Most bootstrap business owners are so focused on the day-to-day grind and growth of their businesses that there is rarely an alignment in the time they choose to exit and the time their business is ready for an exit. If this statement resonates with you, setting a robust business exit strategy in place now can both increase the sale value of your website later on, and also improve operational efficiency to drive greater profits today.
One of the most common characteristics of businesses built without an exit in mind is high owner involvement in everyday operations. This is common because business owners value their time lower than outsourced help, or fail to delegate and elevate key members of staff. While it may look good in your P&L, most buyers are looking for businesses with streamlined operations that are easy to take over and scale. The reason behind this is simple: Time is money, so the potential for return on investment is diminished with each additional hour of owner involvement.
When looking ahead of a sale, it’s important to have all of your daily responsibilities well documented, and delegated or outsourced whenever possible.
A significant part of your business exit strategy should entail:
- Determining how many hours you spend each week on your business
- Whether those tasks can be delegated or outsourced
- Implementing any changes that will ultimately reduce owner involvement
We’ll talk about each of these steps and give you actionable tips and tools to help with your exit planning.
How Much Time Do You Spend On Your Business?
Too often, we get sellers making a ballpark guess to answer this question. If you’ve been running your e-commerce business for years and it’s second nature to you, it might seem like the intuitive way to go about it. But are you factoring in every task and taking into consideration how much time it might take someone who’s new to it?
A good way to determine your hours of weekly involvement is to keep a log, whether with simple pen and paper, in an Excel sheet or using a time-tracking tool like Harvest. Choose whichever option you’re most likely to adhere to, and do this over the course of one to two months. You may also consider rounding up for tasks that are complex, but to which you’ve become accustomed.
Where Are You Spending that Time?
Once you have a log of your weekly tasks and how long they take, you should take a high-level view of that data to find out the areas that eat up most of your time. If it’s not immediately clear because there’s a large number of small tasks that individually don’t take much time, you should categorize them then look at aggregate time spent on each category.
For an e-commerce business, your main areas will likely be:
- Content creation and SEO
- Paid advertising campaigns
- New product development and/or sourcing
- Inventory ordering and tracking
- Customer service
Knowing your most time-consuming operations is helpful in a few ways. Firstly, it allows you to pinpoint low value tasks that can be delegated or outsourced. Second, it will help you understand inefficiencies in the business and further streamline operations to reduce operating expenses, which can increase your valuation. Finally, it is also valuable knowledge for a potential buyer, who will want to know every detail about what running the business entails.
No matter what your tasks are, you’ll always have two options: outsource or hire in-house. Both have pros and cons, depending on the job and your particular needs, so we’ll break all of that down here:
Content and SEO
It’s important to have high-quality, optimized content on your website. For most e-commerce businesses, organic traffic is a big part of attracting new business, so having optimized content is key.
- Can have high levels of expertise (particularly if you’re willing to pay well)
- Potential to become a loyal, valuable asset to your business
- Useful for one-off projects
- “Try-before-you-buy” test for future full-time employees
- May take some trial and error to find a good fit
- Tend to operate on their own schedule; have no obligation to complete assignments that aren’t paid in advance
- Fewer chances for revisions versus an in-house member of staff
- May only have expertise in content or SEO
Whether or not hiring a freelancer is a good idea likely depends on your needs and your timeline. If you have highly technical products and your exit is still a year or two down the line, this could be a good option. Otherwise, you might look to an agency or hiring part- or full-time staff.
Agencies will often assign a dedicated account manager and a creative team, as well as technical support, depending on the size of the agency. Agencies can range from full service offerings, like Fat Joe, to specific solutions, like the content-only services provided by Audience Ops.
- A single point of contact can save you time giving instruction or feedback
- Usually have a contract (i.e. a binding document stating what you’re owed and when you’re owed it) to which they have to adhere
- Can usually manage both content creation and SEO
- Creative teams tend to be entry-level, so finding high-SME writers may require some trial and error
- Agencies often experience high employee turnover, so your team may change over the course of your contract
- Speaking of contracts, they can be hard to get out of…
If you require a high volume of content on a regular basis and require a full spectrum of support, using an agency is probably a good option. Otherwise, you may find it to be expensive and cumbersome if your needs are only occasional.
Hiring a Staff
Bringing on a staffer or two can be a great option if your cash flow supports salaried or hourly workers. The best part about this option is that a staff can support all of your needs – not just content and SEO – if you hire the right people.
- A dedicated team can help your business grow exponentially due to increased work capacity and creativity
- Staff members can provide you with perspective and feedback on your operations
- There is no limit to level of expertise or dedication – if you find good talent
- Staff members often come with overhead costs, such as healthcare and office space
- Hiring and managing people can cost a lot of time upfront
- Employees may not stick around after an acquisition
Also, when hiring a staff, you need to consider that an employment contract is a commitment, even if the contract clearly states that the partnership can end at any time. Letting people go is never fun, so don’t hire anyone unless you have a necessary role to fill. That being said, businesses with long-term teams in place (even if remote) often receive higher valuations than those without.
Inventory Management and Fulfillment
If you own an e-commerce website, it’s likely that a large portion of your time is going toward managing inventory and fulfilling orders. While staff members would surely be able to help you with this, there may be better solutions available outside of your own company.
Here are some of your options for reducing the time you spend on these tasks:
Your products are the most important part of your operation – and they’re also likely one of your biggest expenses. As such, keeping track of inventory and balancing supply with demand is a key task. Make sure you have organized systems in place, are well aware of which products are core to your business, and have good understanding of your peak seasons. Businesses that frequently run out of stock do not provide a good customer experience, see lower rates of repurchase and ultimately, are valued lower.
By hiring someone to handle your inventory management, you may avoid costly mistakes, such as overselling, over ordering inventory or running out of stock before you can reorder.
Below is a list of possible tasks that you could delegate to an employee:
- Keeping track of products in stock
- Ordering products
- Meeting demand without overstocking (knowing your seasonal trends and promotions calendar)
- Identifying the winning products and cutting the under performers
Although hiring someone to handle these tasks will free up your time, you can’t forget that you have to properly train them before they can be valuable to your business. This is where having well-documented and detailed standard operating procedures (SOPs) comes in handy. Using a tool such as Sweet Process will make documenting everything simple and easy to follow.
Whether you hire someone or not, you should use inventory management software in your business. This facilitates:
- Multi-channel management
- Automated, real-time updates
- Store integration for businesses that also sell on marketplaces like Amazon or Etsy
- Warehouse integration
As your business grows, fulfillment will become a more time-consuming task. This is when you should consider bringing on help that will keep everything running like a well-oiled machined, no matter how big you grow.
Depending on your situation, you have a couple of different options when it comes to hiring help.
If you currently handle all of the fulfillment on your own but your operation is outgrowing your space, then opting for a fulfillment center such as ShipWire or Fulfillment by Amazon (FBA) might be your best option.
- Allow you to store your goods in a third-party location, which means you don’t have to worry about storage
- Will handle the packaging, inserts and any other branding involved with your packaging
- Quickly process and ship your items nationwide to ensure an on-time delivery with every order
- Lower shipping rates negotiated by the fulfillment centers on your behalf
- Gain greater exposure to clients (via Amazon Prime, if using FBA)
- Use of their inventory management software
- The fulfillment centers will take their cut of the profits
- May not be the best option for larger e-commerce businesses
- Decreased flexibility on a product-to-product basis (i.e. custom touches like hand-written notes may not be possible)
If you are an established e-commerce business with a large range of SKUs and you own a warehouse, then it could make sense to build an in-house fulfillment team. In this case, your best option would be to hire a warehouse manager to run the fulfillment operation.
- Higher margins (in most cases)
- Don’t have to compete with other companies for hours at the fulfillment centers
- Increased flexibility with branding and packaging
- Makes your business location-dependent, which will likely lead to a lower valuation
- Unfavorable shipping rates versus fulfillment centers
- Forces you to handle all aspects of the fulfillment process, such as shipping logistics and importing
- Requires you to rent, lease or buy your own warehouse
- Can actually increase the amount of owner involvement
The biggest problem with handling fulfillment in-house is that it locks your business into that location, which severely limits the buyer pool for your business. Also, handling your own fulfillment adds to the total number of hours that are required to successfully run your business, which in the end will hurt the value.
Good customer support can make or break your business, especially in an age when consumers are so motivated by online reviews. One disgruntled client can scare off hundreds of customers, and, unfortunately, those are the ones most likely to leave a review.
If you find yourself spending a lot of time answering questions or responding to complaints, think about how your website can be updated to simply prevent these messages. For example, an updated FAQ page can drastically reduce the number of questions you see coming through. Also, if you find that your customers are having similar issues with your products or service, it’s a good idea to fix those problems at the core – not just to save time, but your business.
Once you’ve addressed the root cause of any common questions or complaints, think about how your customers are contacting you and whether that can be simplified. It’s much more efficient to answer emails than it is to field phone calls, so you might want to replace that Contact Us number with an email address. There are no cons to updating your website and fixing your product or service, only pros, so do this first.
If you’re simply overwhelmed with messages from your customers and there’s no quick fix to resolve the issue, you may consider using a support center. If you choose this option, however, make sure it’s a high-quality agency that vets its employees. When your customers are having a problem with your product, it may only worsen the situation if they have poor communication with the person whom they call for help.
Here are some perks and drawbacks to using a call center:
- Saves you time and negates the need for a hire
- Well-trained, professional customer service reps may be a big value add to customer experience
- Can often be more efficient than in-house services
- Can offer 24/7 services for an international client base
- Many services utilize non-native English speakers, which can cause communication barriers
- Hard to ensure consistent quality, which can be damaging to your brand
- Expense may not be worth it if your calls are minimal
It can be hard to relinquish control of your operation. However, if you determine the areas in which you can securely unload your time burden, it will be well worth the end result. The business can simultaneously improve efficiency while driving costs lower, which will lead to more profits right now, and a higher valuation when you exit.
Speak to a FE International adviser today to develop your exit planning strategy.