Lean E-Commerce in 2014

Have you been thinking that you should move your business online and start selling globally?

Unless you are offering something spectacular or something dirt cheap, you should proceed with caution.

Testing Your Assumption

If you have revenue between 1 and 5 million dollars, you should think about selling online. You may even need a full-blown e-commerce site complete with all the bells and whistles. Here’s a plan to help you make that decision.

One of the core ideas in The Lean Startup is the idea of testing an idea as soon as possible to see if your assumptions are correct. I have come to love that idea, because so often our assumptions are 180 degrees out of phase with reality.

My favorite example this is a question I love to ask crowds when I speak on search engine optimization: which term has more search volume, lawyer or attorney?

The answer is usually overwhelmingly “lawyer”. Sometimes there will be a contrarian who will raise their hand for attorney, but almost everyone knows that way more people search for lawyer than attorney… right?

It’s not even close. Attorney kills lawyer in search volume.

When Virginia Bridges called me a couple of weeks ago while doing some research for a piece in the News & Observer on Small Business and E-Commerce it got me thinking “lean”.

Starting Small

If you think your business can make a dent in the online space, then let’s test that assumption. Take your best product and put together an ad for Facebook aimed only at your exact best demographic.

Because you can target Facebook ads so tightly, it’s a perfect testing ground with almost no cost, especially if you sell you thing!

Need to only aim at women 19-29 who are currently engaged and love trucks? Facebook can do that. Need to get the attention of grandmothers who live in Salt Lake City? Facebook can do that.

The point is, put your product in front of as close as you can to its perfect customer and see what happens. If it doesn’t work, you’re ad was probably terrible, so try again. Still no luck? Then you just saved yourself 18 months of stress and thousands of dollars in development costs.

What if it does work. What does that mean? If you need a rule of thumb, think 5X. If you are selling really cool $20 t-shirts that cost you about $5 to produce, and you spend $100 on Facebook ads, you need to earn at least $500 to consider that a successful test.

That means you would have to sell about 34 t-shirts to make $500. Remember that doesn’t take into account your time to create the ad, package up orders, shipping costs or anything else. All we’re trying to test is if there is enough interest to take your idea to the next level.

Step it up

Congratulations. You killed it on Facebook and over a few months saw revenue of $10,000 from a Facebook ad campaign of $2,000. Time to expand your empire.

The next step means more work for you and exposure to a wider audience. A site like Ebay will expose you to a different type of buyer, but a more general audience that you should test. You can also start to sell more products in your line.

Use similar accounting methods here. Make sure you’re making enough money to make it worth your while. Since Ebay is still affordable to sell on, it’s a logical next step.

If things don’t work out here, you may need to look closer at what went wrong. It’s possible that Ebay just doesn’t work for your products or it could be that the wider audience doesn’t love your stuff.

If you did do well, then it’s time to look at another small step. fully managed solution like Yahoo Stores for under $50/month.

Fully Managed

When you step up to a fully managed storefront like Yahoo, you have to play completely by their rules and use their templates. Yahoo has a super powerful domain, but you will need to be the person who does the marketing, the inventory, they advertising, etc.

This is the step where you can put all of your products online and see what takes off. This is a big step, and you may want to ask from someone who’s been down the ecommerce path before.

I’m Ready for my Own Site

If you have jumped through all of the hurdles, then you can start looking at moving all of your awesome e-commerce onto your own domain where you can do what you want, when you want, how you want. This last hurdle will probably cost you some real money.

Setting up a well constructed e-commerce site is not for a novice. The nuances are many and can kill what seemed like a logical next step. Work with a trusted partner to make sure that your steps are solid, that your cadence is even and easy and that you’re working a strategy.

If you need to ballpark something here, you’re most likely looking at a minimum of $10,000 for a website and it can get to $100,000 without too much effort.

The Hardest Part

Now that you just spent the bonus money on a new website you need to do more than ever to sustain the new castle. You need to start to build up a rabid and engaged community around your brand, your products and maybe even yourself.

Running an e-commerce business without having evangelists to help you push the boulder up the hill can kill you. Look at brands like GORUCK, Best Made Company and Moz for inspiration.