Reviewing your Ecommerce Business at Year End
Many ecommerce businesses owners will soon perform a year-end count of their product inventory. For many merchants, this process will determine cost of goods sold — and profit — for the year.
Beyond your products, however, I recommend you critique your entire business. As you close your books and review your financial performance, analyze other goals you set for the year — for all aspects of your business.
This is how top-performing businesses achieve continuous improvement. Your goal should be to understand where your business stands relative to its past history and the goals you set for the current year.
Here are some tips on your year-end business review.
Business Review: Getting Started
Start by collecting data from each of your functional areas. Combine that with assessments from all the aspects of your business to gain a total view of how your business model is performing. By taking a holistic view, you can determine what worked and what did not. You will then have a solid basis to start your strategic planning for the next year.
First, have your accounting department run a variety of detailed customer, sales, and product reports. Ask customer service personnel to produce a summary of customer interactions, problems, resolutions, and so forth.
Task your marketing department to produce analytics reports for the full year and include comparisons to the previous year. This should include performance reports from all marketing investments, such as advertising, search engine optimization, social media, and newsletters.
You can also begin to review your organization and infrastructure.
Here are detailed questions, broken down into the key components of your business model: customers, products, sales and marketing channels, organization, infrastructure, and your financial model.
Start with an assessment of your customers. Review your sales records for the year to identify the following.
- How many customers purchased from you?
- What percentage of customers is new?
- What percentage of your previous customers made a purchase this fiscal year?
- How did these numbers compare to goals you set for new customer acquisition?
- Are there any identifiable customer segments?
- Are there any obvious trends for the customer segments?
- How does your average order value compare to your previous history and to your goals?
- What is your most profitable customer segment? How could you attract more of them?
- Look at the top 20 percent of your customers’ total contribution to revenue. Most businesses find that roughly 80 percent of their revenue comes from 20 percent of their customers.
Now look at the products you sold for the year.
- Identify your best sellers.
- Identify your most profitable items.
- Look at sales trends for the year as well as seasonal trends.
- Look for your worst sellers; clear them out of inventory.
- Evaluate which product categories show growth and make plans to expand those categories.
- Are your competitors offering products you should be selling?
Sales and Marketing Channels
- What was the revenue and growth from each of your sales channels, such as online store, marketplaces, physical stores, direct sales?
- Evaluate the profitability of your sales channels.
- Evaluate the performance of all your marketing channels relative to your previous history and your goals. Scrutinize your analytics to review visitors, page views, referrals, ecommerce performance, and advertising.
- Examine your return on investment from your marketing efforts.
- Identify trends — positive and negative — to plan for in the coming year.
- Did you meet your sales goals? Why or why not? What does this mean for 2013?
- Is the customer experience — navigation, speed, design — on your site acceptable?
- Evaluate organizational goals you had for the year.
- Critique personnel and staffing levels. Are there gaps in your organization?
- Can your operations be more efficient?
- How was your employee recruiting and retention?
- How do you and your employees feel about their compensation?
- How is your culture? Does it support your company values?
- What should you improve on going forward?
- Are your office and warehouse space sufficient to support current operations? Are costs in line?
- Do you have the necessary equipment to support operations?
- Is your computer infrastructure acceptable? Are your costs in line with expectations?
- Is your customer support operating at the level you are targeting?
- Is your fulfillment operation achieving performance targets?
- Is your supply chain providing timely, reliable, and profitable products for your sales efforts?
- Did you achieve your revenue targets? Why or why not?
- Did you achieve your profitability targets? Why or why not?
- Do you have sufficient operating capital to support 2013 operations and investments?
- Are you making the money you need to support your personal life? Don’t forget to mind your personal finances.
- Did you have a strong year? If so, you may want to open a line of credit now so you will have a backup later.