Reviewing your Ecommerce Business at Year End

Many ecommerce companies owners will soon execute a year-end count of the merchandise inventory. For most merchants, this procedure will determine cost of goods sold — and gain — for the year.

Beyond your merchandise, however, I urge you review your whole business. As you close your books and examine your financial performance, assess other goals you set for the year — for all aspects of your company.

This is the way top-performing companies achieve continuous improvement. Your goal must be to understand where your company stands relative to its past history and the goals that you set for the current year.

Here are a few hints on your year-end company review.

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Business Review: Getting Started

Begin by collecting data from each of your operational areas. Combine that with evaluations from all of the facets of your business to acquire a entire perspective of how your business model is doing. By taking a holistic perspective, it is possible to determine what worked and what didn’t. Then you’ll have a good foundation to start your strategic planning for the following year.

First, have your accounting department conduct an assortment of detailed customer, sales, and product testimonials. Request customer service personnel to create a summary of customer interactions, issues, resolutions, etc.

Task your marketing department to make analytics reports for the complete year and include comparisons to the prior year. This should incorporate performance reports from all advertising investments, such as advertisements, search engine optimization, social networking, and newsletters.

You can also start to examine your infrastructure and organization.

Here are comprehensive questions, broken down into the key elements of your enterprise model: customers, products, sales and marketing channels, business, infrastructure, and your financial model.

Customers

Begin with an assessment of your clients. Review your earnings records for the year to recognize the next.

  • How many clients purchased from you?
  • What proportion of clients is new?
  • What proportion of your previous clients made a purchase this financial year?
  • How did these amounts compare to goals you set for new client acquisition?
  • Are there any recognizable customer segments?
  • Are there some obvious trends for the customer segments?
  • How can your average order value compare to your past history and to your targets?
  • What’s your most profitable customer segment? How could you draw more of these?
  • Look at the top 20 percent of your clients’ total contribution to earnings. Most companies find that approximately 80 percent of the revenue comes from 20 percent of the clients.

Products

Now examine the products that you offered for the year.

  • Identify your best vendors.
  • Identify your most profitable products.
  • Look at sales trends for the year in addition to seasonal trends.
  • Search for your worst vendors; clear them from stock.
  • Evaluate which product categories show growth and create plans to expand those classes.
  • Are your competitors offering products you should be promoting?

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Sales and Marketing Channels

  • What was the earnings and growth from every one of your sales channels, such as online shop, marketplaces, physical stores, direct sales?
  • Assess the profitability of your sales channels.
  • Assess the performance of all your marketing channels relative to your past history and your targets. Scrutinize your analytics to review traffic, page views, referrals, ecommerce functionality, and advertising.
  • Analyze your return on investment from your advertising efforts.
  • Identify trends — positive and negative — to plan for in the next year.
  • Can you meet your revenue goals? Why or why not? What does this mean for 2013?
  • Is the client experience — navigation, speed, layout — on your site okay?

Organization

  • Assess organizational goals you had for the year.
  • Critique staffing and personnel levels. Are there any gaps in your business?
  • Can your operations be more efficient?
  • How was your employee recruiting and retention?
  • How can you and your employees feel about their reimbursement?
  • How is your culture? Does this support your company worth?
  • What do you need to enhance on going forward?

Infrastructure

  • Are your warehouse and office space enough to support current operations? Are costs in line?
  • Do you have the essential equipment to support operations?
  • Is your computer infrastructure okay? Are your costs in line with expectations?
  • Is your customer care operating at the level you’re targeting?
  • Is your satisfaction operation achieving performance goals?
  • Is the supply chain providing timely, reliable, and profitable products for your sales efforts?

Financial Model

  • Can you achieve your revenue targets? Why or why not?
  • Did you attain your profitability targets? Why or why not?
  • Do you have enough working capital to support 2013 operations and investments?
  • Are you making the money you will need to encourage your personal life? Do not forget to mind your own personal finances.
  • Did you get a strong year? If so, you might choose to start a line of credit today so that you will have a backup afterwards.