What should I focus on in order to grow my Ecommerce business and avoid risk, instead of drowning in the day to day routine?

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Anna Hill , CPA, Co Founder | Accounting We Will Go Industry Expert · Sunday, March 3rd, 2019

Many Ecommerce entrepreneurs are inundated daily with decisions about inventory – what to buy, who to buy it from, how many units, ranking, competitors, etc. It seems to never end.
However, be sure you keep in mind the classic advice, “You should work ON your business, not IN your business.”
While sourcing inventory is what makes your business run, there are certain management issues that you should consider that may even help reduce risk!

1. Entity structure
Consider selecting a business structure that limits personal liability. While simply forming an LLC doesn’t immediately remove risk, there may be some possible benefits and protections for you personally if you have this structure. Be sure to consult with a CPA
and/or attorney before making this election, consider having the conversation about potential benefits of changing.

2. Insurance
Be sure you have proper insurance. Consider product liability insurance (which Amazon requires,) protection against damage to your facilities, business interruption insurance and protection if there is an injury to employees or contractors, and other exposures you may have in the operation of your business. If you use a personal vehicle for business activities, confirm with your insurance provider that you have proper coverage for that. If you store inventory in your home, be sure you have proper coverage should something catastrophic happen to that inventory; do not just assume your personal homeowner’s insurance coverage is sufficient. It may be, but definitely double check. And, as morbid as it sounds, be sure you have coverage if there is incapacitation or death of company principals (you and/or other).

3. Surprise operating results
As much as we do not like to think about it, sometimes our business does not perform as we’d hoped and results are not as positive as we’d planned. This is due to many factors including increased competition, slow inventory restocking, supply chain issues, and even weather impacting delivery.
Be sure you have an understanding of your crucial operating costs for each month, and save enough so that you can pay for those during lean times. Recurring expenses such as payroll, rent, professional fees, insurance, and even estimated taxes should be considered, although this is not an exhaustive list. Only you know how many months savings you think is adequate, and I acknowledge it is a tricky balance.
Cash Flow Frog‘s forecasting software is an easy solution to help you predict your income, expenses and cash balance.
You do not want to live in fear and have so much in savings that you don’t have enough money to fund inventory purchases, but you also do not want to get caught in a downturn without funds to cover operating expenses for a period of time. This is a great issue to discuss with your CPA. Crucial to this is that you have your books in order so that you CAN estimate your monthly operating expenses.

4. Borrowings
Reduce financial risk by carefully considering loans and other financing options. Some people operate on a zero debt model and others see debt as a tool to help grow the business. Always be responsible with debt and never borrow a single cent if you are unsure of the ramifications. Be sure you understand the personal liability you may have associated with business debt you incur. If you are unsure, you may want to consider meeting with the SmallBusiness Administration (free,) your CPA, or financial planner for guidance before incurring debt. You can search by zipcode here for your local SBA office.

5. Get free help
Although the expression is “You get what you pay for,” this is not always the case. I also recommend you mitigate risk by working closely with a business mentor, and Score is a good way to do that. Score is a 501 nonprofit organization that provides free business mentoring services to prospective and established small business owners in the United States. More than 10,000 volunteers provide these services, with all volunteers being active or retired business executives and entrepreneurs. These mentors volunteer to work with small business owners like you to help them develop and grow their business.
According to Score, business owners who receive three or more hours of mentorship report higher revenues and increased growth. No matter what type of inventory business you run, Score is worth considering as a way to minimize risk and grow your business.

6. Develop systems
While this may seem like common sense, or even deemed not necessary if you are a one-person show, it really is crucial to have documented systems and procedures in place. This is important should something happen to you temporarily (sickness or “life happens” situations,) and you may need someone to step in and help you with crucial tasks. If you ship inventory to customers yourself, if you are sick, you do not want shipping to stop, and you also don’t want to work when you are sick. Having a quick “one pager” of business critical tasks, at a minimum, is a great way to reduce risk and help you feel prepared in case something should happen, or if you just decide to take an extra day at the beach!

These suggestions may not all apply to everyone, but some certainly will. Be sure you have a plan in place to mitigate risk and give consideration to adding protection to your business where it currently may not exist. No one should live in fear of something bad happening, but running a business as a solopreneur or a small business with a team should include a certain level of “insurance” against common business issues.

Anna Hill is the founder of Accounting We Will Go, a firm that provides accounting and bookkeeping services along with training for Amazon sellers.