|Is it worth it?|
time consuming, need a life
Does this business ever get any easier? I am starting to hate my life. We only ship 50 orders per day. It shouldn't be this hectic for that low of a volume. We have a wide product selection, so 33% of these have to be drop shipped 'cause we can't stock everything and who know what exact widget a customer will need. Many times our vendors don't receive a fax for the PO, customers call, complain, etc. Inventory is off even after we take inventory due to some stupid problem with our Mail Order software. As for personnel, it took 4 months just to find a reliable shipping person. Most people are just lazy and don't want to work. There seems to always be a software problem at least once per week, or inventory is off or the vendor sends it UPS Ground instead of Red Label. I sell technical widgets. Due to customers needing questions answered, 50% of my sales are call in and 50% are placed on the web. Then, when they receive the widget they have no clue how to install it. Our salespeople need hand holding as well. Our inventory is growing, but so are our payables. The bank does not want to lend on inventory.
My question is this:
1)Are all mail order/web sales businesses this time consuming?
2)Are there some web businesses that are just better left alone for those who love problem businesses?
Sorry to whine.......just trying to find a life.
It seems that your business is grinding to a halt.
One way to reduce calls is to log all tecnical calls and subject and produce a FAQ on your web site, maybe available in PDF form and send one copy to your client with the order.
Make a question form on your web site (ticket) or something similar so people will likely send in the questions by email which can be logged and turned into a FAQ. Also, your sales operator can answer emails while idling instead of waiting for calls.
Put as much information on your web site about the questions as possible. People read when they are in doubt.
Consider a different product. Some products are lower maintenance. Even consider dropping some more high maintenance products.
Consider adjusting your pricing - sometimes it's better to have less sales but more time and resources to cater to them. an 5% increase is not even noticeable, if you consider adjusting prices, make it at least 10%. The more high maintenance products could be increased to match their customer service time. Consider adjusting your shipping cost to upgrade your shipping department.
I have few lessons at this time to teach to anyone. I did have shares in a failing business and the lessons are similar, staff is stretched, money is all reinvested. Line of credit nearly always maxed out. Inventory too high or too low. Too much unproductive staff
Also, the uncaring staff can feel management difficulties. If things are prosperous and employees are rewarded, you might get better quality of work from the same people
When I restarted 4 years ago by myself, I vowed not to fall in those traps again. I found that internet businesses not only sell products but a service as well. The service is offering items that no one else carries because of low turn over on Brick mortar stores. This means that you can price according to value of the item plus the service of having it on the shelf when no one else carries it.
If your reaction is Man this is expensive, I would never buy that! Your price may be just right :-)
If there's no money to be made with a product why would you bother answering questions and supporting a product after the sale?
If you are having to ask that question and from your post is seems you are in need of a change I would have to say the answer is NO
Thanks for the input. Good advice. When I first started my website, I said to myself, "Boy if I could just sell $35K per month I would be set. Well now we are selling $80K per month and guess what, had to hire more people, had to purchase a server for all the computers, had to hire a shipping clerk, bookkeeper, office manager and 2 sales people. Guess where all the money went?
If it were not for the fact that my wife is my office manager, and I am paying her a decent salary, I was making close to this before I added the website to my bricks and mortar service center.
Not necessarily practical, but worth considering: if you only need to sell $35k a month, but are currently selling $80k, could you raise your prices until sales drop to a level that you can easily manage but still make you plenty of money?
It is something I am definitely going to look into!
"Then, when they receive the widget they have no clue how to install it."
Here is were you make the money to pay for the support time.
Charge for support plain and simple. Add to the cart a fee for support if you need help installing the widget. This will pay the support payroll and maybe more. make it plain no support without a payment for this.
If they fail to buy support offer it to them if they call. Be firm on the no support unless you pay and one or two things will happen.
Either you will have a stronger business or you will go back to 35 k a month and can decide your direction.
I would have a sales number only and
I would invest in an online chat then you could confirm the support payment without them being on the line and then give them the support number.
The employee could add the time spent on the order ticket and that way your support team is being paid for by the support payments.
My 2 cents.
1. If you provide the level of support you do, reflect that in your "mantra" - you should have your prices reflect your service and cover your costs. Some people simply pay more if they know you're willing to help.
If they want "bottom of the barrel prices" thats what they will get.
If you can't modify your prices surely with your inventory churn you can better negotiate prices/purchasing to streamline the process.
Sounds like you need to step out of the "in business" face and look at your business from the outside and see how you can optimize it. FIre problem customers, update your content (aka mantra) to reflect your core values & services and work on standardizing process so you have them repeatable, documented and managed.
If you don't want to do the support in house i'm sure you could setup a referral network to generate revenue and build relationships that may be advantageous.
All good insights. This used to be a nice manageable little business, then it got big. I thought that would mean easier, more money, less stress, more buying power etc. Not so, overhead is eating us up. Profit margins are around 60%. Maybe downsizing and running a lean profit making machine is better than being the number one internet company selling parts for my industry. Right now we are the number one leader in our industry for what we sell. We rank #1 in the organics in Google. You would think I would be ecstatic!
There's a bunch of great specific suggestions throughout this thread so..... allow me to play devil's advocate.
Note: I'm throwing an idea out there and I mean no offense - this is not a shot at skatingtoolman :)
I've learned the hard way that the best webmaster may be the worst business man and the best business man may not even know how to use a computer. In a case like this where the web site end of the business is thriving but the business logistics are lacking, why not bring in a specialist?
I know, I know, I cringe when I hear the word "consultant" too - but perhaps that's what's needed in a case like this in order to get the business end of things on par with the web site.
No offense taken. We have actually picked out a new CPA who is quite a sharp businessman, not just a bean counter. He said that he can look at our business and tell us where we are losing money and how to turn it around. He is a very bottom line type of guy. So......we are waiting for him to look over our books, come and visit our operation and then give us his harsh reality suggestions.
Nice! Let us know what his suggestions are. Perhaps others, myself included, will be able to take a tip from his recommendations.
I hope he can cut your costs!
Maybe I'm crazy...but before you have a "consultant" look over the business, have a friendly round table session with all the staff. They're likely the ones to have the best ideas on how to improve efficiency, after all, they're the ones doing the work, and know what kills there productivity. Worst case, they offer up nothing useful, but likely, there will be a few good ideas.
You have to be careful with staff suggestions. You can upset staff by having them make suggestions and then not implementing any of them. Worse if you follow it with an outside consultant and implement his/her suggestions.
The staff will end up thinking you dont value them and they will resist the new processes. You can incorporate staff suggestions but you have to be careful about it
Conversely, not talking to staff, and going straight to a consultant would make them feel ignored and undervalued as well, at least giving them a forum to voice opinions and suggestions first should make them feel valued. I know, personally, I don't care if my boss agrees with me, even when I'm right, I just want to know that my opinion carries enough weight to be considered...otherwise...why am I working here?
I have meetings with my staff weekly. Most of the time when I ask for suggestions, they just give me a blank stare, like.....duh....
I have talked to shipping, sales, office manager and bookkeeper alike. They don't really care about the bottom line, they just want a job. Pretty pathetic, especially since one of them is my 23 year old son. I have asked them, "what do we need to be selling?", "what products should we stop selling because they elicit too many returns?", "what kind of questions are you getting from call in customers?". Most of their answers are, "I think we are selling the right things","same type of calls I always get". Nobody sees the BIG picture. My bookkeeper only knows how to enter bills and balance the checkbook, not much of an analyst or P & L person.
|I don't care if my boss agrees with me, even when I'm right |
Both your wife and your son are employees? Perhaps mixing business with family is hurting your bottom line?
Out of my 7 employees, my wife, who is my office manager does the work of 3 people. She knows our MOM program inside and out as well as keeps a watchful eye on our bookkeeper and shipping department. My son who is in sales does a great job at selling, he just does not have a clue about the bottom line, nor does my other salesperson. Believe me, if they were slackers they would be gone. I fired my ex-wife many years ago. That was fun! Oh...the twisted webs we weave.....
The first thing I would do if you haven't already, is break down your monthly costs to a percent of sales.
Inventory: 20k = 25% of sales
Direct Labor [ including benefits:] 20k = 25% of sales
Admin: 10k = 13% of sales
Shipping: 5k = 6% of sales
Rent: 2k = 3% of sales
Advertising: 2k = 3% of sales
Target key areas for improvement.
If you determine that your Admin time is due to answering customers questions, improve your faq page and/or automate the process of responding to questions.
If the bulk of your direct labor time is associated with picking and packing, improve that process.
The best way to reduce the cost of inventory is to buy larger quantities.
If you can reduce your cost per sale, you can increase your advertising and generate more sales.
Measurement is really the key. Make a change and see how it effects the ratio.
Forgive me if this is a big DUH.
Indeed this seems obvious when you put it that way. It is often difficult to see problem areas in the daily grind of things. Taking a step back to globally bird's eye view of the different department is definately a must do.
I think that growing if not planned correctly and just happens can / will cause problems.
In my small one mane operation I have the following tasks which are all performed by me.
confection of products
Fulfilment of orders
Either tasks must be broaken down if/when I grow to ensure that modularity is kept - not blended. Not so easy because when I hire my first employee. The perfect candidate will be one who can do all tasks. Not so perfect for keeping modularity for expansion. Not a luxury I can afford after I will hire my first employee. Things are rather simple at the moment. If some package has been shipped to the wrong person, it's my fault. If clients are satisfied, I did a good job.
I was with a company which collapsed a few times just shy of bancrupsy - here were the problems I could identify:
Cash flow: line of credit always topped
bad management - poor business decision (receptionist that couldn't type - incompetant sales person - poor overseeing of growth - would not listen to suggestions
bad purchases: would purchase stock on speculation then would be stuck with stock for over a year
bad sales: not enough profit on sales to absorb the above blunders - delivery times poorly evaluated - scope of sale poorly evaluated.
This was not an ecommerce business but some of these problems are certainly part of the difficulty of any business.
In a niche market, you have the luxury of charging what the market will bear for your products or service. As you grow, instead of evaluating each item and considering the best possible price, you find some "formula" and use it across the board irregardless of whether you could get more for it. Slowly you relegate this pricing task to some employee who keeps using your "formula". When you grow and you start getting better volume pricing from your suppliers, those same employees still use your "formula" thus reducing your profit. (Cost x 2=Sell for price) You are selling more, but your profit margins never increase because they are using your "formula", instead your expenses of running a larger business increase and wipe out your sales volume.
I have noticed this in my business. I am now evaluating every single item and making changes based upon the market, not some "formula".
Hopefully this will start to turn things around.
I am also eliminating problem suppliers and their products.
I am curious at the result you will have in the short/medium term. Please keep us up to date.
It would be great if you could get some irritants under control and report back that YES it was worth it!
I personally think that the level of sales that you have and the energy already put in make it worth while to try.
P.S. I just adjusted my prices + 10% accross the board, for me, it's easy, one line of code in a section where all prices go. $price*=1.1;
This is a great topic, although I am kind of confused.
If you buy product A and it costs me 25$, my business grows and I buy product A in sufficient quantities for my cost price to go down to $23, why would your team suddently reduce your sale price?
If you're selling products to get a decent reduction in cost, you're obviously selling enough to warrant a reduction. I would only be tempted to lower my sale price, if there was some stiff competition selling lower than me.
If you're number 1 in the SERPS, you probably don't have too much competition that can buy cheaper than you, so that two dollar saving should be money in your pocket.
I would instruct your team to only use your formula for new products, not existing products.
Good luck and all the best for the future.
This clearly highlights the oft-ignored fact that efficient business administration is pretty-much the single most important part of doing business, whether it is online or offline. Unfortunately, many people start business focused upon the profit per item or per job and then fail based upon their poor business administration.
Faxes are very unreliable. If the supplier has an email address, email as well as fax. Now build that into the back-end of your ecommerce system as automatic - it is easy to automate both emailing and faxing.
If customers are calling for advice before sales then you need to start recording every single question asked. No matter how unimportant it might seem. Record it and record the answer. Put it into a database. Add those as FAQ entries, and as autosuggest entries. Disclose your help phone number ONLY AFTER the autosuggest box. Contact us -> What do you want to ask? [............] -> Autosuggestions -> See our contact details
For those who have already purchased the product and are unable to use it, charge. I know it doesn't sound nice but that's how life is. Don't advertise this fact on your website but include details of the premium rate support line in the shipments. Refuse to give help to customers on the standard line... even if it doesn't make you much a minute after the provider cuts, it will keep calls short and minimal.
Your ecommerce software has problems. Ditch it. There are many very shoddy packages on the market, some of them sold for impressive sums of money. Don't waste your time and risk your business dealing with software which isn't built to work reliably. It's more work now but it will pay off even just weeks into the future.
When you say accounts payable are increasing, do you mean accounts receivable? I sincerely hope so. If you are having mounting payables then you are probably insolvent and need to take drastic action to avoid bankruptcy. See an accountant specialising in small business as soon as possible for advice.
If what you mean is accounts receivable then my best advice is to sell them. So long as you've not been stupid with your credit giving you can get a very good price for accounts receivable from one of many agencies who will give you that cash your business needs, now. Accounts receivable can kill a business faster than anything else. If you don't want to or can't sell them then take legal action on them as money claims immediately, don't waste time - 95% of your accounts will be settled after you inform them of your intention to go to court.