The Owner’s Guide to Building Scalable SOPs For Your Ecommerce Business
The scalability and value of an ecommerce business relies heavily on the extent to which it runs on reliable systems and processes. Standard operating procedures (SOPs) will help you scale your business and increase its value because it creates efficiency in your work force, allowing humans to focus on solving the big problems that matter.
We’ve said it before: A business is an entity of systems and processes that take in capital and output more capital. People are there to run those systems and processes— not BE them.
In ecommerce specifically, systems allow you to scale profitably, and SOPs are how you ensure systems are run correctly. So if you want a valuable business, you need a good set of functioning SOPs that the people within the business are happy to follow.
In this post we’re going to walk through why SOPs are so important, how to build them, and the critical SOPs every ecommerce company should have.
What are SOPs and what should they look like?
SOPs are the instructions for how a system or process should work. This provides scale and consistency in your business and ensures the knowledge is not sitting with any one person, such as the founder or department leaders. Most business owners and managers know this but aren’t using them in all the places they should.
To make it more exciting, think of SOPs as your brand’s secret recipe. Remember how Coca-Cola’s recipe is locked in a vault somewhere? Your SOPs are the instructions for how your business does what it does and stays successful. That makes them important to define.
The goal of writing SOPs is pretty simple. It’s just taking knowledge out of a single person’s mind and putting it into a system that others can follow.
Basic SOP Template
Here is a basic template to give you an idea of its structure.
- Department: System Name
- The outcome of this process (Example: Orders getting successfully packed and to the carrier)
- A metric you use to measure success/fail (Example: Orders placed vs orders shipped per day)
- The roles required here
- Time budget, timing, schedule
- The link to the previous and next step in the system
- A detailed list of instructions to go from A to B (Example: Instructions to take an order from the time it’s placed in Shopify to becoming a package awaiting the carrier)
How do I know what SOPs I should generate?
If you’re not sure what SOPs to generate, ask yourself (or department leaders) what things need to happen each day, week, month, and quarter for the business to keep running well. What systemized processes can be put in place in order to keep that running? Or, are they already in place but just need to be written down for others to be able to follow?
Signs Your Ecommerce Business is in Need of Standard Operating Procedures (SOPs)
Still not convinced writing SOPs is worth your time? Refer the checklist below for a few tell-tale signs that you need SOPs:
1. An overstretched leader
Is one person in your company involved in several areas of the business? SOPs are crucial so that as other individuals are hired, they can effectively help manage the ship. All of this also needs to be written down in the event that this one person can’t be there to lead, so that the ship doesn’t go up in flames.
Does your team experience chaos whenever you have an influx of orders, or around busy times like Black Friday and Cyber Monday? SOPs create efficiency and order to eliminate chaos.
3. Inconsistent results or revenue
Are you seeing inconsistent results in your core ecommerce system? For example, this could be inconsistencies in your acquisition, conversions, customer lifetime maximization, or order fulfillment. Or overall, is your revenue inconsistent?
If this is the case, there’s a good chance that one or more of these systems works like a guessing game, or your team is throwing things at the wall to see what sticks. And that’s no way to scale a business long term. Standard operating procedures create the consistency you need to grow.
4. Poor Profit
Are you seeing poor profits? If you’re earning revenue but still netting without much of a profit, that could point to inefficiencies that could be made better through SOPs.
5. Customer Complaints
Are you receiving customer complaints? No matter where complaints are coming from or what they’re about, they are signs that your process needs to be improved— and then maintained. SOPs can help with this.
6. Inability to Scale
Are you experiencing an inability to scale your ecommerce business? As we’ve mentioned, you cannot scale without order and efficiency in your systems and processes, as well as all team members being on the same page about those systems. It all starts with getting them documented!
How to Prioritize Your SOPs
How do you know which SOPs to start with? Below you’ll find our recommendation for how to prioritize establishing and documenting your company’s SOPs. Keep in mind, the most important thing is just to get these started, and you can always be optimizing.
Among the ecommerce companies we’ve worked with, marketing is the system we most often see running without any structure. If your business is the same, you might be able to “get by” like this for a while. But you’re likely wasting budget and time, which not only decreases your profits, but also your ability to scale.
Get on the right path by establishing systems and processes for the following:
- Product launches
- Hiring and managing ambassadors
- Creating new content (for the website, email marketing, social media, and ads)
- Running your social media accounts
- Running your PPC accounts
- Creative specs for site banners, ads on all platforms, video, etc.
Getting your products to your customers — accurately and quickly — is one of the most important jobs in an ecommerce business. It must happen in a consistent way, otherwise your customers’ experience suffers— and so does your business.
Create standard operating procedures for packaging and shipping orders as they come in. This will help immensely during busy seasons, especially Black Friday and Cyber Monday! You’ll also likely need separate SOPs for handling returns.
If you offer any customization on your products (such as engraving), create SOPs for that process as well.
3. Customer Service
Customer service can take up a lot of valuable time, and it’s important to get right to maintain your customers’ loyalty and trust. In fact, customer service is the front line for creating a brand fan. There is no room for inefficiencies, confusion, or frequent errors in that department.
A simple way to make everything flow smoothly is to establish SOPs for this department. How do you respond to common questions and problems? How should your team members elevate customer requests that they are not able to address, and how do they follow back up with the customer when there is a solution? Establishing SOPs that are easy to follow will make your employees and your customers much happier!
4. Finances and Reporting
Finances and general reporting are also crucial for a healthy business. Be sure to establish SOPs for the following important areas:
- Business health reporting: This should happen monthly (quarterly and yearly are great in addition). Determine what you’re reporting on each time, and how those numbers are pulled.
- KPIs: What KPIs are important to your business? How do you establish monthly or quarterly targets for those?
- Payroll: How is payroll getting done consistently and without error?
- Accounting: What processes are in place for closing out a month, quarter or year? What do you do with profit?
- Expense Review: Are you doing a quarterly or yearly review of your expenses to be sure those are in line? What is the process for doing so and for trimming those down?
Any systems involving your products are also critical to document, which likely include a couple of areas.
First is your supply chain. Create SOPs that detail how you get your product or how you make it. This needs to be clearly documented so others can jump in and help scale appropriately. An established SOP will also help you optimize this process and make sure it’s operating healthily.
Second, is research and development (R&D). This is a system for how to improve your existing products and how to create new ones. R&D often falls on the back burner for many ecommerce business owners, but we can’t stress its importance enough. Being proactive about R&D is a key element to growing your business. So create an SOP that details how you address this monthly and yearly to keep your customers coming back to buy from you again and again.
The Time to Start Building SOPs? Right Now!
In this post, our goal has been to communicate the benefits of SOPs as well as their structure, and the areas of your business to start standardizing. Stay tuned to a post coming soon where we will dive deeper into things you can do to make writing these SOPs easier and to make them easier for your team to follow!
If you own or manage an ecommerce business and are hitting a growth ceiling, it’s time to investigate healthy ways to scale and generate profit. Reach out to us below and we’d love to see if we’re a fit to help.