Running an Online Business – Getting Things Done On Time

If you are like me, most of your career has been spent working in the traditional business model: nine to five, Monday to Friday.  While that model has been the norm in many sectors for a hundred years or more, it has never been universal.  Think about farmers who need to work every day taking care of their animals, or the emergency workers who need to be able to respond whenever there is a need, or the retail workers who are on the job when yo are not making your shopping at convenient times possible. (Yes, I know there are lots of others.)

I have good news and bad news, running an online business frees you from the nine to five schedule!  The benefits are clear.  If it’s a particularly nice day and you want to go for a run, smell the flowers or whatever else, you can.  You won’t have customers standing outside your door at “opening” time, since your online store is always open.  The down side is that because your customers can always get to your store, it is always open.  This means that you need to be in a position to respond to emails on an almost 24/7 schedule.  You also have a much greater need to track and manage your inventory.  If you have outsourced fulfillment, tracking inventory is a bit simpler because you just need to be able to forecast how much you need and when.  If you do your own fulfillment and have options like expedited shipping, you must be able to meet that commitment or suffer the online consequences.

In the aggregate, the pros outweigh the cons.  Again assuming that you don’t have to physically make or ship the product, you can do most of your work anywhere you have an internet connection.  So with a little discipline, working vacations are a snap.  What tends to work best for most people is having a realistic albeit flexible schedule following an ABC approach.  Using this guideline, “A” tasks are those that must be done and done by a specific date/time (e.g. replenishing inventory, shipping merchandise or paying bills).  Yes paying bills.

The “B” activities are those that need to get done, but which have some flexibility.  Items in this category might include updating your website, finalizing changes to your product mix or upgrading non essential equipment.  All of these tasks need to be done.  The difference is pretty simple.  If it is just past Memorial Day (which is in late May for those outside the U.S.), there is no big penalty in getting your 4th of July special offers onto your website today, tomorrow or in five days.  You need to do it in enough time that you can tell your customers about it and get them to shop.  The same goes for you inventory.  While your suppliers may have deadlines for getting your order in, you know about that well in advance.

And finally, you get the “C” activities.  These are the “nice to do” activities.  The list here is huge, your particular business will determine what tasks fall into this category.  Because you have an online business, the need to paint or redecorate your office is a big example of a “C” activity.  While ultimately, you may think it is necessary to complete these tasks, when you get them done will not help your business to succeed.

Tasks can move up the scale, typically from “B” to “A”, based on deadlines.  They seldom move up from “C”.

If you want to take advantage of the flexibility your online business provides, you need to assure that you get your “A”s and “B”s under control.  I’ll talk more about long term planning in a future installment.  Planning out for more than a moth at this level is useless.  Start out with a calendar.  You decide if you want paper or digital, etc.  Block out your “A” tasks and when they need to be done (remember to add in snail mail times if needed).  If you have similar activities that fall due within a few days of each other, schedule them for the same time.  While you might earn an extra three or four cents interest delaying a payment a couple of days, the time it takes to go from one type of activity to another will kill that savings.  Once you have the “A”s scheduled, add in the “B”s and as there is time available, the “C”s.  Remember to leave time for the unexpected.  Now you’ve done the easy part.

This schedule is not an academic exercise that you hand in and you’re done.  The schedule is your work plan.  Keep it where you can easily reference it.  When you start your first work day, go over the activities you have scheduled for that day and be sure that you can get your “A”s done and your “B”s started.  Remember, if you have two weeks to get an order in it’s a “B”, with two days it becomes an “A”.  Starting with your second work day, your first task is to add any missed completions from the previous day. (Remember, just because it didn’t get done doesn’t mean it goes away!)  Helpful hint, try to get the most important items done first.  You never know what the day may bring, so if you need to get that tax remittance in today, do it first!

After a week or so, go over the past week’s schedule results (this is an “A” task).  See what went well and what kept getting carried forward.  Some things end up taking longer than we expect.  Some times we don’t budget enough time for unexpected things.  Based on this knowledge, revise your schedule,  A couple of things to keep in mind: your schedule is dynamic and you must be able to manage it to meet the key requirements of your business; on days when you have unused time, you can start on tasks you have scheduled for the next day!

With a little practice and diligence, you’ll become the master of your schedule which translates into more efficient use of your time ultimately freeing up more time for the things you want to do.

Getting Started In This Business – Getting Things Going, Keeping Things Going

If you have been following this series of posts, you should be set to do business online.  Now comes the hardest part, doing business online!

One of the really hard parts about getting your business going is getting customers “in the door”.  With a traditional brick and mortar business your physical location will start attracting customers even before you open.  People will walk by, see the construction and your name so they know what is coming.  Opening online just doesn’t work that way.  You need to do a lot more work via your family, friends, social networks, professional organizations, etc.

I’ll be the first to admit that I’m not a good networker.  Even so, I’ve made it a point to send email to family and friends letting them know about my new business (including a link to my site!).  I’ve also posted notices on my Facebook page and started a page for my business.  I’ve also promoted businesses that I work with.  In some cases they have reciprocated.  I’m not on Twitter.  Call me old fashioned, but I don’t get that whole idea.  If you use Twitter, or any other networking/communications tool, be sure to broadcast the news about your business through all of them.  If your business plan includes an advertising budget, be sure you get your ads going the day you launch.

When you talk to people you know, or meet at social events, the question will likely come up “what’s new” or “what do you do”.  Don’t be afraid to tell them.  One of the tips you get when conducting a job search is to develop an elevator speech.  An elevator speech is a short introduction to something, you, your business, etc, that can be delivered while riding the elevator in a commercial building.  Such speeches are usually no more than thirty seconds long.  Develop your elevator speech for your new business.  Practice it until you have it perfected.  Once delivered, if the other person is interested, they will lead it into more of a conversation.

Along the same lines, have business cards ready.  Even in this digital world, they come in handy.  If you are at a party and in the first half hour someone tells you about a website how likely are you to remember enough to find it the next day?  (Yes, I know you could go to the site on your phone while talking to the person, but most people won’t!).  Because I started a photo business I considered it to be important that my business card really show off that fact.  I used one of my images as the background on the card and then added the necessary text.  Remember, you don’t necessarily need to put your name on the card!  My business is John Feist Photography, so I would hope the recipient can figure out my name!  You do need to include your url (your website address e.g. JohnFeistPhotography.com)  You also need to provide an email address.  Do you include a physical address and phone number?  That’s up to you.  I think phone numbers are good.  They give your prospect another way of contacting you.  Strange as it may seem, we all have different communication preferences.  Do you really want to miss a potential sale because a customer couldn’t text you or get you on the phone?  Physical address is a different question.  Most eBusinesses don’t really need one unless you are doing fulfillment from your address.  If you are doing fulfillment you need to give people a way to return things, hence your address.  Also for now, many people expect to find an address on a business card.

Next you need to think about updates.  There’s a commercial running on TV lately that starts out saying in technology if you are not moving forward, you are moving backward.  Think about successful websites.  The basic layout may remain the same, a good thing as customers know how to find things easily.  The content and merchandise will change very regularly.  Develop a plan for how and when you will change your product mix or add/remove items.  If you are opening a clothing site aimed at North America, are you going to be selling many down parkas in July?  Don’t be in constant change either.  If I buy a new offering from a website and tell a friend about it a week later, we’d expect it to be there!  This also ties back to an earlier post about inventory management.  You should only display merchandise you have, or be very clear when you will be able to ship.

Part of updating your site is keeping your customers coming back.  Most hosted sites will give your customer the option of receiving email updates from you.  There are numerous ways you can get the email address of your customers and prospects.  Sending email updates is a tried and true mechanism for keeping visible to your customers.  Remember, getting a general purpose update once or twice a week from a website is fine, getting several a day is spam.

Another mechanism for getting customers back is via loyalty rewards.  Not all hosted sites will provide you with the capability to run a major loyalty program like the airlines and credit card companies do.  I don’t know too many small businesses that want that.  You should be able to offer coupons/discounts pretty easily.  A very good way to get repeat traffic is to send your customer a coupon for maybe ten per cent off their next purchase as part of your follow up on the initial purchase.  If you do that be sure that the offer has an expiry, otherwise someone may decide to use it in five years!

Another tried and true mechanism is having a sale.  Sales are held for a variety of reasons.  The two you should initially focus on are getting people to your site and moving inventory that you’d like to discontinue.  Functionally, running a sale on line is no different than doing it in a physical store.  Decide on the items, decide on the markdown and let people know about them.

Finally, find ways to be visible in the real world.  If you are located in a smaller community and offer a somewhat unique service or product, let your local media know.  You never know when the local newspaper, radio or TV station will need a filler piece.  Another good avenue can be teaching.  Most communities offer free adult education courses.  If you are opening a site that sells tools, offer some classes on using tools.  You can get some easy plugs in for your site, perhaps giving your students a discount.  Be creative and know your market.  A friend of mine recently launched a line of yoga clothing.  Her sales are via her website KiraGrace.com.  Kira knows the business.  As part of her launch, she got glowing reviews from fitness and yoga publications.  She also goes to yoga studios and conferences with trunk shows so that more people see her line.  All of her appearances are publicized via social media.  Take a look at the site and you’ll understand why I don’t use the product (hint it’s womens yoga clothing).  I do tell my friends who may not know about her when she’ll be in their area and not just my yoga friends.

This will be the last entry in this series for a while.  As I get more into this business, I’ll share my experiences and learnings.  Please check back as I will continue to blog on some other topics going forward.

Getting Started In This Business – Fulfillment or Getting People Their Stuff

In the previous two posts I looked at creating your website or store and the back office you need in order to actually sell something.  Assuming that you have done them, the next question you need to answer is how will your customers get what they have purchased?

You have three possible choices for fulfillment: electronic, outsourced or self fulfillment.  Not all will apply in all cases.  Regardless of your fulfillment method(s) you must be sure that they can handle almost any volume.  We go into a business with the expectation that it will be successful.  In internet terms, that can happen literally overnight or faster.  Assume you get a customer who buys from you and is really happy with your product, the online experience, timely delivery, etc.  and that customer is very socially networked.  A very good review of your new business can end up in front of millions of eyeballs in hours!  While that isn’t likely to happen, what will you do if your original sales estimates are off by a factor of 10 or 100?

The best option is to have orders filled automatically and electronically.  If you have purchased music from iTunes or software from Microsoft you have used this model.  There is a major entry criteria to using this model…you must be selling something digital!  If you are selling something digital you have two choices as to how you will deliver: use your own infrastructure or use someone else’s.  There are a number of reasons to “outsource” this component.  As with hosting a website, the vendors who provide this service have the experience and business motivation to do it well.  If you are a small business, do you have the time to go through all the security concerns to assure that your “warehouse” is secure.  Do you have the time to do the maintenance that this infrastructure requires?  Do you understand how the automatic fulfillment process works to a level where you can implement and manage it?

The bottom line is that if you are outsourcing your hosting, your hosting company can likely provide fulfillment services or direct you to a partner of theirs who can.  Not only will such partners have what you need to deliver you products safely and efficiently, they will also have the ability to scale up or down to meet your needs very quickly and provide you with good data about your completed orders.  Will there be a cost? Yes.  Figure that into your pricing and get back to what actually makes money for you.

So much for digital fulfillment.  What if you need to actually deliver a physical product to your customer?  Here again you get the two options: do it yourself or let someone else do it.  This time the answer is not as cut and dry.  For my photo site, I have some sales that are fulfilled automatically through PhotoShelter.com.  These are the downloads of an actual image.  I also offer my images imprinted on a number of different surfaces and media.  PhotoShelter.com has arrangements with a number of photo labs who are ready and able to do the fulfillment that I need.  All I need to do is decide which of the lab’s I want to offer.  From there PhotoShelter.com lets me set the retail price for each offering.  When a customer orders a physical product the order is automatically sent to the lab for fulfillment.  The lab will complete the order and send it to my customer.  All labeling, return addresses, etc. will show John Feist Photography and not the lab.  For me that set up is ideal.

Not all fulfillment works that easily.  If your business manufactures or resells a product, you will need to decide if you want to work with a fulfillment house.  If you do, you will need to get your product to the fulfillment house, determine that your hosting company can route your orders to the fulfillment house and make sure that your fulfillment house has sufficient inventory.

The alternative to working with a fulfillment house is doing your own fulfillment.  A number of photographers who host on PhotoShelter.com self fulfill some or all of their offerings.  In some cases this is because they offer signed prints.  In other cases they want to have absolute control over the quality of what goes to the customer.  There is nothing wrong with doing that.  Doing your own fulfillment does place additional burdens on you:

• First, what shipping options you will offer.  Can you turn orders around to do next day or two day shipping?
• You need to establish a relationship with a shipping company (usually UPS or FedEx) and understand their pricing so that you can add that to the total cost to your customer.  Typically online vendors do NOT include shipping in the product price.  Recognize that you will probably not be able to get the same cost structure for shipping as the “big guys” get.  Big customers get big discounts.
• Put a cost on what it takes to actually receive the order and convert that into a package ready to be shipped.  That is the handling component of Shipping and Handling.  You may consider that to be part of your markup when doing it all yourself.  Bad idea!  What is your time worth?  What if you have to pay someone else to do that work?  The only way you will know what it takes to do the handling is to dry run it until you are satisfied that the process works reliably and reasonably efficiently.  Be realistic!  Use a stopwatch to determine the time it takes to do the individual tasks, understand how you transition from task to task (e.g. print out orders, pick inventory, pack, etc.)  You’ll be amazed at the time and effort involved in those “connectors”.  Be realistic about doing these tasks for numerous orders and not just one.  Once you understand the time, effort and materials involved talk to your accountant about figuring out those costs.
• Where will you keep your inventory, do your processing and how will you get your packages to the shipping company?  Remember, your inventory must now include all the supplies you need for shipping.

New age stuff aside, self fulfillment can be the right option for you.  Just make sure that you understand all that is involved before taking it on.

Another consideration when you are planning fulfillment, regardless of who is doing it, is real time inventory management.  Consider this scenario.  You go online to order something.  You place the order and pay the premium for next day shipping.  Six hours later you get an email from the vendor stating that they are very sorry, but your item is out of stock and they will let you know when they have more.  Odds are you will not be writing anything nice about the vendor or buying from them again.  You need to be sure that when the customer is looking at your offerings, you tell them if something is not available and if possible when you expect to have it in stock.

One final reminder that is not exactly part of fulfillment.  Don’t forget about sales tax!  I am not going to try and explain how it works, when it needs to be collected, etc.  Sales tax laws and requirements differ from jurisdiction to jurisdiction.  Check with your accountant as to when you have to collect sales tax and at what rate.  Remember, when it comes to sales tax you are collecting it for one or more governmental agencies.  In the current economic climate, most state and local governments need every penny they can get, so don’t get yourself in trouble when it can be so easily avoided.

I do hope that you are finding these posts useful.  I appreciate feedback, questions, comments and constructive criticism.

Getting Started in this Business – Getting Paid

In my last post I talked about websites and what it takes to get them started.  Having a website is important, but if you are opening an online business, the website is just the start.

Your website must do a lot of jobs.  First it tells the online world that you are there and what your business is.  Don’t underestimate the information aspect of your site.  People want to get some idea of who they are dealing with before they will trust you enough to buy something from you.  In addition to splashing your name and product(s) all over your site, you need to let them know who you are and how they can contact you.  Be sure to check your business email very regularly.  Customers who send email expect quick replies. In today’s world, believe it or not, email is probably a more important customer service tool than the phone.

Let’s assume that a potential customer has come to your site/store and decided to buy.  Assuming you have a site set up with products, prices and some type of shopping cart, your customer can browse through your store and put their choices into their shopping cart.  Ultimately, there will come a time when they need to check out and pay for their purchases.  That’s where things can get a bit more complicated.

You typically have two mechanisms for accepting payment.  I’m going to be cavalier and assume that you will only be accepting online payments.  The simplest mechanism for accepting payments is PayPal.  You can set up an account with PayPal for free and most hosted sites will give you a mechanism that will let you link to PayPal payments.  The down side to this arrangement include:

• You have no control over the look and feel of the PayPal payments site
• Your customer actually goes away from your site into PayPal’s site to make their payment
• PayPal will also post ads etc. to your customer

The other payment mechanism is for you to accept payment directly.  Again, it sounds simple.  In actuality, the mechanisms really are.  The “gotcha” has to do with how the process works.  Accepting payment by credit card directly involves three components:  a front end (in this case your website), an interface or gateway and finally a merchant bank that will actually handle the credit card transactions.  Most hosting services have existing arrangements with gateways and merchant banks.  The benefit to that is that all connections have been built and tested.

Getting set up with the gateway and merchant bank take time.  You have to go through an application process that includes credit checks and identity verification.  The other gotcha is that the banking industry has set up security standards for websites that accept credit card payments (PCI).  The standards are all documented, long and detailed.  One of the requirements for PCI compliance is for your merchant bank to go to your website and validate that you are in compliance.  Again, why go through all the trouble of building your own,which can take a lot of time, when your service provider should already be compliant.  Once you are approved, you need to do some simple setup so that the gateway knows your account information.

Either way, you need to get an approval for any transaction with a credit card.  The merchant bank or PayPal will handle that.  If you are using a service provider website, it should handle both accepted and rejected transactions.  At the end of the business day (as defined by the service provider),  all of the transactions are gathered (batched) and processed.  Once they are processed, you get paid, normally within a day or two.

The bottom line is that you need to have a payment received and approved.  Once you have that, you can give your customer their goods or services.  It’s no different than swiping a card at a brick and mortar retail establishment.

I opted for the gateway and merchant bank.  My hosting company had a relationship with several gateway providers who in turn hooked me up with the merchant bank.  The process was not difficult, it just took time.

How do you actually get your money?  The merchant bank will deposit your funds directly into your bank account via ACH.  (If you don’t know what ACH is, just accept that it is a direct deposit mechanism between banks).  Since I wasn’t interested in the PayPal option I didn’t research it in detail.  They pay to your PayPal account and then you get to transfer the funds to your bank or spend directly through PayPal.

In all cases, nothing comes for free.  PayPal, the gateway and merchant bank will all take something from your transactions for payment.  Most will also have monthly minimums, batch fees etc.  Payment is either taken before funds are delivered or directly from your bank or PayPal account if the fee is not transaction based.

Do your homework!  Get the full picture on what all the costs will be.  Do your best to come up with realistic estimates of what your business volume will be, both in terms of number of transactions and amount of money.  Once you have them, set up best, worst and most likely scenarios and see what you can expect, both gross and net.  Remember, you will need to track both as the charges you pay to the providers are normally deductible business expenses.  Check with your tax adviser to be sure.

And speaking of tax advisers… Most states charge sales tax.  The rules around if you need to charge sales tax on what and to whom can get complicated.  Talk to your tax adviser to understand if you have to pay sales tax, if so on what and what the tax amount is.  The distributed nature of this business can also confuse some of these questions especially when your fulfillment or distribution is in a different tax jurisdiction than you are.

I’ll talk more about these aspects in the next post, when I look at fulfillment.