Best Practices from Renewal Logistics:
Top 3 Tips to Scale Your E-Commerce Business as a Solopreneur
E-Commerce sales grew by 50% during the pandemic
E-commerce sales grew by 50% over the early part of the Covid-19 pandemic. Two years later the sector is continuing to grow! Many first-time entrepreneurs have taken advantage of the boom to open up their own online shops. With the availability of tools like Shopify and social media channels for brand amplification, it has never been easier to develop an online presence as an entrepreneur.
In today’s post we’ll be discussing What Comes Next? Once you’ve launched your business, brought in those happy customer reviews, and started your line-up of new products, how do you continue to scale your business beyond the scope of a bite-sized operation? More importantly, how do you scale efficiently and effectively? You’ve got to be careful not to overspend your revenue on new infrastructure or get in over your head. But how?
Below, we’ll provide three guiding principles to follow to make sure you’re scaling your e-commerce business in the most strategic way possible. Read on to learn more!
Guide for Solopreneurs:
3 Tips for Scaling Your E-Commerce Business Efficiently
1. Outsource
As an e-commerce solopreneur, you probably find yourself wearing many hats. One day you’re designing a new product, the next you’re packing orders, and the next you’re posting promotional content on Instagram. You’re effectively acting as CEO, Chief Marketing Officer, Sales Rep, Inventory Manager, Chief Finance Officer, Floor Worker, Designer, Customer Service Rep, and more! This workload may be manageable for one person on a small scale but, in order to scale your operation, you will need to outsource certain tasks.
Many solopreneurs take pride in managing all sides of their operation on their own, but the truth is, nearly all companies that achieve long-term success rely on outsourcing to some extent. Larger, more established companies view outsourcing as an extension of their own operations. For example, nearly all apparel companies outsource their production labor and some fashion houses even outsource design work. Large, service-based companies like insurance carriers outsource all of their customer service operations. Outsourcing is one of the most reliable ways to transition from a small-scale company to a large-scale operation.
The advantages of outsourcing as you scale are two-fold. Firstly, outsourcing will free up more time for you to do what you can do best – that is, creating amazing products and brainstorming new ideas. All too often we see solopreneurs who get off to a great start and then hit a rut when they can no longer bring their creativity to the development process because they are too busy handling the operational side of the business.
We know you want to make sure every single step in your operations is being done well but, by focusing too much of your own time on the everyday minutiae, you end up experiencing what we call ‘brain drain.’ The company loses out on potential ideas because your head is stuck in the day-to-day.
The second major advantage to outsourcing elements of your daily business operations is that you get to benefit from experts who specialize in a niche part of the process. If you’ve been successful so far, there’s no doubt that you’re really great at what you do. However, no one is an expert in every single part of a business. Maybe you can work with a package designer, who knows just how to package your product in a way that keeps it safe in shipping, stays true to your brand, and uses sustainable materials. Or maybe you hire someone who shares similar interests with your target audience and knows exactly how to position your brand on social media. These are all tasks you could do yourself but can often be done most effectively by people who have specialized experience.
When it comes to outsourcing, you will see the biggest impact by outsourcing larger parts of your operation. Think about what processes currently take the most time and/or resources and see if you can use outsourcing instead. For example, many e-commerce solopreneurs find that inventory management and order fulfillment take up a huge chunk of time – and sometimes take up a huge chunk of space in their homes and offices as well!
Luckily, fulfillment and inventory management can be outsourced to a 3PL that knows how to handle this as efficiently as possible. With that major task off your plate, you’ve got time freed up to work on planning and development. And just like that you’ve conquered the dreaded Brain Drain.
More Ways to Outsource
1. Outsource Payroll.
Payroll can be outsourced to a PEO (Professional Employer Organization) that also takes care of employee benefits and administrative people-management tasks. This is particularly beneficial for smaller businesses because PEO’s can offer lower insurance rates usually reserved for giant firms.
2. Outsource Accounting
As your operation grows, it can be useful to outsource accounting to an accounting firm. This option is generally cheaper than hiring an in-house accounting team and saves you time on hiring and onboarding.
3. Outsource Inbound Communication
Call centers are an excellent resource to use for outsourced communication and customer service. While it’s great to have direct relationships with your customers, call centers can help filter contacts and answer simple questions.
4, Outsource IT
Very small companies usually don’t need to outsource IT as long as employees are reasonably tech-savvy. However, as soon as you start integrating more advanced software and growing your staff, it may be a good idea to outsource IT operations. This helps save you from tech-related headaches and make sure your technology is working as it should.
2. Use a Fulfillment Center
We’ve already touched on this advice above, but we’ll now dive into the importance of this specific type of outsourcing. A fulfillment center is a warehouse used specifically for warehousing goods that need to be shipped to customers. At these centers, inventory is received from the manufacturer, stored in racks, and then packed up and shipped off when customers order goods. Fulfillment centers are busy places where efficiency is prized above all else and every step in the process is done according to carefully designed systems. Today, about 90% of Fortune 500 companies outsource their warehouse and fulfillment operations to take advantage of their efficiency and well-tested systems.
Few solopreneurs start off working with fulfillment centers from the get-go. That’s because when an operation is small you don’t need to have much inventory on hand and you may not be shipping orders out at a steady cadence yet. At this early stage, you probably spend a lot of your time setting up your online store, generating interest via social media, and perfecting your product. All of these tasks can be done comfortably from a home office just using your personal computer and maybe a phone.
However, once business starts picking up you’ll notice that you need to stock more and more inventory. You’ll spend less time on the computer and more time shipping and receiving. At some point, your operation will hit an upper limit on how many units you can move each day because there’s only so many packages you can fit into a home office, and so many boxes you can carry to the post office on your own.
At this growth phase, it is extremely helpful to hire a fulfillment company. By storing your inventory at a fulfillment center, you will no longer be limited by physical constraints like the size of your home office and the number of packages you can take to the post office in one trip. It’s certainly a better option than splurging on your own industrial forklift. And you’ll get to enjoy a clutter-free home office space once again.
3. Take Advantage of Fractional Services
Our last piece of advice for efficiently scaling your e-commerce business is to take advantage of fractional services. Fractional services follow the “pay for what you need” model. This type of service is essential for scaling efficiently. Below we’ll use an example to illustrate the inefficiencies that can arise without fractional services.
Let’s say you are going to rent a small warehouse to store the inventory for your e-commerce business. In the beginning you only need to store about 1,000 units at a time.
You need to decide on the size of your warehouse right at the start but what happens if your business grows?
Option A is to start with a warehouse that’s much bigger than your current operation. That way, when your business grows you’ll have plenty of space. For this option, let’s say you choose a warehouse that can store 50,000 units at once.
This all sounds fine, but here’s the problem. It will take time for your business to grow into this large space. In the meantime, you still need to pay rent, but you may not be able to afford the large space at your current scale. This means you may go into debt waiting for the pace of orders to pick up. This is not an efficient way to grow because you’ll be sinking money into space that you don’t currently need.
Option B is to start with a smaller warehouse that you can afford at your current scale. But as soon as your business begins to grow you need to find a bigger space. And what happens when you grow even more. You need to move again! Each time you relocate your operation you sink money into moving services and lose out on time that could be spent in other areas of the business. Moving your whole operation to a new space every time you scale is not an efficient use of resources either.
This is where fractional warehousing comes in to save the day. Fractional warehousing means that you will pay to use part of a larger warehouse. Under a fractional model, you generally pay by the square foot, which means you don’t need to waste money paying for empty space. Additionally, because your inventory is housed in an expansive warehouse, you usually have the option to add on additional space as soon as you need it, which means you don’t need to pick up and move as soon as you start to grow. Fractional warehousing is the most efficient way to scale your inventory management. With Renewal Logistics, smaller businesses can choose exactly how much square footage they need in the warehouse. We’ll work with you to devise a custom solution without any extra costs.
More Fractional Services to Use
1. Fractional COO
Using fractional services can be a great way to save money instead of hiring a full C-Suite. Firms like BravoCPG are set up to perform the strategic and high-skill work usually done by a COO.
2. Fractional CFO
Hiring a fractional CFO or CFO firm to manage the finances of your operation and provide expert guidance is a good tactic for smaller companies to take. It is hard to fit highly paid positions into your budget when your company is still small. With a fractional CFO you need not hire someone full-time.
3. Fractional Controller
Whereas CFO services handle the big-picture finances of your operation, a controller is tasked with ensuring compliance and reviewing the accuracy of financial documentation. By hiring a fractional controller, you can make sure your financial documentation is in tip-top shape, while paying for only the work that you need done, rather than hiring a full-time position.
4. Fractional Bookkeeping
Like controller services, bookkeeping is also a popular choice for growing companies to outsource. By paying for fractional services you can save money while still ensuring that your bookkeeping is handled by skilled professionals.
Key Takeaways
Scaling Your E-commerce Business
1. Outsource
Work with people who specialize and avoid your own Brain Drain
They’ll handle the picking, packing, and storing. That way you can focus on the creative parts.
3. Take Advantage of Fractional Services
Pay for the exact amount of space you need and avoid moving over and over.
Next Steps:
Ready to Start Scaling?
Our 3PL and fulfillment services are designed to help small business owners like you run their operations as efficiently and effectively as the big guys. With us, you’ll get to take advantage of bulk pricing, carefully designed processes and top-notch facilities. Because we offer our services on a fractional basis, you’ll only pay for what you need and can add on space or new services as your business continues to grow.
If you want to learn more about strategies for scaling up your business, shoot us a message today! We love hearing about your business goals and helping small businesses grow.
