7 Tips That Allow You to Run an eCommerce Company from Anywhere and as a Side Job

I get asked a lot if it is really hard to get an ecommerce site off the ground.  With all of the tools out there, as long as you don't have outrageous expectations, getting something going is extremely easy, capital requirements are light, and you definitely don't need to jump in full time.

Here are 7 tips that can really help you enter the ecommerce industry while minimizing your risk.

1. Find a partner

FOCUS, you are just creating an ecommerce site.  You do not need to open a shipping facility, a manufacturer, a design group.  Your focus is your website and marketing it, so find a partner for your product.  Let's say you want to get into the coffee business.  Find a great coffee grower and create a relationship.

Find that partner that does everything else:

• Growing
• Shipping
• Packaging
• Warehousing
• etc.

Offer them incentive to handle your product as well.  Obviously, you will already be purchasing product from them, but also offer to pay a slight premium for shipping, warehousing etc. so that they can make a little extra money off their existing operation.  You can always make a shift later if the costs get too high and it makes sense, but for now, it is a lot more beneficial to eliminate any extra overhead than to maximize your Gross Margin.

This allows you to cut costs such as:

• Staff
• Facilities
• Office Expenses
• and many other items that come with running a fulfillment operation

Your partner can also offer you a lot of knowledge as they most likely have much more experience in your products industry than you do

2. Use existing platforms

The world has become saturated with awesome ecommerce platforms that are ready to go out of the box.  Shopify has been the easiest, out of the box, in my experience.  Find a platform that suits you, and get the thing up and running.  Choose existing templates, add simple addons and plugins, and get going.

You are not starting a technology company!  So stop trying to create new technology.

3. Start Small

You are creating a side business to start, you are in no rush.  Start with a small run of your product and test it.  For example, if it is coffee, try selling 300 bags and see how it goes.  Don't invest 10s of thousands of dollars and hope for the best.

Put your site up and sell a minimum.  You can use scarcity to your advantage.  See how your friends and family react to the product, then tweak it, then try marketing a little bigger, tweak again, nothing happens overnight and use the luxury of the fact you haven't jumped in full force to be calculated and grow organically.

4. Get Terms

You do not need to be putting much cash upfront, and since you haven't raised any, you probably don't have much.  Get net terms and only extend yourself as far as you are confident you can make the money before the money is due.

If it is for your product, get net 30 terms (meaning you pay 30 days after you receive the product) and then only take on as much product as you can sell in those 30 days.  This allows you to make your money, before spending any, and creates a self sustaining business without large capital requirements.

5. Don't quit your day job

This is a side job until the money is pouring in! Don't tell me you "have to give it your all" and "this is your passion."  If you can maintain without the businesses cash-flow, this allows you do make decisions on for the benefit of the growth and prosperity of the business, not your personal bills.

Without you as an addition to overhead, you can run extremely lean, which means your business has a significant higher chance of success.

Also, if your day job pays well, it can provide growth funding for your business.

6. Get Interns

You have created an opportunity.  You have a product, you have a platform, you are ready to go.  If the growth starts to exceed the amount of time you have to put into it, start bringing in interns:

• They will work for cheap (even free)
• They will learn a ton because it is so hands on
• You can create a situation where they can make a career for themselves if they grow well
• You are running so lean, payroll shouldn't be an issue if you have a decent product
• Did I mention you are creating a huge opportunity for them as well?

7. Let it grow organically

This is a great way to decide where to put your money.  Before you go out and market this, and pump money into growth, just let it grow.  Tell your friends about it, see which ones actually buy, get feedback, really learn why your product is selling.

Then the next step is favors and connections.  If you have friends, see if any have a way to help you gain some exposure, don't be afraid to ask for help.

Create a budget for marketing based on revenue, that way your business can self sustain.

If you have any more questions, please feel free to email erik@hawkemedia.com

Men vs Women, 6 Key Differences in eCommerce Marketing

Are you trying to decide whether you should target men, women or both with your new product?  I have something shocking to point out.  The buying habits of men and women are DRASTICALLY different.  Your entire strategy has to change to attract one or the other.  Here are six key differences to look out for depending on who your audience is.  Please remember this is based on my personal experience, and you are entitled to your own opinion in the matter.

1. Cost per Acquisition
When it comes to women, they love what's new and exciting.  With the right marketing position and branding, it isn't that difficult to get them to try your product.

On the other hand, men are very set in their ways.  It is hard to convince a man to try something new.

The result of this is a higher CPA.  It takes less marketing to get women to try a product than it does men (this is obviously a broad generalization, but assuming everything else is equal).

This means it takes more upfront cash to get a male customer base growing.

2. Lifetime Value
This is where men make up some ground.  As easy as it is to market to a woman and get her to try your product, one wrong move and they will never forgive you.

I have had very different experiences marketing to men.  At Swag of the Month, we could send someone the wrong size, a color they stated they hated, and make countless mistakes.  The response would usually be something a long the lines of "can you just make sure this doesn't happen again."  They wouldn't even ask for a return or exchange most of the time!

At Ellie, we saw average lifetimes of about 4 months.  At Swag of the Month, we were seeing around 14 months!  Once men like something, they are a lot harder to lose.

This allows you to invest more up front, but eventually you will make higher returns (see my last blog post on key metrics).

3. Emotion vs. Logic
This all comes down to the way you position your product.  To get the best response, women want to see the emotional appeal.  They want to know the lifestyle behind the brand.  How is this product going to make them feel.

Guys shopping habits are much more logic based.  You need to appeal to why they need what you are selling.  Why does it make sense to purchase this.

Lifestyle can come into play for both, but men are going to think about it as a "why do I need this?" and women will usually think more as to "how is this going to make me feel?"

4. Social Media Strategy
This has been surprisingly tricky.  Women love to look at products.  You can push your actual brand all day and engage them on the lifestyle and product images (especially in fashion).

With men, you have to almost sneak the product in.  Guys are not on social media to look at pictures of fashion, just as much as they don't go to the mall to browse.  So with this in mind, you need to actually engage them on their interests.  Post about things guys will want to read and see, and then connect it to your product (but not too much).  Social media is a much more delicate thing when it comes to men.

5. Product Navigation
Basic rule here, girls love to shop and guys want to get in and out.  A men's site needs to have a tight funnel and focus them on getting exactly what they want and getting out.  Girls want to browse and look through products.  Girls are looking to spend much more time on the site.  A small product line and focused navigation is better for guys and a wide selection and user friendly interface for browsing (like fab.com) is much better for girls.

6. Customer Service
This is a big one.  When Swag of the Month had 1000 subscribers, we would get around 30 emails per month in customer service.  When Ellie hit 1000, we were getting about 1000 emails per month.  This goes back to the "men never stop and ask for directions" thing.  If women have a problem, they let you know it.  They want acknowledgement, validation and help.  Men are a lot more forgiving, want to handle it themselves, but they also don't give you the opportunity to make a problem right as often.

So think very hard about who you want your customer to be and how you model your business based on that.

The 5 Key Metrics to Analyzing your eCommerce Business

Many eCommerce sites are completely missing one or more of these key metrics.  The most important data points about your business.  Without knowing each and every one of these points, there is no way you can know if your business is sustainable.  Make sure when starting out, you are tracking every one of these metrics so that you know if you are going to survive, let alone make money.

CPA (Cost in Marketing to Acquire Each Customer)

CPA is your main marketing metric.  You calculate this by taking your marketing spend and dividing it by newly acquired customers.

i.e. Let’s say you spent $150,000 in marketing in the month of July.  Now let’s say that you got 7,500 new customers during July as well.  You would calculate your CPA as 150,000/7,500=20.  Your CPA during July was $20.  That means that for every $20 you spend given everything stays the same, you will get a new customer.

LTV (Lifetime Value)

Now that you have your CPA, it is extremely important to know your LTV.  LTV is measured by the average amount of revenue generated by a customer in their lifetime.  When analyzing this, it is also important to know how long this lifetime is usually as well (do they spend mostly over 3 months, 6 months etc.), that way, you can then calculate an estimated ROI taking your CPA and your LTV.

Let’s say that using the same case as above, the LTV of your customer is $200 over 6 months.  Now you know that, if all things remain constant, if you invest $20 in your business, you will make $200 over 6 months.

Gross Margin

This is where a lot of ecommerce businesses aren’t looking.  You have your LTV, but that is just based on revenue.  What percent of that do you actually take home after your cost of goods?  To calculate this you take your retail price, let’s say it is $50, and then you take the cost it takes you to get it out the door, let’s say this is $20.  You take 50-20=30, then 30/50=.6 which means your Gross Margin is 60%.

This means 60% of the revenue coming in actually goes to your business and the other 40% goes to cover the goods you are selling.

Overhead

Keep your overhead low!  All the costs of running your business other than your goods.  Your employees, office, equipment, anything at all that you are spending money on to keep your business open.  Make sure you know what you are spending (this may seem obvious, but you’d be surprised how many people don’t know this number).  Taking the case from above, let’s assume that your overhead is $50,000 per month to pay yourself, your employees, your office rent, equipment and all of your business expenses.

Profit

Don’t let anyone tell you this number isn’t important.  You want to make money and this is where you do.  Focus on getting your “bottom line” or Profit up by make sure to keep your costs under control as well as growing your revenue.

Now let’s look at the examples.

$20 CPA

$200 LTV over 6 Months

60% Gross Margin

$50,000 Monthly Overhead

$150,000 spent for 7,500

This means:

You will make $1,500,000 in revenue over the next 6 months (7,500 customers x $200 LTV)

$900,000 after your Cost of Goods are covered (1,500,000 * 60%)

Your overhead will cost $300,000 over the next 6 months (50,000*6)

After 6 months you will end up with $600,000 (900,000-600,000)

So if you invest $150,000 in marketing, it will take approximately 1.5 months to make that money back (150,000/(600,000/6 months)) and then you will make approximately $450,000 profit over the remaining 4.5 months.

Recap

CPA, LTV, Gross Margin, Overhead, Profit

Know these key metrics and you will know how to analyze your business.