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231. Investing and Managing Margins in Your eCommerce Business

231. Investing and Managing Margins in Your eCommerce Business

When was the last time you really dug into your profit and loss statement?

I don’t know if it was people hearing our recent episode about inventory and finances, the state of the economy right now, or a little bit of both, but I’ve been having A LOT of conversations about finances with clients and Lounge members of late.

I’m glad these conversations are happening though because finances and profitability are some of the most important parts of running a product-based business, or any business.

If you’re crunched financially, that comes with a lot of pressure and stress, and rightfully so. That’s why today I want to talk through some of the things you should think about and consider when you’re trying to grow your business and/or increase profitability.

Of course, there is certainly nuance to every business and situation that I can’t possibly cover here, so take everything I say with a grain of salt and think of it as food for thought vs. diehard facts.

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Common Reasons Your Business Isn’t Profitable

Not surprisingly, there were a few common themes that kept popping up. Some were trying to cut expenses because they are seeing a slowdown in sales. Some were trying to take more money out of the business so they can quit their day job, and some just realized they hadn’t actually focused on profitability as much as they should have.

Once I started digging in and getting to the root of the issue, new patterns started to emerge.

The most common was an attempt to cut expenses because an accountant or CFO told them to. In some cases, the thing they went after was paid ads… presumably because it was the highest expense. The second biggest victim of these cuts was software.

There was another case where this biz owner wanted to be able to take more money out of the business so they could quit their day job. From a revenue perspective, they were going great, 7 figures a year. But there was barely anything left over to withdraw. While the biggest culprit was some debt that accumulated during the pandemic, the other biggest expense? Masterminds and agencies that didn’t quite bring the ROI to justify them.

Knowing how to manage all of this can be tricky though. You have to invest in order to grow, right? So how do you balance what you invest in with actually making money? How do you adjust these investments when you see a dip in sales? How do you decide when you should invest in a mastermind, a group program, a course, a coach, or a membership like the Lounge? How do you know when you can get rid of that monthly subscription to that software platform?

Let’s talk about it.

Take Your Accountant or CFOs Advice With a Grain of Salt

Let’s start with taking advice from your financial people. I’m all for getting support with things that you are not the best at. And managing your finances might be one of those things. But… before you go cutting every expense your CFO tells you to (especially if they’re new to your business) make sure you do your due diligence to ensure it’s actually the right move for your company.

Maybe this is the cynical New Yorker coming out in me, but I’ve been seeing (as have some of my other business friends) that these high-priced accountants, CFOs, or finance coaches are charging exorbitant fees and then telling you to cut things that are actually making you money.

For instance. Let’s say you’re running ads. And maybe you’re even outsourcing that to an agency. They might look at your P&L and see a big expense for ads. But if those ads are profitable, cutting them may actually just mean lowering your revenue in which case you would end up at the same profitability you are now, or less so.

This might also come up with software. While there might be some subscriptions that you’re just not utilizing and can do without, there might be something else that on the surface looks expensive… but ultimately saves you a lot of money in another area; like labor; because it increases your efficiency. This can especially be the case with customer service tools such as Gorgias*.

While there is nothing inherently wrong with having this sort of person in your corner, please do your own due diligence before you cut everything they recommend. Typically, they’re going to go after the highest expense first but not necessarily doing enough research to determine how that might affect the rest of your business. It’s up to you to dig deeper with them and make sure that cutting something in one place isn’t going to hinder you somewhere else.

Like most things in business, this is really just a math problem. Do the math. If you know ads are currently getting you an X return on your money. When you lower that budget, what does it do to your revenue? If you’ve been seeing a dip in organic revenue recently, cutting those ads is probably going to hurt you more than help you.

For others, the opposite may be true. I’ve seen many people cut their ads altogether because they were able to make up the difference in revenue through other organic means like email and product launches.

Ultimately, it’s going to depend; you’ve got to the research.

Choosing the Right Educational Investments for Your Business

Alright… let’s talk about investing in your education. As someone who sells courses and has a membership, I absolutely believe in investing in education. But not every offer out there is right for your business at any given time.

I’m going to break down the most common offers out there, what they typically consist of, what to look out for, and who they’re generally best for.

Let’s get started with masterminds.


Mastermind is a word that gets thrown around A LOT in the online space. These days they come in many different forms which can be pretty damn confusing.

The idea of masterminds was first articulated by Napoleon Hill in his book Think and Grow Rich. Masterminds are essentially groups of two people or more who come together with the aim of solving problems. The idea is that when multiple minds come together you create another mind… an invisible intangible force, the mastermind.

Essentially, any group of more than one person that is sharing ideas and solving problems can be considered a mastermind. And truth be told I see some programs that are marketed as masterminds but when you get down to it, they don’t really offer the support I would expect from such a high price tag.

What I typically associate with the word mastermind is a small intimate group of 10 or so people who rotate hot seats and can get support from the group. For the best results, these people are going to be at similar revenue levels and everyone needs to be SUPER committed. If people aren’t showing up, then you have no mastermind.

While masterminds can be super powerful, as mentioned they do come with a high price tag and a commitment. Typically 6 or 12 months, though there might be some 3 and 4-month commitments out there.

Another one of the downsides of a paid mastermind is that you don’t get to pick the other members of the group. One would hope that the facilitator would do a good job of curating the members to ensure everyone can give as much as they take. But ultimately, that’s out of your hands. For all you know, they just let people in for the sake of hitting their revenue goals.

And while revenue is often a driving factor in how groups are put together that doesn’t necessarily mean you’re all on the same wavelength in terms of your goals and expectations from the group.

I know, there’s that cynical New Yorker again… but I sure have heard some horror stories.

When I put together the Megamind a few years ago, which was more of a group program and mastermind hybrid which we’ll talk about in a bit, I put out a survey to my audience to get a feel for what they were looking for in a mastermind and to learn about some of their previous experiences making this level of investment. Two of the things that stood out were that the hot seats were often pretty superficial and that there wasn't much support in actually implementing what was suggested. That feedback led me to create an accompanying curriculum and to require hot seat submissions ahead of time. I provided everyone with some prompts to make sure they really thought through the topic they wanted to brainstorm and get support with.

So.. who is a Mastermind right for?

Ultimately, it’s going to depend on the group itself and how it’s structured, but if we’re talking about the hot seat type mastermind, then I think it’s best for those who are already established and seeing success in their business but are ready to think outside the box and take it to the next level or if you need to make grownup business decisions. It’s also really great for making connections and creating deeper relationships with other business owners who are working toward the same thing you are.

Who is Not the Right for a Mastermind

This is likely not for you if you’re still struggling to make ends meet in your business, if you’re trying to get on solid ground with your growth plan, if you’re looking for a hail mary, or if you need to learn a specific skill.

If that’s the position you’re in, you’re likely better off working 1:1 with someone who can get you set on the right path. And that doesn’t even necessarily mean an ongoing 1:1 engagement, sometimes it’s an audit of your business or a one-off strategy call to get you some quick clarity on your best next steps.

How to Create Your Own Mastermind

While there is of course value to a paid mastermind group and having the support of the facilitator, you can also create your own peer-led group. I do find this too works best with established businesses, so it’s not the blind leading the blind, but even for those just starting out. Sometimes you just need someone else who gets your struggles and can support you and lift you up when you need it.

There are of course downsides to free masterminds as well. Someone still needs to be the leader and typically people aren’t quite as committed to things they haven’t paid for. But if you can rally the right group together, it can still be pretty powerful.

Group Programs

Group programs are typically a few weeks long say 6 or 8 weeks, where a group of people are all working toward the same goal.

Like masterminds, group programs can come in different forms and structures, and whether or not it’s right for you is going to depend on your current needs and where you’re at in your business.

Most group programs are created in one of two ways.

The curriculum or process is based on what the facilitator does with their 1:1 clients and it’s put into a group setting so they can serve more people in the same amount of time, or, it’s a curriculum that they plan to turn into a DIY course, but want to walk through it live with a group of students to get feedback before they put it out in the world.

A great example of this might be me turning my 1:1 process of setting up someone’s email marketing flows into an easy-to-follow step-by-step process and then hosting a group program where people can work through the content and get my feedback over an X number of weeks.

I’ve also hosted a mini-group program exclusively for lounge members on content strategy and planning. The majority of the content is already available inside the Lounge that members can access anytime, but something about the accountability that was created when it was structured week over week with support from the hosts, it just hits different.

You might also find a group program/mastermind hybrid. That’s really what the Megamind was that I did a few years ago. I knew there were certain things most of my audience weren’t super versed in even though they were already super successful in their business, like analytics and ads for instance. To make sure we addressed that but also provided the high-level support of a mastermind, we did a combination of live training, and rotated hot seats among the members.

Like the mastermind, group programs do require commitment. If the goal of the program is to learn and implement something and you want the feedback of the facilitator, then you definitely need to show up in order to take full advantage.

I think group programs are great when you want to level up or learn a specific skill, have the time to dedicate to them, and need the accountability of the group and the facilitator to get things done.


Courses are great when you want to level up a specific skill. For instance, I have a course that teaches you how to read, interpret, and take action from your Google Analytics. I also have a course that teaches you how to take advantage of all of Klaviyo’s features. I’m also working on a course to teach you how to do SEO for eCommerce, how to run a product launch, etc.

Some courses are a bit more high-level covering multiple of these topics. [Like The Product Boss’ Multi-Stream Machine] One of these days I will probably create the eCommerce Badassery Course that includes all the things. The Lounge is already halfway there.

Those are generally more expensive but likely come with a community to lean on and serve as something you can go back and reference over time as your business grows.

The one trick about courses is that you need to be able to keep yourself accountable for actually doing the work and implementing what you learn. Some course creators may offer VIP options such as material review, 1:1 calls, or even a live course experience similar to a group program. If you struggle with accountability and follow-through, it’s probably worth it to invest in the additional support.


Next up, memberships! Like most of what we discussed so far today, memberships do come in many different forms. Some memberships will be all around a specific topic, such as email marketing, and others like my membership for eCommerce business owners the Lounge is a bit more all-encompassing.

In most cases, memberships are going to be the lowest investment option… but not always. There are a range of different price points out there. The Lounge is $47/mo, but there are memberships that are hundreds of dollars a month or even some that are less than $20/mo. It obviously depends a lot on the topic, the content, the support, etc.

Some memberships have monthly focuses where a specific masterclass is released and the idea is everyone is working on the same thing, similar to a group program. And others are a bit more choose your own adventure like the Lounge. We teach you how to determine what to focus on in your business and then give you the tools to implement it.

There are other memberships that deliver content ideas on a weekly or monthly basis for social and email.

Honestly, there is pretty much a membership out there for any topic you might be interested in. Memberships are a great way to get ongoing support and typically for a lower price than other educational options out there.

You’ll want to do a bit of research about the membership though and make sure it meets your needs. For instance, I was in a membership when I first started my business but it was too general and too big. There was a lot of content that wasn’t really relevant to me and there was little to no face time with the hosts. Sure, there was a lively engaged community which was nice, but I still felt like a needle in a haystack.

What I ultimately found a lot more valuable for myself was a smaller program that let me create deeper connections with the other members and the host.

The Lounge is a similar example. The group is smaller, and while we are planning on growing it long-term, my co-host Nicole and I will always be the ones guiding the group and answering strategy questions. Sometimes in larger groups, even higher-level group programs, it’s not actually the coach who is leading it.

What is going to be the right fit for you is going to depend on what you need but memberships are great for getting ongoing support at a more affordable price point, that doesn’t necessarily require you to show up all the time.

Investing in 1:1 Support

What if you decide you need more one-on-one support and these group options just aren’t cutting it?

In most cases, this is going to be a bigger investment than the mastermind, but it’s 100% undivided attention on YOUR business from someone who is well-versed in the thing you’re getting help with.

The big trick here is figuring out what sort of 1:1 support do you need.

Get Help From a Specialist

If you want help specifically with growing your eCommerce business, then, in that case, you’d to hire a specialist, like me. Specialists are going to be able to see your blind spots, uncover insights, and set you on the right path for where you want to go next for the specific thing that you’re struggling with right now.

A Business, Mindset, or Life Coach

If on the other hand, you’re thinking bigger, like what is the vision for your life, then you might want a more general business, mindset, or life coach.

True coaches are good at helping you identify where you might be getting in your own way or bringing clarity to what you actually want your life to look like. For instance, a previous client of mine recently shared how she always had a bigger vision for her brand vs. just selling the product that she sells. She’s been working with a coach for the last year or so and it helped her to bring clarity to that vision and she is now starting up a new venture.

Investing in Service Providers & Agencies

Now, let’s talk about investing in service providers and agencies. Who you should invest in is going to depend on so many factors like your skillset, your time, your team, your budget, etc. This is honestly one of the more difficult decisions to make, especially when it comes to marketing activities.

For instance, if you have a wide product assortment and source from a lot of different vendors, it’s a no-brainer that your inventory manager should be an in-house person. Customer service is typically better with in-house people as well because they know your business and customers way better than any outsourced agency could.

But what about things like Facebook Ads or email marketing; how do you decide?

Sometimes it seems like you should wait until you hit a certain revenue number before you invest in a service provider…. but at the same time, investing in someone to do it right the first time could mean that you get to that revenue number faster, right?

It’s often less expensive to outsource than it is to hire an actual W2 employee, but you still need someone to oversee and facilitate that relationship, to make sure they’re up to date on what’s going on in your business, etc.

Am I getting to an answer here? I’m not sure. But here are some things to think about when it comes time to decide.

Things to Consider When Deciding Between Hiring an Employee or Outsourcing

Hiring employees comes with a whole lot of extra red tape and expense, but sometimes it truly is the best decision for your business. While the final answer is going to depend a bit on your unique situation, here are some things to think about.

How much information do they need to do their job?

This is probably the most important question to ask yourself. Using the inventory management example, assuming you have a wide assortment of product, this person needs to be really well-versed in what’s going on in your business to do this job effectively. They need to be on top of your sales, and know if certain products are getting poor reviews or being returned a lot, they need to be up on your marketing and launch plans so they can ensure you’re properly stocked.

Another example is if you are really reactive in your marketing. When I first started eCommerce Badassery I was doing email maintenance for clients. One of those clients was very reactive in their marketing, partly because they got a lot of unexpected press and influencer mentions, and because they were pretty pop-culture focused and often would create new products in response to things that went down.

As an outside person, it was way too hard for me to keep up with that. They would email me and want an unplanned email to go out that same day. That just wasn’t happening. Even if I were a full-blown agency with a team. Rarely is that going to fly.

What is your backup plan if they get sick, go on vacation, or quit unexpectedly?

One of the issues with small in-house teams, is often there is only one person who knows how to do the thing that person does. This was often the case for me at my previous day job. Having the work ethic that I did, I never left the team hanging, but that can be pretty hard to come by. The nice thing about agencies is, they’re will always be someone to fill in if needed.

Certain things like email marketing or posting on social, that’s probably easier to take over than say paid ads.

How Specialized is the Skill?

While there are of course people out there who are specialists and can do things better and or faster than someone who isn’t a specialist, how easy is it to learn?

Take email marketing for example. Sure, I’ve been doing email for a long time and can hit the ground running compared to someone who is brand new to it. But with a little research, practice, and testing… anyone can do a decent job at email marketing.

Web development? That’s a bit of a different story. That requires lots of training and hands-on learning before someone can do that successfully.

Even at my previous day job, we outsourced anything development-wise. It wasn’t worth the time, energy, or effort to build our own development team.

Things to Consider When Outsourcing to An Agency

If you are going to outsource something to an agency, it’s important you find the right agency for you. Not all agencies are created equal and many of them focus more on getting new clients vs. keeping the ones they already have which means the service leaves a lot to be desired.

Be a Big Fish in a Small Pond

If you’re looking at an agency's website and see businesses that are 3-10x your size listed as clients… this is not the right agency for you. In most cases, you want to be a big fish in a small pond. You don’t want to be the guinea pig necessarily, but you do want to be at the top tier of their client roster. Why? Because you’ll get more attention.

With so many layers inside a typical agency structure, there are a lot of mouths to feed. You’ve got the account manager who manages the relationship with the client. You’ve got the creative team that typically includes graphic design, copywriters, etc. Then you’ve got the managers who oversee all the account managers. And the list goes on and on.

Because this type of structure requires a good amount of volume to be profitable, the A players are going to be assigned to the A clients. And the smaller your contribution to the bottom line, typically the more junior your team is going to be.

That’s not to say that all agencies are bad or that they don’t have value in the space. But as the small fish… you’re not likely to get the attention you deserve.

Be Prepared for Turnover

Agency work is a pretty common entry-level position for recent college grads and it’s a tough environment to work in. If you are on the lower tier of their client roster, it’s likely you’ll go through a few different account managers.

Find Out Where Their Team Works

Some agencies build their teams with remote workers who live in less expensive parts of the world. Depending on what it is they’re doing for you, it might not matter. But it can also hinder the quality or turnaround time of the work… and of course time zones can really screw up your communication.

For instance, in my previous day job, we were working with an SEO agency whose writers were mostly outside of the united states. Because of the delicate nature of our industry, a lot of the copy they wrote and the way they approached certain topics really wasn’t appropriate for our brand. Eventually, we ended up hiring our own writers.

There was also a consultant we used at the beginning whose developers were based in India, so it took forever to get things done.

Hiring developers in the States is certainly more expensive, but depending on your needs it’s worth the extra investment for less headaches.

Knowing Your Numbers

The last thing I want to talk about today is knowing your numbers. More specifically, your gross margin and net profit numbers.

As we discussed in the inventory & finance episode with Ciara + the selling your business episode with Christine, net profit is the most important number in your business.

Your gross margin is a very close second because that margin is what allows you to invest in your business while still leaving money on that bottom line.

Now, statistics say that most online retailers see a 40-ish% gross margin and 7-ish% net profit margin. The problem with these statistics is they are most likely looking at higher-volume businesses where those percentages still equal a lot of dollars. For a $1M revenue business, a 7% net profit margin is about $70k. For a $500k business, it’s only 35k.

I typically recommend shooting for a 60% gross margin. Not every business will be able to achieve this, but get as close as you can. Even being in the mid-50s will get you far.

In terms of net profit margin, is 70k a good number for a $1M revenue business? Well, it depends. What is the structure of your business and how do you pay yourself?

If you are an LLC that is taxed as a sole proprietorship, it’s likely you pay yourself based on whatever profit is left over. In that case, is 70k a year with nothing left over for the business good for you?

On the other hand, if you’re an LLC that is taxed as an S-corp, or you’re a corporation, in that case, you’re paying yourself a reasonable salary for the work that you do which gets lumped into wages and effectively lowers your net profit. Note: when you sell your business, your wages will get added back in, and adjust your net profit number.

In that case, that 7% profit margin might not be too shabby for you.

As for profit margin benchmarks, 10% net profit is typically considered average, 20% is good, and 5% is bad.

Ultimately, what are good margins to you are going to be different than the next business because you have different businesses, goals, aspirations, etc.

The Takeaway

At the end of the day, the most important thing I want you to take away from today’s conversation is to get intimate with your numbers. Understand how they all affect each other. Get clear on your goals and the numbers you’re trying to reach so you can make educated decisions about how to get yourself there. Be critical of all the advice you get, no matter how qualified it seems. And when it does come time to invest, be clear about what you need and make sure whatever it is you’re investing in is giving you exactly that.

Listen to the Episode

Links Mentioned

The Lounge eCommerce Marketing Membership

Average eCommerce Margin Statistics

Episodes Mentioned

229. Becoming an Inventory (and Finance) Genius with Ciara Stockeland

228. How to Prep Your Business for Sale & Get Top Dollar with Christine McDannell of the Magnolia Firm

Hey, I'm Jessica

I support scrappy female entrepreneurs with actionable steps & strategies to grow and scale the traffic, sales & profit in their eCommerce businesses. 

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About Our Audience

  • eCommerce business owners selling a physical product on their own website (Shopify + Klaviyo users)
  • Soloprenuers or less than 25 on their team
  • All revenue ranges, up to multi 7-figures
  • Mostly female

Who We're Looking For

  • Subject matter experts in eCommerce & Physical Product Marketing (ex. Social Media, Public Relations, Website Conversion, Copywriters)
  • Apps or SaaS platforms that can share marketing strategies that work even without their product.

Who We're NOT Looking For

  • Strategies to build ONLY a marketplace business
  • Strategies for building service-based businesses or SaaS Platforms
  • Agency owners who only work with large budget businesses
  • Service providers for coaches or consultants