or scroll down to get the highlights

What is “scaling”

In ecommerce businesses, scaling happens when your sales increase sharply, but your inventory and expenses do not increase at the same rate.

Generally scaling happens when you create a “scalable” offer. It can be a product, or a collection, or a subscription that has the potential to be sold in increasing quantities every month. These offers usually have a “hook” that makes them highly desirable.

These offers are more profitable because the merchant is able to:

• Create an acquisition path for that one offer
• Focus their marketing on one offer
• Confidently predict their sales of the offer
• Collect the profit on the offer every month as a result of high “turnover”
• Maintain low levels of inventory
• Have more cash on hand every month

Here’s a visual example of a store’s sales and expenses and inventory before and after a scalable offer
Left side expenses and inventory: 150K and sales:175K
Right side expenses and inventory: 175k and sales: 350k

Growing vs Scaling your Sales.

Most store owners are focused on “growing” your sales by finding more customers to buy more of their products. When you’re thinking of ways you can grow your sales, it’s not unusual to create new product lines that you can sell to your current customers. It feels logical, and it’s the way that most people grow their sales.

The problem with growing your sales this way is that it’s expensive. It requires an investment of your cash to finance this growth. It “costs” time, brain space and causes a “drag” on your operation as you adjust to the growth.

Adding products = adding inventory
More inventory = more labor, more space, fewer turns
More inventory on hand = less cash on hand
Profit sits in inventory + you have to “feed the inventory beast” fast – takes all your cash and more.

Scaling is your best opportunity to be more profitable

When you create a single offer that you can scale, you have more control over your inventory, because all your sales growth comes from one offer. Your inventory turns over quickly, and your investment isn’t spread over multiple products. You’re able to capture your profit on your inventory investment frequently.

More revenue and more profit = more choices, freedom in your life
More profit = bigger paycheck
More sales and profit = high value company that can be sold
Create wealth in your life

This week, I’m sharing why “scaling” is better than “growing”, and how you can start.

If you prefer to listen, Scroll to the bottom

Read on to learn:

• What “Scaling your Sales” looks like
• Why this is an important concept for you to understand
• When to scale your sales – and how YOU might do it
• Real examples from my clients

Who is “scaling” for?

Online stores are perfectly positioned for scaling.

Unlike a brick and mortar store, online stores don’t need a huge selection.
That’s because web visitors at most successful online stores view an average of 5 or 6 pages, and spend 3-5 minutes on the site when they visit.

On top of that, it’s common that 80% of your web visitors are viewing your site on a mobile phone.

They can’t look at all the things, and that’s why we should not try and recreate a physical store experience online.

Online store owners can be specialists. Instead of having a broad selection and a few units of each, you only need the best sellers, and you need depth in those items.

The good news is, that becoming a specialist alone makes it easy to scale your online sales.

How can I scale my sales?

First we have to clear up a common misconception.

Most of us think getting more Sales will solve all of our problems.

That’s not the case. It’s important to understand this concept.
It’s natural to think that everything will be easier when you hit a magic sales figure.
It could be $10K a month or $100K a month.

The conversation you have in your head is that “everything” will be easier when I have more cash coming in.

But the truth is that if you have gaps in your business before you grow your sales, those gaps could become so big that at best, it’s harder to run your business, and at worst, it could shut you down.

Before you scale, ask yourself this:
If I quadrupled the number of orders I receive every week, would I:

1. Have the product on hand to ship all orders immediately
2. Have the time and materials to ship all orders immediately
3. Have the physical space to store and ship all orders
4. Have the bandwidth to answer all the customer service inquiries
5. Have the cash on hand to grow my inventory
6. Have the cash and the time to hire and train helpers

Before you significantly increase your sales, it’s important to make sure You have the basics in place. If not, you’ll be scaling more than your sales. You’ll be scaling your problems.

What happens before you can scale

Are you out of the “Proof of Concept” stage?
In this stage of your business growth, you’re building your audience and your traffic.
You’re trying lots of strategies so you can figure out what works to get sales.
You start building lists and you’re getting more consistent with your marketing.
You are a “hands on” store owner, managing all aspects of your business as you learn what you need to focus on to make progress towards your sales goals.

Do you have Reliable Revenue?
Are you set up to get sales every day, every week, all year long?
Do you have a plan to get sales every month?
Have you set up email automations that are generating consistent sales every day?
Do you have systems and processes set up for managing the repeatable tasks in your business?

At this stage, you might be doing things like:

• Hiring. you are not the person doing everything
• Implementing solutions and procedures for customer service
• Outsourcing shipping to a 3PL or hiring dedicated shipping people
• You have a marketing plan for each month
• You have “go to” promotions that you know will get leads or sales

You’re ready to scale your sales when:

You feel confident that everything won’t fall apart when the orders start pouring in
You know your numbers, and you review your monthly statements
The business is profitable
You have cash on hand
You have systems, processes, and the people in place to support growth

Create a Scalable Offer

You have control over your offers and your sales. Open your mind to doing things differently.
Think about your current customers. Who they are, and why they buy your products.
Think about your current products. Identify the products that sell the “most” and “least” often.

Offers that Scale

A “Front Door” product or collection.
This is the one thing you drive the most traffic to. Think of this product as the first thing you want every customer to buy. This is your customer acquisition plan. Once you have acquired the customer, you’ll use email marketing to offer them other products.

The “Front Door” offer is highly effective because:
You become “known” for one thing, it makes your business memorable.
You have sticky messaging, because you’re focused on one product
You have one ideal customer
You can automate and perfect your back end marketing knowing that you’re speaking to one avatar.

Subscriptions
Perhaps the most common way to scale your sales. If your store has a high returning customer rate, a subscription might be a great way to scale your sales. You can offer a product based subscription, a combination of digital and product, or a subscription that is digital only.

The Subscription offer is highly profitable because:
You turn your inventory and capture your profit every month
You have one ideal customer, so you can offer simple upgrades and add ons
You control your growth and your sales using scarcity, urgency, and exclusivity

Collectables
Perfect for jewelry, Artists, handmade, or high end products. With this method, you’ll use your marketing to set the stage for people to become “collectors”. You’ll select one item to become the “starter” piece and launch subsequent “pieces” on your own schedule. You’ll use scarcity and exclusivity to curate a community of people who love and value your work, and can’t wait for your next piece to become available.

The “Collectable” offer is highly effective because:
You become known for one thing
Your product is memorable
You have a “front door” offer
You control your growth and your sales using scarcity and exclusivity
You have sticky messaging, because you’re focused on one thing.

Digital Offers
Digital offers are a great way to scale your sales without scaling your expenses. You can create a digital one time offer or a digital subscription. Your offer could include products, or it could be only digital. Use a digital offer to deliver education, experiences, and tutorials.

Digital offers are highly profitable because:
Your product cost is a one time investment
No inventory to buy or ship
You have one ideal customer
You can automate upsells and consumption of other products.

Examples of great scaling offers from our smart clients

Ann Chikahisia
Ann is a high end jewelry artist. Her Talisman is her scalable offer.
She uses this as a “Front Door” and “Collectable” offers to grow her sales
https://chikahisastudio.com/pages/talisman

Edith Minne
Edith has used short term subscriptions to scale the sales of her custom ribbons.
She’s grown her audience and customer base quickly by partnering with well known fabric designers in her industry, to create kits that are perfect for both audiences. Edith has created a “Front Door” offer and a subscription
https://renaissanceribbons.com/products/4-month-project-kit-club-webbing

Pam Rodgers
Pam uses her Mystery Polish Subscription as her “Front Door” offer to acquire new customers and scale her sales. Her fast growing low dollar subscription is so simple that it’s easy for Pam to manage, and it feeds her business with a steady stream of buyers that love her hand made polish.
https://www.stellachroma.com/products/monthly-mystery-subscription

Shannon Cates
Shannon has grown her interest based subscription box by leaps and bounds over the past 2 years. This $45 product ships to hundreds of customers each month, creating a steady stream of buyers for her other products. Shannon’s subscription is the “Front Door” offer, and she uses scarcity and exclusivity to grow her sales every month.
https://birdmoss.com/products/birdmoss-box-monthly-subscription

Natalie Santini
Natalie has created a variety of digital courses that teach her clients how to create beautiful items of materials they purchase in her shop. Natalie’s scaling offer is a fully digital product that increases her profitability every month.
https://sewhungryhippie.com/collections/courses

Your next steps:

Block some time on your calendar to do a “brain dump” of how you might create a scalable offer for your business.

Ask yourself:
What does the perfect outcome look like for you?
What could you scale that’s easy and profitable?
What’s working in your business now?
Who are your customers?
What are your top selling products / product categories?
Why are people buying these items?

Get a look behind the scenes and see how Edith Minne, Shannon Cates, and Pam Rodgers created their scalable offers.
Podcast episode:

69 Shannon Cates

111 Edith Minne

112 Pam Rodgers

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

It’s  the embarrassing little secret that ecommerce store owners don’t like to talk about.
Why do we always feel broke? It is so frustrating, embarrassing, and it causes us so much stress.

It’s important that we talk about it, because for most of us, when we get into a cash flow crunch it makes us feel like we’re failing. Like we’re doing something wrong.

It’s embarrassing, and it affects how we run the business.

Running your business when cash is tight is like trying to run your business wearing handcuffs.

It often leads to making poor decisions made out of a desire for a quick fix.

It’s a tough problem to solve, and most of us suffer in silence.

The truth is, many store owners don’t know that there’s a conflict between our sales goals and the real cost of growing a product based business.

We’re wired to want to grow our sales, and we can learn how to do this. We teach this in the Inner Circle, and it’s the exciting part of business for most of us.

But nobody teaches us the downside. That most store owners don’t know that growth is expensive, and that it has the potential to strangle your cash flow and make it really hard to run your business.

The most important thing you need to know is that it’s preventable.
And if you have a cash flow crisis, it’s fixable.

Today on the Podcast, I’m  talking about why it happens – but more importantly, how you can fix it and have more cash in your business.

Scroll to the bottom to listen, or read on… 

I want everyone who’s feeling bad about their current cash situation to reframe how you think about it.

It’s just another problem to solve. And you’ve already solved harder problems – if you’re listening to this, I’m betting that you are a problem solver.

So before we talk about how to solve your cash flow problem – let’s talk about why it happens.

Why do I always feel like I’m short of cash in my Business?

There are a few reasons most store owners hit the wall and run out of cash.

The most common reason is start-up costs.

Our industry promotes that it’s fast and easy and cheap to start an ecommerce  business.  All that promotion creates an expectation that you can start on a shoestring, and the sales will pour in.

But that’s not normal. In fact, here’s what I see; most people start their business with personal funds, or they use a line of credit, or they borrow the start-up money from family.

They use their start-up cash for things like:

• Website
• Fees
• Training
• Products
• Supplies / Tools

Basically they spend most, or all of their money getting started.

And when that start-up money is debt, most people feel immediate pressure to pay it back.

And we actually expect that we should be able to pay it back out of the profits of the business.

Here’s the problem with that:
Sales don’t roll in right off the bat. It takes time to learn, and money to pay for traffic to your store. You also have to spend money to  replace the product you’ve sold and stock a little extra for growth.

Often it takes all the money you have and then some.

And so for most everyone with this kind of cash flow crunch, they feel like they’re failing, and the business isn’t successful. Because they’re not good at it.

Your business is an investment. 

It’s like buying a house. You need capital. When you buy a house, you need a lump of cash for a down payment. And you invest that money with no expectation of getting it back quickly.

It’s a capital cost. Start up costs for your business are the same. They are capital costs. It’s completely possible that you’ll never take that stat-up money out of the business. 

Maybe not until you sell it.

But,  if you do need to pay it back, it needs to be a capital loan. You amortize it over a long period of time.You have equal monthly payments, like a mortgage. Keep the payments really tiny at first, and then you have the option of paying it down faster after you become profitable.

Doing that takes the pressure off you. You’ll treat your loan payment like a small fixed expense.

Once you understand this – you can stop feeling like you’re failing, and stay focused on running your business.

Are you growing too fast?

The other cash crunch scenario I see often is when someone’s been in business for a while, and their sales are growing fast. The problem for them isn’t sales. 

In fact, these store owners can’t understand how they can have such great sales and no money. Their cash goes out the door as soon as it comes in.
Outwardly, they feel successful – they have great sales.
Internally, they feel like they’re a hot mess.

They don’t know what to do and think they’re not good at this part of the business.

If this is you, here’s what you need to know:
You don’t have cash, because you’re feeding the beast.

We have this common perception that we should be able to finance our growth by just getting more sales. 

The problem is that the cost of your growth is more than the cash you’re generating to finance it. 

You need to constantly buy more inventory to support your growing sales, and you need to maintain a higher level of inventory every month.

What this happens, you’re probably taking the cash that you need for operating expenses and using that money to buy more inventory. You’re feeding the inventory beast.

When this happens – you look for relief from this constant shortage of cash, and you tell yourself that if you just had an extra $10K or $20K you could get ahead.

And you take a Shopify loan – or a Paypal loan. It relieves the stress, but only for the short term. What you really needed was an Investment of capital, and when you took on short term debt, you put a bandaid on a 10 inch gash.

You need to replace the inventory you sell every month, PLUS buy more, but you have even less money to do it because you’re paying that loan back every week, and now you have even less cash.

How do you fix your cash flow for good?

1. You inject capital into the business – as an investment or long term debt
2. You pare down your skus – cut out 25% of your products – so your $ aren’t spread so thin
3. You control your growth. Every month you put your landed COG into a separate account and then you decide how much of your profit you want to “invest” in your business – you can add that in too.

That’s all you spend. You will control your growth – you’ll focus on your best sellers, and you’ll sleep better at night

Here’s how to rethink how you feel about your cash.

1. If you have a cash flow problem, you are not failing. You have a viable business, and all it means is that you have a problem to solve.

    

2. Understand  the capital costs in your business. Capital costs are investments – equipment, inventory, start up costs, level up costs (moving to a bigger space), coaching, some contact services. Capital costs are investments. They need to be funded by a cash injection or long term debt amortized over several months or years.
3. Operating expenses are the cost of running your business. Ads, employees, rent, taxes, postage, your esp, apps. These expenses are often recurring. They need to be funded by the profit in your business. If you have a cash flow issue, cutting these expenses to the bone will only be a short term fix.

Next week on the podcast, I’m going to share my thoughts on how to grow your sales in a profitable way – where you can grow your sales without feeling like you’re broke.

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.