Building a Million-Dollar Online Business: Challenges and Solutions
Wondering what it takes to start a million-dollar business?
It can seem like a lot of people have achieved this milestone. After reading so many success stories, you’re probably wondering what kind of startup goes on to become a successful business and generates that much revenue.
One of the most popular ways to achieve millionaire status is to start an ecommerce business. While there’s a lot of potential in scaling an ecommerce business, the future is dark and uncertain after you first register on an ecommerce platform.
You’ve got a lot of issues to wrestle with, such as what types of products you sell and which digital marketing channels will yield the best results.
We’re not going to tell you what to do with a step-by-step approach, simply because there’s no one-size-fits-all solution. Every ecommerce business is different and faces its own challenges.
Instead, we asked several million-dollar ecommerce business owners what it took for them to scale their business, including some of the challenges they faced and how they overcame them.
Ecommerce Hassle Map
From the responses we received, we picked a sample size of 11 multi-million dollar businesses and analyzed the responses across 17 different data points.
The data points are based on the owners’ experiences of growing their respective brands. We’ve picked out the most interesting data points:
Let’s take a look at some of the answers and what the common trends were.
What motivated you to start this business?
We thought a good starting place was asking people for their inspiration in creating a business. The 12 responses were grouped into the following categories:
- Finding an opportunity in the marketplace
- Following my passion
- Having freedom in my schedule
- Improving the environment or advocating for social change
- Taking control of my own destiny
As expected, finding a blue ocean in a crowded marketplace was the most common reason. Interestingly, following a passion was the least reported response. While it could be argued that improving the environment or advocating for social change could be grouped with the passion category, one doesn’t necessarily lead to the other.
Owners who said improving the environment as a driving motivational factor elaborated that they wanted to reduce the amount of single-use materials.
With regards to making a difference with a business through social change, owners said they wanted to help others with certain health issues, with one owner saying they hoped to help to pull one million farmers out of poverty.
In a similar vein, we split taking control of your schedule and taking charge of your destiny into two categories because the latter felt like it had some serious conviction behind it. Both of these categories allude to the fact that online businesses give you unparalleled freedom to choose to work from anywhere in the world and at any time.
The days of working from an office being compulsory are long gone, especially after we’ve seen how well the world adapted in the face of a global pandemic. With the right collaboration tools, you can manage a million-dollar business by overseeing a team working in various time zones without sacrificing productivity.
How did you start your business?
The majority of owners started bootstrapped, meaning that there was very little budget and that they had to hold down multiple jobs while working long hours at the start.
A couple of owners mentioned that they partnered with a co-founder. Many entrepreneurs argue that being a one-person team is the only way to start a business, but there’s also a case to be made for bringing in a partner if you’re lacking key skills or time. The bottom line is to keep an open mind towards strategic partnerships, as it might pay dividends in scaling the business. In the end, either you or your co-founder could buy the other partner out to have complete ownership of the business.
How big is your team?
None of the owners indicated that they were a solopreneur running the show on their own.
One interesting observation was that the larger the business, the more employees they had helping with the business. When we compared the number of employees against annual revenue, businesses earning up to $500,000 in annual revenue had up to five employees, while all businesses making at least $1,000,000 in annual revenue had more than six employees.
This finding makes sense because the larger the operations, the more hands you need to keep things running smoothly. With that being said, you could also outsource many of the tasks to contracted specialists if you want to keep a smaller team.
Entrepreneurs who are in the business of buying and flipping online assets usually have a dedicated team experienced at scaling businesses so they can be sold for a profit in the future.
How did you build your team?
Most of the owners responded that they hired when they received enough funding or when they realized they didn’t have enough time to expand the business.
Nishchal, CEO of Nepal Tea, had this to say about realizing what his priorities were:
I was working too much ‘in’ the business and did not have time to work ‘on’ the business and therefore, I knew I needed someone to do the operations if I wanted to scale and really work ‘on’ the business.
Knowing when to hire can be a tricky thing. Hire someone too soon and you won’t have enough work for them to do, while waiting too long could lead to burnout and a loss of revenue because there are too many spinning plates to keep going.
As Nishchal shared, the majority of entrepreneurs want to work on a business rather than in it. Delegating time-consuming tasks to staff or hiring virtual assistants (VAs) to manage these processes can free up a lot of time and mental bandwidth so you can grow your asset instead of maintaining it.
What maintenance work did you outsource?
All ecommerce store owners said they outsourced at least one area of their business to freelancers or delegated the task to someone else.
With such a wide range and combination of answers, we separated the responses by the number of times an ecommerce owner said they outsourced a task.
Inventory packing was the most delegated task, as seven of the 11 owners either hired a third-party solutions (3PL) service provider or staff to repackage any inventory. This step can be crucial to creating a differentiated brand through customized labeling and curated packaging. However, it takes a lot of time and effort to do so effectively, especially if you’re fulfilling hundreds or thousands of orders per year.
Tied for second are store or site maintenance and ad management, both of which are also time consuming. While checking on product listings daily sounds simple, it can be outsourced to a VA to oversee. A VA can also be trained to manage paid advertising campaigns, but many owners often prefer to outsource to an expert in order to get the highest conversion rates.
Outsourcing tasks comes down to how much time it takes to complete a task and weighing up whether it’s worth your time or if you could be spending that time doing something more valuable.
What work do you currently do on your business?
Most of the owners shared that they spent their time in product research, managing inventory levels, and responding to customer queries or managing returns.
As far as scaling a business, these tasks are expected of a CEO who’s responsible for growing the brand.
Finding new products can give a brand the competitive edge while creating a new revenue stream. However, finding products that will sell and also align with a brand’s reputation and identity takes time and research, which is why you’ll see many owners dedicating resources to this area.
Managing inventory levels is also an important task, as running out of stock for your best-selling products can seriously affect a brand’s reputation and cash flow. Customers are more likely to order from a similarly priced and reviewed product if it’s in stock, so making sure you have enough supply to meet the demand is vital, especially during peak periods where demand increases.
On the other hand, customer service needs to be excellent year-round. Making sure customers are satisfied with the product quality and the level of service provided can go a long way to creating brand evangelists. While this area can easily be outsourced, some owners take responsibility for it to make sure it’s done to the best of their ability.
What were the biggest challenges you faced with this business?
Finally, we reach the question we’ve all been waiting for: what are the difficulties in building a million-dollar ecommerce business?
While there was a wide range of responses when it came to answering this question, none were unexpected or out of the ordinary for ecommerce businesses.
Let’s start off with the obvious issue you’d expect to see at the top of the list: COVID-19.
Interestingly, only one owner referred to the global pandemic as putting a wrench in things, which is much lower than we expected. If anything, this evidence points to online businesses having been a really smart investment when much of the world was forced to work from home for a period of time.
We found that the coronavirus actually made digital assets even more in demand. Instead of struggling to survive, many owners were struggling to keep up with the demand as more and more people turned to shopping online.
Thankfully, this trend looks like it’s still happening and continues to grow as our State of the Industry report shows that we’ve seen growth like never before.
The challenge of keeping up with the demand is reflected in the chart above, as several owners said that they struggled with scaling their brands as a result of cash flow issues, not receiving enough funding to take the brand to the next level, or just getting their brand name out there.
Growing a brand takes time and accelerating growth is usually only possible with extra funding to increase marketing efforts.
A few owners cited team building and hiring as an issue, which becomes more important when you’re looking for talent to scale a larger brand. A larger brand also means operations and logistics increase in size and complexity, which would explain why a few owners may have struggled with this issue as they transitioned from a small business to larger one.
The main takeaway from this is that it’s a great time to own an ecommerce business, and you should expect to face some difficulty when trying to grow your business quickly if you don’t have access to a lot of capital. But where there’s a will, there’s a way, as these owners reveal in discussing how they overcame these challenges.
How did you overcome these challenges? (or attempt to?)
If we could sum up the responses with two characteristics, it would be “patience” and “failing forward.”
The majority of owners gave pragmatic advice, but what stood out to us was the resilience shown in how they took different approaches to tackle these issues head-on, or acknowledged that more time was needed before they could mount a challenge to conquer these hurdles.
The most common response was “patience,” which several owners pointed to.
Nishchal of Nepal Tea said his approach involved: “Patience and persistence mainly. Business is mostly common sense and a lot of hard work so failing fast and learning is very important.”
Nishchal’s latter statement is especially important in the world of entrepreneurship as the hard truth is that failure is part and parcel of the journey. You’ll need to experiment with different approaches to work out sustainable processes that can be applied at scale.
And it’s okay if these experiments fail. The important thing is that you “failed forward,” as coined by Judson who runs Butter. It can be discouraging to see negative results all the time when you first start off, but treat every failed experiment as an opportunity to learn what didn’t work so you can fine-tune your processes until you figure out what does work.
The million-dollar business owners did exactly that, as you see from the responses. For example, Dustin of 503 Sports took it upon himself to learn trademark law, “…to fully understand what I could and could not sell. I was able to stand firm against companies (especially competitors) that demanded money or that we stop selling certain merchandise.”
Not everyone will have the time to learn a new skill, which is why many owners said they took it slower and tempered their ambitions. It might not be the sexy route, as many entrepreneurs want success the fast-and-furious way. But taking a long-term approach pays dividends as you set the foundation for success by establishing good processes and discovering what works for your brand.
Slow and steady wins the race, especially for ecommerce businesses.
Would you say you have the capacity/skills to scale this business to the next level?
All but one of the owners said they did have the skills to scale the business, with capital being the only barrier.
One owner said they didn’t have the skills but also weren’t sure how to take it to the next level, as they had hired a consultant that didn’t give the ROI expected.
In these cases, it might be worth looking to sell your business so you can raise the capital to pursue other projects. You’ll free up mental bandwidth, resources, and time to commit to other ventures without the constant nagging feeling of a business that isn’t performing as you hoped looming over your shoulder.
Why would you sell your business?
The majority of owners shared that they’d only sell if a strategic merger would be in the best interests of the team and company or if the owner wanted to start a new business project.
Sometimes, a strategic merger could help you claim more market share as you gain access to a wider pool of resources when you join a larger organization. However, many entrepreneurs want to be completely detached from the business after the sale so they can focus on other projects.
Lessons Learned from the Empire Flippers Marketplace
What we’ve covered so far is a pretty high-level overview of the 11 entrepreneurs who kindly shared their experiences of building a million-dollar online business.
Their responses conveyed what the journey looks like when creating a large business from scratch. But what about the finer details of what a million-dollar business looks like from the inside?
We thought it would be useful to share some of the quantitative measures taken from the seven-figure ecommerce deals on our marketplace and comparing the survey responses to some of the trends we noticed.
Here’s the breakdown of the 42 seven-figure ecommerce businesses that were sold through Empire Flippers that we analyzed:
- Average sales price = $2,448,993.38
- Average monthly revenue = $240,377.33
- Average monthly net profit = $69,106.38
- Average age of businesses (from creation to listing on our marketplace) = 5 years 2 months
- Average number of SKUs = 54
- Average number of team members = 2
- Average number of hours worked per week = 12
If you’re curious about how ecommerce businesses are valued and sold, we’ve created a comprehensive article that goes much deeper into how it works and what you need to know if you want to sell your business.
For now, let’s see what the trends were and what you can learn so you can better prepare to build your own million-dollar business.
Delegate, outsource, adapt
All of the entrepreneurs who responded to our survey said they outsourced at least once area to a specialist or a staff member.
However, some of the seven-figure sellers on our marketplace indicated that they were a one-person team, not outsourcing any tasks. But what’s interesting is that solopreneurs worked 12 hours per week on average, while sellers who had at least one employed staff member worked 11.5 hours per week on average.
A half-hour difference in owner involvement doesn’t seem like much considering the expenses involved with hiring people and the additional resources needed to manage them. We decided to see if there was a trend between the number of hours worked by the business owner against the number of employees.
Interestingly, we found that the more members of staff there were in the business, the more an owner was involved in running it.
This could be down to entrepreneurs looking to scale their business. Growth needs a large investment of time and money, so it’s not unusual for sellers to outsource the majority of the business’s operations so they can focus on identifying new ways to expand the business, such as through product research or competitor analysis.
On the other hand, a one-person band would be looking to streamline the business by automating as much of the processes as possible. If you’re looking to create “passive” income, it’s important to create SOPs and outline your processes as soon as possible. Doing so makes it easier to outsource to specialists or freelancers if you don’t want to hire anyone on the books.
Let’s see what types of processes were outsourced.
Most owners either outsourced their logistics to a 3PL provider or relied on Amazon’s fulfilment network. With Amazon FBA, some sellers opt to use a 3PL to hold inventory before forwarding to FBA warehouses in order to avoid long-term storage fees.
Assigning VAs to handle customer service was also a popular choice. These tasks can be straightforward if they just involve responding to common customer queries, while the owner will step in if a customer escalates a complaint.
While marketing was broken down into separate categories, different aspects of content creation and promotion were handed off to specialists. It can be cost effective to hire freelance writers to write articles or copy for listing pages while you or a staff member edits before publishing.
Trim the fat: Being selective in what you take charge of
Overall, most owners took responsibility for overseeing inventory levels, running PPC campaigns, and providing customer service (if they didn’t outsource this).
You can use sophisticated software to track inventory levels, but many entrepreneurs take charge of this task. Despite hiring a team, it’s worth taking the extra step to personally make sure that there aren’t any stock shortages to avoid losing any sales.
Many sellers also ran PPC campaigns themselves. This could be due to budget constraints or a way to lower expenses. If you’re a one-person team wearing several hats, it could be worth signing up for an online course to learn new skills and increase the likelihood of success in each area of responsibility. Just take care that you don’t sign up to anything offered by fake gurus!
If you are wearing many hats and fulfilling several roles in your ecommerce business, consider limiting the number of active SKUs on your storefront so it’s more manageable to maintain each one.
The average number of SKUs was 54, but when you analyze businesses that were managed only by the founder, this average dropped to 38.
Keeping the SKU range lower is important so you don’t have to spend as much time optimizing or updating each page. While adding new products is a great way to create a new stream of revenue, you might have to spend more time than you can afford on product upkeep.
Like Frankie from Gustus Vitae shared, a good way to know when you can outsource is to keep pace with the business.
We grew with demand – from the Farmer’s Market, our first account was our local Whole Foods, and we’ve just grown since then.
After hitting certain revenue goals or landing your first big client, you can consider hiring so you don’t fall behind with the increased demand for your products.
However, there isn’t a one-size-fits-all approach to managing a business. The types of activities you choose to manage personally and outsource depends on your skillset, your budget, and how much time you have to work on the business. Keep in mind that if you’re working a full-time job on top of running a business, you’ll naturally have less time compared to someone who’s dedicated all their resources to manage a business.
These data points are useful to see how the majority of millionaire sellers ran their business as a point of reference, but remember to do what you need to do in order to make things manageable.
Outside of the data, there are other points to factor in when starting a business that aren’t quite captured by analytics but worth considering.
Pick a niche you’re interested in
From DropShipping to Amazon FBA or DTC ecommerce, there are different ways to start an ecommerce business. However, how to pick the “right” niche is a commonly asked question.
In our data-driven study where we analyzed whether niche was critical to the success of a business, we found that niche doesn’t make a significant difference. We did notice that the home niche was a popular choice, and businesses in the pet care industry had the highest average sales price.
However, there isn’t a single niche that will guarantee success.
With that said, we recommend that you choose a niche you have interest in so you’re motivated to stay with it instead of pursuing a niche that you think has the highest profitability. For example, starting a business selling dog collars because you think it’ll be highly profitable can only take you so far and it’s likely you’ll fall off the bandwagon when you lose interest.
The worst-case scenario in this example is that you feel forced to sell the business when performance declines because you haven’t worked on it for a long time.
Start strong by choosing a niche that you have some knowledge of, and preferably some interest in as well.
Customer research: Ask, ask, and ask again
Few owners shared in the survey responses that finding product-market fit was an issue for them.
It’s likely that they found their unique selling point in the market very early on so this wouldn’t become a problem when they focused on scaling the business.
In order to put you in a similar position when you’re growing your ecommerce business, it’s highly recommended that you conduct as much market research as soon as possible.
The best type of market research comes from your customer or prospective leads. If you’ve sent samples out or you’ve received great reviews through objective review programs like Amazon Vine, consider reaching out to individual reviewers to find out a bit more about your product.
You can ask why they chose your product and what they thought about your customer service. These deeper questions can reveal what your brand’s strengths are, as well as show you the areas you need to improve so you can optimize your product and business more effectively instead of trying to improve based on gut instinct alone.
Entrepreneurship is hard. The #alwayshustlin crowd will remind you as much, but the fact is that building a business is tough.
As these entrepreneurs shared, they found a way by persevering and figuring things out one step at a time. Through a huge amount of hard work and steady improvement, you can pave your own way to that million-dollar mark.
It doesn’t happen overnight. Rome wasn’t built in a day, and your ecommerce empire probably won’t be scaled in a few days either.
The average age of seven-figure businesses on our marketplace was five years and two months. While they can be proud of their achievements, I’m sure all of them can recall fears and worries about whether it would all work out.
It could help to establish a roadmap so you have certain milestones you can work towards. Your first profitable month might not come for several months after you launch, so it’s important to have a business plan in place to keep the nerves at bay.
During this time, you can focus on growing different marketing channels. Many entrepreneurs stick with running several PPC campaigns, but there’s a lot of potential in other types of digital marketing such as email marketing, organic search, and social media.
You could partner with influencers for word-of-mouth endorsements or guest post on other blogs in the same or shoulder niches in order to expand your reach. Many entrepreneurs use LinkedIn as an organic source of networking by connecting with like-minded ecommerce owners.
You can create a pretty diversified marketing strategy on a tight budget. As your business grows, you can outsource some of your marketing campaigns to a specialist if you feel like there’s potential for growth but you’re unsure how to improve it further.
The important takeaway is that you keep going and continue to innovate in the face of adversity.
Invest in a Business to Fast-Track Becoming a Millionaire
We’ve covered a lot of ground, but here are the key takeaways:
- You can start a business in any niche as long as you have some interest in it
- You can outsource tasks to freelancers or hire so you’re not working a full-time job instead of running a business
- It takes time to build a million-dollar or multi-million-dollar business
- You’ll come across a wide variety of challenges, so stay agile and adapt to each situation
No matter how many million-dollar business ideas you might have, making one into reality is a different story. Even with a lot of money available at the beginning of the journey, success isn’t guaranteed. As seen in both the survey results and the marketplace data, you’ll often have to take on many different roles and run several different tasks, some of which you’ve never experienced before.
What if there was a way to skip the difficult startup journey and get straight to the part where you’re running a business that’s earning profit from day one?
That’s what Laura did. She originally invested in Adoratherapy, but over time saw how profitable it was and eventually acquired the whole business.
In the same way, you could make a smart investment by acquiring an ecommerce business from our marketplace. As the business is already profitable with product-market fit, you just need to focus on maintaining its performance by running it as the seller does. They’ll give you support up to 30 days, with room for further support if you need it upon further negotiations.
To get an idea of what it looks like to run a business you’re interested in, tune into our seller interviews where we ask sellers a wide range of questions to give you an idea of what type of skills are needed to run the business if you’re not familiar with the business model or niche.
And don’t worry—you don’t have to buy a million-dollar business immediately. You might consider buying a smaller business that’s on a strong growth trajectory to get a feel for what it’s like to run a profitable business. With this initial investment, you can learn how to scale it and apply the same method to a larger business in the future.
Register on our marketplace for free to start browsing for listings now. A few years after you’ve gotten used to running an ecommerce business, you could exit a millionaire.