14 Things to remember when starting and running your ecommerce business
Founder of American fast food chain Wendy’s, Dave Thomas said “What do you need to start a business? Three simple things: know your product better than anyone. Know your customer and have a burning desire to succeed.” Pretty straightforward advice, isn’t it? But we’ll tell you about the things to remember when starting an ecommerce company that falls between, above and beyond the three things mentioned by Thomas.
Keep it simple
We mean the business idea. Clear and concise idea about what you want to start, which can be explained in one simple line. For instance, basic idea behind starting Instagram– capturing and sharing moments. Alibaba – to start an Internet company for China.
Define what differentiates you
Price, quality, innovation, new product and value added service; your ‘differentiator’ can be any of these. Example: Part of the same online grocery circle, Localbanya follows traditional inventory model. Whereas, Grofers opted for hyperlocal model by tying up with local vendors which allows them to deliver quickly. That got Grofers investors’ attention.
Focus all your energy on building your product
A good product will always find its place. Recession has little effect on a product or service that has an organic demand. But if your product doesn’t deliver what it promised, no amount of buzz or money you blew on marketing will help you to sustain it. So develop your product first, marketing later. HashTag, a startup for crowd sourcing platform for start-ups failed to make money. The founder’s advice was ‘Reduce noise around you.’
“The last 10% it takes to launch something takes as much energy as the first 90%.” – Rob Kalin, Co-founder – Etsy
Crafting your business basics
Settle on what will be your geographical area of operations, what’s your target market & group. When companies try to pack in a lot in one thing or over complicate the offerings that’s when things go wrong. For instance starting an online grocery startup across the country right from the inception stage is not feasible. Also, decide do you want to sell on your own or via popular marketplaces.
Find a name
Sounds too obvious to mention but it can be one of the most exhausting process. What kind of company name you want? Something that spells out exactly what you do (Fabfurnish), or your/partners initials (IKEA) or something general (Pepperfry) that leaves scope to expand in the future. We suggest sit and scribble all possible adjectives and words you associate with your business and brainstorm. Once you find one, register your company and web domain name. And pray that the web name you want isn’t already taken. If it is, play around with words – Cart becomes Kart etc.
Legal aspect & Taxing business
- Memorandum of Association and Articles of Association documents that has details such as company’s objectives, structure, operations, authority of directors, officers & the shareholders listed down besides other internal policies.
- Bylaws document with details about internal management
- VAT/CST registration
- Service tax, sales tax, income tax are the common types of taxes applicable on ecommerce businesses. However, new policies for ecommerce may come out this year, i.e. 2015
- Get legal written agreements with investors, co-founders in place with all possible terms & conditions spelled out properly without any loophole
- Draw memorandum of understanding MoUs with your suppliers
- Invest in data security and developing a secured payment channel to avoid any scandal
To know more in detail, go through this article published on Trak.in that talks about legal documentation process when starting a business in India.
Get straight to the point for funds
It depends on your business’s capital requirement and your financial health whether to approach VCs and angel investors when you start or self fund. Discovery engine Stumbleupon’s co-founder suggests, “Stay self-funded as long as possible.” But if you do decide to approach financers, keep your business proposal clear, jargon-free, direct and concise. Keep the estimates, research findings and references credible.
Build a strong core team
A start-up can’t afford even a single employee who isn’t adding value. So try to build a team that has a mix of experienced professionals, freshers with new ideas, interns and freelancers who can help you to scale up. Finding right people is always a task for startups due to the money constraints. So be patient, interview process is going to be long unless you can pay a lot.
Find a logistic partner
Very important! Logistics remains one of the key challenges of ecommerce. Read here to know whether to choose a new logistic player or an established one. Key thing would be to determine how reliable and fast their services are, as in ecommerce speed is everything. Your focus should be picking up a partner who can make your logistics and delivery process seamless.
I’m convinced that about half of what separates the successful entrepreneurs from the non-successful ones is pure perseverance.” – Steve Jobs, Co-founder – Apple
Faceoff with challenges
Running out of funds, customer retention, employee attrition, technological breakdown, and disagreement between co-founders have been the common reasons why certain ventures failed to reach where they set out to be. Tackle them from the beginning. Use your funds wisely, keep cash reserved for crisis management. Partner with people who can bring in their expertise and certain skill sets in core areas of a business such as Marketing & Sales, Operations, Finance, and Technology. Keep communication with the team open and crystal clear.
Ask for help
Whether it is outsourcing processes such as website development, building online shop, inventory management or getting mentors & advisors onboard, don’t hesitate to ask for help. Visit sites like Quora which is a very resourceful site where many entrepreneurs, business advisors and investors share their stories & viewpoints. Read, ask, interact and learn.
Make use of all possible social media tools like Facebook, Twitter, Pinterest and Instagram. But keep in mind to collect organic likes and followers. For that regular interesting updates will do the trick. No shame in asking your social gang to share and spread the word.
Set up a Feedback system
Ask every customer of yours to give their feedback. This will be a great source of learning as ideas on paper and in real can have different results. Feedback, whether good, bad or ugly will tell you what’s working and what’s not. You can make quick amendments before it’s too late.
Who would think about ‘exit’ when they are just starting out? But industry experts believe there always should be an exit plan sketched for circumstances beyond your control. Exit doesn’t mean shutting down shop. It simply means planning ahead for a possible merger/acquisition in the future or an IPO.
There’s nothing called overnight success. Ask any successful entrepreneur and he/she would agree that the path of any successful business has never been easy. It’s just that the world tends to glorify success stories but not the back-story which is filled with failures, struggle and despair. As Biz Stone, co-founder of Twitter rightly said, “Timing, perseverance, and ten years of trying will eventually make you look like an overnight success.” Determination will take you a long way as long as you have a solid idea and faith in it.