Profit.
Now, Gross Profit might sound like jargon, but it’s just a way of saying, “how much actual money are you making after covering your product costs?” If that dollar amount isn’t high enough, it’s like trying to fill a bucket with holes in it.
Many of us start with a product, think, “I’ll sell it for twice what I paid,” but forget about all the other costs lurking in the shadows – Shopify fees, email service providers, advertising expenses, and more. Suddenly, that $5 profit looks more like pocket change.
So, we did a follow-up episode #167 (if you want to check it out) where we ditched all the confusing percentage-based pricing strategies and focused on the cold, hard dollars – Margin Contribution Dollars. Margin Contribution is simply the selling price per unit, minus the variable cost per unit.

Alison’s Journey to Profitability

Our podcast guest, Alison, who runs a successful e-commerce business (and happens to be an e-commerce coach in the Inner Circle,) had the same question many of us have – what’s a good Margin Contribution Dollar target? She’s been in the game, mastered Facebook ads, Google ads, and all the things, but finance still left her scratching her head.

Alison sells all sorts of products on her site, from high-margin socks to lower-margin walkers. Her socks might have a whopping 100% margin, while walkers are hanging out at 25%. But here’s the kicker – the actual dollar profit on walkers might be higher!

So, what’s the magic number? Well, there’s no one-size-fits-all answer, but here’s a trick – set a minimum Margin Contribution Dollar you’re willing to accept for a product. For Alison, it was around $20. If it doesn’t meet that threshold, she’s not interested.

A Bird’s Eye View of Your Finances

Before you start scrambling to redo your entire pricing strategy, take a breath. Instead of drilling down to individual products, focus on the big picture. What’s your monthly run rate? Let’s say it’s $12,000. You need to generate enough Gross Profit to cover that and leave some sweet cash for yourself. How much is up to you.

Get Your Financial House in Order

First things first, you need an income statement every month. Yes, just like clockwork. This is your financial compass, helping you navigate the e-commerce seas.

Some folks out there do their accounting on a “cash basis.” What does that mean? Well, if you receive a massive order of socks, for instance, they expense the whole shebang in that month. You can’t run an e-commerce ship that way. It’s a big no-no.

What you need is “accrual accounting.” Fancy term, but it means your cost of goods is only what you sold that month. This will give you a much clearer picture of your expenses.

If you’re working with a bookkeeper who hasn’t navigated the e-commerce waters before, they might mess up your numbers big time. Imagine them pushing that big order through every invoice. That’s a recipe for disaster, skewing your cost of goods and margins.

So, step one, make sure you’re working with someone who has e-commerce experience. And step two, get that accrued income statement every month. It’s your financial lifeline. 

Putting Data to Work: Analyzing Your Sales

Here’s where it gets exciting. Don’t be afraid to get down and dirty with your data. What products are your heroes? Which ones are playing hide and seek? Anything below, say, 10% of your total sales? Well, they might as well be invisible because they’re not making a dent in your profits.

Now, imagine this – you’ve got your sales data in one hand and your expense report in the other. You can see the pieces of the puzzle coming together. You’re not just throwing darts in the dark. You’re making informed decisions based on your business’s unique needs.

The Great Outsourcing Dilemma

But wait! You’ve analyzed your data and your expenses are creeping up. Maybe you’re using a 3PL (Third-Party Logistics) to handle your shipping, or have been paying a Virtual Assistant to manage your social media posts or customer service. Wouldn’t it make sense to bring it all back in house?

It’s tempting…but that move might not be the best for your business.

The truth is, slashing expenses won’t necessarily lead to long-term profitability if it’s going to drain your time and energy. If you have to take a course to understand Quickbooks and it still takes you 3 times longer than it would to hire out your bookkeeping…it’s not worth doing yourself.

If you sell a high price-point item and your buyers expect white glove customer service, is it worth the risk that you won’t be able to answer their questions in a timely manner?

Avoid making knee-jerk reactions to cost-cutting, and take the time to consider your long term profitability. Your focus should be on growing your business, not on menial tasks that someone else could do better and faster.

Overcoming Pricing Paralysis

Have you ever struggled with pricing your products? It’s common, especially in the e-commerce world where competition is fierce. Here’s a secret: Pricing isn’t all about being the cheapest.

Sure, some shoppers hunt for bargains, but others value factors like fast shipping or excellent customer service. Especially in the high-end market, customers are less likely to spend hours comparing prices.

Stop stressing about a couple of bucks and focus on delivering value beyond price tags. Your unique selling propositions, like superior service or unique product features, can be the reason customers choose you over a cheaper competitor.

Facing the Hard Decisions

As your business matures, you’ll need to make some tough calls. Whether it’s discontinuing a product that isn’t performing or parting ways with an underperforming team member, remember: It’s about what’s best for your business’s growth.

Don’t hold onto things that aren’t moving your business forward. Consider the data, analyze the numbers, and make informed decisions. Sometimes, you’ll need to try different approaches a few times before finding what works best.

Crushing Your Debt and Raising Your Profits

If you’re juggling business debt, focus on a plan to pay it off. That debt won’t disappear by itself, but once it’s gone, you can re-allocate those payments to give yourself a nice raise.

Map it out on a spreadsheet: Set a target date for becoming debt-free and visualize that financial freedom. Take responsibility for your financial results and don’t let past mistakes weigh you down. You didn’t know then what you know now, and that’s okay!

Remember, every business has startup costs, and not everything will bring immediate returns. Think of it like making a down payment on a house—it’s an investment in your business’s future.

Don’t Overcomplicate Things

It’s easy to overthink unfamiliar territory, especially when it comes to finances. You don’t need to understand every single detail, but you do need a grasp of the essentials.

Focus on the part that directly impacts your bottom line: making profit. Once you embrace this mindset, you’ll find that financial management becomes more enjoyable and less daunting.

Keep Your Eye on the Prize

Set clear financial goals and track your progress. If you want to pay off debt, give yourself a raise, or boost your profitability, start by visualizing the outcome. Create a plan, and don’t be afraid to adjust it along the way.

So, what’s the next step for your e-commerce business? Keep hustling, stay focused, and watch your profits soar. The struggle is real, but so are the opportunities. Don’t be afraid to dive into your numbers, make data-driven choices, and, most importantly, give yourself a raise when you deserve it!

Related Links:
Find Alison’s website here: www.easeliving.com

Pricing to Maximize Profit: https://thesocialsalesgirls.com/pricing-to-maximize-profit-episode-167/

The Secret To Getting Paid: https://thesocialsalesgirls.com/the-secret-to-getting-paid/

How To Have a Business That Pays You Well: https://thesocialsalesgirls.com/how-to-have-a-business-that-pays-you-well-episode-2/

Ditch Your Decision Fatigue: https://thesocialsalesgirls.com/ditch-your-decision-fatigue-im-giving-you-my-framework-its-brilliant-episode-186

New FREE Course

GROW YOUR SALES

(without breaking the bank)

Conversion School is a step by step process to grow your sales,
without spending a fortune on risky ad strategies, or discounting your products.

Works for Ecommerce stores at all stages.

Start getting consistent sales, and see significant sales growth every month.

New FREE Course

GROW YOUR SALES

(without breaking the bank)

Conversion School is a step by step process to grow your sales,
without spending a fortune on risky ad strategies, or discounting your products.

Works for Ecommerce stores at all stages.

Start getting consistent sales, and see significant sales growth every month.

or scroll down to get the highlights

The Customer Acquisition Game

Let’s cut through the jargon and dive straight into something crucial for your business: customer acquisition cost (or CAC.) Yes, it sounds funny, but it’s actually a pretty big deal. Let’s break it down.

The Basics of CAC

If you’re running your e-commerce store, or just starting out, you’re likely hustling hard to get those first sales. And you’re probably relying on organic efforts (like social media or word-of-mouth) to bring in customers. The good news? It doesn’t cost money! The bad news is, it does cost time. Potentially lots of it. And unless you’re a natural social media wiz…there might be a steep learning curve.

However, when you’re ready to kick things up a notch and scale your business, you’ll likely need to put some money into marketing, like ads. This is where the customer acquisition cost (CAC) comes into play.

CAC, in a nutshell: Ad Spend/New Customers
Imagine you spend $1,000 on ads this month, and you get 100 new customers. Your CAC is $10 (that’s $1,000 divided by 100 customers). This simple number is a game-changer.

Why CAC Matters

Why should you even care about CAC? Well, it’s like a reality check for your business. It reminds us that growth isn’t free. You might have been frustrated, wondering why your sales weren’t soaring. But now you know—it costs money to acquire each customer.

Knowing your CAC gives you power. You can compare it to different platforms like your website, Etsy, or Amazon. This helps you make informed decisions about where to focus your efforts.

Customers > Sales

Let’s shift gears a bit. Instead of solely chasing sales numbers, let’s talk customers. This is super important. Sure, you can sell more to your existing customers, but they likely won’t keep buying forever. Everyone has a limit. Eventually, you’ll need new customers to sustain growth.

Picture this: You’re looking at your sales numbers, and they’re good. You can boost them by selling more to your current customers, but deep down, you know you need fresh faces. That’s where focusing on customers, not just sales, comes into play.

Beware of Magical Thinking

Now, let’s talk about something that can sneak up on all of us—magical thinking. It’s when we set goals and create plans but forget about the nitty-gritty details.

You need to connect the dots between your goals and your CAC. Say you want to increase sales by $25,000. Awesome! But you can’t just wing it. You need a marketing budget that aligns with your goal. Don’t fall into the trap of thinking everything will magically fall into place.

How to Calculate Your Acquisition Cost

Ready to tackle your CAC? Let’s break it down in a few simple steps:

1. Start with a significant timeframe, like year-to-date. Take your total ad spend, including platforms like Google, Facebook, and Instagram.
2. Find out how many new customers you’ve gained in that timeframe. Divide your total ad spend by the number of new customers. Voilà! You’ve got your CAC.

Remember, this is just the beginning. To dive deeper into the nitty-gritty details and apply it to your business, grab our free downloadable workbook HERE [LINK TBD]

Putting It All Together

Now, it’s time to connect the dots. Let’s say your CAC is $14.69. That’s your starting point. If you want to boost sales by $25k, divide that by your average order value. This tells you how many orders you need.

But here’s the kicker: Not all of those orders should be from existing customers. You need new blood to keep growing. Adjust your marketing budget accordingly. In the end, you’ll have a clearer picture of what growth truly means for your business.

Figure out your cost of Acquiring with this workbook:

Related Links:

Want More Sales? You Might Be Missing These 3 Things: https://thesocialsalesgirls.com/want-more-sales-you-might-be-missing-these-3-things-episode-179/

The 10-Minute Checkup – A quick, 10-minute guide to understanding customer metrics and benchmarks: https://thesocialsalesgirls.com/a-10-minute-checkup-you-should-do-today-episode-157/

How to Have More Cash in Your Business: https://thesocialsalesgirls.com/how-to-have-more-cash-in-your-business-episode-164/

New FREE Course

GROW YOUR SALES

(without breaking the bank)

Conversion School is a step by step process to grow your sales,
without spending a fortune on risky ad strategies, or discounting your products.

Works for Ecommerce stores at all stages.

Start getting consistent sales, and see significant sales growth every month.

New FREE Course

GROW YOUR SALES

(without breaking the bank)

Conversion School is a step by step process to grow your sales,
without spending a fortune on risky ad strategies, or discounting your products.

Works for Ecommerce stores at all stages.

Start getting consistent sales, and see significant sales growth every month.