Often to start an e-commerce business all you need is a good internet connection, computer, killer website and a few sought after products to sell.
But make no mistake, e-commerce businesses incur costs just like any brick & mortar store and some of these sneaky costs go unnoticed.
To avoid unexpected bills, keep an eye out for these 5 expenses:
1. Customer acquisition & retention costs
Customer Acquisition Costs (CAC) is the total price of the your marketing spend divided by the total number of new purchases.
CAC reflects money spent on advertising, sales & technology used to drive customers to purchase products and is an important KPI to monitor.
While it typically costs more to get new customers than retain loyal ones, you may want to consider loyalty programs as part of your ongoing customer relationship strategy.
2. Shipping & Returns
You may have researched the best and cheapest way to get purchases to customers, but don’t forget about hidden costs such as packaging, printing invoices & handling customer refunds.
Cost of returns also include the physical & administrative labour needed to process returns or issue refunds.
3. The cost of professional services
These can range from tax preparation to tech support, and while these are often budgeted expenses, a few of them can catch you off guard. Factor in expenses like staff absences, adhoc financial management accounts or website technical support.
4. Transaction & referral fees
Credit Card processing can take a bit out of your revenue and it varies by platform and payment gateway.
It’s always important to read the fine print when selling on third party platform to ensure you are clear about what you are paying for and to avoid hidden “extra” charges.
5. Cybersecurity expenses
Funds should be set aside for anti-virus programs, password managers and firewalls to ensure that your business does not fall victim cybercrime.
At CRESCO Accounting, we don’t just manage our clients books, we work with them to provide the best support & insights to take their business to the next level. Knowing what to expect can help you create an e-commerce site that runs smoothly & brings in sales.
