Building a business with your best friend always sounds like a great idea. You guys will be millionaires and cheer beers every Friday to a job well done. Until you wake up in year 5 and you guys aren’t millionaires, even worse, you aren’t even friends anymore.
For Trip and Don, this was the reality they were living. They were a dynamic duo that sold sneakers for 5 years. They were grossing $500,000 and had become stagnant in sales despite Don’s amazing marketing skills. Trip was the CFO while Don was the CEO, CMO, and COO. Trip often made the business decisions for Don because Don was overwhelmed.
When Trip and Don came to us they were at a Stage 2 business- around $1 million dollars in sales per year. We helped them build a foundation that allowed them to grow to Stage 4, surpassing $3 million per year in sales. Follow along for their success story!
If you don’t resonate with Trip and Don, check out Tiffany, Tara, or Tyler
USE SKUS PROPERLY
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Impact: 5/10
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Timeline to resolution: 0 – daily maintenance
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Ecommerce Maturity Stage WITH: 4
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Ecommerce Maturity Stage WITHOUT: 2
We talk a lot about using SKUS properly in Clearinity because they not only help you stay organized, they also help pinpoint reorder points. This helps keep your inventory well-stocked and ready for more orders. It also proves valuable to make your SKUs properly as they should include important identifying information for your warehouse crew when it comes time to pick, pack and ship.
Trip trusted Don to create SKUs that were accurate and Trip thought they were. Don made SKUs but they only reflect the different styles of shoes and not the colors or patterns. Because of this Don could never group their items on their website properly and often could not convert sales. By using an SKU generator, they were easily able to make unique but consistent SKUs for their products.
Use a Purchase Order
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Impact: 5/10
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Timeline to resolution: 2 Day Training
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Ecommerce Maturity Stage WITH: 4
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Ecommerce Maturity Stage WITHOUT: 3
Purchase Orders help you reconcile between sales orders and invoices. When it comes time to pay your vendors you aren’t asking why you are shelling out more money mysteriously than last month. They also take the guesswork out of what you purchased and from where.
For Trip and Don this wasn’t an issue because Trip was an accounting wizard. He knew the value in Purchase Orders and that is why he chose the cheapest shipping warehouse and the cheapest manufacturing center. In Trip and Don’s case, purchase orders allowed them to make strategic business decisions regarding where and how they choose to manufacture, ultimately saving them money.
Count your inventory regularly
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Impact: 6/10
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Timeline to resolution: 4 days of training
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Ecommerce Maturity Stage WITH: 5
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Ecommerce Maturity Stage WITHOUT: 3
Counting inventory regularly allows you to count stock (stock-take) in your business and evaluate future inventory shortages sooner. Most people are taught that counting inventory yearly is enough. Although better than not counting at all, counting yearly leaves out the ability to see potholes in your inventory that might arise sooner rather than later.
Trip is on top of his books. They know what they can spend, they also have a good idea of what they are bringing home at the end of the day. In order to maximize Trip and Don’s salary, Trip went with the cheapest shipping and fulfillment center. When they chose their 3PL fulfillment center they didn’t ask any questions. They made assumptions that the warehouse counted inventory and was organized in a way that is conducive to their business.
Trip and Don have made the decision they either need a new 3PL center or they need to consider internal fulfillment methods. Clearinity helped them recognize that the errors, as well as the lack of communication, they might be experiencing is because of these factors in the warehouse choice.
Separating Goods and Products
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Impact: 6/10
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Timeline to resolution: 2 weeks
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Ecommerce Maturity Stage WITH: 4
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Ecommerce Maturity Stage WITHOUT: 3
We like to think about product family separation as donuts. You start with the same dough but can end up with many different kinds of donut flavors and shapes depending on the additions you make to the dough. Separating this process and your products into appropriate categories and subcategories allows your customers to recognize their needs in a product from a brand they trust. On the back end, separating your products also allows for more accurate accounting methods.
Trip and Don have communicated about this. Trip is a great communicator. Don just doesn’t learn in the way that Trip does, so they struggled to find a process of separating goods in the inventory. Don currently just separates by type of shoe and that’s it. Don doesn’t realize that by not separating by subcategory his third-party fulfillment (3PL) company has to spend more time looking for specific characteristics when going to pick, pack, and ship thus the customer waits longer than anticipated.
Organize the warehouse in an efficient manner
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Impact: 6/10
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Timeline to resolution: 2 Weeks
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Ecommerce Maturity Stage WITH: 3
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Ecommerce Maturity Stage WITHOUT: 2
Whether you are a business that outsources their fulfillment needs or has internal fulfillment, knowing your warehouse’s organization methods is crucial for your quality control in the delivery of your product and ultimately your customer’s experience. Knowing how they receive your inventory, package, and fulfill orders is imperative to your product quality control.
When Trip was looking into 3PL fulfillment, Don did not know the right questions to ask. Trip wanted the lowest cost and Don wanted a company that would be fast. When we really evaluated the time Don was making calls and corrections to their fulfillment warehouse, Trip recognized he ultimately was not saving money.
Build a team AND a process
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Impact: 9/10
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Timeline to resolution: 6 Month Leadership Intensive
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Ecommerce Maturity Stage WITH: 4
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Ecommerce Maturity Stage WITHOUT: 2
Hiring a team to support you in day to day operations is an investment in your business. In order to make the investment worthwhile, your team must have a clear process and understanding of their roles and responsibilities within tasks. Building a process along with your team is a high impact as it allows you to build a foundation for your business as well as have clear expectations moving forward.
Trip and Don did not have a team or a process before. They spent much of their time putting out fires instead of building a process for mistakes to not happen as frequently. By establishing some internal routine they were able to really look at the mistakes that were happening and clarify a process with their warehouses.
Not really sure how this would apply to your team? Take the Ecommerce Maturity Assessment and we can help you with it!
Add technology for long-term success, not short-term wins
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Impact: 8/10
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Timeline to resolution: 3 Months
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Ecommerce Maturity Stage WITH: 5
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Ecommerce Maturity Stage WITHOUT: 3
Far too often we have business owners that have already invested in technology as a solution to one problem but not all the others. They don’t know the interfaces very well and end up spending more time and resources on an ill-fitting inventory management system. Choosing technology that fits your business needs ultimately will provide long term success of your business. Evaluate the assumptions of the system and what problems your business solves for.
Because they were going to start fulfilling their orders themselves, Trip would like a comprehensive view of operations as well as accounting while Don can stay focused with the team. Trip and Don successfully collect all their data in four months and hand it over to Clearinity. After implementation, they now are successfully on DEAR with a support team and Trip and Don don’t argue as much.
Understand COGS and the relationship to inventory
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Impact: 6/10
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Timeline to resolution: 1 Day of training with accountant
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Ecommerce Maturity Stage WITH: 4
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Ecommerce Maturity Stage WITHOUT: 3
The number one cause of inventory write-offs is when purchasing and manufacturing are disconnected from the actual demand for the product. This often results in unsold products and thus a write off occurs.
Trip thought he was doing enough by simply writing off inventory at an appropriate time . What he failed to acknowledge was that he needed to reduce the number of write-offs. His write-offs were a direct result of a poor 3PL service and poor SKU creation. Clearinity helped Trip and Don with both of those issues.
Write SOPs
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Impact: 5/10
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Timeline to resolution: 2 Weeks
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Ecommerce Maturity Stage WITH: 4
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Ecommerce Maturity Stage WITHOUT: 3
Writing standard operating procedures (or SOPS) saves time and money down the road when Bob your admin gets sick or wants to take a vacation. They also help keep efficiency at the forefront as we should always be improving upon the processes and procedures. Standard operating procedures also come in handy if and when you would ever like to sell or expand your business, as they provide roadmaps for your new buyers or employees.
Because Trip and Don outsource a lot of their process, their internal processes are all between the two of them. Writing down the standard operating procedures allowed them to hire a small warehouse team. Mistakes in the process are now minimal and can be monitored closely for efficiency by Don.
Retain control of your company (Is Amazon good for my business?)
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Impact: 7/10
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Timeline to resolution: A month
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Ecommerce Maturity Stage WITH: 4
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Ecommerce Maturity Stage WITHOUT: 3
We often have many Amazon clients come to us with the same problems as Don and Trip. They don’t have an accurate count of inventory, they don’t know their warehouse processes and they don’t have the team to help them where it’s most needed. Amazon presents a similar, enticing deal as a 3PL service but often costs much more than a 3PL and doesn’t allow flexible ship times. If you aren’t ready to take your fulfillment in-house quite yet, there are better options Clearinity can help you find that work with your business and most importantly for your business.
Don and Trip were only on their self served website. Trip enjoyed the control he had over the user experience and they had a pretty loyal following. For Don and Trip it meant regaining control of part of their process in shipping in orders to grow further. They decided to invest in a warehouse with a small team and now are doing much better with the timing of shipping and organization. They have room to grow into selling hats now.
So What Now?
We hope that these top ten mistakes helped you look at your own business from a new perspective. Here at Clearinity, we acknowledge that this is a journey and not an overnight fix. Start at your highest-impact changes and begin there. As always, we are here to help you along that journey and continue to push for your business to reach its highest potential. Reach out to us and stay tuned for more tips and tricks.