Welcome to our latest blog post, inspired by Return on Podcast’s recent series “Mind Your Business” podcast episode. As we stand on the brink of 2024, it’s crucial for online sellers to arm themselves with the financial intelligence that fuels entrepreneurial freedom. Today, we dive into the three core financial lessons from 2023 and how they can shape a prosperous 2024.
Lesson 1: Cash is King
The year 2023 reminded us of a timeless truth: cash flow is the lifeblood of your business. Many ecommerce sellers faced cash crunches, amplified by excessive inventory and soaring interest rates. The key takeaway? Be proactive in cash management. This includes:
Forecasting “Yucky Scenarios”:
Instead of overly optimistic projections, prepare for realities like market downturns or supply chain disruptions. Plan for the unexpected.
Expense Auditing:
Annually reviewing expenses is not just about trimming the fat; it’s about investing in areas that genuinely add value. (Looking for more guidance in this area? Check out this podcast or this blog.)
Engaging with Your Numbers:
Embrace your inner CFO. Regularly reviewing your ecommerce financials can transform how you steer your business. For more on this topic, check out Return on Podcast’s “From Pain to Profit” series here.
Lesson 2: Master Your Supply Chain
Take what you’re doing this year, and be sure to level up in 2024. Check out our friend Josh Gilliam’s story from this episode of Return on Podcast: Inventory Management & Supplier Relationships, which underscores the importance of supply chain relationships. Josh’s journey to China not only uncovered hidden inventory but also strengthened crucial connections. For 2024, consider these steps:
Regular Supplier Check-ins:
Whether through weekly or monthly calls, these interactions can lead to better terms and a competitive edge.
Personal Engagement:
Sometimes, you need to be there in person. Dust off that passport! Flying out to meet your suppliers can reveal opportunities hidden in balance sheets.
Negotiate:
Leverage your relational equity or tenure and ask for better terms or lower rates per product.
Use these tactics to gain an unfair advantage over your competitors who aren’t nurturing their supply chain relationship.
Lesson 3: Smart Advertising Spend
The final lesson revolves around using your Cost of Goods Sold (COGS) ratio to guide your advertising budget. You need to assess each product’s margins to determine the optimal advertising spend. A balance between COGS and advertising spend is crucial. If the sum of your COGS & Total Advertising Spend stays within a healthy percentage of your sales price, you’re on the right track. Here’s what we recommend when checking your individual products:
- Elite Products : COGS + TACOS = 40% or less
- Healthy Products: COGS + TACOS = 45% or less
- Products with Room for Improvement: COGS + TACOS = 50% or more. In this case, you will really need to be creative here because there is just no room for advertising.
In 2024, viewing your ad budget through this lens is not just about spending; it’s about spending smartly.
Wrapping Up
As we embark on 2024, remember that the lessons of the past are blueprints for future success. At Seller Accountant, our commitment is to provide you with not just ecommerce bookkeeping services, but a partnership that helps you navigate these financial complexities with ease. Remember, understanding your financials is not just about survival; it’s about thriving in a competitive ecommerce landscape.
Ready to take the next step? Schedule a free consultation today! Discover how our tailored financial tools and expert guidance can transform your ecommerce business. Let’s work together to make 2024 your most profitable year yet. Click here to book your free consultation and start your journey towards financial mastery and entrepreneurial freedom.
Stay tuned for more insights in Return on Podcast’s “Mind Your Business” series, and here’s to a prosperous 2024!