Why eCommerce Businesses May Face Failure – Part 2

It takes time for an online company to mature. It is all too common for young company owners to believe that they will make money right away. The majority of the time, however, this is not the case. You shouldn't be shocked if it takes many months to make even the smallest amount of money.


In our last article, we discussed a few reasons ECommerce businesses are prone to failure. We’ll be discussing a few more today.


Big Customer Acquisition (CA) Expenses


Customers are expensive to obtain, regardless of whether they are acquired via SEO, SEM, public relations, social marketing, or other means. It is critical for a well-established eCommerce business to keep a careful eye on this over time. Use a channel that generates more consumers per dollar invested.


What are the signs that your CAC is too high? You may monitor its relative performance over time, but the most accurate way to assess it is to compare it to the lifetime value of your customers. A general rule of thumb is that LTV should be at least four times the cost of capital. In addition, you should strive to recover CAC during the first transaction.


Conversion Rates Are Below Expectations


A poor conversion rate is wasteful, and impacts your cost-per-acquisition CAC. Don't spend your time and money on effective marketing that has a poor conversion rate. Maintain a close eye on your website's conversion rate over time and compare it to industry standards. If your conversion rate is too low, you should investigate why. Check if your website takes too long to load, or if it is hard to navigate.


What is the average amount of time visitors spend on your site? How many people have made it to the cash register? How many shopping carts have been abandoned? By answering these questions, you will discover any possible issues that are preventing your conversion rate from increasing significantly.


Poor Financial Flow Monitoring


Poor financial flow and cash management are among the most severe problems.

We are all aware that cash flow is similar to oxygen for an e-commerce business in that you need a consistent supply. Despite this, 32% of ECommerce businesses fail due to a lack of cash on their hands. Too many ECommerce businesses vacillate between extremes of having a lot of money and not enough money.


There are a variety of approaches that may be used to smooth out the cash flow in your company. Sales promotions during sluggish times, more effective inventory management, and positive connections with suppliers are all advantages of doing business with us.

However, one of the most effective methods to manage cash flows is to improve how it is monitored. If a patient does not know when they are unwell, they will be unable to get care. Is your business keeping track of its cash flow? Monthly reports from your account are not taken into consideration. By the time you get the report, the information included within it is no longer relevant.


Companies need a simple method of tracking their cash flow in real-time. Improved accounting will result in improved timeliness, and dashboards will make monitoring your cash flow concerning important KPIs much more straightforward and convenient.


Final Thoughts


Remember that success is a result, not a virtue and that you may have had a long time of prosperity with your e-commerce company. It would help if you keep an eye on top of your company and avoid the mistake of assuming that what worked yesterday will continue to work today.


Make sure you are always a step ahead and avoid any pitfalls by having a reliable accountant for your eCommerce business. At Ecommerce Accountant, we will make sure you will increase profit and take a leap in your niche industry. Book a free session with us today!



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