The Ecommerce Survival Stage: Growing from $1 to $10 Million
Here at Metacake, we work with brands of all sizes to drive extreme growth through each stage of an ecommerce business’ lifetime. Over the years, we have identified patterns and trends that happen in each of these stages, as well as key factors that business owners need to focus on in order to move forward.
If you’ve grown your business to the $1 million per year mark, first of all— CONGRATULATIONS. This is huge and something many entrepreneurs will fail to achieve. But if you’re looking to grow to $2 million, $5 million, or even to $10 million and beyond, we have some tips for you that will be mission-critical!
We call this phase of business ownership the Survival Stage. If you’ve made it here, you’ve already proven there is a market for your product and some attraction to it. You have likely eliminated a considerable amount of risks, are able to produce your product, and can see business rolling in.
Now if you want to keep growing, your key focuses should be agility and acquisition. If you want to thrive (not just survive), now is the time to work out the kinks in your business, listen to the market and feedback from your customers, and make necessary changes to your product. Let’s dive into a few tangible ways to make this happen.
1. Refine Your Brand Story
There is always a purpose for a product but it’s rare for business owners to have their brand story entirely developed when they first start out. One key to growing from $1 million to $10 million is to create a compelling, aspirational story that is told throughout your site, your marketing, and your product. Ask yourself what your brand is about. How can you connect with your customers in a relatable way? Once you know, start telling this story through product descriptions, your “about us” page, posts on social media, copy in your ads, and more. This connection will be important to creating fans of your brand.
2. Prove Your Product
Another key to success in this stage is to prove you have a market fit. If you’ve made it to $1 million, you’re on your way, but don’t stop there! You need a product that can scale all the way up to $10 million. Define your space in the market, and then continue to refine your brand and your product, working out as many kinks as possible, so that it’s perfect for your customer base.
Not sure where to start? Try sending surveys to your established customers. Gather focus groups. Do your research, and then don’t be afraid to evolve your product for the better.
3. Find Your Customers Quickly
As we mentioned, acquisition is a major theme in this stage. How will you establish your customer base? As you make a name for yourself and acquire pockets of customers, your traffic needs to come from somewhere, and organic traffic will not be enough to help you scale. Most business owners’ bread and butter for this are paid ads, whether it’s Facebook, Google, YouTube, or more likely, a combination of these three and more.
Your best bet is to do a lot of testing of different campaigns on every channel possible to figure out which avenues and ad strategies provide the most sustainable customer acquisition. There will be inefficiencies and your ad spend will be higher than you want it, but that comes with the territory of nailing down an effective ad strategy for your business. Shoot for an ad spend to revenue ratio of 45-55%. Although this seems high, it’s crucial for testing and growing. To help fund this, think high dollar with your conversions, targeting an average order value of $75 or more. Whatever you do, don’t be discouraged by failing. The nature of this stage is plenty of research and development, testing, failing, learning— and repeat!
4. Turn Customers into Fans
Most people are worried about turning visitors into customers, but now is the time to think bigger. How can you invest in your customers for the future so you can turn them into raving fans? Think about raving fans of music groups or sports teams. These are the people that will camp out in the cold, rock full-out body paint, stand in line for hours, and do plenty of other irrational things for whatever they love. If you could create fans like this for your brand, these people will spread your brand further and faster than any amount of marketing dollars ever could.
To create fans, start with customer service. This is the best place to really wow and win over your customers. Go above and beyond by making their questions and concerns a priority, fulfilling on time, communicating clearly, and offering the best warranty you can. Once you have this nailed down, there are always ways to serve your customers better! One of our clients has a free TryOn program to eliminate concerns about sizing. Another sends handwritten thank you letters to customers. Another surprises their top customers with swag bags. What you decide to do should fit your brand story, but remember that making this effort is a beneficial long-term play.
5. Healthy Team Growth
As you work your way to $10 million, consider your team as well. You’re either working solo or have a small, chaotic team. Chaos is normal starting out and can actually be energizing for your business. However, now is the time to start refining this as much as possible by putting team processes in place. This is different for every business, but it’s about identifying your inefficiencies and coming up with an action plan to streamline your processes. A few things to consider…
- What internal, day-to-day processes need help?
- How can you improve communication between team members or departments?
- Which priority items are falling behind that need more dedicated attention?
- Consider hiring a project/operations manager to keep everyone on task and on the same page.
- Think carefully about which roles are out-sourced and what you bring in-house.
In the $1 to $10 million stage, it’s expected to have inefficiencies and make mistakes every now and then. But as you grow, these small mistakes will become more and more painful. Avoid this by learning from each mistake and putting processes in place to fix it for next time.
6. Check Your Margins
If you’re an entrepreneur or business owner and don’t feel especially finance-savvy, you’re not alone! It’s still important to be very aware of your finances during this stage though. Even if a company has found a market fit, many will fail if they can’t afford to get their product out there.
An important place to begin is with your product margins, making sure they are as high as possible. When you’re driving an ad model, you need 80-90% margin on your products. This will fund critical initiatives such as your marketing, customer service, and research and development. An 80-90% margin may seem high, but in reality you need this to both run and scale your business AND invest in creating fans of your brand.
If you don’t have a finance mindset, consider hiring a fractional or part-time CFO. Ad costs, inventory purchases, and other expenses can easily get out of control and it will be beneficial to have an expert monitor all of this.
If you need more guidance as you focus on agility and acquisition in this Survival Stage, click below. We would love to help!
Ready to scale beyond $10 Million? Check out our tips for the Health Stage!