By Ross Kimbarovsky, Founder and CEO of crowdspring
From the moment you sit down to write a business plan for your new retail or eCommerce business, you discover that you have a lot to do but little time to accomplish everything.
Starting a business takes a great deal of time and effort, and even experienced entrepreneurs know that there’s no guarantee of success.
But every successful business owner knows that whether your business succeeds or fails comes down to profitability (the amount of money remaining after all business expenses are paid). That’s the only way to build a sustainable business.
Here are three practical tips you can implement today to increase the profitability of your business:
1. Evaluate what isn’t working.
It’s OK to have occasional unproductive days, but most successful businesses figure out what works and what doesn’t – and focus on the things that work for them.
Existing businesses can do this already. If you’re starting a new business, don’t delay this type of assessment until you’ve been in business for several years. Work it into your quarterly strategy.
Apple became successful only after eliminating most products and focused on a few strategic products that formed a foundation for their brand. This important change also helped Apple build a global brand and not just a niche brand popular primarily in the U.S.
Are you and your team spending a considerable effort on daily activities that aren’t contributing to building your brand, sales, and profits? Are those daily activities connected to the goals you’ve set for the business?
It might be fun to spend two hours daily on Facebook or Twitter hunting for customers. Still, the more critical question is whether your prospective customers are looking for your business on those social networks.
How you can start today: Start by listing all of the tasks you do regularly (hourly, daily, weekly, monthly). Do your best to break these tasks into logical areas, such as sales, accounting, marketing, inventory, etc.
Next, consider how long it takes you to do each task and assess whether each task is essential. You’d be surprised how many things we all do during a typical day that add little value to our business. Once you understand the importance of each activity, rank the activities (or logical areas) to understand better where you should be focusing.
Focus on the areas where you bring the most value to your business and find the right people to fill the gaps in areas you don’t.
2. Find time to develop a strategy.
Most successful business owners develop intelligent strategies and execute those strategies. Yet, many confuse decisions and strategy.
Every business owner makes decisions about their business. For example, they decide where to market, how to market, how much money to spend on marketing and sales, what types of products and services to market and sell, etc.
These decisions are important – but they are not a strategy. These day-to-day decisions are like the moves we make in a game of chess. Knowing how to make a move lets you play the game. It takes strategy and execution to win, especially on a global scale.
For example, AI and automation are reinventing the retail industry in a post-Covid-19 economy. If you run a retail business, you’ve been reading about this trend. But have you developed a strategy for how you’ll adapt and reshape your business?
How you can start today: Ensure that you set aside sufficient time every month or quarter to assess and develop a strategy.
When you develop a strategy, you’ll want to focus on your goals (it’s impossible to create a strategy if you don’t understand your goals). Assess your product/service offerings and determine whether you need to expand or reduce the number of products/services you offer. Some questions you might ask about your business:
- What is my current strategy?
- What is happening in my industry or with my competitors?
- What are my growth, sales, and profitability goals?
- What products and services do I currently offer
- What products and services do I want to offer in the next X months?
- What will I need to do to sell these new products/services?
- How will I compete against X, Y, Z competitors
3. Market to your existing customer base.
It’s 5 to 25 times cheaper to market to your existing customers than to find new customers.
How you can start today: Look at how your customers are using your products or services. Are they staying with your products/services for a long time or using them for a short time and leaving (this is called “churn”).
A churn rate is the percent of customers who terminate their relationships with your company in a specific period (a month, for example).
Once you establish a baseline churn rate for your business, evaluate why customers are leaving. And then build models that can help predict which customers are more likely to leave or stop using your products or services.
Remember that churn rates may vary in different countries and markets, so assess your churn rate on a market-by-market basis.
Churn rates can offer many interesting insights into your business. For example, a high churn rate could mean that you need to focus on improving your company’s products or services. It can also mean that you’re simply marketing to the wrong customers and using your marketing budget unwisely.
Ultimately, the only guarantee that you’ll be in business five years from now is for you to build a sustainable business. Start by applying the three tips we shared in this article to your business.
About the author
Ross Kimbarovsky is founder and CEO at crowdspring, where more than 220,000 experienced freelancers help agencies, small businesses, entrepreneurs, and non-profits with high-quality custom logo design, web design, graphic design, product design, and company naming services. Ross mentors entrepreneurs through TechStars and Founder Institute, was honored as one of Techweek100′s top technology leaders and business visionaries, and enjoys wearing shorts to work after a successful 13-year career as a trial lawyer. Ross has founded numerous other startups, including Startup Foundry, Quickly Legal, and Respect.
With more than half the global population engaging with social media platforms, Social Commerce is growing exponentially. Derek Chew, the CEO of Fullmoon Digital, explains that agile marketing strategies that leverage Social Commerce have become mandatory for a brand’s success.
“Our business simply wouldn’t operate without Inventory Planner. It’s absolutely worth the investment for us – the ROI is massive” – John Mac, Co-Founder
From augmented reality (AR) and virtual try-on tools to shoppable videos, personalized product recommendations, and enhanced content, there are many ways brands and retailers could offer immersive digital product experiences.
Generative AI chatbots are a significant paradigm shift for the retail and eCommerce sectors. By offering advanced features like understanding complex queries, performing tasks, and maintaining conversational context, they have the potential to dramatically improve customer loyalty and Net Promoter Scores (NPS).