01-06-2025
Why a huge social media presence and millions in the bank doesn't mean you've made it in 2025
An e-commerce expert with 15 years experience has warned Aussies keen to start their own brands about the pitfalls that have caused so many to fail.
Joshua Uebergang, 40, has been helping businesses navigate the Shopify online storefront since 2010 with his marketing agency Digital Darts.
He told Daily Mail Australia the two simple rules that can help any business thrive - customer retention and keeping a handle on spending.
Mr Uebergang said the recent closure of Exoticathletica, an online activewear brand founded in Noosa in 2014, was an example of companies outspending their profits without locking in a loyal customer base first.
The activewear brand collapsed earlier this month owing $13million to creditors after raking in $7million in sales of an 'ultra-comfortable' crop top in 2021.
It accumulated debts of over $6.2million, including $800,000 to the ATO, $6.7million to the Commonwealth Bank and $114,000 to staff.
'What you generally see on TikTok is customer numbers, high revenue numbers and media mentions but that's all meaningless compared to what really keeps the business afloat,' he said.
'Building up a brand is perfectly fine but the main thing these brands are missing is the fundamental basis of businesses: Can you acquire a customer for less than what they give you over their lifetime?'
Emerging companies are too focused on social media visibility instead of investing in creating loyal customers at a cheap price, Mr Uebergang explained.
He pointed to the Lifetime Value to Customer Acquisition Cost ratio (LTV/CAC) which compares a customer's lifetime value to the cost a business puts into acquiring them.
This roughly translates to how much a customer is willing to spend on a brand compared to the money a business invests in attracting them in the first place.
When the ratio becomes lopsided - usually when a customer spends less than three times the amount a business had spent on them - it can cause issues.
'The smaller that ratio is, the more dangerous the business becomes and it also becomes more of a long-term bet,' Mr Uebergang said.
Venture-funded start-ups have more time to make up the margin compared to those which are self-funded as the latter relies on the founder's personal wealth.
With venture-funded companies, investors and stakeholders are able to make up the initial difference between profits and spending.
'They can really can push because they've got more money than its founder initially had when they started it. If someone has a small business, self-funded company, they can't push that hard,' Mr Uebergang said.
He warned new business owners can easily become obsessed with creating the illusion that they're living 'the dream'.
'Founders are incentivised to promote a dream, and it's a bit like general human reality with social media that we want to favour our successes and not highlight our failures, so it's no different to e-commerce brands,' he explained.
'It comes from a "make money quick" belief, which can be great, because it's good for people to try new things.'
But he said some start-up owners can I greatly underestimate the debts their start-ups owe at the end of the financial year.
'It's pretty common to see people in their first year or two of business, someone who is not particular to the e-commerce space, shocked to find that after making $4million they might have to pay $2million in taxes,' Mr Uebergang said.
A good rule of thumb for newcomers is to focus on making ends meet first before focusing too much on expansion or growing their customer base.
Making sure the business is making enough profits and listening to customer feedback is essential to creating a lasting business, Mr Uebergang said.
'Start from day one with profit in mind, so that's having a product that you pay for and then having at least 500 per cent on top of that with what you will sell it for,' he said.
'That will help account for freight costs, general labour, customs, even some marketing to help get customers.
'Second, really master one marketing channel, focus on one and get really good at it. This can take you to $1million in annual year revenue.
'And thirdly, listen to your customers and improve on their feedback from your first sales. Build 100 customers initially and really seek to make them returning sales because they are the people that you ultimately serving.'
