Catherine Langman:
Well, hello there, it’s Catherine Langman here back with another episode of the Productpreneur Success Podcast. And today on the show, we are going to be having a conversation about scaling your e-commerce brand. There’s various different stages in launching and building a business. Obviously the pre-planning pre-launch phase, where you’re doing all of your research and testing the opportunity in the market and all of that kind of jazz, the launch phase, which sometimes feels like the hardest bit. I know myself when I was gearing up to launch my first business, it feels like you’re climbing Mount Everest and you haven’t even turned the website on yet. And it’s easy to sort of feel like, just need to get through this and everything will just be hunky-dory after that and I will be laughing all the way to the bank.
Catherine Langman:
Of course, though, once you’ve launched, then you realize, well, you’ve got the hard job of actually growing the business to follow, which is a whole different ball game on its own. Really in those early days of a business, the focus that you need to be going through at that point is not trying to chase down some kind of miracle cure or silver bullet that’s going to secure your overnight million dollar success story or anything like that. That’s just ludicrous. And it’s not reality at all. Really what you want to be focusing on in those early days is finding what is going to convert. It’s like finding the marketing strategies, finding the promotional strategies, finding the ways that you can actually engage and connect with your ideal customers and build up that audience and motivate them to buy from your online store.
Catherine Langman:
So really, there’s no way through that other than to learn some solid strategies and test some of those content ideas until you get to that right message to market fit so that you can really figure out what’s going to make your audience convert into customers. So, that’s that early stage. Once you’ve got that figured out, though, then you enter into the scaling phase. And I often talk about scaling and optimizing and they’re two different tasks and two different disciplines. Scaling is when you’re really putting your pedal to the metal and you’re really gunning it. And you’re going really hard with the growth strategies.
Catherine Langman:
And optimizing is where you kind of maybe take the foot off a little bit, not that you want to go backwards, but you just want to then focus on, okay, well, let’s look at optimizing in terms of, can we improve those conversion rates? Can we improve those performance metrics? And can we improve profitability as well? So you’ll go through some processes of optimizing and then you go back to scaling. And it’s like a bit of a staircase really. You’re kind of focusing on scaling and then you’ll focus on optimizing for a bit. And then you’ll head back the other way. And that’s kind of that step-by-step process to get to whatever your ultimate goal is.
Catherine Langman:
But what I definitely see as a really big mistake that a lot of businesses make when they are trying to scale a business up and to really grow it is that they want it too early. And I know that sounds really strange, especially when I’m in the business of teaching people how to do this, right? How do you grow your business? But the biggest mistake that you can make is wanting it too early, because here’s what happens. And I’ll never forget, actually, this is probably a story that’s like, I don’t know, 30 years old or something. I remember applying for my first ever job when I was in high school. I was applying for all different kinds of jobs. Ultimately ended up at McDonald’s like probably most people do as an early job.
Catherine Langman:
But I was applying for all these jobs and I saw one that was advertised at like a lunch cafe deli place where like business people in the CBD who worked in the CBD, went to get their sandwiches and that sort of thing. And the job was literally making sandwiches. And for those of you who don’t know, I grew up in a family of five kids and we all made our own lunches. We were all cooking. I think my mom had me cooking from the age of two. So, I knew how to make sandwiches. And I didn’t get the job because making sandwiches for one person is very different from making sandwiches at scale and really needing to keep pace with the fast-paced orders and having gone on to have a bit of a career in hospitality whilst going through university. I get it now, right?
Catherine Langman:
And this is the thing in business as well. It doesn’t matter what kind of business that you’re in. If you’re trying to do tasks for one or two things and you’ve got plenty of time to spread out getting these things done, then it’s extremely different to actually doing it at pace and at scale. And more recently, I remember being asked or posed the question in a mastermind group that I’m in, could you handle it if we threw a large number of customers your way? So if you think about it, if you maybe fulfill two orders a day, and then somebody was going to literally throw 100 orders a day at you, could you handle it?
Catherine Langman:
And I think a lot of small businesses who have their eyes on this end prize, and they want to have a seven-figure business or maybe more or whatever your goal is, right, it would be… And it’s very easy to kind of chase the promises that some people like to make that you’re going to have that tomorrow or next week, or even next month, but really soon, right? That overnight success it’s so enticing. It’s like a kid in a candy store. You just can’t help but want it, right? But what’s going to happen if you’re not prepared, if you don’t have the stock there, if you don’t have the fulfillment capabilities and the systems and processes. If you don’t have the team there to manage the customer service? It’s going to kill you. You will die a very fast death in business if you’re not ready to scale. And that can actually lead to resulting in some really huge losses for your business. And it might kill off what could have been a hugely successful product and business idea.
Catherine Langman:
So scaling a business is really a complicated process. When I say complicated, I mean, it’s not like this is rocket science, right? It’s not that we have to try and solve landing a rocket ship on Mars using a remote control gadget from earth. It’s not that complicated, but it isn’t an easy thing and it is a puzzle that needs to be worked out for each individual business and really needs to be backed by really solid strategies. So I’m going to go through a few keys that you need to have in place in your business in order to scale.
Catherine Langman:
And the very first thing that I’m going to mention, it doesn’t have anything to do with marketing at all, or operations necessarily, and it’s having high profit margins. And I know that there’s probably one or two of my past clients who would smile at this one. It’s very easy to fall in love with a product that you just sort of think, this needs to be out there. I absolutely love using this for myself and kind of gloss over what the margins really are. And I think also, there’s a certain naivety sometimes in many of us when we start a business and we don’t necessarily go into it realizing the kinds of overheads that you need to be able to fund through the profit margins on your product.
Catherine Langman:
So if you really do want to scale up and see some kind of exponential growth in your sales, then your products do require to have a high enough profit margin that is going to allow you to spend the necessary amount of money on marketing and advertising. Literally, there’s no way that any business or brand in the e-commerce world will get to that kind of point of scale and fast growth without being able to spend money on marketing. And so by high profit margins, I’m talking about 60% or above. Realistically this is going to require most people to at least have a distribution margin. So if you are not manufacturing your own products like I did in my business and you’re buying in other people’s brands, realistically, to get that kind of a high margin, you need to have a distributions… a distributor’s, get my words out, a distributor’s margin. So not a regular wholesale margin, but a distributor’s margin.
Catherine Langman:
So that means you’re bringing product in probably from overseas or being a distributor for somebody here in Australia, if you’re listening from here. And that would happen if it’s somebody who loves the product development and manufacturing, but they don’t want to be involved in the sales and distribution side of things. But a distributor’s margin allows you to have enough fat in the margin there that you can wholesale if you want to, but obviously selling direct to consumers via your own e-commerce store is going to give you the biggest margin there.
Catherine Langman:
And at the end of the day, like I said, there’s no way around growing a business online these days without spending money on traffic. And spending money on traffic and on advertising and building brand awareness and all of that kind of stuff, that doesn’t take away from the onus that is placed on us as brand owners and business owners to also create content and have organic marketing going out there. We absolutely need to be doing all of that. I’m going to talk a little bit about scalable marketing in a minute, but we definitely need to have money to spend on paid amplification as well. So, advertising across whatever platforms are going to really drive traffic and sales in your online store.
Catherine Langman:
And really, in terms of the margins, allowing for you to scale, it’s not just paid amplification that comes into it either. It’s being able to scale up a team. And I’m going to talk a little bit about that in a minute as well. But at the end of the day, one person can’t build a business to scale. You need to have the ability to build a team of some kind as well. So high profit margins, 60% or above is what you want to aim for. That’s really important if you want to successfully grow your business and build it quickly.
Catherine Langman:
The second key that you really need to consider, and this is probably something that gets looked at a little bit too late. Certainly we’ve seen this happen with clients. And this is a scalable supply chain. So before you scale, you need to make sure that you’re not going to run out of stock as your sales grow, because obviously if you sell out, then that is going to drastically harm your conversions, right? So if you’re getting really great traffic and sales, because you’ve really nailed the marketing side of things, but then you sell out of your most popular items, then that traffic in sales is going to go somewhere else. And you’ll start to get a little bit of negativity happening out in the marketplace because people will start saying, “Oh, I really wanted to get that brand, but they’re always out of stock.”
Catherine Langman:
And this has happened. We’ve seen this happen before. And look, as somebody who’s been the owner of a brand where we designed and manufactured our own goods, I completely understand the lead time required to keep on top of this. It’s not an easy thing. And over the last 12 months, thanks to COVID, it’s been harder. I totally get it. It’s been a lot harder for people to, if you’re either manufacturing overseas or you’re getting packaging from overseas or you’re even just getting raw materials from overseas, trying to get stuff into Australia has been a lot, lot harder and has taken a lot longer and it’s cost more money as well. But even for brands and products that have been manufactured in Australia, we’ve seen those lead times really blow out in the last 12 months, just because so many other people, other businesses have suddenly brought their manufacturing back on shore as well. And so, the demand for what’s available is much higher, so therefore everything takes longer.
Catherine Langman:
But having that scalable supply chain is incredibly important. So what we’ve seen happen with brands in the past that have worked with us, and I’m sure it’ll happen again, they come to us, we get all of the marketing in place and we start really driving fantastic traffic and sales. And of course the clients really want that to happen because they’re paying us to do that. And that’s how they’re going to start making money from working with us. But then, because they haven’t kept on top of the sell-through rate, obviously the sell-through rate has sped up and they run out of stock. And then of course the traffic in sales tanks, and that’s not great. So scalable supply chain is incredibly important. Now you can use apps to help you manage all of that inventory and supply chain lead times and all of that kind of stuff. Of course, you can do all of that. And that will help you with, predicting when you need to place your orders and all of that kind of stuff.
Catherine Langman:
All right. The third really important key to scaling your e-commerce brand is having scalable fulfillment and operations. So this, I guess, harks back to the story that I told earlier about making sandwiches for one versus making sandwiches in a really, really busy cafe at lunchtime. It is a different kettle of fish if you are fulfilling one or two orders a day versus 100 orders a day, and you absolutely need to have nailed this fulfillment side of things. If you are going to scale up your business, you as the business owner cannot be the one doing this work, doing this fulfillment work, nor can you be the one doing the customer service.
Catherine Langman:
I think this is another thing that gets a little bit missed, or at least people not realizing that this is going to kind of explode when they get really busy is the customer service side of things. But when you do sell more and you have more traffic and customers coming through your website, your customer service inquiries are going to increase dramatically as well. They are directly correlated. So you can’t really have the sales without dealing with the customer service inquiries. I know in my business, they were very happy days when I had a warehouse manager on board and then when I had a customer service manager on board and I didn’t have to do any of that kind of stuff.
Catherine Langman:
In actual fact, I never did any kind of order fulfillment. I decided right up front in my business, that wasn’t going to be a fantastic use of my time. My skill set is absolutely in the marketing and driving the demand and converting the sales. So that was my zone of genius. So I was going to concentrate on that and I always paid other people to fulfill the orders, but in getting a lot busier, we definitely needed to have more of a leadership position in that business. So we hired that warehouse manager and it was fantastic to take all of that load off my plate and the mental load as well. So managing that team of order fulfillment people and as well, the customer service.
Catherine Langman:
These are really important roles that you need to consider. If you’re thinking in your business, okay, well, I know that I need to work towards not doing this work, but I can’t necessarily afford it right now. I’ll be able to afford it when I’m doing X, Y, Z revenue regularly. But what you also need to think about is that it’s very difficult to get to X, Y, Z revenue consistently, if it’s not your focus to do that work, to focus on the growth strategies and implementing the things that will actually drive the growth. If you’re focusing on the low ticket items, which is really packing orders, you’re not focusing on growth strategies, right? So I like to think about what would Jeff Bezos do at Amazon? I don’t think you’d see him packing orders, right? I don’t think he would have gotten to that position in terms of scaling up the behemoth that is Amazon had he been on the tools and fulfilling orders and answering customer service inquiries, right? So scalable fulfillment and operations are the third key to really scaling up your e-commerce brand.
Catherine Langman:
The fourth one is scalable marketing. And I’m not going to dive into too much detail on this one because this really is kind of the topic of most of what I talk about, but scalable marketing is the opposite of hustling in Facebook groups, of jumping on Facebook Lives, or doing all of that kind of hard work in terms of using up a lot of your time just to get a sale here or there. That is not scalable whatsoever. Scalable means that if you turn up the spend, then you turn up the traffic and sales out the other end, and it doesn’t require more of your personal time and effort to generate that kind of growth. Right? What you need to have in place is a leveraged model, and you can leverage other people’s time by building a team to help you or by outsourcing. And you can also leverage tools like automation. So marketing automation through email marketing, as well as obviously using scalable sources of traffic, which generally means paid traffic. So advertising on whatever platforms your customers hang out on, whether it’s Facebook and Instagram or Google or something else.
Catherine Langman:
Now, like I mentioned earlier, having scalable marketing in place, it’s not going to take the onus off you to have to create content that you also distribute for free. Realistically the free content or the organic marketing is part of the mix as well. But if you do it in a way that is a little bit more of a leveraged system, you have a system that does not take up more time for you in order to grow your business, then you’ll be golden. So at the end of the day, it does require having a little bit of a mix of hiring and outsourcing, as well as paying for that marketing to get that system in place.
Catherine Langman:
Really much like the scalable fulfillment and operations, it’s okay to manage it all yourself if you’re just doing maybe a post today on social media and an email once every couple of weeks, and that’s all you’re working on plus fulfilling orders, but that’s not something that’s going to get you to seven figures. It might get you going, but it’s not going to get you to seven figures. And you can’t replicate yourself and the time that you spend indefinitely. You have to find ways for it to work that are a little bit more leveraged than that. Otherwise, you’ll probably never sleep and you’ll probably die an early death because you’ve worked yourself to the absolute bone and who really wants that. Right? Okay. So, that’s the fourth key to scaling your e-commerce brand.
Catherine Langman:
The fifth one is access to capital. So moving away, I guess, from the operational side of things and into something a little bit different. Access to capital can be a little bit hard. Not all of us. I know I’m not made of money. I don’t come from a super wealthy family and I don’t have some kind of an angel investor who’s come and plonked several hundred Gs in my account to scale up a business. But at the end of the day, you do need to have some access to capital when you are going to be scaling your business because you’re going to need to start increasing your ad spend, and you’re going to need to increase your stock purchases as well. So whether you’re manufacturing or buying in ready-made products and for all of that to happen. You’re probably going to need to also start increasing your spend on team or outsourcing as well. So for all of that to happen, you are going to need to have some access to capital.
Catherine Langman:
And so there’s a variety of ways that you can fund this. So to an extent, when you are gearing up, like in your early stage in business and starting to gear up with scaling, some of it can be sweat equity, right? So you can donate your own time and not draw a salary. So income that you are bringing in through revenue, rather than paying yourself a salary in those early stages, you can kind of donate that back to the business as sweat equity, and that can help fund some of the scaling. But realistically, if you want to grow fast, you are probably going to need access to some other capital as well, so that you can invest in the product, in the inventory and invest in the marketing as well.
Catherine Langman:
So various ways that I’ve managed to access capital and some of my clients as well. The first thing that I did in my first business was applied to the National Australia Bank for a micro enterprise loan. Basically those are loan products that are designed for startups who need access to some capital. And it’s really designed for those small businesses. So that got me going, it got my first mass production run funded and some marketing as well. Beyond that I then had an overdraft facility with the bank so that every time I needed to pay a really big production run, I could dip into that. So it was a little bit like three steps forward, one step back in terms of growth.
Catherine Langman:
But other things that some of our clients do, PayPal loans can be really useful. I know that there’s other loan products like Mueller and that sort of thing. So, they’re kind of cashflow loans. Or finding a business partner. So once you get that kind of confirmation of product and market demand, and you’ve worked out what kind of marketing and advertising is going to convert, but you really want to gun it with the scaling and you need some more capital, selling part of your business and taking on a business partner for some funds is another really cool way to do it. And of course, in doing that, you not only get the access to the funds, but you also can get access to things like skills and experience and contacts and all of those sorts of awesome resources that can really help.
Catherine Langman:
I’m sure there’s other options that I’m not thinking about right now in terms of funding. I’m sure you can really go hard in the traditional investor space as well, if that’s the way that you want to gun it. But access to capital super, super important. I think if any of us think that we’re going to… Oh, credit card, that would be the other basic one. So that’s another probably easier way to kind of tap into things.
Catherine Langman:
So yeah, at the end of the day, we all just need to accept that in the very early stages of your business, you’re probably not going to be profitable because if you want to get big and you want to really grow, you need to fund that. We need to spend money to make money. But then once you get to that point of scale and you can focus on optimizing for profit and optimizing for more profitable conversions and efficiency and all of that kind of stuff, that is when you’re going to make your money back in spades and that’s what you want to be aiming for.
Catherine Langman:
All right. I have one more key to scaling your e-commerce brand. It has nothing to do with business operations or marketing or strategy or anything like that. And it is mindset and having a growth mindset. I’m sure you guys have all seen that meme that has gone around many times over the years on social media, the little cartoon of the two miners and one miner is doing his little mining, chipping away with his pick or, I don’t know what those tools are called. And hits gold or gets the diamond or whatever. And then the other guy’s almost about to crack through and hit the pot of gold or the pile of gems, but sees that the other guy found the gold or found the gem. And so before he just cracks through the final little bit of dirt, he turns around and goes and tries to chip away at the first guy’s space. And there’s nothing there.
Catherine Langman:
At the end of the day, I think we do all know that growth is not going to be this… The strategies that get us from where we are now to our goals is not going to be the same for us as for the next person. There’s no kind of cookie cutter scenario that’s going to work 100%, exactly the same for everybody. I think logically we know that it’s not a straight line between here and there, right?
Catherine Langman:
We know that logically, but emotionally when things aren’t going as quickly as we would like, or if maybe things don’t work perfectly all the time, or maybe we get some bad feedback on a product or a bad customer review on a product, or maybe some fantastic marketing campaign or promotional campaign that we’re running, that we’ve worked really hard on doesn’t work as well as we really expected and we don’t sell as much as we expected, it’s really hard to keep that confidence really strong and to be really internally self-confident and not be saying to ourselves, I’m going to be happy when that works. I’m going to be happy when I get to seven figures. I’m going to be happy when I have a six-figure product launch campaign, or all of those external factors. I’m going to be happy when I never have a bad review on my product ever again.
Catherine Langman:
It’s really easy to let those external factors dent our confidence. And when we allow those negative things to take over and affect our self-esteem, it affects our ability to grow our business and to scale up. We cannot hang the success of growing our business on those external factors. We need to have that internal self-confidence rock solid in our business. And this comes down to mindset and having that really strong and, like I keep saying, anchored internally so that we aren’t at the whims of whatever’s going on outside in the marketplace.
Catherine Langman:
And we also need to really be adopting that growth mindset side of things, a way of viewing things. And so this really means being able to give things a go, have that testing mentality through the scaling process, know that we might not get everything right all the time. It’s very hard for those of us who are Type A perfectionists out there and we really want to get the gold star all of the time and not make a mistake, but that’s not how it is, right?
Catherine Langman:
I remember someone years ago saying to me, “Look, being a successful entrepreneur, it’s a bit like jumping off a cliff and assembling the plane on the way down,” which scares the absolute crap out of a lot of us. I know that I don’t find that easy. I think anyone who grew up with me and knew me as a teenager and through school and early adulthood and stuff would probably go, “Yeah, that’s not really your strength, Catherine.” Definitely, I see my middle child is a lot like me. He really doesn’t want to put himself out there unless he knows he’s going to be good at something.
Catherine Langman:
So it’s really hard to get past that and to adopt a testing mentality and not to perceive results that aren’t perfect as a failure. We can’t perceive it like that. We need to perceive them as tests and we learn from the results and then we do better next time. And that is the way that we scale and grow. So I guess in terms of the progress through launching and building and scaling your business, you need to know that you will be operating at a bit of a loss in the beginning and that that’s going to pay off in the future. And that it’s okay to run these tests, whether you’re testing something new on your website, or you’re testing out a new product, or you’re testing a new marketing campaign, or you’re testing some sort of something or other else, there’s all sorts of things in a business.
Catherine Langman:
Like it might be a new way of managing the fulfillment. You’re developing a new fulfillment process or whatever the case may be. And you’re trying to work out, is that going to get me better results than what I was doing before? We won’t always hit that pot of gold every single time we test something, certainly not in the early days, but we need to have that right mindset that doesn’t let that be perceived as a failure. And that we’re actually just happy to test and then iterate and test and iterate and improve based on what we are learning through the process. And at the end of the day, it pays off, right?
Catherine Langman:
So I guess with this growth mindset, this sixth key to scaling your e-commerce brand, just remember that no matter where you are in the process, always test, always iterate, and always monitor your results and learn from what you have done. And you will get there. It will pay off in the future. And you will end up with one of these amazing businesses similar to the ones that I’ve been featuring and interviewing on the podcast recently. So Kristi from Babiators and Kate from Uberkate Jewelry, and Cinzia from Smoothie Bombs, we’ve had some amazing guests on the show that have had this mindset and taken this approach to business. And they are still going 10 to 20 years later and building these really amazing businesses. And that’s what I want for you guys as well.
Catherine Langman:
So that’s what I’ve got for you today, the six keys to scaling your e-commerce brand. And if you are not at the point of scaling yet, because you are at the launch phase, or you are in that early stage of business where the focus is a little bit more on figuring out what is going to really connect with your customer base, these six keys are the things that you can start aiming for. And they’re also kind of pillars in your business that you can start putting into place and attitudes like growth mindset that you can just start practicing now. And it’s going to set you up for having fantastic success when you do hit your stride and you are able to scale up. If you are at the point of scale and you don’t have one of these keys in place in your business, hopefully this opens your eyes a little bit and you can figure out, okay, well, that’s missing. I need to go back and work on that and get that in place before I keep gunning it any harder.
Catherine Langman:
So that’s what I’ve got for you this week. I hope you’ve enjoyed the episode and I’ll look forward to being with you on the podcast again next week. Bye for now.