How to Manage and Grow Your Online Business

Some online business owners make the decision to expand on intuition or “gut feel”. I’ve met quite a few who said their reason to expand was their belief that the “market demanded expansion.”

A belief in how markets move shows an understanding of market psychology. Traders in equities markets place greater emphasis on analyzing the underlying structure of the market by reviewing trends in prices, volume, and time. The analysis of these three variables will give the trader an understanding of what the market wants to do.

But remember there are three key variables: Price, Volume, and Time.

“Which products are moving fast and how much do you sell per month?”
“Have you made pricing adjustments in the last 120-180 days? And if so, how has it affected sales?”
“Where does the traffic come from for your highest moving product? Why do you think that is?“

The only response I get is silence and an expression that yields the sound of crickets chirping.

Every business owner wants to expand their business. Whether it is a brick-and-mortar establishment or an online business, we all get excited at the thought of taking our “Starship Enterprise” and boldly going where we haven’t gone before.

Business expansion has three (3) objectives:

• Create new market opportunities
• Develop the current market base
• Retain existing market base/build brand loyalty

But business expansion is not a strategy that you should do on a whim. It takes planning, strategy, and most of all: Purpose.

1. Review Your Numbers

Every time I have the opportunity to state this, I will: strategy follows numbers. Most business owners only pay attention to one set of numbers; the ones that reflect in their bank account. If you don’t study your numbers seriously, those figures in your bank account may dwindle to zero.

From my experience working with small business owners, they get intimidated by financial statements. All those rows, columns, and figures trigger migraines. They would rather spend time working on activities that generate more money. But the figures in your financial statements ARE your money.

The best solution is to hire an accountant on a retainer basis and have him discuss your financial position at the end of the month. These are the key questions you should find the answers to when analyzing your financial statements:

• What is my cost of goods sold?
• What is my after-tax profit margin?
• Which items have the highest margins?
• Which items have the lowest margins?
• What is the incremental cost per unit sold?
• Which cost of operation item is contributing the least to my business?
• Do I have a healthy net cash flow at the end of each month?

As you can see, by breaking down the financial statements into key questions, the numbers will begin to tell a narrative of your business performance. An accountant can show and teach you how to interpret these figures so you can do it on your own.

Of course, part of the financial analysis is studying ratios, but that is the forte of your accountant. As a business owner, you should have a keen understanding of how your money moves about in your enterprise. By referring to the financial statements, you will have a strong foundation to validate a business expansion strategy. Your accountant will work with you in planning your expansion program.

2. Analyze Your Sales Distribution

Accountants can also help keep track of your inventory and product distribution. Even if you don’t store merchandise, knowing your product or sales distribution pattern is crucial in planning an expansion program.

Your accountant will create a Product Matrix. This is set up on a spreadsheet and aims to uncover the following details of your business:

• Fastest moving products
• Slowest moving products
• Products with the best profit margins
• Products with the worst profit margins
• Percentage distribution of each product to total sales

The numbers can be an eye-opener for some business owners who held biases toward products that accounted for the majority of sales but had such low-profit margins that it significantly pulled down net income margins. The analysis would then shift to improving its margins. Should you increase its price? Or should you negotiate for better pricing from your wholesaler?

From my experience, increasing prices should be your final option. Once you raise the prices of your products, it would be difficult to scale them down. Also, the Internet is a price-sensitive market. There are so many online businesses that customers can always look for another retailer.

Talk to your wholesaler and figure out how you can have better pricing to boost profit margins. The wholesaler may ask you to increase your volume of orders and require you to book the price. This arrangement makes your business more speculative so you have to assess if an expansion plan will move the additional inventory.

Of course, you can always look for other accredited wholesalers. But if you have already established a good reputation with your current wholesaler and the relationship has been stable, it would be in your best interest to maintain the arrangement.

My approach here would be to take it one goal at a time. Did I get the pricing I want from my supplier? Yes. Great! Bravo! I can be assured of better profit margins. Mission accomplished!

Now, will I be able to move these products with my expansion program? That would be my next goal. I would look at this as a challenge to double and triple my efforts in pushing my products out in the market. After all, isn’t success in business about overcoming challenges?

3. Review Your Website Analytics

Your website is your online business hub. This is where business is found, transacted upon, and converted into sales. Websites have built-in tools such as Google Analytics to help you assess your site performance through data analysis. For website analytics, I would suggest getting the assistance of your web designer, developer, or social media marketer.

What are the key metrics to follow in website analytics?

• Visitors. You would want to know the number of people who are clicking on your website. This will
  give you an idea if inbound traffic to your website is increasing or decreasing.
• Unique visitors. These are the visitors who only visited your website once during a specified period. This data will show if you are attracting new users to your website.
• Page views. This metric show which pages on your website has the most views. If the number is closer to the number of visitors, your focus should shift to finding ways to lead them to other content on your website.
• Content. Are your “Top 10” lists doing better than your “How to” articles? Knowing which content makes your readers stay longer is crucial for your content management strategy.
• Bounce Rate. This measures the rate at which a visitor leaves your page. The higher the bounce rate, the less favorable the result. A high bounce rate implies your visitors are not interested in your content.
• Traffic sources. This metric helps you identify which keywords visitors are using to search online. It also helps you identify where your traffic is coming from. You will know if your content is shared online and on which website.
• Average Time on Site. Learning the average time on site will determine if people are reading your content. If your 600-800 word blog posts are averaging below 12 seconds, it is possible your readers are not interested in your content. Or it could be that your download time is slow.
• In-Page Analysis. This is a map that shows you where your visitors are clicking on your website. You will see if you have call-to-action buttons that have not been patronized or if people take the time to scroll to the bottom of the page.

Website analytics will give you an idea of market behavior. This presents you with a framework to reference the behavioral pattern of people who visit your website.

By having this data available, you will have a key basis for developing your expansion plan. You will know how to revise your website and its content, which social media channels yield the best results in terms of generating inbound traffic, and how to improve market engagement.

4. Conduct a Market Expansion Study

Once your accountant has confirmed your business is in a healthy position financially, and analytics have given you a better understanding of who your market is, you may now firm up the decision to expand the enterprise.

But you should still go through the process of developing a Business Plan just like you did before you launched your online business. The components of the Business Plan remain the same:

• Market Study
• Marketing Study
• Project Feasibility Study

The difference is, this time, around; the projections are less theoretical as you have the historical basis of performance. Your market study, for example, will be supported by website analytics. You can pinpoint the demographics that make up your target market.

The objective of the Market Study is to anticipate demand and consumption patterns given the behavioral profile of your market. Among the questions it has to answer are as follows:

• What is my main product?
• What niche does my main product fill?
• Should I introduce a variant of my main product?
• Who are the primary users of my products?
• Where are they located?
• Do I have a market outside my current audience?
• Can I expand or promote my product line to other regions?
• Is there a seasonal component in my demand pattern?
• Can my wholesalers meet increased demand?
• How will business expansion affect my present operational frameworks?
• Do I need to make changes in any of my workflows and process flows?
• Do I need to hire additional personnel?
• Will I be able to maintain the quality of products and services with the expansion?
• Do I need to re-evaluate my current website design and see if it will be accessible to different browsers or appeal to new markets?

Throughout all of these questions; and there will be more to come up in the course of the study, the underlying question of an expansion program remains the same:

Will demand be enough to validate an expansion program?

Keep in mind that an expansion plan isn’t just meant to build in your existing markets. You should also use it to penetrate or increase your reach to new markets.

With the data collected from website analytics, you can now design a more definitive marketing study. Whereas when you were trying to launch your business, the marketing plan was largely theoretical and adjustments were made in the natural conduct of the activity.

With the expansion plan, you have the advantage of identifying the key sources of your inbound traffic. You now know where your market is coming from. You also have a greater idea of how the market patronizes content.

The marketing study will have three (3) objectives:

• Capitalize on marketing strengths
• Improve on marketing weaknesses
• Develop new markets for growth

In expanding an online business, you must use every opportunity to strengthen your foothold in the Internet community. If there are networks or channels where your patronage is weak; research and develop strategies on how to improve the numbers.

Among the possible strategies, you can use to strengthen your marketing are as follows:

• Make your website accessible to foreign markets. Determine which regions in the world frequently view your website. Ask your web designer to have versions translated into their language.
• Study the possibility of giving discounts to loyal customers. You can give a virtual membership card to the top 100 customers for free and then charge an annual fee for the rest.
• Study the viability of offering volume purchase discounts. You can work with your wholesalers on this one. Some wholesalers, even manufacturers, have an MSF or Marketing Support Fund, which allocates a percentage of their sales to help retailers sell more products.
• If your 600-800 word blogs are not generating longer page views, increase the length to 1,800 to 2,000 words. If this will not carry over to longer page views, you may have to change the writing approach.
• Create a customer service group. On your website, integrate chat support services in addition to a customer care e-mail address.

These programs will be validated by the Project Feasibility Study. In an expansion program, there will be additional investments and improvements.

The Projected Cash Flow will give you an idea of how changes in operations may impact the flow of money in your business.

The Projected Income Statement will forecast if the expansion will yield significant profitability as well as a reference point for development time frames.

Similar to the launch of your business, it will take time for these expansion programs to bear fruit. Now that you are in expansion mode, your current funds will be allocated to support:

• Current expenses; cost of operations
• Expansion programs

Once the costs of the expansion programs have been factored in, your accountant will be able to advise you if your current cash flow will be enough to support current expenses and the expansion programs.

The feasibility study will also set the sales targets your business needs to support expansion programs through internal sources. Finally, the feasibility study will also show you if getting a loan or 3rd party funding will be viable to support your business and the expansion programs.

5. Assess the Scalability of Operations

The final step in expanding the business would be to assess if your current scale of operations can undertake an additional volume of work.

It may very well do so until the first quarter of the expansion program, but inevitably, you would have to scale your operations up. This means you will have to look into hiring new personnel to help you manage the business.

As a business owner, your focus should be on activities that relate directly to revenue generation. However, some functions still need to be conducted to keep the business running. These are the non-essential or non-core functions of the business and those which do not fall under your core competencies.

To find out which skills you need to hire, on a sheet of paper write down on one side your core competencies and the non-core functions on one side. Those that do not fall under your core competencies are those you need to hire. For example:

Core competencies:

• Business planning
• Writing
• Market research
• Negotiation
• Technical Analysis

Non-core functions:

• E-mail filtering
• Calendar management
• Phone handling
• Social Media Management

From this checklist, it would appear that you need someone who can manage your e-mails, work schedules, and social media marketing. Most first-time business owners would probably resort to asking a friend or a family member. The arrangement would be on a fixed salary basis every month.

While our experiences working with family and friends would vary it is not advisable to be professionally involved with anyone with whom you are emotionally invested. This is because it is difficult to remain objective. When you have to make important decisions in your business, you must have clarity.

The emotional investment makes it difficult to have clarity because biases exist which will impede your objectivity. A more effective option that is in line with your business model is to hire a Virtual Assistant.

A Virtual Assistant or VA is any person who works online from a remote location. VAs have come a long way since the 1980s; they are no longer just contracted for a personal assistant or secretarial services. Any job that can be conducted online is virtual assistance.

A VA is a more cost-effective option because you pay him per productive hour. A Full-Time Employee or FTE is paid every hour whether he or she is working or not. Also, a VA is essentially self-employed. You don’t have to pay them benefits and they are accountable for their cost of business. You will save 40% by hiring a VA instead of an FTE.

And just because they are home-based does not mean they lack in skill or experience!

Most of them came from the traditional 9-to-5 grind and made the shift to starting their own business.

A VA can also manage your social media marketing. There are online programs such as Hootsuite, which will schedule the postings of articles and blogs. Some of them can write great content as well.

Next, sit down with your website designer and developer and see if your site needs a redesign. You also have to test its accessibility to multi-browsers and download speed.

A website audit is an important activity to undertake so you can check if your website can handle an additional volume of visitors. There may be existing features or plug-ins that are not frequently used. These should be removed for security purposes. You may also want to add new plug-ins to make the site run better.

Check your online support programs and implement upgrades if necessary. If there are new people onboard, set up their accounts. Have your IT person check if your bandwidth is enough to accommodate the greater activity. The more data transmitted, the higher the required bandwidth. This is important especially if there are voice services. You should also undertake upgrades on your PC.

Finally, set up a meeting with your wholesalers and discuss your expansion program with them. They should have an idea of the quantity of orders your business will need to ensure inventory will be enough to cover all retailers.

Expanding your business will always be an exciting moment.

It is a milestone. An expansion represents the next chapter in the life of your online business. But you should not rush into it. It always pays to take a step back and view the entire situation. Make sure you are ready to assume the responsibilities of a business expansion program. If you and your business are not ready, it can ruin everything you have worked for to this point.

Next read: How to Keep Your Online Business Legal