Here’s the biggest difference separating dropshippers doing 5 figures a month dropshipper and 6 to 8 figures a month: having a scaling system. The more scalable your system is, the more scalable your revenue will be.
To understand how this works — top dropshippers who are scaling profitably and consistently know that once you have a process that works, it’s not about finding new hacks, tactics, and strategies for media buying. Or frequently revamping their product research process, or chasing after new tools, apps, softwares, or new ways of doing things — those are just distractions. Like shiny object syndromes.
The only thing that truly matters is creating a scalable system that will help them to consistently find winning products that can scale quickly and profitably. The key word here is “consistently”.
When it comes to finding winning products consistently — once you already have a proven process of doing product research, then the number of winning products you’re able to find will come down to how many products you’re able to test on a daily and weekly basis. This is why 6 to 7 figures dropshippers build teams that enable them to churn out high quality product launches each day.
Just to give you a sense of the number: Our 7 figure dropshipping clients are testing upwards of 8-10 products every single day. So, to scale their revenue, they would focus on hiring more people so that they can test more products every day.
When you hire more people, you can test more products. Hence, you find more winners, scale even faster, then reinvest the number to hire more people. Scaling to 7 to 8 figures can be as simple as that.
However, oftentimes, as they start hiring more people — many dropshippers tend to face problems like these:
- They hire 2X more manpower, expecting their revenue to double, but only to have revenue remaining the same, or worse, decreasing.
- They grow their team and test more products to increase their monthly revenue, but net profits end up LOWER than before.
- They hire more manpower, and start increasing their outputs but only to have their systems start breaking, causing inconsistent revenue, or revenue to fall.
- They hire more people with the intention to delegate more tasks out, but only to spend much more time training, and guiding the team members.
- They end up spending 80% of their time fire-fighting and solving more problems than usual. More team members means more problems to solve.
Problems like these can easily prevent your business from breaking the 5 figure a month mark, and cause you (the business owner) to burn out extremely quickly. This is extremely demotivating.
Majority of the dropshippers just ASSUME that it’s because they are hiring the wrong people, or that they are just on a “bad luck” streak, unable to find profitable winning products consistently. Worst case scenario, they will keep tweaking and changing their product research process thinking it’s not good enough. That’s not true.
After working with 6, 7 and even 8 figure dropshippers, the real secret that prevents dropshippers from breaking the 6 figure a month mark is because their systems are not “scalable”. Meaning, their existing systems are not optimized for scaling.
When your systems are not built for scaling, you will experience challenges such as your system breaking whenever you add more team members, try to double down on the number of products you test, and try to do something new to the business.
Overall it is preventing you from scaling to the glorious 7 figures a month profitably.
However, if you have systems that are scalable — you will be able to DOUBLE the number of products you test everyday whenever you like, leading to 2X or even 3X your existing revenue. You can also add more team members into your team without ever worrying that your entire team structure and process will break.
Along with that, you will be able to continuously scale to 7 figures smoothly and profitably. You will also be able to maintain or even increase your profit margins as you scale to the 7 figure mark. Most important of all, because your systems are so well optimized, your business will be able to run WITHOUT you, leaving you plenty of time to plan for your next long term business like an eCommerce brand, or a software.
All these things are possible once you have a scalable system.
It’s always very fulfilling for us whenever we see that our clients are able to scale their revenues and profits quickly while spending less time on the business once they have a scalable system.
But How Do You Know If Your Existing Systems Are Scalable?
At our agency, one of our core services is to optimize our client’s systems and processes and turn them into scalable systems so that they can scale to 7 figures a month profitably, and most importantly MAINTAIN at the 7 figures a month mark profitably.
We do that by using a framework called the 4E Scaling Principles.
In this post, I will share how you can apply this 4E Scaling Principles to build a Scaling System. Before going into that, it’s important to first know if your existing systems are scalable. This will allow you to have a good gauge as to which part of your system needs optimizing.
We do it by ask these four questions:
Are the processes in your company built around you?
For example: Does your team need to report back to you and get your approval for every single step of the process? Does your team need to get approval for every single step of the process of launching a new product, from product research to copywriting, to video creation, to media buying?
If the answer is yes, your systems are NOT scalable because you are the bottleneck of the business.The worst thing that can happen in any business is having the business owner as the bottleneck.
As your company scales up and you go from a small team of 2 to 5 to a team of 10 and above, the number of approvals you have to give multiples 2X, 3X, 5X. This leads to 2 problems.
First, it is impossible for you to be on the ball and approving every single step without exhausting yourself out, also commonly known as burnt out.
Ever worked so hard for a few days in a row, only to become demotivated, sluggish and suffer from brain fog, spending hours in front of your computer doing nothing? That’s burnout.
Second, because every single step of the business requires you for it to move, it’s impossible for you to take an off day from working without having the business to come to a screeching halt.
Take top dropshippers like Steve and Evan Tan for example, they’re able to take 2 weeks off from their eCommerce empire because they have already built and optimized their systems to run without them, giving them time and freedom to travel the world and attend/host masterminds.
Are you able to add new hires into your team, and have them adapt to your company’s workflow immediately and with zero questions?
An important factor when it comes to having scalable systems is to see if you are able to add new hires into your team without them coming to you with questions on the process.
Before the new hires even start working, they must be fully trained in terms of their skills and knowledge of their role. They have to be able to know what exactly to do if a problem arises, and be 100% clear on their roles and responsibilities. This can be easily achieved by having an automated training system.
By having an automated training system that can train new hires into A+ players automatically, you will be able to add new hires into your team and have them adapt to your process immediately with zero questions.
We have an in-depth post on how to create an “automated” training system. You can check it out to understand the concept better!
Are your team members able to perform at least 80% of your own capability?
It’s one thing to have instructions that are clear and easy to follow. It’s also equally important that you have included in enough information and details to ensure your process is comprehensive enough to produce high quality outputs. You don’t want your team to follow a process that brings in output with varying levels of quality.
Some produce outstanding work you immediately approve after one glance, and others require multiple back-and-forth edits and reviews. The best way to test this is if someone who doesn’t have any prior experience can execute a process and present work of 80% quality minimum. It shows that your process is comprehensive enough and has added in most of the key information.
Processes that can ensure outputs with high levels of quality, no matter who uses it, are scalable.
Do you have anyone in the team who can constantly tweak, optimize and solve bottle-necks in the systems whenever it arises?
A common mistake that dropshippers make is that once they have a system that’s working, they stop improving and optimizing it. This is a big mistake. If you stop optimizing and finding or predicting bottlenecks in the system, when you start to scale the business by testing more products, the entire system will break.
Here’s a quick case study we did in our agency. We had a client who had a proven product research system. They wanted to scale and started adding more product researchers in their team.
We planted an Atomatic Business Manager (ABM), who’s a highly trained systems and operations expert, into the client’s business to act as a Chief Operations Officer (COO). We provide all of our clients with 1 ABM each to constantly, tweak, optimize and identify bottlenecks in the systems and day to day operations in the business as it scales.
The ABM was able to identify that the client’s product research teams were starting to find more and more duplicated products as the team was growing, because all of them were taught to search for products in the same platform, using the same software, and the same criterias.
The ABM foresaw that this could be a huge problem as the company scales bigger and tweaked the product research process and system accordingly — allowing the client to reduce duplicated products by over 80%, and was able to double his number of products tested every day, so that he can scale much faster than ever.
As your business scales, it is inevitable that bottlenecks will come up in your systems. So, it is extremely crucial for you to constantly tweak, optimize and foresee any potential bottlenecks that can hinder your scale. The best way to do this is to hire a COO or operations manager to focus on optimizing your system.
The last thing you want is for the system to break when you’re scaling.
How To Build A Scalable System
If you find that your answer is “NO” to any of these questions above, then it’s very likely that your system is not built to scale. Chances are this is almost the bottleneck that’s preventing you from scaling profitably to 7 figures a month.
In the second half of this post, I will be sharing the 4E Scaling Principles we implement for our clients that enable them to build a scalable system. The sooner you apply these, the sooner you’ll release the shackles of your business, break the current revenue limit, and scale your revenue to the moon.
The 4E Scaling Principles To Scale Your Dropshipping Business To 7 Figure MonthsThe 4E Scaling Principles stands for Effectiveness, Efficiency, Effortlessness, and Exponentiality.
The key to a scalable system that allows you to scale to 7 figures a month consistently and profitably is to have a system that’s effective.
You may be wondering, ”Of course it has to be effective!” But when I say “effective”, it’s probably not what you think it is. Many people think that when I say that systems have to be effective, they think of systems that generate revenue. While that’s true, that’s only one tiny piece of the puzzle.
Majority of the people miss out on the rest. There’s actually so much more.
Here’s what we do in our agency to build effective systems:
In our agency, we first break down the dropshipping business flow into multiple key pillars. These are the most important pillars that will determine the success of the business, such as product research, ad creatives creation (video editors and graphic designers, customer service team, and so on. We then look at these pillars and the systems driving them, and ask ourselves if the results from these systems are helping to bring the company closer to its goal.
In this case, the goal of scaling from 5 figures to 7 figures a month consistently and profitably. We then create metrics for each pillars to track:
Response Rate: How fast are we replying to each ticket?
- Can we reply to each and every customer in a span of 30 minutes?
- Can we then automate this by creating a system?
- How will that help the company to achieve its goal?
How many creatives, both videos and images, are we producing on a daily basis?
- How many of them ended up being re-edited after going through the approval process?
- How many re-edits and approval was needed before launching the creatives?
- Can we streamline the entire process and turn it from a 5 step process to a 3 step process so that we can launch more creates per product?
- How will that help the company to achieve its goal?
How many products are we finding each day?
- How many products submitted into the product google sheet were duplicates?
- What’s the maximum number of high quality products each team member can find in an 8 hour shift?
- What’s causing them to take a long time to find products?
- Can we streamline the entire process?
- How will that help the company achieve its goal?
From the results collected, we analyze and see which processes should be axed completely, require a major revamp or simply a few minor bottlenecks that need to be tweaked and removed. We then set in place a system that allows us to consistently repeat this process of test running a process, proceed to collecting data, analyzing the results, making changes one by one, and finally see if the changes made helped or not.
We do this over and over until the process is hitting optimal results.
While this process may sound very tedious and time-consuming, the end results will always pay itself many times over. There are many tests we have done for our clients that enable them to launch new products 20% to 30% faster each day. Just imagine how many more product tests they are able to do each day when we stack these improvements on top of each other.
For your systems to be scalable, your processes must not only be effective and produce results, it should also do so in the most low-cost way. Not just in terms of money, but additional resources such as time, effort, manpower or money to get a task done, cutting down any wastages like over-hiring, and ensuring the process can be executed in the shortest time possible because time is money!
One of the things we do for our clients is optimize their manpower system towards efficiency because manpower is one of the “low-hanging-fruit” that can be maximized fast. We first make sure that the current Standard Operating Procedures or SOP and tools used are helping the team work at their full potential.
From there, we assess their current workflow, whether there are people involved where they don’t have to be, or if there are any duplicates or back-and-forth steps which wastes time. Then we optimize the current process by integrating in resources custom to the business and team itself. Like a set of well-defined guidelines or a visual decision tree of the process flow to make things easier for the team and help them execute the task faster and smoother.
For example, here is one of the things we did to help our client to optimize the efficiency of his product research process. Our client set a target for his product researchers to find 25 to 30 products per day. Upon review, we started to see that there were only 12 to 15 quality products out of the whole 25 to 30 products found, and that only 6 out of 120 total products found were launched in the end.
The number of products chosen to launch in the end could definitely be higher.
Clearly, the team’s effort and time is not at maximum efficiency. So, instead of having all 4 members of the product research team continue executing this process, we reassigned 2 of them to research and test out ways to refine the process.
This way while the other two members of the team are conducting product research so that product launches can still go on, instead of four people executing an inefficient process and getting low outputs. Two of them are spending their time refining the process and making it produce better outputs — which is a much better use of their time.
For your systems to be scalable, you need them to be effortless to execute. Meaning, any team member whether they are new or experienced, will be able to execute their tasks easily with no questions asked.
For that, your systems will be laid out with simple and clear instructions, easy to implement, and takes minimal resources (like time, money, effort, manpower) to carry out.
A common mistake that dropshippers make is that they have way too many unnecessary steps in the entire process.
For example: Product research > Importing product into Google sheet > Approval by manager > Import into store > Work on product description > Compress images and add pricing > Approval by manager > Work on video script > Work on video creatives > Approval by manager > Launch. Total of 12 steps before launching.
When you have too many unnecessary steps in your system, you are essentially creating more potential bottlenecks when you scale. Especially when you add more manpower into your team, these bottlenecks will start popping out every single day, leaving you to spend everyday firefighting. Not a great way to spend your day.
At our agency, we solve this by doing something called a “system breakdown session” every two months, where we get our in-house system experts (we call them Systems Architect in our agency) to lay out your entire system and stress test it. Meaning, we’ll do a “mock test” and increase the output of the entire team up until it breaks.
From there, we identify which part of the system requires the most moving parts and resources, and we trim it down to it’s bare minimum.
For example, if it takes 12 steps to go from product research to product launch, we test the system by stripping it to 9 steps and see if the system still works. If it works, we then increase the number of products tested a day and see if it still works. If it still works, then we will add an additional manpower into the system and test it again.
We keep going on until the client is comfortable at their revenue range — most of the time they stop at the lower range of 7 figures a month.
This is the last and most important E of them all, because for your systems to be scalable, you first need to take yourself out of the process.
Most dropshippers are their own worst enemy when it comes to scaling. They suffer from what we call the Superhero Syndrome. This is when someone thinks that they must do, or be involved in, every single task by themself. It is either because they think others are not as good as them or they don’t trust others to get the job done.
In other words, the business cannot “move” without them being involved in every single step of the process. Because of this, they usually end up becoming the bottleneck, which limits the number of products they are able to test per week and ultimately prevent the business from scaling to 7 figures a month consistently and profitably.
Scalable systems are systems that must function without your involvement. By doing so, not only is your company able to scale smoothly, but it will also free up a huge chunk of your time so that you can focus on higher level tasks such as planning the next step for the business, attending high level masterminds, or even creating brands from the cash that you generated.
One of the best indicators to see if you are too involved in your company is to track how much time you are spending in your business every day.
In our agency, we provide a tool called the PACE Ratio calculator.
The PACE Ratio is a calculator to see how much time you are spending in your business, as the business owner, you should only be spending 10% of your time executing, and 90% of your time planning for the business. This is one of the first things we look at when working with a client.
Whenever we talk to dropshippers, it’s very common for most of them to be spending at least 80% of their time in the business. So, one of the first things we always do is to make sure that we remove them from the process so that they spend an average of 10% in the business, leaving 90% of their time on planning and delegating.
To help our clients to achieve this, we create for them delegation systems. There is an in-depth post written about delegation systems, you can check it out here for better understanding.
One final point: When it comes to dropshipping, 7-figure dropshippers focus on two key levers in the business.
First is the marketing, and the close second is operations. Operations consist of systems and processes.
It’s easy to just double down on your marketing if you want to scale fast and hard, but if your systems and processes are not able to take the rapid scale, then bottlenecks and breakdowns will start to happen. As what we like to say in our agency, “Marketing Allows Your Business to Scale, But Operations Is What Enables It”.
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