Spend your time where you’re making your money. – Doug Jefcoat (AKA Dad)
Amazon seller often ask us pointed questions like “When should I expand off of Amazon?” or “When should I launch an influencer campaign?” For example, a seller may be considering going international with their brand. If they’re developing toys, they may be thinking about expanding to clothing. Or if they’re a private label expert, they’re often wondering whether they should become an authorized wholesaler, too.
These are critical strategic decisions the CEO must make while accounting for money, time and risk. Making the right call can make or break your business.
So how do you know if expanding is a good idea? While no two businesses are alike, we have strong opinions on this for business owners who have come to this crossroads.
Do Less And Do It Better
At Seller Accountant, our own core values include the belief that we will generate superior results and value for our customers if we stay highly focused on what we believe we can do better than anyone else. We expand into new markets and services slowly because we want to maximize our core instead of overextending to areas that we can’t deliver the best results. Better yet? This strategy is also more efficient and profitable.
Our goal is to do less and do it better than anyone else. This means that sometimes we have to say no to opportunities that would have paid us money, but we felt comfortable walking away because we are getting better and understanding of who we are, where we want to go and our strongest assets.
I respectfully argue that Amazon sellers should take the same approach.
How Generalization Can Fail Your Business
Growing in an area where you aren’t strong is expensive. If I don’t understand social media marketing, for example, assuming that I can just rev up a social-based funnel with zero investment isn’t a very smart move. Remember that just because you won in one arena doesn’t mean you will win in another.
Remember, too, that your own attention and brain are still your best assets until you have the money to partner with new brains. Since you can only juggle so many balls, focus on the two or three that get you the farthest the fastest toward your goals. If your dreams are to expand your Amazon business into a huge company, go for it – just realize that this will take time and money.
Your company will be worth more to you and investors if you excel in generating profit in a few areas versus doing a bunch of things… but not very well. For example, you might be thinking to yourself that if your sales come 96% from Amazon and the rest are 1% each from four other channels, you’re creating more value.
However, here’s the magic number: If you can’t generate at least 20% to 25% of your sales off Amazon, then your business isn’t any less risky. In fact, you are either having to manage a bunch of tiny stores that don’t produce … or you are selling that headache to the next person who buys your business.
On the other hand, having just one SKU is also a bad idea unless you have significant IP protection; doing regular testing into other products is good. But launching 1,000 new ASINS monthly is a very bad idea unless the product is in your core specialty.
Also, if you are an Amazon seller questioning your business model, know this: retail arbitrage, private label and wholesale are three very different animals. What works in one area will not necessarily work in another area.
Conclusion: Generalize or Specialize?
Before you start to question whether you should grow in a new area of your business, consider what you’re already the best at. Are you expanding in this area to its fullest? Do you have the best product ever for a very specific niche or task? Can you create more products that are adjacent to this laser-focused niche? In that case, slowly expand in that area.
However, if you’re feeling the itch or the pressure to expand into something out of your league, consider that there’s nothing wrong with conquering a smaller piece of the pie. In fact, it’s more efficient and profitable. And it might just save your business.
Do you have questions about expanding your Amazon business? Need assistance? Sign up for a free e-commerce accounting consultation today.