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Business Viability Calculator.
Enjoy the rest of the article.
The Secret Formula To
Building A Thriving
Formula To Building
Business in 2021
I’m absolutely delighted that you’re still with me, and you’re going to be glad you stayed until the end. Because right now, I’m going to reveal the Secret Foruma to you.
THE SECRET FORUMULA
PART 1: VALIDATION
Once you’ve decided on a niche, follow these steps to validate your business plan:
Step 1: Make sure you have a stable source of supply with margins that exceed 25% and a delivery turnaround time of no more than 7 working days.
Step 2: Open a Google Ads account and use the Google Keyword Planner to check if there is enough search volume (ie demand) for the products you want to market in the territory you want to sell them in. Another great tool you can use to check search volume is Semrush (semrush.com).
Step 3: Complete the business viability calculator to determine what you need to be spending on marketing to generate the traffic required to meet your revenue and profit goals. Your revenue and profit goals can be phased into a few milestones. Milestone 1 should be small enough to be low risk and big enough to excite you and to prove that your business concept works.
If the commercials in the validation exercise make sense, you can proceed to Part 2. If they don’t make sense, you need to go back to the drawing board and re-think your strategy. If the numbers aren’t quite lining up, the three main things you need to look at are:
1. Are my targets realistic? Is there a market for the products I want to sell? How aggressive is the competition? And can I sell at competitive prices?
2. Are my margins high enough? If you’re not projecting to make an average margin of at least 25%, you’re going to find it very difficult to drive traffic profitably.
3. Is my projected average order value high enough? If a majority of your product range consists of very low value items (less than $30), you’re going to have to invest a massive amount of money in traffic to generate any worthwhile income. Make sure you have a good selection of cheaper products and accessories that you can use as sales bait or upsells/cross sells, as well as high-demand premium products ($30-$100 is a sweet spot for most startups).
PART 2: THE ROLE OF PAID MARKETING
At this point, you should have a pretty solid idea of what you need to be investing in traffic on a monthly basis to get your business off the ground. Before I reveal the three winning strategies for sourcing funding to market your business, I want to give you some insight into the role that paid marketing actually plays as part of your marketing plan.
As a new business, you need to build a customer base. To do that, you need traffic that converts. If, at best, you are only able to break-even on the first sale you make to a new customer as a result of paid marketing, you’ve done a good job. Paid marketing should not be seen as a way to generate profit. Instead, it should be seen as a way to buy a customer base. Of course, in some instances, you may be able to generate a positive return from paid marketing, but if not, that’s totally fine. If you can break even on marketing, you are in effect buying a customer base for free. And that is all that’s required from your paid marketing strategy.
So how do we make money? No different to traditional brick-and-mortal retail businesses, you make money on the second, third, fourth sale to the same customer. I’m sure you’ve heard of the phrase “lifetime customer value”. LCV is the amount of turnover you are likely to generate from a customer over the customer’s lifetime association with your business. A customer who buys a mobile phone cover from you today might come back and buy a power bank later on. The second sale doesn’t cost you anything in terms of advertising, so you make the full 25% margin on the sale. Generally, the cost of generating a sale reduces for each additional sale made to the same person. That’s why it’s critical that you have a solid plan in place to retain your customers and to entice them to come back again and again. The lifetime of a customer will be different for every niche. In some niches, a customer will only ever buy once (in which case your paid marketing does need to generate a positive return). In others, the customer lifetime may extend to 1-5 sales a year over a 2 year period. If you are selling consumable products like protein shakes, your customer lifetime might be monthly for a period of 1 year.
Now that you understand the role of paid marketing and customer lifetime value, you can do a simulation to determine how much money you need to invest in marketing to generate your revenue and profit goals, taking repeat purchases into consideration.
Do you have a number yet? Let’s say you need to spend $1000 a month on Facebook and Google ads to get started. As you’re only just about to launch, you still don’t have a POC – proof of concept: Proof that the business actually works. The only way to determine POC is to dive in and launch, and as you start generating traffic and sales, to monitor your conversion metrics and tweak your advertising, product offering, service, delivery and pricing strategies to make the actual commercials line up with the simulated ones. This takes time. You could get it right in the first month, but what if it takes 6 months of tweaking before you get it right? That would mean you would need to be prepared to invest at least $6000 before becoming profitable. Herein lies the risk. What if you invest the $6000 only to discover that no matter what, you can’t get the business to generate profit? At that point, you may want to cut your losses, re-think your strategy, and start again. But you’re already $6k in, and you’re going to need another $6k for the second attempt. Whether you fund this business with your own money or with borrowed money, the risk is the same. So how do we mitigate this risk? Here comes the golden nugget you’ve been waiting for…
PART 3: THREE ALTERNATIVE LOW-RISK SOURCES OF FUNDING
Marketing 101 dictates that you take your product or service to where your customer is. By now, we know who our ideal customer is. We also know that the are currently buying products like yours on well-established marketplaces. So it’s futile to ignore this opportunity. Launching your products on marketplaces puts your products right in front of an existing customer base. You might need to give away 10-15% of your margin to the marketplace, but you only pay when you make a sale. This makes it a zero-risk strategy where the commission you pay to the marketplace is guaranteed to cost you less than your initial cost of driving cold traffic to your online store using Google or Facebook ads, and the commission is only payable when you make a sale. Some marketplaces worth exploring are:
1. Amazon (53% of Amazon’s sales now come from third party sellers like you)
Here’s a link to an excellent article on The World’s Top Marketplaces in 2021.
2. Single Product Store
The next powerful technique is to find one high-demand product and build a store just for the one product. The product should be one that will allow you to generate a positive return on ad spend. If your simulation shows that running Facebook ads to this one product will cost $100 per customer acquisition with a net profit of $200, you’re in the money. If you slowly scale such a campaign, you can get to the point where you’re investing $1000 to make $2000. The beauty of this is that you invest $1000 once. The $1k generates $2k. $1k is profit, and the other $1k is your original investment that you’ve made back, which you re-invest to generate another $1k. And the $1k profit is what you use to fund marketing for your main store. This strategy works well for Facebook/Instagram as well as Google Shopping ads. Here’s an example of a very simple single product store that consistently and effortlessly generates profit: https://postureprostore.com
3. Content Funnel
A content funnel works in a similar way to a Single Product Store. In fact, you will need to first build a single product store to use this strategy, as this strategy is an alternative traffic source extension of the Single Product Store strategy.
All you do is create a blog that talks about your single product in great detail. The blog should appear as if it was written by a third party, review style. Prospective customers are likely to respond more favourably to a third party review than an advertisement. The end of the blog should have a button or link to your single product store. Then, you market the blog on a Native Advertising platform. My personal recommendation is Taboola. (taboola.com) Native ads are ads that appear on news websites like CNN and MSN, and they are laid out on the news site to look like all other news articles (hence the term ‘native’). Having your ad for your blog appearing on a major news website like CNN or MSN gives your article an element of credibility.
Here’s how it works. A prospective customer reads the news on MSN, sees your ad, clicks the link. The lead is in “news consumption mode”, so they’re expecting to land up on a news-style page. That’s why you direct this kind of traffic to a blog, and not directly to your Single Product Store. Once on the blog, the lead consumes what appears to be a very complimentary third-party review of your product. Whilst consuming the content, the lead becomes indoctrinated, and by the end of the article, they’re sold. Then you present them with a link to your Single Product Store, and the sale will most likely happen.
The beauty of this strategy is that is not very common. It’s not over-used, and it therefore continues to be one of the most powerful, cost-effective forms of marketing. And it works for all niches. Especially anything to do with health & fitness, beauty, pets, kiddies, vacations, vehicles, and DIY/home improvement. It’s also way cheaper than Facebook and Google to advertise on Taboola and similar native networks.
From a commercial standpoint, use this stratgegy the same way you use the Single Product Strategy. Get your funnel to the point where it is generating a 2:1 return, and use the profit to fund paid traffic for your main store.
There you have it. The formula is simple. Make sure the commercials make sense, then generate a low-risk, scalable income stream to fund the marketing of your main store. These strategies have been used by the ecommerce marketing elite for over the past decade, and it’s these strategies that will not only separate you from the hundreds of thousands of new entrants in this industry, they will also greatly reduce your initial risk which will help you buy the time you need to perfect the conversion optimisation of your new store.
BONUS CONTENT: 5 SECRETS TO RUNNING A SUCCESSFUL ONLINE BUSINESS
There are many entrepreneurs whose greatest desire is to build a business that allows them to live a lifestyle of their choosing, and have it run more or less on autopilot. Ecommerce tends to be fairly complementary to those desires.
However, if you want to turn your ecommerce store into a massive business, the only thing getting in the way is you. The potential is always there, and you have to make a decision to start putting in the time and effort it requires to scale up.
Here are five top secrets to running a successful ecommerce business.
1. Treat your ecommerce business as if it were a thriving offline business.
How do you treat your ecommerce business? Do you see it as a hobby? Something fun to do in your spare time?
It might be easy to see it that way, especially if it isn’t earning you millions of dollars yet. However, if you sincerely have the desire to grow it into a massive business, you need to act as if it is already.
”Your ecommerce store is a real business, and it should be treated with the same respect that the CEOs of Fortune 500 companies treat theirs,” says Anton Kraly from DropShipLifestyle.
A lifestyle business is nice to have, but realise that you can create even greater wealth by focusing on the ongoing growth of your business. Don’t wait around for your venture to feel like a big business. Think about the decisions you would make if it already was.
2. Find the right software for your business.
As a business owner, you need to have the depth of vision to see potential issues before they even come up. For many ecommerce business owners, software is something that needs to be addressed and evaluated on an ongoing basis, because it’s really foundational to the entire operation.
Security concerns, scalability, usability, marketing tools and other factors have to be taken into account when you’re looking for the right software to rely on.
“The real growth killer is when an online store owner is not running the right ecommerce software for their business,” says Susan Delly of Zippy Cart. “Your ecommerce software should be scalable, secure, user-friendly and have a solid set of conversion and marketing tools.”
The right tool depends largely on what needs you have. Make sure to identify your challenges and do your research to find the tool that matches your requirements.
3. Figure out where your customers are.
This is business 101. Know who your target audience is, and figure out where they like to hang out. Many business owners don’t take this step seriously, and end up wasting a lot of their time and resources on marketing that doesn’t convert.
“We started off promoting on social media and that got us nowhere fast. After about six months in business we were connected with someone at a deal site, ran our first deal and it was a success,” says Jessica Geier of Raw Generation. “After that I spent an entire month searching out every deal site I could find and contacted all of them until we got on their calendars. That was the catalyst for our early success and I have no doubt that is the reason we are still in business.”
Of course, this doesn’t necessarily mean that you should go after deal sites as well. It really depends on what your business is centered on, what products you offer and who your target market is.
However, you do need to take this principle seriously. If you can figure out where your marketing dollars are going to produce the greatest return on investment, you’ll have an easier time bringing in a steady stream of leads.
4. Allow your customers to be your brand ambassadors.
There’s nothing quite like the glowing testimonial of a satisfied customer to add credibility to your business. By collecting and sharing testimonials and reviews on a regular basis, you can encourage more sales from your website visitors.
“The most powerful tip we could give in growing your ecommerce business is allowing your customers to be your brand ambassadors,” says Michelle Michalak from Slyde Handboards. “Make it easy to compile and share testimonials and reviews from your customers.”
You can talk yourself up as much as you want, but it’s ultimately what people say about your business that’s going to have the biggest impact on buying decisions. Your customers are the greatest assets you have, so learn to leverage them.
5. Remove friction from the checkout process.
If you want to sell more product, you have to ensure that your visitors aren’t getting frustrated, abandoning their carts and leaving your site to find another store where they can purchase a competitor product.
Friction is one of the biggest challenges for most etailers, especially as we move into the mobile age. You have to find a way to make checkout so simple and easy that anyone could do it.
“My biggest tip to grow an ecommerce business is practically common sense, but I rarely see websites taking it as seriously as they should: remove friction from the checkout process,” says Nick Eubanks of SEO Nick.
Eubanks goes on to suggest several ways of achieving this end:
- Eliminate the need for account creation.
- Reduce the number of screens the customer has to go through.
- Make sure your default shipping option is the cheapest, unless there’s a faster option for the same price.
- Use as few form fields as possible, and use auto-fill where applicable.
- Save billing, shipping and payment information when and where possible.
- Provide several ways for your customers to pay for their order, including common payment options such as Credit Card, PayPal, Google Pay, and Apple Pay.
Ultimately, you can grow your ecommerce business to whatever level you see fit. It depends entirely on how ambitious you are, and what you want out of it.
NEED EXPERT ADVICE?
If you want expert advice on how to launch and scale a thriving ecommerce business, book a call with one of the experts at The Digital Cartel by clicking on the button below.