Scaling 101

E commerce

Blogger Image
09 August, 2020

Let's say you run an ecommerce store that does $100k in monthly revenue and you want to increase that to $500k.
You have a 20% net margin hypothetically and you'd naturally want to maintain that while scaling.
Absolutes - you want to go from making $20k a month, to making $100k a month.

What would be step 1?
How most people would go about it (and how we tried to go about it until we learned better) would be to increase your ad budgets to a point where you start doing $500k in rev, but everybody knows you will not be able to maintain the 20% margin. Your cacs will increase several folds, as can be attested by most experts on this group. Your net margins would drop to as low as 10% in the first few months but you'll be like - "it's not so bad because I more than doubled my monthly take home"

Here's what I'd recommend instead.
Before taking the decision to scale, optimize your funnels as much as possible.
- Are you using a countdown timer?
- Are cart abandonment emails setup?
- Have you run experiments on each stage of your website to know your conversion rates are optimal? (Example - Increase your PDP to Checkout rates by having at least 20 reviews per product. Call customers and beg for reviews if you must.) Understand that you're not talking about 2 additional sales a day here, but 700+ additional sales a year, absolutely free.

I have not yet worked with a single client for whom we've done these activities, and not icnreased overall conversion rates by at least 0.5%.

How much is 0.5% when scaling from $100k to $500k?
Assuming that your average CPC is around $1, you're talking about 400k-500k website visitors. A 0.5% conversion rate difference is at least 2000 sales every month that you're losing out on, without spending a dime.
Now, I don't believe that anything mentioned on this post is ground breaking or new. In fact, it's just the opposite. I just felt the need to write this post because I've been speaking to tons and tons of folks on this group who are talking about scaling or have already started the process of scaling without doing something that I think should be considered basic Hygiene.

There are a couple of more steps that I'd take before scaling my campaigns, even after optimizing my store. I'll be covering that in my next post but before I do that, I'd like to know what checklist items the experts of this group follow before deciding to scale a campaign.

Blogger Image