September 2022 Summaries

Contribution margin is a management metric that measures the revenue remaining after variable costs are deducted, helping eCommerce small and medium-sized businesses evaluate product profitability, pricing, production decisions, and progress toward covering fixed costs and reaching break-even. It can be calculated overall as total revenue minus variable costs, per unit by dividing that result by units sold, or as a contribution margin ratio by dividing contribution margin by revenue. Variable costs, such as materials and direct labor, rise or fall with sales and production, whereas fixed costs such as warehouse rent generally remain stable; correctly distinguishing between them is important for reliable analysis. Unlike gross profit margin, which considers all costs of goods sold to assess overall business performance, contribution margin provides a more product-level view. Businesses may use the metric to identify products that warrant price changes, cost reductions, or discontinuation, although these decisions should account for other KPIs and customer demand. Higher contribution margin ratios, particularly those nearer 100%, indicate a stronger ability to cover fixed costs and generate profit, and investors may also view consistently strong margins as evidence of effective financial management.

Profit margins help startup founders assess efficiency and financial health through gross profit margin, which measures production costs against revenue, operating profit margin, which accounts for indirect operating expenses, and net profit margin, which reflects income after all costs, interest, and taxes. While these measures are important, businesses should also benchmark financial and operational indicators such as customer acquisition costs, conversion rates, churn, and returns against internal goals and competitors. Early-stage investors may prioritize sustainable growth, product development, customer acquisition, and long-term potential over immediate profitability. Businesses can sometimes improve profitability by reducing focus on customers, products, or services that cost more to support than they generate in revenue, while concentrating resources on loyal and higher-value customers. Effective financial infrastructure, particularly for companies operating internationally, can also simplify expense management, currency handling, reporting, and reconciliation while helping reduce avoidable fees.

Airwallex’s September releases aim to help businesses prepare for Q4 by improving payment acceptance, reconciliation, expense management, and security. Customers in Australia, Singapore, and Hong Kong can now pass eligible online payment surcharges to payers through Payment Links and Xero Invoice Payments, while Xero integrations offer transaction-level settlement reporting and vendor-contact imports for expense allocation. EU customers can add Airwallex Employee Cards to Apple Pay, and merchants can offer seven additional Asia-Pacific local payment methods, including PayNow, DuitNow, PromptPay, GoPay, LinkAja, Indonesian bank transfers, and JeniusPay, potentially reducing payment costs compared with card transactions. The updates also automatically enable two-factor authentication, introduce network tokenisation for safer one-click checkout, add expense date filtering and archiving, and provide restricted API keys to limit user access. Planned enhancements include configurable expense-approval thresholds and multi-layer approval workflows.

International expansion can help ecommerce businesses reach new customers and revenue opportunities, while Shopify offers tools intended to simplify global selling through local currencies, translated content, country-specific domains, preferred payment methods, duty and tax calculation, market-based pricing, and inventory controls. The article emphasizes that localization is central to conversion and customer trust, citing preferences for native-language content, transparent total prices, and familiar checkout options. Shopify plan costs vary by subscription tier and transaction-related charges, with higher tiers providing features such as custom market pricing, rounding rules, and duty collection. It also discusses reducing foreign-exchange costs by receiving funds in local currencies through local bank accounts or multi-currency providers such as Airwallex, although each approach may involve separate fees. Businesses are advised to identify promising markets using Shopify traffic and sales data, initially focus on one or two locations, arrange importing, storage, and shipping logistics, and tailor promotions around local consumer behavior and shopping holidays.

Amazon Pay is a payment service that lets customers complete purchases on participating websites using payment, address, and account information stored in their Amazon accounts, including through Alexa-enabled transactions. Merchants can add it by creating or using an Amazon Seller account, integrating the service with their e-commerce platform, accepting its terms, configuring checkout, and testing the implementation; security is supported through tokenisation. Fees include 2.9% plus 30 cents for US online and mobile payments and 4% plus 30 cents for Alexa payments, rising by 1 percentage point for cross-border transactions, while Amazon currency conversion may cost up to 3.9%. Its advantages include access to Amazon’s widely recognised customer base, integrations with platforms such as Magento and BigCommerce, and Amazon’s A-to-Z Guarantee, while drawbacks include international fees, potentially complex seller verification and implementation, and incompatibility with some platforms. The discussion notes that offering locally preferred payment options can reduce cart abandonment and presents Airwallex as an alternative that supports more than 60 local payment methods, multi-currency collections, and lower stated foreign-exchange costs.

Monthly recurring revenue (MRR) measures the predictable monthly income generated by active subscriptions, excluding one-time fees, and is commonly used by eCommerce, SaaS, and subscription businesses to assess financial health, customer behavior, and growth. It is calculated by multiplying the number of monthly subscribers by average revenue per user, while annual recurring revenue is MRR multiplied by 12. Breaking MRR into new, upgrade, downgrade, expansion, reactivation, contraction, churn, and net new categories helps identify whether revenue changes stem from customer acquisition, plan changes, add-ons, discounts, returning customers, or cancellations. Monitoring these metrics supports budgeting, performance evaluation, revenue forecasting, and decisions about investment and scaling. Suggested ways to improve MRR include raising prices alongside added value, offering tiered plans, creating upsell opportunities, strengthening customer retention and service, gathering customer feedback, and refining marketing to pursue more qualified leads.

A joint Airwallex and PPRO report identifies China and the United States as leading opportunities for cross-border eCommerce growth, with 2021 market values of $301.5 billion and $103.9 billion respectively, despite relatively low international-shopping participation among their online consumers at 39% in China and 33% in the US. China’s largest eCommerce segments were toys, hobbies and DIY, fashion, and food and personal care, while US sales were led by fashion, followed by electronics and media and toys, hobbies and DIY. The report argues that merchants can improve international conversion by offering familiar local payment options, as PPRO research attributes 20% of cart abandonment to their absence; prominent methods include Alipay, UnionPay, and WeChat Pay in China and Afterpay, Klarna, Splitit, and Venmo in the US. Airwallex promotes its platform as infrastructure for accepting more than 60 local payment methods, settling funds in multiple currencies, and reducing foreign-exchange costs for businesses expanding internationally.

Launch Lessons host Sam Kothari interviews Oyster HR CFO Shannon Lincoln about helping scale the global employment platform from roughly 17 employees to more than 600 across about 70 countries while progressing from seed stage to a Series C company. Lincoln describes Oyster’s remote-first, asynchronous operating model, which relies on written documentation, recorded videos, public-by-default information sharing, and meetings focused on discussion rather than updates, while also recognizing risks such as information overload and burnout. She attributes effective leadership and executive hiring to strong relationships, rigorous role-relevant assessments, trust in employees, and a servant-leadership approach that sets strategic direction while delegating ownership. The conversation also examines Oyster’s efforts to build diverse teams through intentional global hiring, transparent workforce metrics, and access to talent beyond traditional technology hubs. As CFO, Lincoln emphasizes founder-led fundraising supported by close financial partnership, credible but ambitious projections, shared data systems, and transparent communication with employees and investors, particularly during economic uncertainty. She argues that global employment platforms help companies manage cross-border hiring complexities such as local payroll, benefits, and employment regulations, while enabling access to broader talent pools.

A payback period measures how long an investment takes to recover its initial cost, making it a commonly used tool for startups and businesses managing limited cash flow. It is calculated by dividing the investment cost by average annual cash flow, with shorter periods generally viewed as more attractive because they free funds for future investments. The method is part of investment appraisal, or capital budgeting, alongside measures such as accounting rate of return, net present value, internal rate of return, profitability index, and discounted payback period. While the standard payback calculation is quick and easy to apply, it does not account for inflation, the time value of money, or uneven future cash flows; the discounted payback period addresses some of these limitations by applying a discount rate to future returns. The discussion emphasizes that startups can use these measures to compare projects, assess liquidity risks, and make more informed investment decisions, while noting that financial guidance should be tailored to individual circumstances.

Airwallex’s inaugural Australian Business Growth Index reports that Australian SMEs have continued to pursue growth and international expansion despite inflation, supply-chain disruption, lockdowns, and economic uncertainty. Based on a May 2022 survey of 202 Australian businesses with 20 to 199 employees, the index found that 92% had grown over the previous year and 34% were already operating overseas, while more than two-thirds expected to be active internationally by 2027. Businesses already operating abroad, as well as nearly all those planning expansion within 12 months, reported recent growth, suggesting a link between global activity and commercial opportunity. Southeast Asia was identified as the most attractive overseas market, followed closely by the United States, ahead of China and Europe or the UK. The report also highlights the role of digital tools, hybrid work, and fintech in lowering barriers to international trade, with 35% of surveyed SMEs having fully adopted digital and fintech banking solutions.