Checklist for Growing Your Online Business
We have visited 8P conference and attended few interesting speeches. So we want to share some of them with our readers and we start with the checklist for growing online business from David Braun, CEO TemplateMonster and Weblium. Also, David answered our questions about his business and described interesting cases. You can check out our interview here.
Let's start with 'business growing' definition.
You can grow your sales, but your income will decrease. It happens because increasing sales becomes your priority. You work for the number of purchase orders and use all high-conversion channels. When they run out of, you switch to low-conversion channels, that's why income drops, but sales grow.
You can grow your profit. In this case, you are likely to drop the number of orders, since you will concentrate only on high-conversion and high-margin products and channels. Profitability will grow, but sales will fall.
You can grow the market share. This is especially valuable for those companies that are looking for investments and aiming for exit. So in this case, it is not so important how much you earn but what impact you have on the surrounding ecosystem. At this stage, you will lose your income, maybe it will even be negative. And sales will grow because the market territory needs to be covered as much as possible. All of that shows that you have increased market share and company capitalization.
You can increase efficiency. For example, there are companies that come from offline and focus on automation.
And the last one – you can grow capitalization. This is close to the growth of market share, but the notion of capitalization growth is broader. For example, you cannot grow in the market share, but at the same time increase capitalization due to the fact that you conclude a lot of strategic partnerships in the industry and everyone will accept you as an infrastructure player. The market share will remain small for you, but the company's evaluation will immediately jump. Now we can witness this in young markets, such as crypto market or blockchain community. They get good fees and gain value by developing a new protocol. It is much more difficult to work with product companies because they need to stir up the company, come up with a product that people will use, and only then their so-called token economy will work. Infrastructure companies start working immediately.
90% of Ukrainian companies focus on sales growth and income growth. Very few people think about capitalization. And the opposite situation is in the USA. We have a lot of bootstrap companies that start with their own money, in the US somewhere around 90% will start for someone else's money. Ukrainian companies don't understand that when you need to go to the next round, you need to increase capitalization. You cannot just come and say, so I earn 100 thousand a month, and this is a stable profit for two months. When I was selling TemplateMonster, I was proud that we had a margin of 70%, but that wasn't enough. We had our own office, but it became more a burden than a plus because staff is growing and the cost of rent isn't included.
Now let's take a look at the peculiarities of each of the growth strategies.
1. Sales Growth
Here is what I include in this point and what we'll talk about:
- Conversion increase (CRO)
- Changes in sales department
- Personalization (CRM)
- New channels
- New funnels
- New products
- New markets
If you decide to concentrate on increasing sales, you should do it in two steps. First of all, take the current sales and think what you can do in each channel to increase them. And the second – new directions you can develop. Everything is very simple and common, but if you run a brainstorm with your team, you'll already get a gain. For example, you have 1% conversion in existing channels. After a brainstorm (it can be also called conversion rate optimization), you can come up with a bunch of different optimizations, from changing the buttons color to changing the copywriting, A/B testing, etc. All of that can raise the conversion.
Further, the process of managing your Sales department has a significant role. If you correctly put plans and motivation system, everything will start working well. It's different with SaaS businesses. For every dollar that your salesman has earned, he must bring $10 to the company. And a sufficient measure in the usual transactional business, not SaaS, is one to five.
Let's go further – personalization. CRM is the only system that allows you to get sales growth because of relationship history between your business and the client. For example, you used to advertise on Facebook, Adwords, Instagram. And then opened a new channel – Pinterest. This means new funnels. Or, let's say, you used to sell transactionally before. You used video, explainers, trials to attract customers. And then you decided to change your strategy a bit and give a lead magnet to your customers, and then 'catch them up' with a call and a demo.
How to understand what works? One of the good points is to study what is done not by direct competitors, but by non-competitive businesses in your field, and what works for them.
Products need CRM. The history of purchases will allow you to upsell and cross sell to customers more efficiently. A good upselling and cross selling must bring you at least 30% of your global revenue. For example, if you've sold glasses for $100K, it's necessary to sell accessories for them for $30K, then it can be considered an efficient strategy. If it's just 2-3%, this is not serious.
New markets. It sounds simple, but it's really complicated. There are a lot of difficulties with adaptation, mentality and localization, but nevertheless, if you've correctly evaluated the market, it can lead to the huge growth. TemplateMonster has entered 11 markets due to localization. We've found local partners in other countries, found local freelance exchanges, created directories of certified developers and it works. At first, I was skeptical about this, but then we chose the Country Manager for each direction, and it turned out that it is possible to work more or less the same way (except such directions as China and Japan).
2. Profit Growth
The main points:
- Marginality increase
- Correlation change between fixed and variable costs
- Constant improving of Customer Acquisition Costs
If you want to grow your profit, the first thing that comes to mind is to hire a good financial expert. Also, don't forget to bargain. Each year the competition mounts, and you can bring down the price on some services you need. For example, if you use a web hosting, you can bring down the price for it after a year.
Change the correlation between fixed and variable costs. It works perfectly in the IT world. As an example, you have 50 developers, the revenue is $110K and you are conditionally touching the bottom or barely making ends meet. If you have a $300K revenue, you have a super profit, but there is a high threshold of fixed costs. When you come across this, you are thinking: 'What if we make some costs variable?'. For example, we have a case when we've started developing KPI for the Support department. It is very large and constantly growing. We noticed that in summer there is a decline in sales, and a rise in winter. Why is the cost of support flat then? Because they have a salary. We slightly changed the system – wage becomes less, and the bonus part becomes bigger and depends on scope of work. After that, we've received an instant economic effect of $20K a month.
The biggest cost in business besides salaries is customer acquisition cost or client attraction. And to be more precisely, the new channels. For example, we have been in the niche for 16 years and have been working with Adwords campaigns for a long time. We were offered to optimize them by 10%. I thought it would not work, but it did.
3. Market Share Growth
It's basically when you're present and show yourself everywhere. In this case, you need a financial cushion. It will be necessary to attract money either from a new partner, or from an investor, or get it from under the cushion.
Aggressive Marketing Towards Competitors and Strategic Partnerships
You must have facts proving your advantages vs. your competitors. Gather competitors by broad semantics. Well, and, of course, work with strategic partners. For example, we (TemplateMonster) made an agreement with GoDaddy and gave them a big commission. What for? Two years after this, more than 400 hosts have joined us. A good example that if you work with market leaders, others will also want to cooperate with you.
4. Efficiency Growth
Automating and reengineering business processes. There are a lot of books on reengineering. Firstly, you draw a customer journey map (considering how sales onboarding takes place, etc.), and then start improving this process. You can use budget decentralization. With our own experience, I can say that this is a salvation for top management.
So here are the main points:
- Automation of business processes (checklists, SOP, OKR, etc.)
- Business reengineering
- Rethinking of business planning (budget decentralization)
5. Capitalization Growth
The user database (DAU, MAU) plays an important role here. Priority in the market and the number of transactions are more important than profit. Also, intellectual property greatly influences capitalization. Let's say that if one of your patents costs $1 million, and you have 5 patents, your company is already worth $5 million. Of course, they must be valuable. Also, focus on a good investor relations.
What if nothing grows? If you tried everything from this list and nothing worked, change the team. At once. Look at the new markets. Do the pivot and look for upscaling.
I hope my report was useful and will help you come up with new ideas. And let me share a couple of books and podcasts that are worth reading:
- The Growth Handbook
- Marketing School podcast (Neil Patel and Eric Siu)
- Predictable Revenue Book (Aaron Ross and Marylou Tyler)
- Blue Ocean Strategy (W. Chan Kim and Renée Mauborgne)
- All About Them (Bruce Turkel)
- Custom Nation (Anthony Flynn and Emily Flynn Vencat)
- The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail (Clayton M. Christensen)