How to Build Wealth at Each Stage of the Typical E-Commerce Business Life Cycle
Life doesn’t happen all at once. And neither does the wealth-building process.
Wealth building for business owners — just like life — has important milestones that tend to guide a structured financial planning approach for successfully building an appropriate nest egg.
As you move through life and experience each of these milestones, it makes sense to engage a fiduciary specialist who can act as a partner as you navigate issues including business advisory, tax, estate planning, etc.
“Managing many Ecommerce businesses over the years, we tend to see four stages that owners go through, with each phase generally needing a specific set of CPA services,” says Chase Insogna, President of Insogna CPA.
To make the wisest choices possible for your unique situation, understanding the various wealth building stages is important. Keep reading to learn more and see where you are in your journey.
The Four Stages of Wealth Building for Business Owners
Stage 1: Starting Out (<$100K in Annual Revenue)
In this first stage, you’re just getting your business up and running.
Maybe you’re expanding from brick-and-mortar to e-commerce online selling. Your first big month might have just happened or it’s on the horizon.
You’re refining the big ideas of your business plan. You’re continuing to secure capital and laying out strategic objectives and growth targets.
Perhaps you’re still doing all of your own sourcing and pricing.
But to truly propel the business to the next level, it’s time to consider outsourcing back office functions like accounting, inventory management, and tax planning.
It’s simple. Many up and coming E-commerce businesses think they can juggle it all. And they think handling everything themselves will save a few bucks. But in reality, the DIY approach leads to a significant mess to clean up that erodes any initial savings and can actually end up costing boatloads of money.
Here are just a few reasons to move the accounting function off your plate:
- You’ll establish sound accounting practices while you’re building other foundational pieces of your business.
Errors made in the early stages of your operations tend to snowball and create costly problems down the road.
- Professional financial records are non-negotiable when it comes time to secure financing.
As eCommerce companies move along the continuum of wealth building, pursuing financing opportunities is common practice. In order to ensure that the financing process proceeds seamlessly, well-kept financial records are essential.
Stage 2: Accelerating ($100K-$500K in Annual Revenue)
During this stage, your business is scaling fast. Keeping up with back-office work is becoming a source of constant stress, your team is growing and so are your profits. Maybe you’ve even left your job to focus full-time on your online business.
Growth is exciting. But it also comes with a new array of complexities. Accountants for entrepreneurs know all about this and can help in a variety of ways during this stage of growth.
- Accountants for entrepreneurs help you with all of those things you don’t even know you don’t know.
From sales tax laws, insights about your business, and strategic advice that get you closer to your goals to cash flow requirements, properly maxing out retirement plan funding, and minimizing taxes, accountants that specialize in Ecommerce businesses help you manage things you haven’t even thought about yet.
- An accountant can help you properly establish an LLC to protect your business.
If your business is not properly registered, someone could legally claim your brand name. If you sell on Amazon and/or similar platforms, changing your business name and EIN# can result in you losing all of your customer reviews.
Stage 3: Expanding ($500K-$1MM in Annual Revenue)
In this stage, as your workload intensifies even further, a licensed CPA can be your best friend.
It’s likely you have no time to grab yourself a coffee, much less perform enough research to inform seemingly mundane decisions. But with the right CPA firm, you can focus on strategically reinvigorating your company’s momentum and growth.
For example, maybe you’ve decided to hire your spouse and your kids and build a true family business. You know that hiring a spouse can result in tax savings. But this arrangement can backfire if you don’t do it the right way.
From evaluating and prioritizing business goals to solidifying a tax strategy and a financial plan for your future and the future of the business, your CPA serves just like a safety net.
Accounting firms that specialize in e-commerce business can serve as a comprehensive advisory team to:
- Offer well-informed, objective, and future-focused opinions about every aspect of your business
- Provide you with a procedural and technical knowledge base as you evaluate new software, platforms, etc.
- Maximize tax deductions
- Estimate your income taxes, and how much is available for potential tax-deferred savings to minimize your current year tax burden as much as legally possible
- Evaluate additional insurance needs
- Set up payroll as you expand without violating government regulations
- Design employment and/or contractor agreements
- Construct benefit plans that motivate and retain your top-talent
As you grow your business with a licensed financial business advisor, you’ll be moving into the next phase knowing that you’re setting adequately aggressive profitability goals, creating well-timed acquisition strategies, and developing risk management processes along the way.
Stage 4. Established ($1MM+ in Annual Revenue)
As you accumulate money, property, business gains, and other assets, you’re building wealth. Now it’s time to properly manage that wealth.
Together with a licensed CPA firm, you can design a unique plan for your particular situation that continues to grow and protect your business as well as your personal assets for future generations.
The financial tools and strategies you use as you build and manage your wealth will change with your timeframe, risk tolerance, and overall financial picture.
Click here to learn how an Ecommerce-focused CPA firm like Insogna CPA can help address your business and personal financial goals as you scale your business, your wealth, and your future.