Friday, March 23, 2018

How E-Commerce Companies Can Compete in an Amazon-Dominated World

When it comes to e-commerce marketplace dominance, Amazon is at the top of the food chain.

Over 44% of all product searches begin in Amazon’s search bar, and Amazon owns almost half of all U.S. online retail sales.

And if CEO Jeff Bezos has anything to say about it, that’s just the beginning.

Even some of the other biggest retail giants in the world have a tough time competing against Amazon.

Companies like Walmart, Apple, Macy’s, and Costo still can’t stack up against the behemoth that is Amazon.

So how can anyone else even compete? How do you stand a chance?

Well, you don’t.

The simple truth of the matter is that you don’t really stand a chance of competing.

But the key is that you don’t actually have to compete.

You just have to learn how to co-exist.

DON’T compete with Amazon

The bottom line is that you won’t be able to invest the time and capital it takes to build anything close to what Amazon is offering.

In terms of infrastructure, scale, and sheer sales numbers, they’re killing it.

amazon statistics

They have a massive physical footprint as well, which is only growing with their recent launch of brick-and-mortar stores around the U.S.

But you probably already know that you can’t compete with their size.

Some may tell you that even if you can’t compete with their scale, you can compete in other ways, like offering competitive discounts and free shipping for your own customers.

But in terms of product pricing, you still probably can’t offer a better deal to your customers than the price they could find on Amazon.

And yes, free shipping is cool. But Amazon has and will probably always have better shipping deals simply because they can afford to have better shipping deals.

amazon shipping speed leads competitors

In these instances, you can’t beat them.

But there is one realm where you can live in the same relative sphere as Amazon: customer experience.

Amazon has a lot of the same problems that most retailers have when dealing with customer service. They still deal with customer complaints with varying degrees of success, just like everyone else.

And customer experience can play a big role in customer retention and loyalty.

why customers stop using your service

So while you might not have the means and motives of the largest retailer on the Internet, you can still offer something that customers want:


Here are a few ways to offer a comparable customer experience to Amazon’s without breaking the bank.

1. Create a solid product offering for your niche

As Neil Irwin once pointed out, Amazon has a “winner-takes-all” approach to sales.

They want to sell every product in every category. If you think about it, their “niche” is really a lack of a niche. They sell to everyone.

But you can’t do that. You simply can’t appeal to the wide audience that Amazon does with their vast selection of products.

So what can you do instead? Do just the opposite: sell within a niche.

Just like you can’t appeal to the wide audience that Amazon markets to, Amazon can’t satisfy every need in every niche. That’s where you have an opportunity to fill in the gaps.

If you already have a decent product offering and audience, start with what you have. Look at your existing products and find a way to fit them into a narrower niche.

This might mean that you focus on curating products that meet customer demands rather than trying to be ultra-competitive on product pricing.

Studies show that after customer experience, the second biggest reason a customer will ditch your brand is dissatisfaction with the product itself.

customers leave because of bad customer service survey

You can save yourself a few headaches by putting some extra effort into marketing and promoting your products and making sure they work for your audience.

But don’t be afraid to look for other smaller product categories and niches that might serve your audience, too.

The other way that you can go about niching is by using Amazon’s categories to find smaller, profitable niches that fit well with a current customer base and product line.

If you go to Amazon, you can find hundreds of niche ideas on their site directory.

amazon store directory

Clicking on any product category will also give you a list of dozens more niche and category ideas.

amazon niche product categories

This will give you a better idea of the types of products your customers may want from your brand.

When you can tailor the shopping experience to their specific tastes, you can “compete” with Amazon because you’re giving them what they want in a one-stop shop: your site.

2. Use customer data to inform your business

Amazon collects data on every single customer of their 300 million customers.

They collect information on all kinds of things: browsing details (IP addresses, operating system, etc.), search queries, wishlists, reviews and previous order history, and other datasets.

amazon you last purchased this item reminder

They do this to inform a lot of their marketing strategies and determine how to best serve their customers in other ways.

Some of the things they use customer data for include:

  • Product recommendations based on previous searches, wishlists, and order history
  • Kindle book recommendations based on data from Goodreads
  • One-click ordering based on user profiles
  • Anticipatory shipping (their patented model) based on user profiles
  • Supply chain optimization based on customer locations (user profiles)
  • Product pricing optimization based on search inquiries and competitive data
  • Cloud storage optimization (Amazon Web Services) based on user data

A former Amazon employee once said that Amazon “has the ability to track both what people are buying as well as what they search for and can’t find.”

This is part of what gives them the edge over competitors in a lot of ways.

But you can also use customer and competitive data to help improve your offerings in the same way that Amazon does.

One retailer, Spearmint LOVE, saw a year-over-year growth of 991% when they started using their customer data to create more targeted Facebook Ads, for example.

ecommerce advertising on Facebook

They were also able to use dynamic product ads to retarget shoppers who had visited their site, improving their reach by simply using basic data you can easily gather from Google Analytics.

According to research cited by McKinsey, companies that use customer data to inform their practices see 85% more sales and 25% more gross margins than those that ignore their data.

You can use the behavioral data you already have in your database (customer profiles and shopping history, etc.) to improve key areas of customer acquisition and retention.

customer acquisition vs customer retention

Just because you can’t shell out hundreds of thousands of dollars to acquire data like Amazon does, it doesn’t mean you can’t use the same strategies they use to propel your business forward.

It’s a matter of using the resources you do have to improve your offerings.

3. Consider adding subscription services

Convenience is something Amazon offers in abundance.

They do this by offering subscription services like Subscribe and Save, which offers customers the chance to receive specific products automatically every month.

subscribe and save product selection

An Amazon Prime membership also comes with some convenience perks like free two-day shipping and unlimited streaming and use of Amazon’s other services.

They now also offer Amazon Payments, which gives customers the additional convenience of being able to purchase items from other retailers using an Amazon account. (Amazon also tracks these purchases to fuel their data even further, of course.)

amazon payments

Adding something like a subscription service not only provides convenience for customers, but it also can help your own revenue.

Research shows that businesses with subscriptions increase revenue twice as fast as their competitors and see 2x the overall growth.

To take advantage of a subscription model like Amazon’s and consider offering renewable subscriptions for certain products that are likely to be repeat purchases.

Or, if few of your products lend themselves to repeat purchases, consider offering a curated box of specific items every month (the subscription box model) like Birchbox and Dollar Shave Club.

how birchbox works

Other ideas might include:

  • Subscription-based shipping plans
  • Offers from specific manufacturers
  • Product discounts for membership

This not only sets you up for more sales in the long run, but it also gives customers a chance to get products from you without sacrificing their convenience.

4. Improve your shipping

Now, you can’t directly compete with Amazon when it comes to shipping.

Technically, not even Amazon fulfillment can compete with Amazon.

amazon logistics cost growth

According to GeekWire, Amazon lost $7.2 billion from shipping in 2017 between what it cost them and what they charged. But they have more than enough revenue from other sources to make up for it.

You probably don’t.

The goal isn’t to compete, anyway. Your goal is to stay in the game.

To do that, there are plenty of ways you can improve your shipping to provide additional convenience and customer service.

First up, consider offering free or discounted shipping for a minimum threshold or for specific products.

most important options when checking out online

For example, REI offers free shipping on purchases over $50, but they include other caveats to the rule that allow them to maintain this offer without losing money. For example, the offer isn’t valid for special orders or prior purchases.

rei free shipping

Studies show that 48% of shoppers on average will add items to their carts if it means that they can qualify for free shipping. So, while it might come with some initial costs for you, you’re more likely to see a return in added purchases.

If you have specific products that are lightweight (cost effective to ship, for example), you can offer free shipping on ground delivery orders.

Most carriers have slower, low-cost shipping options.

USPS parcel post, for instance, is typically cheaper than priority mail, so you’ll spend less.

comparison of usps fedex and ups

Customers then have the option to pay to upgrade. But when they do they know it’s a choice rather than a requirement, so they’re less likely to be dissatisfied.

If you’re really in a bind financially but want to deliver products for no cost, you do have the option of including those shipping costs in the retail cost of the product.

Of course, you will have to tread carefully with this idea, as your product might appear less favorable on price comparison sites due to the markup.

Another option is to simply offer flat rates for your shipping.

flat rate shipping option

While it’s not free, it still offers customers cheaper shipping for varying products and encourages them to purchase more.

If they’ll pay the same shipping price for one item as they would for ten items, then why not just get ten products, right?

5. Make an effort with customer service

Finally, and perhaps most importantly, the best way you can stay on par with Amazon is by offering outstanding customer service.

Amazon actually does fairly well at this. 67% of respondents to Amazon’s customer service report last year indicated that they were “very satisfied.”

how many people like amazon customer service

But what exactly makes customer service satisfying for the majority of consumers?

According to research by GetApp Lab, the most valuable component of good customer service is simply a real, knowledgeable human on the other end of the line.

what consumers value most in customer service

However, the study showed that it didn’t really matter if the customer service was offered through email, a phone call, or a chat service.

When the rep was perceived to be real (or the correspondence was personalized enough), customers were happier with the results.

So what does this mean for your customer service?

This means putting real people in charge of your customer service. If you already have a team of people who handle customer complaints, you can add automation to shorten response times.

important customer service factors

If you don’t have a large team of people who handle customer service requests, you can always outsource the job using a customer service software or apps like LiveChat, or Help Scout.

While it is a bit of an extra cost (though some services are free depending on your usage and the size of your company), it’s well worth it in terms of customer loyalty.

There are plenty of other ways that you can make sure you have responsive service, however.

You can set up automatic replies on social media or use notifications to alert you when customers ask questions over social media.

If you’re responsive enough, Facebook will actually tell customers how soon you typically reply to messages sent via Facebook Messenger.

facebook page response times

The more active you are, the more customers will tend to trust you. And automation cuts down on the time and energy for your customer service team.

You can also include SMS text updates or responses for mobile customers.

Whichever technology you choose, just make sure you’re keeping the human element alive.

Even when customer service reps can’t resolve an issue, responsiveness and friendliness will still improve your customer service rating.

what makes customers love a business

Even when you can’t compete with Amazon for things like competitive prices or shipping, you can always go above and beyond with customer service to set yourself up as a worthy alternative.

Who knows? At the end of the day, customers might prefer your store over Amazon simply due to your outstanding customer service.

That’s the goal, anyway.


While it would be nice to say that any store can compete with Amazon, it’s just not the case.

Even the biggest brands out there have a hard time slowing down Jeff Bezos and his master plan to take over the e-commerce universe.

But while we wait for that to happen, there’s plenty that e-commerce stores can do to keep their customers just as happy as Amazon’s customers.

First, focus on having a great product offering that targets your niche. Or consider reaching out to new niches to find customers who might not even be on Amazon. (And remember that you can actually use Amazon to do this.)

Next, use your data to your advantage. You have customer information sitting there. Find ways to offer product recommendations or improve your Facebook Ads using what you know.

Then it’s about finding ways to make customers happy.

Offer subscription services on repeatable products, include free shipping in as many ways as you can (no, it doesn’t have to cost you an arm and a leg like it does Amazon), and, most importantly, make customers happy.

If nothing else, you can have just as high of a satisfaction rate as Amazon by doing the little things that matter to customers.

How can non-Amazon marketers compete in an Amazon world?

About the Author: Neil Patel is the cofounder of Neil Patel Digital.

How Much Does an Explainer Video Actually Cost? [New Data]

This is a question with many answers, and usually the best one anyone can give you is: “it depends”.

Not too helpful, right?

At Wyzowl, we set out to answer this question once and for all. In February 2018, we contacted 70 explainer video companies from across the industry and asked them how much it would cost for a 60 second explainer video. We then pooled and anonymized the data (and converted all of the prices to USD for consistency) to evaluate the benchmark cost.

To ensure we were conducting a fair experiment, we provided the same three style guide examples so that everyone was pricing against the same level of work. We also asked for all prices via email and did not take any calls to discuss the project in order to limit the amount of time we took up for each of the companies we contacted.

From our study, we compiled 3 stand out statistics: the lowest price, the highest price, and the average price. Let’s take a look at each one in turn.

The lowest price we were quoted for a 60 explainer video was $700.

The fact that you can get an explainer video for less than 4 figures is great news for startups. However, if you do opt to work with a lower-cost agency, a word of caution: make sure that you know the total price of your video. Some agencies will quote a lower price but then add on extra charges later down the line, such as a voiceover charge, and a charge for every amendment.

The highest price we were quoted for a 60 explainer video was $72,000.

As you can see, there is a HUGE contrast between the lowest price and the highest price, showing the diversity of the industry. Agencies that charge more for their explainer videos are likely to appeal to enterprise-level businesses that have a generous marketing budget to play with and are happy to hand that over to the professionals to ensure their product, brand, or service makes a splash.

However, when spending a large amount of money on an explainer video it is important to consider your ROI. While 78% of marketers agree that video gives them good ROI, the more you invest, the more difficult it is to make a return.

Finally, after compiling the lowest price, the highest price, and all those in between, we were able to calculate the average price ...

The average price we were quoted for a 60 explainer video was $7,972.

We also created an explainer video price distribution chart and calculated that more than half of the explainer video companies we spoke to charge between $2,501-$10,000 for a video.

When you take all of the costs required to create an explainer video into account:

  • Hiring Creatives
  • Sourcing Music & Sound Effects
  • Equipment
  • Software
  • Time

This price seems right about “on the money” (excuse the pun).

A Word About Turnaround Time

Turnaround time is another factor that can affect the cost of an explainer video, after all: time is money. As such, we also asked each company how long it would typically take them to create a video, from initial enquiry to completion. The results are as follows:

  • The shortest turnaround for a 60 second explainer video is 14 days (2 weeks)
  • The longest turnaround for a 60 second explainer video is 84 days (12 weeks)
  • The average turnaround for a 60 second explainer video is 38.5 days (5.5 weeks)

It is important to be patient when hiring an agency to make something creative for you. However, some agencies do offer a “quick turnaround fee” if you are in a rush to receive your video and would prefer to pay for a faster turnaround.

The Truth Is Out!

In addition to finding out the true cost of an explainer video, we also asked companies how much they charge for app preview videos. To find out the average price you can expect to pay for one of those, and for even more juicy data, take a look at the full report.

Naturally, this data is likely to change over time. After all, the video industry is in a state of constant evolution, so who knows what these figures are going to look like in a couple of years? Check back with us then, and we should have an answer for you.

Instagram vs. Snapchat: Which App is Best for Your Business?

Collectively, Instagram and Snapchat attract 687 million daily active users. Their large audiences make them both great platforms to market your brand -- but if you’re working at a small company and can’t justify spending your resources on both, which one do you choose?

Since both platforms increasingly overlap in features, function, and advertising components, it can be hard to distinguish the unique elements that make one a better fit for your business.

If you’re at a crossroads and unsure which direction to take, we’ve got you covered. We’ve compared six major categories within both apps to help you decide which one is the best fit to market your business.

1. Audience

Winner: Instagram

Instagram wins big-time when it comes to numbers alone. With 500 million daily active users, Instagram has an audience almost three times larger than Snapchat’s (which has 187 million daily active users).

But quantity isn’t the only thing that matters here: 45% of Snapchat users are between the ages of 18-24, and that group spends an average of 40 minutes per day on Snapchat -- which is more time than they spend on Instagram. Almost half of Snapchat users aren’t even on Instagram. If you intend to target a young demographic, Snapchat might have a more ideal audience for your business.

Instagram, on the other hand, generally caters to an older demographic: 59% of all internet users between the ages of 18-29 use Instagram, and 33% of internet users between the ages of 30-49 use it. If your ideal audience is an older demographic, or if you haven’t fully established your brand and want to reach as many people as possible, Instagram might be a better long-term fit.

2. Filters

Winner: Snapchat

Although Instagram has tried to create nearly identical filters to Snapchat on Instagram Stories, Snapchat’s filters are still unbeatable. Snapchat is especially unique when it comes to filter animations: if you use the dog filter on Snapchat, you don’t just look like a dog, you also move like one. If you stick out your tongue, it wags like a dog’s tongue. supports the perspective that Snapchat’s filters are better: “Snapchat has a lot more filter choices but Instagram offers a few of the same. For instance, the photo-sharing app has its own variation of the "flower crown" filter but it pales in comparison to Snapchat's.”

Snapchat also offers augmented reality effects, something currently unmatched by Instagram. For instance, you can put dancing hot dogs in your pictures and videos of the real world.

3. Stories

Winner: Instagram

In terms of design, there aren’t many big factors that separate Instagram Stories from Snapchat Stories. But there’s one critical thing to note: when you begin viewing one person’s Instagram Story, you’re seamlessly transitioned into the next person’s story unless you click out. This creates a more addictive experience and keeps you in the Stories feature longer.

Most of your Instagram followers will see your story simply because they were already in the feature, making it more ideal from a business perspective.

With Snapchat, viewers are asked if they want to view the next person’s story. Your followers have the option to click past your story without opening it, which isn’t ideal for your business.

Instagram Stories are designed to ensure you watch all your follower’s stories, which is likely why TheAmplify reported a 28% higher view rate on Instagram Stories over Snapchat Stories.

4. Advertisements

Winner: Instagram

Undeniably, Instagram advertising is growing: according to Klear, the amount of ads on Instagram grew 28% within six months in 2017.

Instagram ads have proven to be a worthwhile investment, too: at least 30% of Instagram users have purchased a product they first saw on Instagram. Since Instagram is often used to portray people’s ideal versions of their lives, it makes sense that it would also be a good place to evoke that envious “I’ve-gotta-have-that-now” feeling.

But the main reason Instagram wins is because it offers much cheaper forms of advertising than Snapchat, with the average cost-per-click being between $0.70 and $1.00. There are more free analytics tools available to measure your success on Instagram. You can also run Instagram ads, and measure results, within Facebook’s Ad Manager, which is especially convenient if your business also uses Facebook as an advertising platform.

In comparison, Snapchat doesn’t offer any analytics tools except for ads, and those tools aren’t free: Snaplytics, one Snapchat analytics tool, costs $19 per account per month. Currently, most marketers see Snapchat as an “experimental” advertising opportunity and only risk a small amount of their total marketing budget (with more of it going to Facebook, Instagram, and WhatsApp).

Although marketers have been dissappointed with Snapchat as an advertising platform, Snapchat is certainly trying: it has deals with major media companies such as NBCUniversal, and allows those producers to sell sponsorships and ad slots within their programs. Snap is also developing commerce capabilities, which would let advertisers sell straight from the platform. So while Snapchat loses for now, it’s certainly putting up a fair fight to reclaim the lead in the future.

5. Sponsorship Campaign Reach

Winner: Snapchat

As we mentioned in the previous section, Snapchat is more expensive than Instagram, but it could be a better use of your money depending on your budget and desired market. For instance, creating a sponsored lens on Snapchat costs upwards of $300,000 for one day, but it leads to a big payoff: Gatorade created a lens filter during Super Bowl 50 so NFL fans could pretend they were showering themselves in Gatorade. The lens got 165 million views, and triggered an 8% increase in purchase intent.

Snapchat ads also get 1.5 times more visual attention than Instagram, making it a clear winner if you have the budget for it.

6. Discoverability

Winner: Instagram

If I’m contemplating following a business on social media, I need a preview of their content before I commit to follow them. If the business is good, and they offer quality content in their images and stories, I won’t be able to resist.

Instagram is a better tool for discoverability because it offers your business a public profile option, so potential followers can check out your content whether or not they’ve agreed to follow you.

Your profile on Snapchat, on the other hand, can only be viewed by people who have added you. This barrier could prevent users from adding you on Snapchat, since they can’t preview your Snapchat content beforehand and essentially don’t know what they’re signing up for.

Plus, there isn’t a lot of information available on your Snapchat profile. All the snaps and stories you create dissappear within 24-hours. On Instagram, followers can find your public profile and see all your posts, whenever they want. They can also find important information about your business, including a link to a website or blog, and company information like store hours or an address. Your Instagram profile can essentially offer as much or as little information as your followers want, making it an easy transition when your followers want to make a purchase.

Final Things to Consider:

Although Instagram won four categories out of six, there are still a few major things to take into consideration when choosing an app for your business. First off, over 95 million photos are shared on Instagram daily, so 70% of posts are never seen. If you think content overload might overshadow your business, consider using Snapchat, at least supplementally.

It’s also important to note that although Snapchat’s 24-hour limit makes it hard to showcase an impressive profile, there are some major perks to the temporary nature of Snapchat. Businesses can take advantage of the 24-hour limit by posting last minute contests, deals, or free giveaways. GrubHub, for example, hosted a weeklong scavenger hunt called “SnapHunt.” On each day, GrubHub posted a new challenge for followers to complete, and at the end of the week gave out a $50 prize for free takeout. GrubHub saw a 20% increase in Snapchat followers during the week.

You should also compare the type of content you’d produce on each app: on Instagram, images are typically edited and filtered to appear more professional, and are higher-quality as a result. On Snapchat, images are typically raw, unedited, and more authentic.

When you’re deciding between the two apps, discuss with your team what type of content you want to produce. If you’re struggling to appear accessible and “down-to-earth” to your demographic, perhaps creating authentic Snapchats is the way to go. If you’re attempting to establish a more well-known and established brand identity, it’s inarguable that Instagram can help you more.

Depending on your content goals and audience’s preferences, you might want to try both for a little while before making a final decision: using Instagram to create a professional and sleek brand image, and using Snapchat to showcase a more authentic, goofier side to your brand.

Ultimately, you’ll want to choose the app that makes the most sense for your audience and your brand.

Lastly, remember why you’re doing this. Sure, it’s fun to reach a lot of people, but it’s more important to create engaging content that resonates with your ideal audience and establishes deep relationships with potential customers, long-term.


The Campaign Comeback: What to Do When Content Fails - Whiteboard Friday

Posted by Shannon-McGuirk

We've all been there: you plan, launch, and eagerly await the many returns on a content campaign, only to be disappointed when it falls flat. But all is not lost: there are clever ways to give your failed campaigns a second chance at life and an opportunity to earn the links you missed out on the first time. In today's Whiteboard Friday, we're delighted to welcome guest host Shannon McGuirk as she graciously gives us a five-step plan for breathing new life into a dead content campaign.

What to do when content fails.

Click on the whiteboard image above to open a high-resolution version in a new tab!

Video Transcription

Hi, Moz fans. Welcome to this edition of Whiteboard Friday. My name is Shannon McGuirk. I'm the Head of PR and Content at a UK-based digital marketing agency called Aira.

Now, throughout my time, I've launched a number of creative content and digital PR campaigns, too many to mention. But the ones that really stick into my head are the campaign fails, the ones that got away from the link numbers that I wanted to achieve and the ones that were quite painful from the client-side and stakeholder-side.

Now, over the last couple of years, I've built up a couple of steps and tactics that essentially will help me get campaigns back on track, and I wanted to take you through them today. So, today, I'm going to be talking to you about content campaign comebacks and what to do if your content campaign fails.

Step one: Reevaluate your outreach efforts

Now, take it right back to when you first launched the campaign.

  • Have you contacted the right journalists?
  • Have you gone to the right publications?
  • Be realistic. Now, at this point, remember to be realistic. It might not be a good idea to start going for the likes of ABC News and The Daily Telegraph. Bring it down a level, go to industry blogs, more niche publications, the ones that you're more likely to get traction with.
  • Do your research. Essentially, is what I'm saying.
  • Less is always more in my eyes. I've seen prospecting and media lists that have up to 500 contacts on there that have fired out blank, cold outreach emails. For me, that's a boo-boo. I would rather have 50 people on that media list that I know their first name, I know the last three articles that they've written, and on top of that, I can tell you which publications they've been at, so I know what they're interested in. It's going to really increase your chances of success when you relaunch.

Step two: Stories vs. statements

So this is when you need to start thinking about stories versus statements. Strip it right back and start to think about that hook or that angle that your whole campaign is all about. Can you say this in one sentence? If you can get it in one sentence, amazing because that's the core thing that you are going to be communicating to journalists.

Now, to make this really tangible so that you can understand what I'm saying, I've got an example of a statement versus a story for a recent campaign that we did for an automotive client of ours. So here's my example of a statement. "Client X found that the most dangerous roads in the UK are X, Y, Z." That's the statement. Now, for the story, let's spice it up a little bit. "New data reveals that 8 out of 10 of the most dangerous roads in the UK are in London as cyclist deaths reach an all-time high."

Can you see the difference between a story and a statement? I'm latching it into something in society that's really important at the moment, because cyclist deaths are reaching an all-time high. On top of that, I'm giving it a punchy stat straightaway and then tying it into the city of London.

Step three: Create a package

So this seems like a bit of a no-brainer and a really obvious one, but it's so incredibly important when you're trying to bring your content campaign back from the dead. Think about creating a package. We all know that journalists are up against tight deadlines. They have KPIs in terms of the articles that they need to churn out on a daily basis. So give them absolutely everything that they need to cover your campaign.

I've put together a checklist for you, and you can tick them off as you go down.

  • Third-party expert or opinion. If you're doing something around health and nutrition, why don't you go out and find a doctor or a nutritionist that can give you comment for free — because remember, you'll be doing the hard work for their PR team — to include within any press releases that you're going to be writing.
  • Make sure that your data and your methodology is watertight. Prepare a methodology statement and also get all of your data and research into a Google sheet that you can share with journalists in a really open and transparent way.
  • Press release. It seems really simple, but get a well-written press release or piece of supporting copy written out well ahead of the relaunch timing so that you've got assets to be able to give a journalist. They can take snippets of that copy, mold it, adapt it, and then create their own article off the back of it.
  • New designs & images. If you've been working on any new designs and images, pop them on a Google shared drive and share that with the press. They can dip into this guide as and when they need it and ensure that they've got a visual element for their potential article.
  • Exclusive options. One final thing here that can occasionally get overlooked is you want to be holding something back. Whether that's some really important stats, a comment from the MD or the CEO, or just some extra designs or images for graphics, I would keep them in your back pocket, because you may get the odd journalist at a really high DA/authority publication, such as the Mail Online or The Telegraph, ask for something exclusive on behalf of their editor.

Step four: Ask an expert

Start to think about working with journalists and influencers in a different way than just asking them to cover your creative content campaigns and generate links. Establish a solid network of freelance journalists that you can ask directly for feedback on any ideas. Now, it can be any aspect of the idea that you're asking for their feedback on. You can go for data, pitch angles, launch timings, design and images. It doesn't really matter. But they know what that killer angle and hook needs to be to write an article and essentially get you a link. So tap into it and ask them what they think about your content campaign before you relaunch.

Step five: Re-launch timings

This is the one thing that you need to consider just before the relaunch, but it's the relaunch timings. Did you actually pay enough attention to this when you did your first initial launch? Chances are you may not have, and something has slipped through the net here.

  • Awareness days. So be sure to check awareness days. Now, this can be anything from National Proposal Day for a wedding client, or it can be the Internet of Things Day for a bigger electrical firm or something like that. It doesn't really matter. But if you can hook it onto an awareness day, it means that there's already going to be that interest in the media, journalists will be writing about the topic, and there's a way in for your content.
  • World events. Again, keep in mind anything to do with elections or perhaps world disasters, such as tornadoes and bad weather, because it means that the press is going to be heavily oversaturated with anything to do with them, and therefore you might want to hold back on your relaunch until the dust is settled and giving your content campaign the best chance of success in round two.
  • Seasonality. Now, this isn't just Christmas. It's also Easter, Mother's Day, Valentine's Day. Think about the time of year you're launching and whether your content campaign is actually relevant at that time of year. For example, back home in the UK, we don't tend to launch content campaigns in the run-up to Christmas if it's not Christmas content, because it's not relevant and the press are already interested in that one seasonal thing.
  • Holidays. Holidays in the sense of half-term and summer holidays, because it means that journalists won't be in the office, and therefore you're reducing your chances of success when you're calling them or when you're writing out your emails to pitch them.

So there are my five steps for your content campaign comebacks. I know you've all been there too, guys, and I would love to hear how you got over some of these hurdles in bringing your content campaigns back to life. Feel free to comment below. I hope you guys join me soon for another Whiteboard Friday. Thanks.

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Thursday, March 22, 2018

How the Customer Experience is Powering the Fastest Growing Brands

A form of this article originally appeared on Stitch Labs. Stitch Labs is a purpose-built inventory management software to help brands improve customer experience and scale efficiency. Download the original guide here.

When we talk about the future of retail, industry news is abuzz with the idea of brands creating experiences for their customers. Consumers want more than an email newsletter—they want easy tracking and personalization. They want more than a product—they want community. The experiences we read about in headlines are often grandiose and costly, like virtual fitting rooms and same-day shipping. So, how can small- to mid-sized brands keep up with this trend in a cost-effective, creative way? With the help of scrappy teams and technology to automate processes, these brands are not only keeping up with the trend, but also are redefining it and leveraging it to grow. In this guide, we’ll discuss different approaches for building a memorable customer experience and how successful brands are executing on these creative ideas.

Automated Personalization Isn’t a Contradiction

Most businesses under-invest in customer loyalty, even though establishing some type of loyalty program is one of the most obvious ways retailers enhance their customer experience. Instead, they often put all of their eggs in the new customer acquisition basket. While this approach may work well in the early days of a business, it can be detrimental for scaling later. In order to set your business up for future success, you’ll want to think early on about a backend system that will scale with you. You’ll also want to think about today’s first-time customers who you hope will become tomorrow’s loyal brand advocates. As you grow in resources, you can consider many types of loyalty programs that will help you track and analyze customer behaviors and reward repeat purchases. If you’re starting out, there are simpler—yet still scalable— ways to personalize the customer experience. Customizing gifts based on the product someone buys is a thoughtful—yet realistic—way to make a customer feel warm and fuzzy about your brand. Chubbies, a clothing brand with an emphasis on the weekend lifestyle known for their colorful shorts and hilariously quirky marketing campaigns, figured out a way to send gifts without breaking the bank.

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With their target customer in mind, they created add-on gifts like branded koozies, coasters, and baseball cards that fit within their lifestyle theme but are significantly less expensive than sending an additional item of clothing. The gifts can match the purchases, too. For example, sending sunscreen when someone buys a swimsuit, or golf tees when a customer purchases golf shorts. This program is able to delight the customer in a personalized way, without having to know personalized information about the customer. In automating this process, they can quickly swap out a gift that isn’t garnering excitement and track orders so customers don’t receive the same gift twice. Their customers are surprised and delighted to receive add-ons and their loyal social media followers will often post their latest gift, thus increasing brand awareness in addition to fostering loyalty.

Using Data To Improve Customer Experience

The previous section is all about personalising the offline experience with your brand, but what about improving the online one?

The better you know your customer, the better the experience you can deliver – on and off-line. Data from customer behavior on your eCommerce site allows you to better understand your customer and therefore engage with them in a way that is deeply personalized to their experiences with your brand. With customers being bombarded with emails and offers that have little relevance to how they’ve interacted with a brand, you can stand out with more targeted, personalized engagements.

To do this, a tool like Kissmetrics collects person-based behavioral data, defines and tracks key customer segments and then enables you to engage more effectively across email, facebook and more. You can segment by location, products purchased, time between events, etc. The more detailed you make your segmentation, the more easily you can personalize your messaging. Why does this matter? Because when you create refined segments of your many different customer types and tailor messaging uniquely toward just that segment you’re creating yet another delightful moment between your brand and your customer. Not to mention better suited engagements increase purchases and brand loyalty.

Collaborations: Combine Forces To Get New Customers

While brands obviously want customers to love their products enough to buy from them time and time again, we know no customer is 100 percent brand loyal. Even your most loyal customers have other brands they love and those are the very brands with whom you should consider working. Topo Designs, a Denver-based outdoor apparel and bag company, has partnered with brands like Woolrich and Chacos (not direct competitors, but other brands Topo’s target customer loves!) to create unique, limited-edition items that they then promote across both of their customer bases.

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Even if your brand doesn’t have the desire or resources to make physical products with another brand, there are many ways to collaborate with lower barriers to entry. Find brands with similar audiences and aesthetic and stock each other’s items in your brick and-mortar stores. Create a themed “swag bag” with several other brands and host an Instagram giveaway by having followers tag three friends for a chance to win. Similarly, host a giveaway where those who enter to win agree to sign up for your and your partners’ email lists.

Austin-based metallic tattoo and accessories company, Flash Tattoos is always finding ways to collaborate with brands who share target audiences. Entries can be as simple as tagging friends in an Instagram post or you could go so far as to have people fill out a form to ensure you’re capturing email addresses (and even additional information you can use to collect data). Keep in mind, the more involved the entry procedure, the more desirable you’ll want to make your prize.

Events: The Low Cost Way To Get Foot Traffic In Your Store

Want an even easier way to collaborate with other brands—without having to give away free product? Consider hosting an event at your store (or theirs). Modern Citizen, a San Francisco-based women’s apparel brand, hosts a series of events both with and without partners to foster a sense of community while getting people into their physical store. For one event, they teamed up with Fashion Incubator SF, a nonprofit that supports up and coming fashion designers. They hosted an open discussion with the two founders and answered questions from the audience—which was made up mainly of their exact target demographic. The total cost of the event was buying donuts and coffee for 30 people (who each purchased $10 tickets to attend, the proceeds of which were donated to Fashion Incubator SF) but they were able to establish themselves as thought leaders and make sales from the shopping attendees did after the talk. Additionally, they sent an email after the event thanking everyone who attended and included a 15 percent off coupon code that expires at the end of the month, encouraging further shopping as well as a sense of urgency and immediacy.

But what if you don’t have a physical store? Brands everywhere are using popups to boost awareness and collect data in a cost-effective way. Whether it’s renting a booth at a local fair or event or even creating a mobile trailer to determine the best location for your next (or first!) brick-and-mortar, temporary shops are great ways to gauge interest and build hype without breaking the bank.

Build a Community

Many brands are still at loss when it comes to Amazon. Is it better to adopt a, ‘if you can’t beat ‘em, join ‘em’ approach, or try to compete as best you can with the behemoth? Building a community is small to mid-sized brands leg up on Amazon. They may provide same day shipping and low costs, but they don’t provide the customer experience that’s only increasing in importance for today’s consumer. One team hyper-focused on building a community and showing their customers they’re much more than a shoe brand is Freda Salvador. Through their mobile shoe trailer, in-store events, and collaborations with other brands, Freda Salvador is everywhere their customer is.

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Similar to Modern Citizen, the Freda team hosts in-store events that both increase foot traffic and brand awareness while simultaneously creating a sense of community between customers and the brand. They often choose tangentially related concepts that their target customer is interested in—like a flower arrangement workshop, a skin care workshop, etc. Since they aren’t actually selling anything Freda-related at the event or even talking about their brand, this is a great way to foster a sense of community in an authentic way.

Have a Backend That Supports Your Initiatives

There are so many creative ways to enhance your consumer experience but even the most well-intentioned plan can have the opposite effect on customer retention if your backend can’t support it. These creative ideas are great ways to connect with your customer, but you first and foremost must master the most basic customer experience: getting the right product, to the right person, at the right time. If someone can’t count on your brand for clear and descriptive product pages, easy checkout, and speedy delivery, you’ve already fallen behind. So, before you begin creating the experience of your customers’ dreams, get organized and make sure you have the right systems and people in place. Stitch Labs provides brands with visibility into their inventory at all times and across all channels, allowing them to be more efficient with their inventory. Stitch connects to your eCommerce site, 3PL, and marketplaces to make sure inventory numbers are accurate and you know where a product is at all times. This level of control lets you not worry about inventory, so you can focus on what matters most—your customers.

Instagram Might (Finally) Be Fixing Its Algorithm

Almost exactly two years ago, Instagram made changes to its algorithm that left some users, in a word, dissatisfied.

The changes would modify the algorithm so that posts no longer appeared in chronological order on a user's feed, but rather, surface pictures and videos that it thought might be of greater interest.

This, like any other algorithm change, was likely based largely on a user's behavior on Instagram -- who the person followed, which posts the person liked, and so on.

It left content creators upset -- including celebrity personality Kylie Jenner.

But now, Instagram might be backtracking.

Today, the visual content-sharing app announced that it would be changing its algorithm once again, so that more recent posts are could appear first in a user's feed. These modifications, the statement said, will "give you more control over your feed and ensure the posts you see are timely."

It's also testing a "New Posts" feature, which is essentially a button that allows users to manually refresh their feeds, rather than having the app update it automatically. Want to see new posts? Tap the button. Otherwise, don't touch it, and your feed will stay right where you left off, Instagram says.

The announcement comes on the same day that Instagram announced it will be allowing users to place hyperlinked hashtags and tagged profiles in their bios.

Source: Instagram

Instagram is owned by Facebook, which has been experiencing a host of PR issues following last week's allegations that personal user data was misused by analytics company Cambridge Analytica.

Henry Franco, HubSpot's social campaign strategy associate, points out that this shift is reminiscent of Facebook's own algorithm changes in January to place a greater emphasis on content from friends and family in News Feeds. 

"'Newer' versus 'popular' means preferential placement won’t be given to brands," he says, "but to whoever has posted most recently."

The announcements arrive among a host of issues for Instagram's competing app Snapchat, which has been experiencing its own blowback following a redesign.

Earlier today, it was reported that Instagram might be working to emulate Snapchat's Snapcodes feature, which allows users to scan codes to find profiles or content on the app.

Instagram's version, which is rumored to be called Nametag, would permit a create a similar capability, giving content creators another method of gaining followers by letting them scan a visual code on print or other materials. 

Starting today, users will be able to add hyperlinked hashtags and tagged profiles in their bios -- with the caveat that any tagged profiles will receive a notification of such and can untag themselves if desired.

The New Posts feature and possible algorithm changes appear to only be in the testing stages at this point, though Instagram says it will announce more "improvements" in the coming month.

As for the rumors -- I'll be keeping an eye on that. Questions? Feel free to reach out on Twitter.

10 Accounting Basics You Need to Know to Run a Successful E-commerce Business

Accounting is a painful necessity.

It’s the boring side of the business. I don’t like dealing with it either.

But, if you want your business to grow, you can’t avoid it.

You could try tossing all your receipts into a shoebox and handing them to a stranger.

But you’ll be handing them financial control. That means risking the success of your business.

You’d be handing them a nice chunk of change to do it all for you too.

I promise it’s not as complex as you might fear, though.

And you shouldn’t need an accountant for day-to-day management.

Even if you do pay for help, you should still know the basics yourself.

This way you can understand and question what someone is telling you.

After all, it’s your business at stake.

The following ten accounting basics will cover everything you need to know to understand your money and ask the smart questions.

1. Get yourself accounting software

Don’t try to piece it all together using excel or a calculator.

Do yourself a favor and get accounting software. Freshbooks is marketed to customers who run e-commerce businesses.

Or if you use Shopify, there are a bunch of accounting software apps you can get right in their app store.

Not sure what you want? Test out a free one. Or pick one with a 30-day free trial.

The best option will depend on your business and preferences.

If you’re shopping through the app store, make sure you’re picking a bookkeeping system.

Look for an app that will track sales, costs, and inventory.

Avoid apps that only create invoices or just provide reports. You want a tool that can do it all for you.

Whether you pick software through Shopify or go with something else, pick one that will sync directly to your e-commerce store.

It will make life a whole lot easier.

2. Track your cash flows

Step two: watch your cash.

If you don’t have a separate bank account for your business yet, get one.

You need to know that your business is making money. And the easiest way to see this is to watch your cash flow.

If you have more coming in then going out, you’re probably doing well, right?

You also should be watching the timing of money going out and coming in.

After all, what if all your bills are due tomorrow?

It won’t matter a whole lot if you have $1 million coming in next month if you can’t pay your employees until then.

Keep in mind any holds you have on your accounts.

What payment methods do you offer your customers? Do any of them place a hold on the money?

Is there a five-day delay from the time a customer pays to the time the money is in your bank? You need to know this when you’re figuring out when you’ll have money to spend.

Shopify offers a free template for tracking cash. You can easily create your own in excel.

Track what you expect to spend each week. Track what money you expect to come in each week.

If what you need to spend is more than your current bank balance plus what’s coming in, you know you’re about to have a problem.

Follow these tips to help improve your cash flow:

  • Don’t pay anything earlier than you have to. If it’s due in 30 days, pay it in 30 days.
  • Consider offering monthly payment plans or subscriptions to customers to guarantee money coming in.
  • Keep a reserve in your business bank account ‘just in case.’
  • Don’t overcomplicate it. You don’t need huge technical cash flow statements.

3. Determine how to count inventory

If you’re selling a service, then ignore this step.

Inventory is the product you sell or all the materials you use to build that product.

Don’t forget to include any costs for wrapping or packaging your product.

Decide what minimum volume of inventory you want to have on hand, and make sure you are tracking inventory so you can reorder before you pass this point.

The last thing you want is to run out of inventory and lose sales.

Why is inventory part of accounting basics?

Inventory equals money.

It’s money you spent to buy the stuff. Money you won’t make back until you sell your product.

And the money tied to your inventory can change while it’s sitting in your warehouse (or store, or apartment).

If I buy 50 products at $100 each, and tomorrow the price shoots up to $150, my inventory is suddenly worth more.

But if the price drops tomorrow to $50, my inventory is worth less.

And watch out for ‘shrinkage’!

That’s when you suddenly have less inventory than what you’re supposed to.

You know you bought 50 products. You know you’ve sold and shipped 40.

You should have 10 left, right?

What if you only have 8 left?

That is ‘shrinkage.’

Maybe an item got lost, or stolen, or was ruined and had to be thrown out. There are lots of reasons it happens.

The good news is shrinkage is lower when you don’t have a physical retail store.

Warehouse shrinkage is actually pretty low. Typical shrinkage is less than 1% of your total inventory.

If you’re operating a business out of your home, it’s even less likely you will have shrinkage.

After all, you’re less likely to have someone steal inventory if you’re the only one around it.

It’s also a lot harder to lose inventory in an apartment compared to a huge warehouse.

That said, shrinkage can happen to anyone.

This is why it’s important to physically count inventory regularly. You need to know if you just ‘lost’ $100 worth of product and factor that into your accounting.

4. Understand your cost of goods sold

Cost of goods sold is the expense directly tied to the products you sold.

This is the inventory sold plus how much it cost to make that inventory.

Let’s say you sell one widget. Whatever it cost you for the parts plus whatever it cost to build it should be the cost of goods sold for that widget.

If the parts of the widget cost $50, packaging cost $10, and you paid someone $25 to put it together, your cost for that widget is $85.

This can get a lot more confusing to figure out if you bought a lot of widgets at different prices, and you’re paying different people different salaries to put them together.

Don’t overcomplicate things.

The easiest way to figure it out is to use a weighted average. Here’s an example of calculating a weighted average:

($440 divided by 5 is $88.)

Anything that is tied directly to your products and has a cost increase when you make more stuff should be in cost of goods sold.

If you pay employees per every widget they make, include their labor.

If you pay them a flat hourly rate even if they don’t make a single thing that day, don’t include their labor in the cost of goods sold.

The retail price of an item minus the cost of that item is your ‘gross margin.’

This is not your profit. It just tells you how much you’re making on each item before you add in all your other expenses.

Things can get pretty complicated here if you have different costs for different sales conditions.

For example, do you offer free shipping on all orders over $100?

This means your cost of goods sold is going to increase every time a customer buys more than $100 worth of stuff.

It will also change for each different location you ship to.

Some websites will tell you not to include shipping in costs of goods sold.

I disagree. ‘Freight out’ goes up or down with the volume you sell.

To simplify it, let your accounting system track your actual cost of goods sold. If it’s linked to your e-commerce site, it should be able to do this automatically.

For predicting your future cost of goods sold, save yourself a headache and just use an average.

If last month you sold $1,000 and paid $150 for shipping, that’s 15%.

So you can assume that if next month you sell $2,000 you will probably pay $300 (or 15%) for shipping.

It won’t be perfect, but it’s better than just leaving the cost out of planning.

Here’s a simple way to calculate your rough average cost of goods sold, including shipping, packaging and any other e-commerce fees:

5. Calculate all other expenses

Now you know your costs directly tied to sales volume.

Next, you need to understand how much everything else is costing you.

Any expenses that don’t increase when you sell more or decrease when you sell less are called ‘fixed expenses.’

For example, if you pay a monthly rent, the amount is fixed. It won’t change whether you sell one widget or one million.

These costs aren’t part of the cost of goods sold and aren’t factored into your gross margin.

They do affect your profit and your cash flow, though.

Common fixed expenses are:

  • Rent
  • Utilities
  • Insurance
  • Property Tax
  • Interest on loan payments
  • Salaries

These expenses are considered ‘fixed’ since you have to pay them even if you sell nothing next month.

Don’t get this confused with an expense being the exact same amount every month.

An expense like utilities might be more one month than the next. Or it might be more in the winter than in the summer.

It’s still a fixed expense in accounting terms.

If any expense changes month-to-month, you should use an average for budgeting.

6. Figure out your break-even sales requirement

Budgeting and planning are important parts of running a business.

After all, you’re not going to just want to know if you made a profit last month, you’re going to want to know if you expect to make one this month and next.

Your break-even sales amount is the amount of sales dollars you need to earn to cover all of your costs.

For example, let’s say all your ‘fixed costs’ add up to $5,000 per month.

This means you have to sell enough of your product to cover the cost of making them (including the labor) plus an additional $5,000 just to break-even (no profit and no loss).

Figure out your gross margin per unit (from the fourth basic).

Then divide your fixed costs by that amount to figure out the number of units you need to sell.

If your break-even number of units is 5,000 and you think you can only make or sell 3,000, you know you’re in trouble.

If break-even is 5,000 and you think you can make and sell at least 10,000 then you know you should be making money.

Remember that your fixed costs don’t easily change.

For example, if you’re in a five-year lease, you’re going to struggle to find a way to lower your rent.

This means if your break-even seems too high, you should first look at either raising your prices of trying to lower your costs of goods sold.

You could do this by charging more for shipping, using cheaper materials or finding cheaper labor.

Here’s a visual of break-even:

7. Track your sales and profits before tax

Now you know how many items you need to sell to break even.

Next, you need a way to track your sales.

This lets you know early on if you’re going to have an issue. It will also help you manage your money.

Let’s say you figured out you need to sell 5,000 units to break even.

It’s now the 15th of the month, and you’ve only sold 1500.

If you’re tracking your sales, you’re able to notice this. Now you have time to do something about it.

You still have two weeks left to try and drum up more business with some extra digital marketing efforts.

Just make sure that if it’s paid marketing, you figure the cost of that into your budget.

After all, if you spend $2000 to increase sales by $1000 then it wasn’t worth it, right?

One way to track your sales is by linking Google Analytics to your e-commerce site.

Google Analytics even has a plug-in for your e-commerce site to make it easier.

Log in to your Google Analytics and go to your Admin Settings.

Next, go to your e-commerce settings.

Then turn on the ‘Enable e-commerce’ switch and ‘submit.’

You can learn more about Google Analytics in some of my other posts, or check out my video.

But let’s get back to accounting.

Now that you know sales, cost of goods sold and all your other ‘fixed’ expenses, you know your earnings before tax as well.

Keep in mind profits don’t mean cash in hand!

Let’s say you sell a service worth $3,000, but you offer a three-month payment plan.

Your sales would show $3,000, but your bank account may only show $1,000.

That means even if your accounting software says you made a profit of $500 after all expenses, you won’t have an extra $500 in your bank account.

If all of your expenses are actually paid out this month, then your bank out could go into the red.

There are tons of accounting rules around when to recognize revenue.

The timing for when to recognize sales and expenses can get pretty complex.

Leave this for your accountant and tax time. It’s not important when it comes to the day-to-day management of your business.

If you ever go public, you’ll need to know the more advanced accounting reporting requirements, but they’re not needed for managing your business.

8. Set up the proper tax rates for customers

Here’s the part most people groan about: taxes.

Taxes are unavoidable, and they can get pretty complicated.

If you sell a lot of different products and services to a lot of people around the world, you may want to consult a professional at this point.

Thankfully, systems are pretty smart these days.

Your e-commerce software should take care of most of this for you.

As long as you flag a product as something that is taxable, once your customer puts in their address, it should calculate the tax payable.

If you use Shopify, you can set this up on the Tax settings:

And if you have tax exempt products or customers, you can set up exemptions directly in your e-commerce store.

The detailed instructions for Shopify exemptions can be found here.

9. Plan for your tax payments

Now that you’re properly set up to collect tax, you also need to make sure you’re ready to pay it.

Your tax rules will depend on where you’re physically located.

At a minimum, expect that you need to submit as much in tax as you’ve collected.

This means it’s important to recognize that money as tax and set it aside. If not, it could hurt when it comes time to file!

Some online shopping services, such as Shopify, allow you to include tax into your sales price.

This means that your product is always $40.00 whether you’re selling it to a customer who pays no tax or one who pays 15% tax.

The difference is that your sales price, and profit, are lower whenever your customer is in a region of higher tax.

I wouldn’t recommend using this function.

It can make it more difficult to plan actual sales dollars you expect to earn.

It can also make it easy to lose track of how much profit you collected and how much tax you collected (which you will then have to pay out).

If you do want to include tax in your prices, make sure you can run a tax report.

This should easily tell you how much you collected in taxes, so you can still identify it and put it aside.

For Shopify tax reports, go to Reports, then Finances.

Then, click on ‘Taxes,’ and it will bring you to the detailed tax report:

It’s a good idea to set aside any taxes you will need to pay out, so they don’t get lost in your bank balance or included in your cash flow.

Consider opening a separate account just for taxes.

10. Understand your balance sheet

We’ve now covered everything on your income statement, as well as cash flow.

The final thing to cover is the balance sheet.

This is what helps you track your company’s long-term health to see overall how your company is doing.

An income statement is a snapshot in time. A balance sheet is the bigger picture.

The balance sheet is made up of assets, liabilities, and equity.

Assets are things you have of value, like cash in the bank.

Liabilities are debts or payments you owe.

Equity is the difference between the two.

Let’s say your car is worth $50,000 and you have $30,000 you still owe on it.

That means your asset is $50,000, your liability is $30,000, and your equity is $20,000.

If you sold the car today, you’d get $50,000 in cash. Then you have to pay off the $30,000 in debt that you owe, and you’re left with $20,000 in your pocket.

This means you have equity and if you had to get rid of the car today, you’d make money.

This is how you want your business’ balance sheet to look.

Here’s a more common scenario:

Your car was worth $50,000 when you bought it. You took out a $50,000 loan to purchase it.

As soon as you drove it off the lot, it dropped in value and is now only worth $40,000. It’s depreciation, which means that things decrease in value as they get older.

If you need to sell it now, you will sell it for $40,000, and pay off $40,000 in debt.

You will be left with no car and still owe $10,000 in debt.

This is ‘negative equity.’ It means you owe more than you own.

This is a bad place to be.

If your business is in this state, it means you’re losing money.

If your income statement makes it look like you’re making a profit but your balance sheet is telling a different story, then you’re missing something in your expenses.

Things like interest payments on loans are an easy one to miss.

If you have a high-interest loan that keeps increasing your liability, it can easily kill your profits without you even realizing it.

That’s why the balance sheet is a good second look to make sure you don’t miss anything.

A simple check to make sure your balance sheet is right is to remember that assets = liabilities + equity.


I’ve now covered all the accounting basics you should be following day-to-day and month-to-month.

Start with a basic accounting software. It will make your life a lot simpler.

Then, remember ‘cash is king,’ and get a handle on your cash flow. You should be managing this on a weekly basis unless you have a big cash reserve built up.

Next, you need to understand your sales, expenses, and profits. This is your income statement, and lets you know if you’re making money each week, month, or year.

Don’t forget to plan for taxes. Set up your e-commerce site to collect them if you need to. Put the money aside to pay them when you need to.

Finally, build your balance sheet. Or let your accounting software do it for you.

This will let you know how ‘healthy’ your company is long term. It’s an easy way to tell if you have too much debt.

There are lots of additional accounting rules and tricks that can help you save money at tax time.

There are also reporting options that should be considered if you’re trying to get investors or a loan for expansion.

But for running your business, don’t get sucked into the complicated rules. It will just distract you from your critical day job of running your business.

An accountant can help you with everything above and beyond the basics if you need it.

What software do you currently use to handle your accounting needs?

About the Author: Neil Patel is the cofounder of Neil Patel Digital.