3. Focus on big-picture strategies
Every organization wants to move forward with a clear road map that allows the business to allocate financial and human capital appropriately. Yet, e-commerce companies face barriers such as rapid growth, geographical diversity, real-time consumer expectations, and supply chain interruption.
Juggling these challenges requires current and future focus, agility, and seamless interaction throughout your operation.
Optimize operations
It’s critical to work through the various operational dynamics of being a direct-to-consumer company, position yourself for a future liquidity event, seek nontraditional financing alternatives, and deal with tax issues.
A solid operational plan and strategy — with technology — can help prepare you for the unexpected challenges. Whether it’s exploring shifts in technology, understanding how to tap into new audiences or sales channels, or how to understand and navigate consumer expectations, these activities can help increase brand awareness and set your e-commerce company up for long-term success.
Strategic planning
Many organizations lack a formal strategic plan, long-term vision to help guide decisions, thorough understanding of how they got to their current state, and a clear path to their chosen future.
Assessing your business functions and identifying strategies to help build and protect the assets of your organization and individuals can help forge a more tangible path forward and keep employees engaged.
Focus areas for a strategic plan can include:
- Capital structure. Building the appropriate capital and debt structure is critical to provide for a company’s near-term cash flow needs and long-term expansion capital.
- Succession planning. Proactive planning helps organizations remain financially healthy and culturally stable and can enhance long-term performance and value, especially through ownership transitions.
- Compensation services. Developing comprehensive compensation philosophies, and aligning those with job descriptions, compensation benefits, and performance evaluation strategies, can help support retention goals.
Path to liquidity
Historically, to plan and structure a company to maximize a liquidity event takes several years. In the explosive digital environment, the timeframe can shrink to 18 months or less due to market forces — such as investment fund stockpiles, low interest rates, the proliferation of special purpose acquisition companies (SPACs), and potential tax law changes.
It’s important to clearly understand and define your personal and business goals and assess your full financial picture, liquidity expectations, and desired legacy ahead of an event.
A comprehensive plan can address your short-and-long-term goals and put you in control of your finances and liquidity.
Focus areas for a plan should include:
- Business transition and succession planning
- Estate planning
- Due diligence
- Initial public offering (IPO) readiness
- Valuations
- Tax implications
- Buy-side and sell-side
- Mergers and acquisitions
Mergers and acquisitions
Businesses engaged in a transaction from both the buy-side and sell-side should conduct due diligence. It’s important to focus on key valuation drivers such as gross margin and inventory management solutions like ERPs.
During due diligence, it’s also important to perform procedures around the appropriate classification of costs and expenses in cost of goods sold, or as part of operating expenses.
4. Implement tactical guidance
As your business expands in scope and scale to meet the demands of your e-commerce and omnichannel distribution channels, it’s important to take a holistic look at your organization and your e-commerce and omnichannel goals.
Supply chain management
Starting sales often requires minimal infrastructure, but there are many costs associated with the process — including sourcing and shipping, taxes, duties, fees, and IT systems — businesses may not foresee, especially if expanding globally.
To prepare, e-commerce businesses with end-to-end value added tax (VAT) and customs duty support on both tangible and intangible products or services can:
- Understand when a marketplace will or won’t collect the tax on customer sales
- Adjust pricing approach based on the tax approach
- Consider logistical costs of selling, including shipping, third-party logistic (3PL) fees, and import duties
For other preparation tips, read 3 Supply Chain Considerations for E-Commerce Companies Expanding Overseas.
Sales-return management
Direct-to-consumer e-commerce businesses manage all kinds of returns, from apparel that doesn’t fit, expired products, recalls endangering public safety, and more.
Devoting more attention and resources to reverse logistics can help extract as much value as possible from returned goods. Implement best practices on both the front- and back-end to enhance margins and customer satisfaction.
Strategies can include:
- Collecting and analyzing patterns in return data
- Assessing location and logistics issues and where value-added processes should occur
- Determining how to address current liabilities to support sustainability and compliance
Sell with popular retailers
Selling products on popular retail sites can provide immediate impact for companies looking to expand their sales and increase their market presence. Without careful planning, it’s easy to be surprised by fees and potential sales tax implications often imposed by such sites.
Websites often have distinct business models for sellers that could bring differing associated fees and sales-tax requirements. It’s crucial to know how to properly account for them and select the model that makes the most sense for your business.
To learn more, please read Fees and sales tax considerations for sellers and vendors.
