Does your e-commerce business have a growth ceiling? When you’re starting up an commerce business, it’s easy to get preoccupied with just getting your business up and running without thinking about its long-term growth potential. But scalability is one of the key factors experienced investors consider when evaluating a company’s profit potential, says Angel investor Marianne Hudson. That’s because scalability is what enables a company to increase its profit as revenue increases without rising expenses cutting into margins. In order to scale up profitably, you need to design your business model so that you can increase your sales without losing efficiency or decreasing the quality of your customer service. Here are some strategies and tools to help.
Increasing Your e-Commerce Customer Base Faster than Your Expenses
A scalable business should have a business model that is designed so that sales and revenue can increase exponentially as the company’s size and expenses grow, rather than revenue increasing in a linear relationship to expenses, explain venture capital experts Nicole Gravagna and Peter K. Adams. Software-as-a-service companies are often good examples of scalability. Once software code is written, it can be delivered digitally to an indefinite number of customers without needing to duplicate the same initial investment in development. Additionally, SaaS services can be sold as subscriptions for recurring revenue or can be used to upsell upgraded versions of products to customers who have already made a purchase, reducing the cost of acquiring new customers.
For example, Salesforce.com pioneered the SaaS business model by offering its platform through online subscriptions rather than traditional on-premise software. Over time, these subscriptions add up to more revenue than traditional software would generate from initial sales and licensing. The main expense Salesforce.com faces is acquiring new customers, which is a cost it has learned to streamline over the years via affiliate marketing. By building good affiliate relationships, Salesforce.com multiplies the leverage of its sales team.
Other companies have been able to take the Salesforce.com subscription model and deploy it to numerous markets and in various ways. For instance, Slide Geeks currently enables subscribers to choose from a download library of over 500,000 Powerpoint slides, soon to be scaled up to over a million.
EXPANDING CUSTOMER SERVICE CAPABILITY WITHOUT OVER-INFLATING EXPENSES
Scaling up will require an increase in the scale of your ability to deliver customer service. There are two main ways to do this without exponentially increasing your expenses. The first is to use automated tools to increase the efficiency of your customer service. For instance, you can use online knowledge databases and automated ticket software to reduce the customer service load on your staff. You can also outsource your customer service to remote representatives using tools such as cloud contact centers.
Scaling up your customer service capability may also require scaling up your company’s human resources and tax functions. This is another place where automation can help you. For instance, you can use QuickBooks to help automate the filing of W-2 and W-3 tax forms, reducing the burden on your staff as you scale up.
Increasing Efficiency with Smart Tools
In order to scale up profitably, you need to be able to operate efficiently at a larger scale. This requires smart selection of the tools you use to run your operations. The tools you use should be designed so that you can continue running your core operations without significant change as you make adjustments to increased growth.
For example, paGO Commerce is designed so that it can be added as an e-commerce plug-in to Joomla sites without requiring any core hacks to Joomla. Similarly, services such as Amazon Web Services and Fulfillment by Amazon enable companies of any size to plug into the infrastructure of large corporations without having to alter their own infrastructure.
