Letter to Griff & Lee @ eBay Radio:
I enjoyed my time on the eBay Radio show yesterday (April 29th, 2014) talking about better managing your time. I have to admit with a 10-11 minute segment I didn’t manage my time well enough to answer Griff’s question about how I was able to run my eCommerce business smarter by working only 1 hour per day. So I wanted to take the time to better address your question here.
First off my 1-1-1-1 goal was something I came up with in 2006 when starting over in the eCommerce space to give me focus and keep what was most important (my time) at the core of my business building foundation. I wanted to have a 1 man business with 0 employees, doing $1 million in sales per year to support my family with the remaining profits, in 1 year of time… and I only wanted to work 1 hour per day.
As I mention on the radio show it took me a little longer than a year to achieve but I achieved my goal in 2008. When I mentioned this on eBay Radio, Griff asked me, “How did I accomplish the 1 hour per day part?”
I created a new eCommerce LAW: Spending Time Does Not Equal Being Productive
On the Radio show I talked about how I created new eCommerce LAWS for myself as I learned to build this business model and one of the LAWS is to understand that being busy does not equal being productive. I watch so many eCommerce sellers being super busy with their business but when I watch the tasks they spend their time doing, it’s obvious they’re not very productive. I also have a story about how this particular LAW came to light for me.
Story: After I quickly found success reaching me 1-1-1-1 goal I thought to myself, what’s next? Should I duplicate this strategy, should I sit on the beach and watch things run on autopilot, should I work 2 hours and see if I can “Double down”? The entrepreneur in me said to double down. If I can achieve this success working basically 1 hour per day, I can achieve possibly 8x this success working 8 hours per day. Makes logical sense. So I ventured out and found an office and warehouse where I could focus 8 hours per day at growing my business even bigger.
I drove to work around 8 am and left to go home around 5 pm just like a normal job each day. Sure I took off work early when my kids had something going on or the weather was nice and I wanted to jump in the pool with my family. But I was basically working the typical 8 hour workday. Of course I got more stuff done, of course I did more things. But what I came to realize over time was the law of Diminishing Returns where the quality of my work drops the longer and longer I work on it. My productivity dropped tremendously relative to the time I put into it and I did not grow my business 8 fold.
I’d find myself in the warehouse breaking down boxes to be recycled, counting inventory, moving things around to try and become “more efficient”. I’d also find myself in the office trying to sell other products that really didn’t fit into my target market or current product mix resulting in very limited success. Not really worth the time invested to get there.
The other interested thing is I felt guilty if I left the office early. Maybe this feeling stems from working in the corporate world where we’re trained to “Do our time” because we owe it to our employer as our part of the agreement. You pay me, I do my time for you in return.
Fast forward the story, I decided to get out of the warehousing business altogether by finding a 3rd party warehouse service that receives my product from the factories and reships my orders to my customers. I can write many blog posts about how this decision may be one of my top 10 decisions I’ve ever made for my eCommerce business, but will leave that for another day.
Here’s where I ran out of time on the eBay Radio show and felt I needed to explain more to Lee and Griff about what other things I did to reach my goal because it’s a combination of many eCommerce LAWS together that really got me there.
The second eCommerce LAW that played a big part in my success was understanding:
The More Moving Parts, the More Time Required to Manage Them.
This concept can be easily explained by looking at the average selling price (ASP) of the item you sell. The fact is that it takes almost the same amount of time and effort to sell a $300 item as it does to sell a $30 item. However in most cases the $300 item should generate a much higher profit margin in gross dollars. When you track the time you take to process an order against the “Return on your time” you will find that focusing on higher ASP products will generate a greater return. I like to demonstrate this by simply showing 4 ways you can generate $10,000 in profits each month.
10,000 sales making $1 profit each = $10,000
1,000 sales making $10 profit each = $10,000
100 sales making $100 profit each = $10,000
10 sales making $1,000 profit each = $10,000
The choice is yours. How hard do you wish to work for your dollar? I like to hover around the $100 profit per sale range myself knowing I don’t need to work as hard as if I was making $10 or $1 profit each item. So selling higher ASP items that generate a higher profit per transaction is one key to working smarter.
The third eCommerce LAW that also played a big part in my success was the process of: Eliminating, automating and outsourcing the “Money moving” tasks so I could spend my time on the “Money making” tasks.
So after eliminating most of the work by working smarter and focusing on higher ASP products it was time to automate and outsource the rest. One way I eliminated waste was to change how my products came in from the factory. They would send me my products in colorful retail shelf ready boxes with photos and words to describe the product. I didn’t need this type of box and I would always re-box the item into a shipping box before I could ship to the customer costing me time and more supplies. So working directly with the factory I asked them to change the colorful retail box into a brown ready to ship box with just my logo on the side. It was a win-win for everyone costing them less and eliminating the need to re-box for me.
Money moving tasks are the tasks that sellers spend most of their time doing such as listing items, taking photos, answering emails and shipping orders. While on the surface, these tasks appear to be “Making money” for the seller but in reality these tasks only “Move the money” from one location to another. These are important steps of an eCommerce business, but not important enough that the entrepreneur should be doing them day in and day out.
Depending on the business’s activity level and cost structure, many of these tasks can be outsourced starting with the simpler tasks and working towards the harder ones. There are many services out there today that can write product descriptions, can answer customer emails or IM conversations and also warehousing services that can pack and ship boxes for eBay, Amazon and website orders combined. And the truth of the matter is, most of these services can do all these tasks better than the entrepreneur can do themselves. These tasks need to be automated our outsourced so the eCommerce entrepreneur can free their time from the money moving tasks and allow the necessary time for the money making task.
eCommerce LAW: Freeing your Time, will Free Your Mind
eCommerce entrepreneurs are in a rapidly changing environment with new competition every day, new tools and processes to do things differently and sometimes better and new ways to connect and communicate with their customers. The landscape is constantly shifting and staying ahead of the trends requires the time to 1) pay attention to them and 2) understand how they impact your business.
The Money making tasks are mostly marketing. Understanding the competitive landscape, finding products that will increase your profits and be attractive for your target audience. Building brand value, brand loyalty and brand affinity so you can profit from the Customer Value instead of just the Transaction Value. Money making tasks are focused on building yourself a unique product offering, with a unique customer experience that’s hard to duplicate by your competitors and desirable by your customers at the same time. It’s also important to spend time understanding your business metrics and why things happen the way they do.
Based on my observations watching the eCommerce sellers I coach and the eCommerce sellers I have built friendships with over the years most of them are spending 80% or more of their time moving money and the remaining 20% or less making money. Once they are able to swim upstream with less moving parts in their business and automate and outsource the remaining 90% or more of the money moving tasks they can now spend this time making money.
Griff and Lee, I hope this helps answer your question on how I did it and I hope in a small way (or large way) it will help you adjust how you spend your time with your eCommerce business as well.
Do I work more than 1 hour per day today? Of course I do. I get bored otherwise, especially during the winter months and while the kids are at school. However most of this extra time is spent on coaching other eCommerce sellers with their business, writing blog articles such as this, reading about new strategies and new tools for eCommerce sellers and chatting with sellers on Facebook. I also spend slightly more time during the winter months when my business is slower to launch new products to ultimately spend less time during the summer months when I can enjoy the outdoors and let my business fly mostly on autopilot during my busy season. Sounds counter intuitive but it works.
Thanks again for inviting me to the eBay Radio show. I always enjoy talking business with you guys and listening to your show.
Cheers to selling smarter!
PS: Remember to LIKE/SHARE! Thank you!