Well, eCommerce businesses are profiting nicely thanks to an agreeable business model. Selling things online is extremely cost-effective as you reduce your expenses by not needing a physical store. Similarly, you open your business up to a huge market of consumers, allowing for a higher sales potential.
If you own an eCommerce business in 2020, you’re probably raking in the money. Naturally, your thoughts drift to expanding your company. Before you do this, please read the following points as they can stop you from making a huge mistake!
Can you afford to expand?
Expanding an eCommerce business is more expensive than you expect. The main idea is that you start selling more items or work on
Already, this costs money. Then, factor in the additional expenses - like equipment, machinery, etc. Additionally, these things come with their own costs - you’d need red diesel drums as fuel for forklift trucks, regular maintenance services on equipment, etc. Tally up all of your new expenses and calculate if you will still make a big profit by expanding. You may realise it makes sense to wait a bit longer before growing your business.
Are you riding a wave?
Is your business genuinely successful, or are you just riding the wave of a trend? You’ve been running your business for a few years, and suddenly you saw a spike in sales over the last few months. Is this the result of years of hard work, or is it merely because people are bored at home buying random things? Or, perhaps whatever it is you sell has gone viral and is trendy.
There are loads of examples of businesses that went through a purple patch then saw sales plummet. If you invested in growth right now, you may be in a tough situation when sales drop and you’re left with a bigger businesses and no customers. Be patient, see if you can sustain your sales over a longer period before jumping into an expansion.
Do you need to grow?
Will your business benefit from expanding? It sounds silly, but some companies don’t need to expand or get bigger. Perhaps your business is successful because it sells niche products to a small market. Expanding could mean you widen your offerings and lose your appeal to the target market. Take a look at your business model and see if you will actually gain anything from growing. It may surprise you to learn that you’ll make more money by staying as you are than if you invested in growth.
Ask yourself these three questions before you think about expanding your business. If you can afford the expansion, genuinely benefit from it, and have seen sustained success for a while, it could be the right thing to do. If not, you should wait and re-evaluate.