As a new eComm business owner, it can seem like you’re always moving towards success without ever getting there. You may feel like your business isn’t succeeding at first, but the reality might be that you are closer to success than you think. You see it in your rearview mirror all of the time: “Objects in mirror may be closer than they appear.”
Recently, I sat down to have a chat on my Podcast (you can listen HERE) with my dear friend and small biz mama, Kristin Ingram. Kristin has been a certified public accountant (CPA) for over 18 years. She loves helping online, eComm entrepreneurs with their finances because the online world is constantly changing. She is devoted to helping entrepreneurs like you fully understand the online world so nothing will stop you from achieving business success.
This hits so close to home for me as I did an entire Facebook live about not treating your business like a hobby. You gotta be in it to win it if you want to achieve the goals you’ve been yearning to accomplish.
If you’ve decided to stop treating your business like a hobby and start treating it like a business, you’re in for a treat. Here is the ultimate guide to business success for eComm entrepreneurs!
How to Achieve Business Success as an eComm Entrepreneur
If you want to be successful, you have to start thinking about eComm as more than just selling online. eComm isn’t a get-rich-quick scheme. You have to be committed if you want business success later on down the road.
Remember that this isn’t a hobby or something you’ll try out for a few weeks before giving up when it gets tough – this is your business! You need to approach it that way.
Since you’ve made it this far, I have no doubt that you’re ready to commit and kick some eComm butt. Now, here are Kristin’s top business and financial tips for eComm entrepreneurs!
Register Your eComm Business
With the changing landscape of business and financial regulation, opening a new business takes more than negotiation with your bank. Kristin suggests the first thing you should do is set up your business. Essentially, this means you should name and register your business. Whether you decide to set up an LLC (limited liability company) or a DBA (doing business as), the sole purpose of this is to get an employer identification number (EIN) for your business.
One of the keys to protecting an eComm business is using your EIN, rather than your SSN. “You’re giving numbers out to everybody, “ Kristin cautions eComm business owners. “Every time you sign up for PayPal, Amazon FBA, or anything online, you have to give either your SSN or your EIN.” Using an EIN instead of your SSN can add an extra layer of protection against any fraud attempts.
How to Register Your Business
As an eComm business owner, you might be unsure about where or how to register your business. I’ve worked with a surprising number of business owners over the years who have had trouble registering their businesses, so here’s how you can begin the process!
“Google is your friend. Honest to God, it’s that easy,” Kristin states. It actually is that easy! For example, if you want to register your business in California, type “how to register a business in California” into Google and – BAM! You now have access to tons of free resources to help you get started.
“Typically, if you’re going to set up an LLC, it will be at the state level with the office of your secretary of state. If you’re going to do a DBA, it will be done with either your town or your county.”
Sole Proprietor vs. LLC
Where you are in your business can help you to determine whether you choose to be a sole proprietor or an LLC. “I’m not an attorney, so we’re not giving legal advice,” warns Kristin.
Kristin was doing purely service-based work when she started her business, so she chose to remain a sole proprietor for quite a while. She explains, “It wasn’t until I brought on other people to do work that I became an LLC.” In comparison to performing your own services, there’s a lot more liability that comes with selling someone else’s products.”
For the vast majority of states, establishing an LLC entails setting up fees in the $100-$300 range, and the ongoing costs may discourage some prospective business owners from proceeding with this option. At the high end, the ongoing fees for an LLC in California will cost you $800 a year!
If you just look at the number arbitrarily, it might seem offputting, but it’s not as expensive as you think. The purpose of an LLC is to protect your personal assets, so it is well worth the investment if you want to make sure you’re covered!
For legal advice on liability matters, consult with an attorney. If you are looking for general business and marketing inquiries, contact us for a free strategy session!
Keep Separate Accounts for Your Business and Personal Finances
Mixing business and personal finances can create a bit of a mess. “If you set up an LLC, the rules are very specific,” Kristin begins. “An LLC or corporation has to be separate from you.” The last thing you want is your business suddenly coming under government scrutiny.
The government might take your LLC and go after your personal assets if you don’t keep your business finances separate, and that’s just the beginning of what can happen if you don’t take proper precautions.
Kristin has seen people who have used their personal PayPal accounts for business have their money frozen by PayPal. Kristin continues, “I have seen instances where banks have refused deposits coming into an account because it had a business name on it.”
Moral of the story: Mixing business with your personal finances can be dangerous territory and cause certain financial setbacks that are difficult to recover from.
Look at Your Complete Profit and Loss Statement
Kristin believes eComm entrepreneurs should be wary of taking on too many expenses. “I think a lot of times, as business owners, we get hyper-focused on particular numbers, ” says Kristin. Too often, business owners get caught up in the profit hype and spend lavishly without looking at the bigger picture.
“All of a sudden, you’re spending too much on coaching, or you’re spending too much on new business software,” Kristin explains. “I think we all get caught in that cycle where we’re so busy making money that we’re not managing the money.”
The Benefit of Hiring a Bookkeeper
If you’re first starting out as an eComm business owner, you’re most likely running this show on your own. This can lead to burnout faster than you might expect. You don’t want to be in the position where you’re doing all of your business admin work at three o’clock in the morning after working on your eComm store for ten hours straight! This isn’t the work-life balance you – or anyone for that matter – is looking for.
“There’s this perception that a bookkeeper is going to cost thousands of dollars a month, but bookkeepers in my program start at $97 a month for their clients,” Kaitlin asserts. If outsourcing a bookkeeper will give you time to focus on other parts of your business, then do it! One of the keys to business success is being intentional about how you spend your time.
You need to make sure your business as a whole is profitable and that includes its profitability outside of advertising. I recommend that business owners hire a professional to do their bookkeeping. Believe me, I love a good spreadsheet, but there’s no need to keep track of your finances by using spreadsheets and writing on napkins anymore!
Stay Aware of Your Options
If you find yourself struggling in the marketplace, take a step back and evaluate what changes need to happen for you to achieve business success. Earlier in the year, there was a lot of debate surrounding whether or not business owners should take the PPP loan.
The Payback Protection Program (PPP), which is backed by the small business administration (SBA), was created to help businesses maintain their workforce during the COVID crisis.
Although PPP ended on May 31, 2021, it’s still wise for you to be aware of programs like this that may come into existence in the future.
According to Kristin, here are a few ways you could have used the PPP loan:
- Open a new office
- Hire a new team member
- Get your website built
- Finish your branding
- Run Facebook ads
“We used the PPP loan to grow our business. We’ve hired new people, and we’re spending money with other companies. We’re actually using the money to kind of lift up the rest of the digital economy,” Kristin proudly expresses. “How cool is that?”
Taking advantage of programs like PPP can get your business in better financial shape and allow you to get a head start on any crucial investments you need to make for your business. You don’t have to feel morally guilty about taking a financial opportunity if you actually need it!
You don’t have to necessarily be doing bad in your business either. If PPP or a similar loan is offered again, be sure to take advantage of it and apply if you feel it will benefit your eComm business!
Be Mindful of Inventory Tax Laws
Guess what? You might not have to track your inventory anymore! Sounds wild, right? Well, Kristin gives a little insight into how The Tax Cuts and Job Act of 2017 (TCJA) gives eComm entrepreneurs the option to do this!
To clarify, you still have to track your inventory from a sales perspective. You need to know the current inventory levels of any items you’re selling so that your customers won’t be disappointed by out-of-stock items.
“You can now elect to say no, no, no. I’m not going to track my inventory. When I purchase something, I get to write it off. When I purchase it, I don’t have to wait until I sell it, ” Kristin reveals.
Kristin suggests if you’ve been using inventory, tell your accountant you want to make the election to treat your inventory under a cash basis.
Why You Should Treat Your Inventory Under Cash Basis
If you have inventory, why not take advantage of this tax law? “As long as you make less than $25 million in sales every year, you can elect to go purely cash basis. So, you’re not tracking receivables or inventory. When you buy something that you’re going to resell, you get to expense it right away,” Kristin explains.
The TCJA act will help you manage your cash flow and take the headache out of tracking inventory. “A lot of systems are great for sales, but inventory tracking is typically pretty terrible,” Kristin remarks.
Why You Shouldn’t Treat Your Inventory Under Cash Basis
If eComm business owners aren’t switching to cash accounting, it’s most likely because they don’t know it exists – or at least that’s what Kristin thinks!
Kristin doesn’t recommend electing to go cash basis if you’re getting close to the $25 million mark. “But if you’re safely under $25 million in sales, I don’t know why you wouldn’t do it,” she encourages.
If you are worried about your total annual revenue passing $25 million, take the average of your sales over the past three years. As long as the average is well below the $25 million mark, you’re good to go!
You don’t have to be a financial expert to reach business success, but it helps to know the basics!
Treat your business like a business, keep your cash costs under control, and remain vigilant about any programs or tax changes you might be eligible for!
If you enjoyed this article and you’re interested in hearing more eComm tips from Kristin, click here to listen to our full conversation on the eComm Profit Podcast! It’s totally worth the listen.
Join my FREE Facebook group, Six Figure + eComm Success Strategies, to become immersed in a community of like-minded entrepreneurs who are steadily growing and bustling with ideas! I look forward to seeing you there.
BIO
Dawn Sinkule, the Founder of Digital Dawn, is an MBA graduate, Strategy and Business Growth Consultant as well as a Certified Online Business Manager with more than 16 years of corporate experience working for a Fortune 50 company. Dawn and her team work with passionate six figure business owners who want to grow, expand, and explode their businesses. Dawn and the DD team provide your choice of self-implementation or fully done for you solutions, and both include detailed business strategies, automation, systems, and most importantly the satisfaction of knowing your business is heading the right direction. Her clients get not only the experience of a Fortune 50 leader, but also a personalized and customized strategy as well as an implementation team: AKA your secret weapon for success.