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Stage 3 E-Commerce Business Fundamentals-My Hair is on Fire

Stage 3-Business Fundamentals

You know you have a great product. You dream of it reaching the European markets. But most days, you just feel like everything is on fire. Your inventory management is nonexistent, and your assistant is severely overwhelmed.

At stage 3, your business has become your full-time job. You are looking for more support but lack the capital. You may start to look for investment opportunities or partners for your business but don’t have good books to show anyone. Most likely, you oscillate between overspending and underspending on inventory, and don’t have a clear grasp on how to change that.

At Clearinity, we see stage 3 businesses that need the structure and support of an inventory management system. Still, we may not be ready for the investment or know what to look for in an inventory management system.

In this article, we review the specific stage 3 business fundamentals that will allow you to reprioritize and reevaluate your people, process, and technology.


The Process is where most eCommerce businesses get stuck. They have started to identify processes organically, but those processes have potholes and are not very successful. At this stage, you are rapidly growing and scaling. Reevaluating your processes, even though they are not successful,  seems tedious and time-consuming. But your people and technology will be only as good as the processes you have in place! To continue scaling and growing your business, it is essential to reevaluate your buying, selling, storage, and tracking processes.

LEGAL: Hiring employees

 You may also be looking to hire more of a team at this stage. You might consider hiring a contractor or an employee. A contractor will report their taxes but are allowed to set their schedule as long as they meet your hourly requirements for the position. As an employee, you, the owner, pay their taxes, and the employee must adhere to a set schedule by you.

There is a lot that goes into hiring employees. At this stage, you should have most of the criteria covered, but there may be things you haven’t thought about, such as:

  • Setting up a payroll system

  • Report each new employee to your states new hire agency

  • File IRS Form 940 every year for employees paid over $1500 and worked 20+ weeks.

  • Adopt and post workplace safety standards

  • Handbooks and Company Culture

In addition to these steps, when hiring a new employee, it is advised to have your contracts and handbooks reviewed by a legal professional. By doing this, it will create expectations for your employees as well as cover you if a relationship with your staff or business goes sour.


 You are tired of “out of stock” statues because you can’t keep track of your reorder points well. What frustrates you more, though, is that you can’t grow your inventory in the way the demand needs because you are always broke. The next step is to find an investor or look for small business loans to help ease inventory shortages so you can invest your time and money into other parts of your business to keep it growing.

 Investors look for these documents:

  • Income Statement

  • Balance Sheet

  • Statement of Stockholders equity

  • Capital Requirements


Those out of stock statuses that are frustrating you are also frustrating your customers. To maintain your loyal customer base, keeping out of stock statuses to a minimum is crucial. It boils down to keeping better track of your stock and paying attention to how you’re selling.

Keeping better track of your stock, so you don’t encounter as many out of stock issues comes down to reorder points or ROPs. Reorder points are the demand during the lead time in addition to your stock safety. Lead time is the days between your product’s production and when you receive your product. If your supplier is overseas, you will have longer lead times. The equation to find your lead time demand is: lead time x daily sales. Your stock safety is the stock that you pile for “ just in case” needs, such as a sudden increase in demand or a delayed lead time with the supplier. Stock safety levels are calculated by taking ( Max daily orders x max lead time ) – (average daily orders x average lead time).

There is more than just avoiding out of stock situations if you want to continue to grow your customer base. We take a look at the customer buying process. The customer buying process is known as inbound marketing. Inbound marketing is when you shift your focus from merely supplying and selling the product to educating and supporting our customers with as much information on the product as possible. The five stages within the customer buying process are:

  • Recognition of needs

  • Searching for relevant information

  • Evaluate the options

  • Closing the sale by addressing buyer concerns

  • Customer Support after the item is received.

 Are you converting your current customers to long-standing fans that will talk of your name to their friends and family? If not, we recommend evaluating how you are listing your products and what you are doing to address your customer’s buyers’ experience.


 In stage three, you have moved into a warehouse or other storage facility. You are ready to optimize your warehouse processes. In Stage 2, We talked about the questions you should be asking your warehouse, whether you are in a 3PL or an internal warehouse situation. At Stage 3, you should have answered your questions and now are ready are in the process of doing a warehouse audit. So what makes a proper warehouse audit and what are some of the benefits of doing so.

 What makes a proper warehouse audit?

 Several key factors make a proper warehouse audit, such as:

  • What is the current process?

    • How well is it working for your business needs now?

    • What does this process look like in the future?

  • Measuring the current flow of product and employees through each of your functions in operations

  • How are they ( or your team ) handling the equipment? Could it be improved?

  • Productivity Reporting and measurements against goals

  • Current Space Capacity – Can it grow with you?

 What are the benefits of a warehouse audit?

  • Improve productivity and performance

  • Reduce travel times between functions

  • Improved inventory accuracy

  • The knowledge that you can grow with them

 Your storage needs will continue to evolve in later years. It is good to get a process around your warehouse audits early on as it can prepare you for migration to a new facility or plan and create better communication with the team that is helping you. Warehouse audits also provide the opportunity to track your inventory better and have metrics for your accountants.


 In stage 3, SKU architecture becomes apparent and vital. The SKU or stock keeping unit you choose to label your products with helps you keep track of the moving inventory and provides critical sales data. SKU architecture should consist of :

  • No Leading Zeros

  • No spaces, grammatical errors

  • No random names

  • Maximum of 24 characters

 Your SKU data will show you your reorder points. Also, your customers will be able to compare similar products’ characteristics, which might encourage more cross-selling.  A good SKU architecture will also allow your warehouse to be able to find items and count your inventory efficiently and easily.

Inventory Counting

 Inventory counting in early business stages is often overlooked or is only done once each year (if that!). It is essential to introduce inventory counting concepts early on so that in later stages, you are equipped to handle more extensive inventory needs effectively. So how often should you be counting your inventory? More importantly, who does this? And will I still be able to produce income while I count my inventory, or will it shut me down for a day?

These are all great questions. Let’s examine how often this should be occurring. Inventory counting quarterly is the most ideal, although we understand it can be tough to achieve for most businesses. We recommend at least twice a year. Taking stock twice a year allows you to make educated business decisions reflected from data of your assets and debts in your business. Sounds great, but who is responsible for this task? Your warehouse staff should be able to count your inventory and have a process to do so. Often this looks like counting your inventory in small sections over time. Doing this allows your business to stay operational, and you don’t lose any business days!


  In all of the updated processes and procedures, you begin to notice that your team is growing rapidly. Maintaining a great team also takes great leadership. At this stage, you will want to start looking at your team structures and your leadership.

You and an assistant are supporting your buying and selling. They are helping you acquire the products and are assisting in customer support while you are managing to find sales data and market your products. Now is a great time to invest a bit more to hire an additional support role for your marketing efforts. Doing this will allow you to look at the bigger picture of your business and concentrate on bettering your operations.

 The warehouse you have partnered with has its team. The relationship with the warehouse may seem like a hands-off relationship. Still, to continue to scale your business, we recommend looking at your leadership and communication styles you are using with your warehouse. Are you communicating effectively? Are you communicating at all? Knowing the pulse of your warehouse team and how internally they are running and updating their processes allows you to make better business decisions regarding scale and inventory management. Your accountant will also thank you as this means healthy reports on time.

Your accounting department is an excellent example of a department that should stabilize costs, and you should not be investing too much more money for a little while. They may begin to notice some discrepancies. It will provide opportunities to evaluate the potholes occurring in your business and indicate when it is time to invest in more heavy technology to manage inventory data. In a healthy stage 3, you will begin to notice you are outgrowing your accountant and will want to move on to an accounting firm that can handle these discrepancies as a team and without much interruption to your operations.


 There can be many unknowns in the world of technology and its relationship with your budding business. Your business is on the cusp of needing these infrastructures to keep growing, and yet it feels intimidating to be investing in expensive systems. Clearinity’s stage 3 clientele are often interested in purchasing an inventory management system software or large marketing packages because they want to make their life easier. Unfortunately, businesses often invest in these technologies without the correct knowledge of their business needs and support to make them sustainably keep working. If you are looking for an investment and have many areas you need help in and around, what are the best systems to consider? We don’t have a clear answer for you as every business is unique. But we will offer insight into what to keep your eye out for in inventory management systems and what you can do before investing in large marketing packages.

Your accountant, the inventory and the warehouse

 It is essential to recognize that once your business becomes somewhat self-sustaining, it will require many capable hands to keep the wheels greased. Implementing inventory management software is not a catch-all for having little staff and better data. It will require knowledge of people to maintain the system so that the data remains correct. However, inventory management systems allow better data communication across departments and make your processes more efficient, eliminating wasted time for your staff. Your accountant should be able to see the same inventory data as your warehouse.

Organic is better

 Marketing packages are baiting you to invest in thousands of dollars worth of advertising help to gain more customers. Often these marketing campaigns send business owners down a rabbit hole as they don’t return revenue as promised. So what is the best investment? A small team that will focus their efforts on growing your business organically and not with paid followers is best. Organic is also better because sales become more consistent, your profit margins are higher, and overall, you have more stability in your business. At this stage, small efforts towards gaining visibility will provide more loyal customers.

Stage 3 represents a leveling up where a company is still in the chaotic throes of explosive growth and “try something new each day.” Yet, they’ve made it long enough to understand that they will require infrastructure and business fundamentals to keep growing. Namely, marketing is still the most significant push, but operations and management are now starting to become “real” enough to understand that we’ll need it.