That 1 Thing You Have to Think About Before Plunging Head-In to an E-Commerce Business

Disruptive technology has enabled us to run our business, but we have to get our basics right. Building an online business is not a guaranteed slam dunk.

You might want to read that subtitle again.

Yes, that is right. There is no guaranteed success in a business, and no, just because it is online does not make it any easier.

The Bottomsup Perspective core team spoke about E-commerce this week, which is Jeremey’s sweet spot. It was interesting to watch how Jeremey pitched a physical-digital hybrid retail model to Kevin, a guy who never left his basement since the pandemic.

This episode, fresh off the oven, captured our thoughts about the future of E-commerce and whether it will continue to grow when global economies start opening up.

This is the link to the show on YouTube. It’s free! Feel free to share your thoughts with us in the comment below.

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The Fundamental Tenets of Running a Business Doesn’t Change

Every venture attempts to transform into a business by focusing on the following formula:

Revenue – Costs = Profits

This formula alone dictates that the only way for the business to have a chance of surviving for the next 10 years is to have revenue above costs.

At Bottomsup Perspective, we respectfully disagree.

We tie expenditure to costs, and when we think of the digit 5-letter cost starting with C, all we want to do is cut, cut, cut.

It works for the first couple of months, and that is about it. Firstly, there is a limit we can cut. We may choose not to upgrade our website if there are costs incurred, but we do finance our living expenses from the business earnings, do we not?

How do we cut that?

That is the first line consideration. The next one is the concept of Capital Expenditure.

Capital expenditures (CapEx) are funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment. CapEx is often used to undertake new projects or investments by a company. Making capital expenditures on fixed assets can include repairing a roof, purchasing a piece of equipment, or building a new factory. This type of financial outlay is made by companies to increase the scope of their operations or add some economic benefit to the operation.

- Investopedia, Capital Expenditure

Do not be fooled by the pure-play physical business explanation. It applies to E-commerce too.

If you intend to start an E-commerce business, you will have to spend money to get it started and keep it going. These are the standard examples:

  • Website costs (hosting, constructing, and etc.).

  • Copywriting costs (website copy, marketing copy, professional social media copy).

  • Affiliate marketing commissions.

  • Webinar, virtual conference tools for client-facing activities.

  • The list goes wide and deep.

Are you prepared to spend money on the necessary line items on the business? Actually, that is a fake question. You have to.

In the latest episode of our show, Kevin shared the amount of money required to build a simple website for E-commerce. He spoke about the recurring costs too. Do listen to get a ballpark estimate.

It is also important to note that capital expenditures, or capital investments, may have an OPEX element to them.

Capital expenditures (CAPEX) are major purchases a company makes that are designed to be used over the long term. Operating expenses (OPEX) are the day-to-day expenses a company incurs to keep its business operational.

- Investopedia, CAPEX vs. OPEX: What's the Difference?

OPEX is recurring costs.

Examples including securing a copywriter and website Search Engine Optimization consultant to the E-commerce start-up on a retainer basis.

That is OPEX.

Physical or Digital, please think things through in terms of CAPEX and OPEX before plunging head-in to start a business.

When in doubt, this Bottomsup Perspective episode on the financial health of the company will help.

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Monetizing Your Skillsets to Support Your Business

Running a business and continuously investing in it to keep it alive can be expensive.

Have you considered monetizing your skillsets via teaching?

If you do, we want to speak to you. At Bottomsup Perspective, we enable content producers to start monetizing their content 100x faster than YouTube.

If you have great content, we want to speak to you. Head to our website, and let us take it from there.

This is a brilliant way you can fund your business.

Until next time, keep in touch.

And do subscribe to our newsletter so our insights can be delivered to your inbox every week!

Aldric,

On Behalf of the Bottomsup Perspective Team