Diamond Hazelton LLC
Picture your e-commerce business five, ten, twenty times bigger. If you like what you see, we should talk.
We'll show you the Money » We'll show you the Money
We'll show you the Money
How many times do we hear, “Let’s raise some money”. “All we need is some funding”.
This creates two very big problems. First, a business that is struggling can ill afford to send it’s key management on the road, in a process that can take many months, even if it is successful. Looking for funding often becomes a full-time or part-time job for one or more critical members of management. This “eye-off-the-ball” can be fatal to a struggling company. It’s a little like saying you have a full-time business you can barely handle, let’s start another one on the side to save the first one.
Second, an initial round of funding has an insidious way of leading to another one. If successful (a big “if”), these rounds often take 40% of the company. Two or three of these and guess what? You now have a job with an equity kicker. The company you started, so that you could be your own boss, belongs to someone else. They can tell you how to run the company, fire you or close the company altogether.
Much of the time, particularly in e-commerce companies, the money is right there, under your nose. Imagine a modest increase in conversion from 1% to 1.3%. It may not sound like much, but it adds 30% to your top line, and most of that new margin will drop right to your bottom line. Some e-commerce companies have a retail online store, a closeout store and an auction store, dramatically changing the gross margins. Have you heard of Diapers.com? Through a clever referral scheme, they changed their gross volume in one year from $11 million to $36 million. ATG Stores divided their SKUs among fifty sites instead of five, making each one more targeted and dramatically increasing click-through rates.
Can you source some product directly from manufacturers, cutting out the distributor and expanding your margins? The opportunities are everywhere.
For an e-commerce business, I have gradually come to the conclusion, that seeking outside funding represents a fundamental failure of the management, the business model or both.
Consider this: if you find the money right there in your business, (we can help), management has focused all it’s energy where it belongs, namely, building a better business.