Who wouldn't want a flawless business with no profit loss? Let's be realistic, losses are inevitable. Every business owner will go through a stage where money can go down the drain.
In today's podcast, I let you in on the mistakes I've learned throughout my eCommerce experience so you can save thousands of dollars!
What's Covered in This Episode:
4 Beginner Mistakes:
Links From This Episode:
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Hey, what's up everybody? Anton Kraly here from eCommercelifestyle.com and welcome back to the podcast. So in the Thursday episode from last week, I talked about how you can lose money dropshipping on Shopify and that episode did a lot better than I thought it would. We had a bunch of really good comments on YouTube, got some emails in about it. Now if you haven't seen that previous episode yet, I will post the link in the description. But in today's episode specifically what I want to talk about are four beginner mistakes that can literally cost you thousands of dollars. So it should go without saying, but these are things that you should avoid at all costs.
Now the first beginner mistake that can cost you thousands is pricing errors. So in that last episode, I talked a lot about knowing your margins, which is super important. But let's just say you do that and you know your margins and you know every time you sell a product for supplier ABC, you are making a ton of money. Awesome. All is well there. Now let's say it's time for you to get supplier ABC's products uploaded to your website. Now maybe you do it yourself or maybe you go to Upwork or something and find a VA and have them do it for you. But what can happen here, and what I've seen happen here even on my own stores back in the day, is that when either you or the person doing this job is editing a CSV file, which is basically a spreadsheet or to think of it easier a Google Excel Sheet that has all of your products on it, all of the sku numbers, all of the pricing, all of the descriptions, when those are being edited, it is possible to make mistakes and to have things not sort correctly anymore.
So the best example I can give you is let's just say product A, when the person is editing it, they made a mistake in some formula where product A's price is now product B's price and product B's price is now product C's price. What happens is when this CSV of products, this spreadsheet of products, gets uploaded to your website now the margins don't matter anymore because there's mismatches. What happens here is you can go ahead and turn on ads, your paid ads, and maybe the next day you see, "Wow, I just turned on my ads and I did $10,000 in sales. This is amazing." But then what could happen is you email your supplier, supplier ABC, and you say, :Hey, can you ship product A to this customer or product B to this customer?" So on and so on. Then they send you your invoice and you realize that you're actually losing money on every order you've just sent them.
How can that happen? Well, like I just said, it's because of pricing mismatches. Now when this happens, of course you can reach out to your customers, the people that paid you and you can say, "Hey, sorry, there's been this error," but I'm telling you right now, even though the rational thing for customers to do is either say, "Okay, just cancel it." Or, "Okay, I'll pay the difference," most of them, because this is again the way people are are going to say, "No, I paid X. I want it for X." Then you have to make that decision of do you want a negative review or do you want to just lose money on it. So this is something that is common, but it's also extremely avoidable.
So the first thing I would tell you is whether it's you or an outsourcer that edits your product catalog, after it's uploaded to your website, to your online store, before you turn on your paid traffic, you want to do what I call a spot check. This is where you're actually pulling up your original product catalog from your supplier and you're searching on your online store for different products. So simply just go to your search box on your website, search for the actual products, and make sure that they match up.
Now if you're working with good people and people that aren't making careless mistakes, chances are you're not going to have an issue here but if you're going to have an issue, you need to know before you start paying money for ads that are resulting in sales that are not profitable. So make sure please, you are spot checking your product prices before you bring on the buyers and turn on paid traffic.
Now the second beginner mistake that can cost you thousands I actually did a standalone episode on earlier this month and that one's called Is Buying Done For You Stores Legit, but the second mistake is buying what I refer to as turnkey opportunities. If you want to know more about this, you want to hear me go deep into it, look for that episode. I'll post the link again in the description. But what happens here is people, they get blind I guess to the fact that starting a business takes real work and I hate to say it, but almost greed kind of takes over and they see opportunities online where maybe they can invest $3,000 into this new website where it's being pitched or sold as, "Hey, you're getting this custom store. It already has 10,000 products uploaded to it. All you have to do is turn on ads. It's going to start making you money."
These are not usually cheap sites when people buy them but like I mentioned in that previous episode, it's almost impossible to make money with them because what you're buying when you buy a turnkey store is a copy and paste clone template that other people already have and the products that are uploaded to it are coming from places where there's just no margin. There's no real relationships there between that site and the suppliers. The prices on your future turnkey website are already more than people could buy the products for from basically any other website. If you just go on Google and search for the products you could see for yourself. But the way I can say this is when you're looking to invest into a business, if something seems too good to be true, it is and these turnkey stores that people waste thousands of dollars on when they're beginners, they are too good to be true. It's a waste of money. Save yourself the headache, the money and the time. Do not buy them and save yourself thousands of dollars.
Now the third beginner mistake that can cost you thousands is by working with supplier directories and the easiest way I can describe this is let's just say you're new. You want to find suppliers, you want to build a website, you go on Google.com. You type in dropship suppliers and you'll notice if you do this that all of the sponsored ads, the ones that people are paying for, go to these websites that ask you for money, usually a monthly fee, to have access to sell their products. What I really don't like about this is they pitch them based on potential profit. So on their homepage, on their order forms, they'll give you examples of how much money you could make if you sell their products and let's just say we'll use this stand up desk again as an example. It shows you on their homepage, you can sell this stand up desk and it says your price, your sale price, $1,000. Your cost to us $500, your profit $500 and to the unsuspecting beginner, they see that and they're like, "That's awesome. That's exactly what I'm looking for."
But what they don't show you is that the other 50 people that might be selling that same exact desk are selling it for $600 or $550 or $500 because they have a better connection with the supplier. So the way you can lose thousands of dollars this way is you pay the fee to have access to these products, to the directory. You upload them all to your website, you turn on your paid ads and you start spending a good amount of money in paid traffic, but you realize your conversion rate is zero. Meaning nobody's buying from you and the reason no one's buying from you again is because your competitors are selling the product for much less money because they're not going through a directory. They're working directly with the company that makes that product. So do not work with directories. Do not waste the money on ads that aren't converting.
Instead, go direct it to the brands that make the products you want to sell. That is where the true margins live. That is where you can actually make money. No directories. Go straight to the source of the companies that make the products you want to sell. And finally, the fourth beginner mistake that can cost you thousands is something I really don't talk a lot about and it definitely could be controversial, but if you want to hear me do a whole episode on this, just let me know in the comments. But it's business partnerships. Now I'm not going to just say write off business partnerships completely and they're always a bad thing because that's not true. But when you are a beginner, my advice is stay away from partnerships because you don't know what you don't know and it will cost somebody, either you or your business partner, a lot of money in the long run.
So let's just look at it this way, right? Let's say you're brand new to eCommerce, maybe you're in a forum online or on a Facebook group, you see somebody else that's also brand new and they say, "Hey, I'm looking for somebody to build a store with and I want to do this together to keep ourselves accountable or motivated." And you're like, "Okay, awesome," because that sounds good and you two decide that you're going to be 50/50 business partners. You do the work, you build your store and let's just say three months from now, the store is doing $50,000 a month in sales and the net profit is $15,000. You and your business partner take a distribution. You get 7,500 your business partner gets 7,500 and then you sit there and think, "Why did this person just get $7,500? I'm the one that stayed up late. I'm the one that worked weekends. I'm the one that got approved with the best suppliers. I'm the one that responded to customer live chats."
This is something that you wouldn't know when you first just got into the business that just forming a 50/50 partnership or really any partnership just from nothing to something when both people are beginners leads to this type of problem very early on. At that point, one of two things could either happen. You could then say to your business partner, or if you're the one slacking, they could say to you, "Hey, I want to buy you out." Now you have to deal with extra money to actually pay somebody off for what? For a few months of work, or you have to do the next thing which would be, you know what? Let's just sell this business because we're not going to work together. Or you're going to keep growing it and there's going to be resentment over time.
Now, I'm not saying, again, this happens 100% of the time where you have a business partner, but if it's two people that are beginners, which is who this video is for, who this podcast is for, if it's two people who are beginners that are just saying, "Hey, let's just do this together and see what happens," I'm telling you there's going to come a day where the numbers don't make sense anymore and you feel like you're wasting thousands of dollars. So if you want a work around to this, let's just say you're thinking, "Well, okay, Anton that makes sense but I'm not an analytical person. I want a partner that knows their numbers. That can set up things like tracking and set up things like our first Google ads campaign."
What I would say to you is look at the actual out of pocket expenses for that. If you want to outsource it from day one and then compare that to what the potential longterm fee is to have a business partner. So again in the beginning my advice is do not partner with anybody. It's going to hurt somebody in the long run and it probably will hurt the business. If you want to hear again my full thoughts on business partnerships at different stages of business, just let me know in the comments and maybe I'll do a future podcast on it.
But to recap this episode, the four beginner mistakes that can cost you thousands of dollars. The first is pricing and having mismatches. The second is buying opportunities and turnkey stores. The third is using supplier directories and wasting money on ads for products that you truly can't compete on. The fourth is taking on business partners too early and then ending up splitting profits for no reason other than two people randomly said one night, "Hey, let's be business partners."
So as always guys, if you got value in this episode, please do go over to Apple Podcasts and leave a review. It means a lot, helps more people learn about the show and if you want to know more about how to build a highly profitable semi-automated online store, be sure to go to dropshipwebinar.com to get my free training. So that's it guys, appreciate you. Thank you for listening and I'll talk to you in the next episode of the podcast. See you.