Home > Sell On Amazon > Planning Your Company’s Growth (Part 2)

Planning Your Company’s Growth (Part 2)

In Part 1 we talked about why your company isn’t going to ‘just grow’ on its own, and that long term healthy growth requires constantly searching for ways to make your business more efficient.  In Part 2 we’ll talk about how to actually do that.

In my case, I have an engineering background, so to me becoming more efficient with my time generally means writing software to automate some task that I currently do manually that consumes a lot of my time, or that I can’t do enough of because I don’t have the time.  Eg., writing software to automatically update the prices of my products throughout the day to implement my pricing strategies.  Before writing that software, I was updating my prices manually.  It took a lot of the time I could afford to spend on my business and, since I could do it at most once per day (and often not even every day), it wasn’t very effective.  Once I finished writing that software it freed up a lot of time, which I spent looking for additional products to sell, and it allowed me to use some novel pricing strategies that noticeably improved my profit margin.

It isn’t necessary to be an engineer to become more efficient though.  E.g., there are third party service providers that will update your prices for you throughout the day – I could have just chosen to use one of them.  They do cost money and I believe my pricing strategies give me an advantage, but I could have gotten most of the benefit without writing any of my own software.

Money is a different story, though.  Think about how much money you’re using to run your business (mostly for maintaining inventory, unless you have employees) and how much profit you’re making per year.  If you need to double the value of your inventory to double your annual earnings the money to pay for that inventory has to come from somewhere – your savings or company profit being the most likely sources.  If you don’t have savings to spend on more inventory you have to use profit from your business to grow your business any further.  Using profit from your business to grow your business means paying yourself less. 

Given how much your business makes and how much you have to pay yourself, you can calculate how long it will take you to generate enough cash to double the size of your inventory.  Most likely that’s longer than you want to wait.  Are you stuck, forced to wait it out?  No, you can find a way to generate more profit with the same amount of capital.  Eg., you can change the products you carry so that you get a larger gross profit margin.  Or you can sell products with a higher turnover.

I’m not trying to tell you specifically what you need to do to become more efficient – every business is unique, and what specifically you need to do will change over time.  I am trying to tell you that you need to:

  1. Understand every aspect of your business in detail – this usually means measuring the amount of time spent on each task, measuring the annual return on capital of every product you carry, measuring pretty much everything about your business that consumes any resource (time, money, space, etc.)
  2. Decide what aspects of your business need to improve to double the size of your annual profit and by how much they need to improve – be specific
  3. Choose one or, at most, two aspects of your business at a time to actively pursue ways to improve
  4. Dedicate a couple of contiguous, uninterrupted hours every week to thinking about specific ways you can change your business to meet your improvement objectives
  5. Once you’ve settled on a way to meet your objectives, implement the changes you identified, measuring the results to make sure these aspects of your business will no longer limit your ability to double your annual earnings

It’s a lot of work, and it needs to be pursued every week without fail.  If you don’t actively pursue it every week your business will plateau out.  If you reach a point where you feel your business has plateaued for a while you’re probably not working on the above steps consistently enough.  As I said at the beginning of this section, your business isn’t going to ‘just grow.’  You have to make it grow, and the above steps are how to do that.

When someone who hasn’t started selling online yet asks me about what’s involved in running a business they usually focus on the mechanical aspects of it – keeping the books, incorporating, stocking inventory, etc.  Those are the mechanical things that must be done and do consume most of the time, but they aren’t the things that determine the success of your business (unless you don’t actually do them, of course).  It’s your efforts to constantly improve your business that determine its long term success.

I usually take a long walk once or twice on weekends, and spend that time just thinking about what I could potentially do to improve my business.  I’m sure it doesn’t look like work to anyone – it just looks like someone enjoying a long walk through a quiet residential neighborhood.  But it’s actually my time for planning growth.  All of the meaningful improvements I’ve come up with came during those walks, not while I was performing the mechanical steps of running my business.

Random Observations

The February lists of potential products to sell have been popular (thank you!).  I hope and trust you’re finding good products for you to carry.  If there’s any additional information you would find helpful please let me know.

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